10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended June 30, 2006

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________________ to ______________________.

Commission file number 0-27471

RONCO CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	84-1148206
State or other jurisdiction of	(I.R.S. Employer
incorporation or organization	Identification No.)

61 Moreland Road, Simi Valley, California 93065

(Address of Principal Executive Offices)

Registrant’s telephone number, including area code: (805) 433-1030

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $.00001 per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o          No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.

Yes o          No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x          No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.

Large Accelerated Filer  o             Accelerated Filer  o              Non-accelerated Filer  x

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

Yes o          No x

The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter was $12,654,210.

At September 30, 2006, the issuer had 2,591,605 shares of common stock, par value $.00001 per share, issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None

RONCO CORPORATION

INDEX TO FORM 10-K

PART I		Page
Item 1.	Business	3
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	22
Item 3.	Legal Proceedings	22
Item 4.	Submission of Matters to a Vote of Security Holders	23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer purchases of Equity Securities	23
Item 6.	Selected Financial Data	24
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	25
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 8.	Financial Statements and Supplementary Data	43
	Reports of Independent Registered Public Accounting Firm	F-2 - F-4
	Consolidated Balance Sheet	F-5
	Consolidated and Combined Statements of Operations	F-6
	Consolidated and Combined Statements of Cash Flows	F-8
	Consolidated and Combined Statement of Stockholders’ and Members Equity (Deficiency)	F-7
	Notes to Consolidated and Combined Financial Statements	F-10 - F-24
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	43
Item 9A.	Controls and Procedures	43
Item 9B	Other Information	44
PART III
Item 10.	Directors and Executive Officers of the Registrant	45
Item 11.	Executive Compensation	48
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	52
Item 13.	Certain Relationships and Related Transactions	57
Item 14.	Principal Accountant Fees and Services	59
PART IV
Item 15.	Exhibits and Financial Statement Schedules	59

PART I

This report, including the sections entitled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operation” and “Business,” contains “forward-looking statements” that include information relating to future events, future financial performance, strategies, expectations, competitive environment, regulation and availability of resources. These forward-looking statements include, without limitation, statements regarding: proposed new services; our expectations concerning litigation, regulatory developments or other matters; statements concerning projections, predictions, expectations, estimates or forecasts for our business, financial and operating results and future economic performance; statements of management’s goals and objectives; and other similar expressions concerning matters that are not historical facts. Words such as “may,” “will,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes” and “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to:

· seasonal patterns affecting consumer spending, primarily related to the Christmas holiday season as well as other gift-centric holidays;

· other seasonal patterns affecting the performance of television media, primarily weather;

· availability of raw materials and manufacturing capacity, which may limit the ability to get our products manufactured;

· the relative availability of attractive media time within a given period for us to promote our products;

· changes in interest rates, which may impact certain customers' decisions to make purchases through credit cards;

· the impact of general economic conditions;

· the introduction of new product offerings; and

· the introduction of new infomercials for existing products.; and

· other factors discussed under the headings “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.”

Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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Item 1. Business.

Corporate Overview

We are a developer, marketer and distributor of consumer products for the kitchen and home branded under the “Ronco” and “Popeil” names. Our products are primarily sold through direct response television marketing by broadcasting 30-minute long advertisements commonly referred to as “infomercials.” Ronald M. Popeil, our principal consultant and founder of our operating business, started selling products under the Ronco brand over forty years ago. Over the last six years, Ronco branded products have been sold to over five million customers.

We were incorporated under the name Fi-Tek VII, Inc. under the laws of the State of Delaware on July 12, 1990. Before June 30, 2005, we were a “blank check” company. During this time, we engaged in no significant operations other than the search for, and identification and evaluation of, possible acquisition candidates. The address of our principal executive offices is 61 Moreland Road, Simi Valley, California 93065 and our telephone number is (805) 433-1030.

In June 2005, we (at the time operating under the name Fi-Tek VII, Inc.) completed a series of related transactions including the merger of our wholly-owned subsidiary, Ronco Acquisition Corporation, with and into Ronco Marketing Corporation and the acquisition of assets comprising the Ronco business from Ronco Inventions, LLC, Popeil Inventions, Inc., and RP Productions, Inc., which we refer to collectively as the predecessor entities, and Mr. Popeil. On June 30, 2005, in connection with these transactions, we changed our name to Ronco Corporation.

The following table summarizes these transactions and our corporate structure:

Our Products

We operate in a single operating segment which designs, sources, markets and distributes our products. We currently offer two product categories: kitchen products and household products. The majority of our products were developed by Mr. Popeil, and we acquired the intellectual property rights underlying those product lines through our acquisition of assets from the predecessor entities and Mr. Popeil. All of our products carry the Ronco or Popeil brand names.

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Kitchen Products

We manufacture or source, market and distribute innovative, affordable and highly functional products for use in kitchens. Our products include the following:

· Showtime™ Rotisserie & BBQ

· Electric Food Dehydrator

· Six Star+™ Cutlery Set

· Popeil's Pasta Maker

· Solid Flavor Injector

We have also, over the last year, reintroduced products previously sold by the Predecessor Entities, including the Chop-O-Matic, Bagel Slicer, Dial-O-Matic and Inside the Shell Egg Scrambler.

Our most prominent and successful product line today is our family of Showtime™ Rotisserie & BBQ electric rotisserie ovens and accessories. We offer several models of Showtime™ ovens including the standard unit, the compact unit and the professional unit. In addition, we sell a variety of accessories which complement this appliance, including cookbooks, food products, flavor injectors, gloves, racks, and self-turning kebab rods. Historically, our Showtime™ rotisserie products have had very low return rates, averaging 3% of units sold. Since the 1998 launch of this product family, over $760 million in Showtime™-related products have been sold. The majority of the sales originated from direct response television marketing.

Another of our prominent product lines is the family of Six Star+™ Cutlery Sets of knives for use in residential kitchens. We offer a range of accessories that complement our Six Star+™ Cutlery Sets, including flatware, knife sharpeners, scissors and wooden blocks. Since this product family's introduction in November 2003, over 650,000 Six Star+™ Cutlery Sets have been sold with a return rate of less than 3%.

Since 2002, the Showtime™ family of products and the Six Star+™ cutlery family of products have accounted for in excess of 94% of our revenues.

Household Products

We also manufacture or source, market and distribute the Pocket Fisherman and GLH Formula Number 9 Hair System. The Pocket Fisherman is being maintained because it is a classic and instantly identified with the Ronco brand. GLH has a very loyal following and we believe that it will offer licensing opportunities in the future.

We believe that our products are characterized by their fundamental utility, innovation, quality and value.

Our Industry

Direct response marketing is a form of advertising or promotion that seeks to generate an immediate sale or lead from prospective customers. The direct response industry, which consists of direct response television, marketing, live home shopping channels, direct mail, catalogs, internet marketing and advertising, and outbound telemarketing, is one of the fastest growing segments of the retailing industry.

Direct response marketing allows marketers to develop, test, implement, measure and modify their marketing programs. The advertiser can monitor exactly how much business is derived from each station, each commercial flight and each creative effort. Direct response television has succeeded as a medium in part because the format allows potential purchasers to see products actually in use. Direct response television combines the power of television with the precision of direct marketing. Top direct response television product categories have historically included fitness equipment, housewares, beauty products, healthcare and diet products, and coins and collectibles.

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Direct response television consists of both short-form infomercials and long-form infomercials. Short-form infomercials are typically one to three minutes in length and are used to market simple, easy-to-understand products with very affordable price points. In contrast, long-form infomercials are typically twenty-eight to thirty minutes in length and utilize a more elaborate sales pitch, which generally involves identifying a problem or need and introducing a product solution, supported by product demonstrations, question-and-answer sessions and audience testimonials. Long-form infomercials are the medium of choice for products sold at a higher price point and require a more elaborate presentation of the product's features and benefits.

Many infomercials are filmed before a studio audience and feature one or more hosts to explain and demonstrate the virtues of a given product, solicit audience member testimonials and then present the opportunity to purchase a given product through a toll-free phone number provided during the infomercial. The atmosphere created within an infomercial is generally positive and high-energy to convey the benefits created by a product. Often, celebrities are enlisted to act as hosts or to otherwise endorse products marketed through infomercials.

Companies who market their products through direct response television typically purchase commercial airtime from local broadcast stations and regional and national cable television operators across the country, either directly or through media buying agencies. Infomercial programs are most commonly run during late night and overnight time periods during the week and throughout the day on weekends.

Availability of time periods varies from station to station, depending on programming. The majority of customer purchases occur within the first four hours following the airing of infomercial programs. Some direct response television companies also choose to market their products through retail channels, particularly after a product has been on air a sufficient amount of time to build brand awareness required for success at the retail level.

In addition to domestic television and retail channels, there is generally a significant demand for U.S. direct response television products internationally. A direct response television company with a successful product in the U.S. may work with one or more international distributors who specialize in bringing U.S. direct response television products to countries around the world. Some of the leading international distributors for direct response television products include Thane, Interglobal, TV Shop, TelSel, and Northern Response.

Marketing and Distribution

We primarily distribute our products through three channels: direct response television marketing, wholesale and retail outlets, and online commerce. These channels and new product strategy with respect to marketing and distribution are described below.

Direct Response Television (Infomercials)

We market our products direct to consumers through thirty-minute infomercials, which allow potential customers to see demonstrations and hear testimonials of our products. Since 2002, in excess of 77% of our gross product sales have been generated through direct response television marketing. Our infomercials provide viewers with the opportunity to purchase our products by calling a toll-free phone number provided during the infomercial. Of the 210 broadcast markets in the U.S., we primarily focus on the top 90 markets for infomercials, airing on as many as 4 to 8 stations in each market. We ensure the highest profitability from the broadcast of our infomercials by closely monitoring media costs per order and encouraging telemarketers to suggest additional products to all customers who call the toll-free number. Most of our infomercials air between Friday evening and Saturday afternoon to ensure the maximum viewership.

We produce our own infomercials, and purchase television media through our internal media group, that does business as Castle Advertising, we purchase broadcast and cable time to reach consumers. Castle Advertising employs several highly trained media buyers who purchase media on our behalf at pricing that we believe is significantly below that which would be obtainable through the use of a third-party media buying agency. In contrast, other infomercial companies will typically have a modest staff of in-house buyers and outsource most of their media buying activities to third-party agencies. We believe this competitive practice provides us a distinct competitive advantage.

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Castle Advertising functions as an independent agency and receives agency commissions from media outlets, thereby reducing our net media costs. Media expenditures are highly volatile and depend on many factors, including type of television station, short or long-form infomercial, time slots for our target audience, rating and size of audience delivered, seasonal influences on available media inventory, general market trends, and negotiation of packaged deals.

We also intend to supplement our direct response television distribution channel by continuing to develop and expand sales through our customer service department and our third party outbound telemarketers.

Wholesale and Retail Distributions

In addition to television marketing, we sell our products through selected traditional retailers. These wholesale arrangements are made through agents and distributors and directly to large retail chains. During the period from 2002 through June 30, 2005, sales through wholesale and retails distribution channels accounted for approximately 19% to 26% of our gross product sales. In the fiscal year ended June 30, 2006, sales through wholesale and retail distribution channels accounted for 38% of our gross product sales.

We plan to expand our retail distribution network by entering into direct distribution agreements with key national retailers of household and home improvement products. We are currently in discussions with a number of mass merchants, department stores and large retail chains in an effort to achieve wider retail distribution of our products nationwide. In September 2005, we began shipping our rotisserie ovens to Wal-Mart Stores, Inc. and have successfully secured a repeat of this program that shipped in September 2006.

Online Commerce

We sell direct to consumers through our website, www.ronco.com. Historically our website has primarily been used by viewers of our television infomercial as an alternate means of purchase and by existing customers to buy additional products and accessories. We plan to redesign the website to accommodate higher traffic counts and to support more robust features such as product up-sells (the recommendation of higher-priced versions of products) and cross-sells (the recommendation of related or complementary products), product recommendations, automated customer service, product demonstrations, customer affinity programs and branding. We expect that our website redesign will increase our ability to sell online, and will position our site for search engine optimization. Historically, online sales has represented approximately between 6 and 10% of our gross product sales.

New Product Strategy

We have historically focused a substantial portion of our creative, managerial and capital resources within a given period on a single product and have not diversified our business. Until the November 2003 launch of the Six Star+™ Cutlery Set, a launch which overlapped with the marketing of our Showtime™ Rotisserie line, Mr. Popeil had not simultaneously invested in and featured more than one major product line in a long-form infomercial at the same time. In addition, our historical product development efforts have relied solely on the inventions of Mr. Popeil, which could constrain our ability to respond to market opportunities on a timely basis or with forward-thinking product ideas. We intend to diversify our sources of product development and our emphasis on a given product category. We also intend to pursue a new product strategy by which we will:

Work Closely with Mr. Popeil to Create New Products that Leverage our Historical Competencies In Product Development and Marketing

As an inventor, Mr. Popeil has conceived of, developed and produced a succession of unique and highly-functional products that have been well-suited to infomercial marketing, which feature thorough product demonstrations, discussions of a product's virtues and user testimonials. As a model, the sales of our Showtime™ product family demonstrates the effectiveness of infomercials as a marketing medium and the value that we can create through innovative product design. On June 30, 2005, we entered into a new product development agreement with Mr. Popeil which provides that we will have an exclusive relationship with Mr. Popeil with respect to new product inventions for the next two years.

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Add Complementary Products to our Existing Primary Product Lines

We plan to introduce product line extensions to our major product families in the future, including the Showtime™ Rotisserie and the Food Dehydrator, to take advantage of their imbedded customer bases and our cumulative media investment in building each sub-brand. In addition, most of our products have not been “versioned.” We believe this type of product differentiation will result in extended product life and allow us to increase our market share and retail shelf space for our products.

Introduce New Ronco-branded Product Lines that Innovate through Packaging and Pricing

We believe the success experienced thus far with the Six Star+™ Cutlery Set product line serves as a demonstration of the value that the Ronco brand can bring to the marketing of less unique items. Our cutlery product line takes advantage of the large market in cutlery sold through direct response television. While we own no intellectual property with respect to this product line, we have created a strong market position for our product offering through the value proposition (24 knives for $39.95), the Ronco brand, and our infomercial marketing and sourcing expertise. We intend to continue to selectively leverage our brand and market position to introduce and sell non-proprietary products.

Introduce Unique Products from Third Parties that have the Opportunity to be Major Contributors

We regularly receive new product ideas. We anticipate formalizing a process of new product evaluation and market testing. This effort would include identification of products that could be the subject of infomercial marketing by us under a license or royalty arrangement. Opportunities also exist within the industry to either purchase or form a joint venture with companies who have potentially successful product lines, but could benefit from our brand, marketing expertise and established distribution channels.

Long-Term Marketing and Distribution Strategy

Our objective is to increase our revenue, profitability and cash flow while growing our position as a direct response television marketer of branded products for use in the kitchen and elsewhere around the home. Our strategy for this objective includes the following key elements:

Expand Retail Distribution

We believe there is a substantially untapped opportunity to market our products through traditional retailers. To date, over five million Showtime™ Rotisserie & BBQ units have been sold. Approximately three million of those units were sold through direct response television channels and two million through retailers. This represents a ratio of less than one retail unit sale for each one direct response television sale. Therefore, a core component of our strategy to increase revenue is to expand retail distribution of our products by entering into direct distribution agreements with key national retailers of household and home improvement products. We are also re-focusing our existing wholesale distribution relationships to target selected smaller or regional retail chains while we develop direct relationships with the larger retailers, in an effort to improve our gross margins. As part of this strategy, we have selectively re-introduced certain of our existing products into retail distribution.

Market Directly to the U.S. Hispanic Population

We believe the Hispanic population within the U.S. represents a growing and attractive market for our products. According to a December 2004 Conference Board study, Hispanic-American households will sharply increase both their numbers and spending power over the next 10 years. By 2010, Hispanic households are expected to reach approximately 13.5 million, up from less than 6 million in 1990, the report finds. According to the Conference Board, in 2010 the Hispanic market will represent $670 billion in personal income, however, the domestic Spanish language television market is still largely untapped by the direct response industry. Historically, we approached this market opportunity by re-producing certain content from our library of infomercials with Spanish dubbing. We do not believe that these efforts are the most effective method of addressing this marketing opportunity. We believe the market opportunity requires a more comprehensive strategy and investment. We plan to increase our domestic Spanish language media exposure through the production of a new infomercial, produced entirely in Spanish, with a Hispanic host and appropriate recipes. Beginning in July, 2006, we initiated efforts to market our products to retailers who sell in the Hispanic markets.

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Enhance Our Online Commerce Capabilities

While sales through our e-commerce distribution channel have grown substantially, we believe our current website lacks many commonly-available e-commerce features that would improve the customer experience and increase our sales. In order to address this untapped opportunity, we plan to make a number of modifications and enhancements to our existing website operations. The enhancements and improvements that were completed include improving our technology infrastructure to accommodate higher traffic counts and simultaneous transaction processes. We are continuing to increasing online features to enable product up-sells, product recommendations, automated customer service, product demonstrations, customer affinity programs and overall branding. We are also providing higher quality online streaming of past and future infomercials and adding content that will draw potential customers to our site for repeat visits and for longer durations, including online newsletters, sweepstakes and promotions, and an expanded our recipe section featuring celebrity chef recipes and automated affiliate links. We expect to complete these enhancements within the next twelve months.

Expand International Distribution

We sell a nominal amount of product in international markets. In addition, the Showtime™ product is marketed in Canada either through television/telemarketing (via Northern U.S. television stations) and The Shopping Channel or through retail outlets. We believe that our international market opportunity is vastly untapped and that the emergence of additional television shopping channels in Western Europe, Latin America and Asia present additional market opportunities. Beginning in February 2006, we began targeting these markets for export; this program includes both multi-national import/export companies, as well as individual in-country importers. We have signed an agreement with Interglobal International Ltd. to act as our distributor in this endeavor.

Leverage our Customer Database for Relational Marketing Programs

We maintain a database of over four million customers while adding many thousands of new customers each month, which is a valuable asset for current and future sales. To date, we have not exploited the potential value of this asset. We currently generate revenues through mining our customer lists and occasionally renting our list to third parties for a fee. Among the tools we are currently testing or developing are outbound telemarketing programs, catalogs, direct mail offers, and email.

Manufacturing

We currently outsource manufacturing of our products, primarily to China. We have been sourcing Six Star+™ Cutlery and related products in China since November 2003. Delivery of Showtime™ Rotisseries from China began in September 2004. Our manufacturing was sourced in Korea prior to China. Our Chinese sourcing partner will assist us going forward with product development, product line extensions, quality control, and ongoing review of manufacturing and distribution. We will continue to re-engineer many of our business processes over the next several years and expect that we will further enhance our profitability as a result. We believe that our profitability will be increased by developing new products that increases sales while maintaining our historic gross profits.

We enjoy the protection of sixteen patents covering the design and manufacture of the Showtime™ Rotisserie & BBQ, and own the tooling and dies currently used by our manufacturers and their sub-contractors for production. Manufacturing of the Showtime™ product line is streamlined. Since the primary differentiation among all three Showtime™ units is width, common parts, including side panels, motor, gear assemblies, and electrical wiring are utilized. This allows for extremely efficient production and allocation among suppliers. There is a six to eight week production cycle from issuance of a purchase order to the arrival of the product at port in Los Angeles. This quick turnaround enables us to maintain relatively low levels of inventories and allows for efficient production.

Fulfillment and Customer Service

We utilize telemarketing service bureaus to handle most of the inbound traffic generated by potential customers who are calling one of the toll-free phone numbers provided within our infomercials. Each show has a unique toll-free phone number, enabling us to gather important data for determining the profitability of individual shows and products and the efficacy of our media buying. We have also implemented the use of unique internet URL addresses to track the traffic increase from our media to internet sales.

Potential customers call into a toll-free number, received by our telemarketing partners. Our telemarketing vendors route a customer's order, via order-fulfillment software, for approval. We use third-party vendors to process customer payments.

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When an order is placed and the original method of payment is declined, our customer service department contacts the potential customer to obtain an alternate method of payment.  It is our experience that approximately 75% of such orders are recovered. We operate an in-house 80 seat customer contact center and utilize strategic partnerships with off-site vendors for customer service support during our peak volume periods.  We also operate a 30-seat data entry center, which handles our written correspondence, product warranties, returns, collections and quality assurance for all aspects of our call center operations.  Together, these departments generate sales revenues from inbound customer service inquiries, as well as outbound campaigns to existing customers. This customer contact center not only handles basic customer service inquiries, but also has instituted a number of successful inbound and outbound telemarketing programs that are currently generating significant revenues at attractive margins.

All approved orders are routed to a fulfillment house, which remits shipping status notifications back to us through our order-fulfillment software. The majority of our physical inventory is warehoused by our fulfillment partners.

Arrangements with Ronald M. Popeil

Although Mr. Popeil has not assumed day-to-day operational duties or executive responsibilities with us, he is continuing to be involved in our business as a consultant. We believe it is in our best interests and our stockholders' best interests to maintain a close working and financial relationship with Mr. Popeil. Accordingly, we have entered into several agreements with Mr. Popeil including a consulting services agreement, a trademark co-existence agreement and a new product development agreement. We have also entered into an agreement with Mr. Popeil pursuant to which we will pay Mr. Popeil a percentage of the gross profits generated from the sale of our products, which occur as a result of his ongoing personal appearances on QVC or other television or online shopping venues.

Consulting Agreement with Ronald M. Popeil

On June 30, 2005, we entered into a consulting services agreement with Ronald M. Popeil for an initial term of three years. During the term of the agreement, Mr. Popeil will not enter into any consulting services, advisory services or employment agreement, nor directly provide consulting or advisory services to any entity or person that is in direct competition with our business or in violation of the new product development agreement, as described below. Pursuant to the consulting agreement, Mr. Popeil may, among other things, consult on the development of new products acquired by us pursuant to the new product development agreement. Mr. Popeil will also make the following personal appearances (each of which will be performed at Mr. Popeil's sole discretion, unless otherwise noted):

· Speak as our chief spokesperson for non-financial matters in all forms of media (not otherwise covered below);

· Promote our image by making up to six appearances per year on nationally broadcast television programs, if invited or booked by us;

· Make personal appearances for leading national retailers;

· Participate in the mandatory production of up to three long-form infomercials per year for the direct response television marketing of our products, if we choose to produce them; and

· Attend and participate in the Gourmet Show and Housewares Show (at our discretion).

We will pay Mr. Popeil an annual base fee of $500,000 per year, paid in equal weekly installments, at Mr. Popeil's direction, in the form of salary and/or payment of certain business expenses incurred by Mr. Popeil. In addition, we will pay Mr. Popeil certain fees for personal appearances in accordance with the following schedule:

· Fees for chief public spokesperson, which will be negotiated on a fair and reasonable basis as and when appearance requests arise;

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· $10,000 per day for appearances on nationally broadcast television programs;

· $10,000 per day for appearances for leading national retailers;

· $50,000 for each infomercial produced; and

· $50,000 per day for the Gourmet Show and Housewares Show.

Mr. Popeil will be eligible to receive stock options under the stock incentive plan that we intend to implement during our next fiscal year, based on his contribution to our growth, as determined by our board of directors in its sole discretion. We will also provide customary indemnification to Mr. Popeil with respect to our products, appearances and other items.

Trademark Co-Existence Agreement

On June 30, 2005, we also entered into an agreement with Mr. Popeil with respect to the names “Popeil,” “Ron Popeil” and the name and any form of the likeness approved by Mr. Popeil (or one of his representatives), including the image, silhouette and voice of Mr. Popeil. The term of this agreement will continue so long as the trademarks are protected by applicable U.S. law. Mr. Popeil retains as his sole and exclusive property, the worldwide royalty-free perpetual rights with respect to the trademarks for certain uses, including autobiographical works, various media projects, and a specific licensing arrangement. We acquired the trademarks subject to the rights of certain third parties, including QVC, the PopeilFamilyStore.com and Marketing Development Group. Should certain events of default with respect to the promissory notes issued in connection with our purchase of the assets of the predecessor entities occur, we will grant Mr. Popeil a non-exclusive license (at no cost to Mr. Popeil) to use the trademarks in connection with the manufacturing, marketing and sale of certain specific new products as to which Mr. Popeil elects, pursuant to the new product development agreement, and terminate the applicable patent or other intellectual property licenses we hold.

Mr. Popeil retains the right to approve all uses of his name and likeness for any purpose including but not limited to products, packaging, advertising and displays, but with such approval not to be unreasonably withheld or delayed. Should Mr. Popeil die or become incapacitated, a designated representative of Mr. Popeil will exercise the right of approval.

New Product Development Agreement

On June 30, 2005, we entered into a new product development agreement with Mr. Popeil. Under the terms of the agreement, we have a fifteen day right of first refusal on all new consumer products (excluding all products that are autobiographical in nature) that are created by Mr. Popeil during the term, to the extent that Mr. Popeil owns and controls the rights to such products. Should certain events of default with respect to the promissory notes issued to the predecessor entities occur, the right of first refusal described above will be suspended until such event of default is cured. The purchase price of each new product will be negotiated and agreed upon on a fair and reasonable basis. The purchase price will include the cost of any product designs, prototypes, tooling and a completed commercial or infomercial.

The agreement also provides the terms of purchase for a specific product currently under development by Mr. Popeil, including a specific upfront payment and a per-manufactured-unit payment to be paid up to an aggregate maximum. We will also be obligated to pay the costs for all patent filings, tooling and infomercials related to this product and will be obligated to reimburse the out-of-pocket expenses incurred by Mr. Popeil in connection with the development of this product. All the intellectual property related to the product will remain with Mr. Popeil until the promissory notes, including any accrued and unpaid interest, are paid in full.

Mr. Popeil will have creative control over all new consumer products created by Mr. Popeil and sold to us under the new product development agreement, and control over all packaging, advertising, naming and promotion, including, without limitation, creative control over all stages of new product conception, creation, design, development and completion. Mr. Popeil has no obligation under the terms of this agreement to develop new products. Mr. Popeil will have the right to terminate the agreement if we breach any provision of the new product development agreement, the asset purchase agreement, the trademark co-existence agreement or the consulting agreement with Mr. Popeil, if the breach is not cured to Mr. Popeil's reasonable satisfaction within fifteen days of such breach.

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Sources of Supply

We maintain supply contracts with third party suppliers, located primarily in Asia, which include standard terms for production and delivery. Specific production amounts are ordered by separate purchase orders. We believe that we maintain good business relationships with our overseas manufacturers, although these relationships were strained due to our cash shortfall and our payments for products purchased exceeded our agreed upon terms.

We believe that the loss of any one supplier would not have a long term material adverse effect on our business because we believe we would be able to locate other suppliers that would be able to increase production to fulfill our requirements. However, the loss of a supplier could, in the short term, adversely affect our business until alternative supply arrangements are secured.

Backlog

Although we obtain firm purchase orders from our customers, customers typically do not make firm orders for delivery of products more than 30 days in advance. In addition, customers may reschedule or cancel firm orders. Therefore, we do not believe that the backlog of expected product sales covered by firm purchase orders is a meaningful measure of future sales.

Competition

The direct response television marketing industry includes numerous companies that market their products on television through infomercials. Competition among direct response companies is largely based on: (i) ability to place infomercials into television time slots that yield the highest viewership and customer generation for a particular product; (ii) ability to purchase air time at competitive prices, create brand awareness, and generate sales profitably; and (iii) product quality, reputation and pricing. In the U.S., we compete with several other companies and products in the direct response industry, including GT Brands, Telebrands, Idea Village, Guthy-Renker, Tilia (a division of Jarden, Inc.), and Sylmark. We believe, however, that we have a definite advantage due to the strength of our brand and the consistent quality of our products.

We believe that manufacturers of small kitchen appliances, such as Cuisinart, Kitchen Aid, Oster, and DeLonghi, are not comparable competition because these products are mostly commoditized and are not characterized by unique, patented systems and designs. Currently, we believe there are very few competitive brands that market appliances equivalent to our proprietary models (such as the rotisserie and food dehydrator) in price, uniqueness or quality. We also compete with various manufacturers of kitchen knives and flatware, sold both through direct-to-consumer and retail channels. We believe that our Six Star+™ line of products favorably competes on quality and durability at very attractive price points. In addition, some mainstream manufacturers, such as Panasonic, Salton, Sharper Image, and Nautilus, have turned to direct response television to create self-liquidating brand value.

Insurance Matters

We currently carry insurance policies through major carriers for product liability, general liability, commercial property, automobile, plant and equipment, marine insurance, workers' compensation, directors and officers' insurance and excess liability. We currently have key man life insurance coverage and disability coverage on Ronald M. Popeil in the aggregate amount of $15 million. In addition, we increased the limits of our directors and officers' insurance commensurate with our status as a public company.

Intellectual Property and Proprietary Rights

We acquired a significant amount of proprietary technology covering the design and manufacturer of our products. We rely on patents and confidentiality, non-disclosure and assignment of inventions agreements to protect our proprietary rights. We hold over thirty patents on the proprietary design and manufacturing processes of our products.

Our policy is to require employees and consultants to execute confidentiality agreements when their relationship with us begins. We also seek these protective agreements from suppliers and subcontractors. These agreements provide that confidential information developed or made known during the course of a relationship with us is to be kept confidential and not disclosed to third parties, except in specific circumstances. It might be possible for unauthorized third parties to copy aspects of our products or to obtain and use information that we regard as proprietary.

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We also have trademarks in the U.S. and various countries around the world covering a variety of our marks.

Many participants in the consumer products industry have an increasing number of patents and patent applications. Third parties may, from time to time, assert infringement claims in the future alleging infringement by our current or future products. It is possible that these claims may require us to enter into license arrangements or may result in protracted and costly litigation, regardless of the merits of these claims.

Government Regulations

We are subject to federal, state and local regulations concerning consumer products safety. Foreign jurisdictions also have regulatory authorities overseeing the safety of consumer products. Foreign compliance regulations vary by country and because of these various certifications we have encountered a very lengthy approval process for marketing and selling products in the European Union (EU). This process has delayed shipments to our international distributor. We have completed the necessary electric and RoHS (a directive that bans the placing on the EU market of the new electrical and electronic equipment containing high levels of lead and other contaminants) certifications for the United Kingdom, which should enable us to expand our sales into this international market during the third and fourth quarters of fiscal 2007.  Our small electric appliance products sold in the United States are listed by Underwriters Laboratory, Inc., which we refer to as UL, and similar products sold in other countries are listed with local organizations similar to UL, if required.

Employees

We currently have approximately 117 employees, including executive, management, warehouse, customer service, media buyers and maintenance personnel. None of our employees are members of a labor union. We believe that we have good relations with our employees.

Item 1A.Risk Factors.

Cautionary Statements and Risk Factors

Several of the matters discussed in this document contain forward-looking statements that involve risks and uncertainties. Factors associated with the forward-looking statements that could cause actual results to differ materially from those projected or forecast are included in the statements below. In addition to other information contained in this report, readers should carefully consider the following cautionary statements.

Risks Related to our Business

We have a history of operating losses and we may be unable to achieve or maintain profitability.

Ronald M. Popeil has been selling products under the Ronco brand name since the early 1960s. The predecessor entities have been operating since 1991 under various brands and entities. These entities have recorded operating losses during various periods in their operating history. During this year, we continued to experience these losses as the revenue from the direct response sales decreased and had greater media expenditures on a per order basis. It is our expectation that we can achieve positive operating profits under our current business plan as we have recently seen an increase in our direct response sales and the decrease in the media expenditures on a per order basis. There can be no assurance, however, that we will achieve or maintain our profitability targets.

There can be no assurance that we will be ability to continue as a going concern

Our substantial historical operating losses, limited revenues, negative working capital and our capital needs raise substantial doubt about our ability to continue as a going concern. We can provide no assurances that cash generated from operations together with cash received in the future from external financing will be sufficient to enable us to continue as a going concern. If we are unable to obtain adequate funding or sufficiently increase revenues from the sale of our products to satisfy our working capital requirements, we could be required to significantly curtail or even shutdown our operations.

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If we are unable to meet our increased need for liquidity our business and financial condition could be seriously harmed.

As a result of our strategy to increase our wholesale business, we will need to purchase more inventory, but we will have less available cash per product sold because we offer credit terms to wholesale customers. Thus, we will require additional working capital. We cannot be certain that additional capital will be available to us at all, or that, if it is available, it will be on terms favorable to us. Any inability to raise additional capital when we require it would seriously harm our business and financial condition. Any additional issuance of equity or equity-related securities will be dilutive to our stockholders.

We face risks associated with the use of debt to fund our operations, such as refinancing risk. We currently may have incidents of default of our debt obligations under multiple arrangements with lenders, as a result of which we could lose significant rights to our products and intellectual property assets, which would harm our business.

We are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. If principal payments due at maturity cannot be refinanced, extended or repaid with proceeds from other sources, such as new equity capital, our cash flow may not be sufficient to repay amounts under the promissory notes that we issued in connection with our purchase of the Ronco business. We also may be unable to satisfy our debt obligations under other arrangements with lenders, including our obligations to Sanders Morris Harris and other lenders under the $1.5 million loan transaction completed in June 2006, our obligations under our factoring agreement and our obligations under our new $4.0 million credit facility with Crossroads Capital that we closed on October 6, 2006.

We may have defaulted under certain of our obligations with these lenders. Under the terms of our loan agreement with Sanders Morris Harris and other lenders that we closed in June 2006, we agreed to retain Richard F. Allen, Sr. as our Chief Executive Officer. On August 9, 2006, we terminated Richard F. Allen, Sr. as President and Chief Executive Officer of our company, at which point we were technically not in compliance with our obligations under the loan agreement; also have not made certain payments under the promissory notes issued in connection with the purchase of our Ronco business, including promissory notes issued to Mr. Popeil, which could result in an event of default under these notes.

Our agreements with lenders provide that the interest rate on the notes will increase upon occurrence of default to which we have been notified in writing that is not cured in the time specified in the agreements. These agreements also provide that any unpaid principal and interest will become immediately due and payable. Accordingly, our default of obligations under these agreements will significantly increase our cash flow needs and cause us to incur substantial damages, all of which could harm our business. In addition, the promissory notes issued to Mr. Popeil provide that we could lose significant intellectual property rights if we default on our obligations under these notes. The loss of these intellectual property rights could have a material adverse effect on our business and results of operations.

Due to changes that occurred in our financing and licensing arrangements, and other changes that occurred in connection with our acquisition of the Ronco business, the financial statements of the predecessor entities may not be a good indicator of our future performance.

In connection with our acquisition of the Ronco business, we modified certain of the predecessor entities' business arrangements and did not assume certain of their liabilities. For instance, we purchased the patents that the predecessor entities licensed and terminated product development and license fees. We also did not assume approximately $39.2 million of related party loans to the predecessor entities. Although we will not have the expenses associated with these liabilities, we will incur the substantial costs associated with being a public company, pay income taxes (the predecessor entities did not pay taxes at the corporate level) and have to establish financing facilities since we will no longer be able to rely on Mr. Popeil to make loans to us, as needed. We cannot yet determine the amounts of these additional costs. As a result of these changes, our historical financial statements may not be a good indicator of our future performance.

We are subject to Federal Communications Commission regulation with respect to the telemarketing aspects of our business, and our business could be harmed if these regulations limit the format and/or content of television direct marketing programs.

Our television direct marketing programs are significantly impacted by government regulation of television advertising, particularly those regulations adopted by the Federal Communications Commission. These regulations impose restrictions on, among other things, the air time, content, and format of our direct response television programs. If we are required to remove or alter the format or content of our television programs, our business could be harmed. Additional regulations may be imposed on television advertising in the future. Legislation regulating the content of television advertisements has been introduced and passed in Congress from time to time in the past. Additional regulations or changes in the current laws regulating and affecting television advertising may harm the results of our operations.

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Our business model is dependent, in part, on our ability to purchase sufficient quantities of television media at attractive prices. If we fail to obtain attractive media prices for our direct response television programs, our profitability will decline and our business may be harmed.

While we intend to invest in and develop other distribution channels, direct response television is currently our main channel of distribution. Our business model is dependent in part on our ability to purchase television media time at attractive prices in order to broadcast our direct response television programs. We have formed our own media department, Castle Advertising, solely for the purpose of making these media purchases.

The nominal cost of television media rises every year as a result of increasing competition for “paid programming” time slots. In addition, each network or station generally desires to increase annual revenues and they achieve revenue growth by increasing the price of their media. Castle Advertising faces the problem of having to negotiate low prices despite this upward pressure on prices. If we fail to obtain attractive prices for our media purchases and our media purchasing costs increase, our results of operations may be adversely affected and our operating profitability may decline. There can be no assurance that our media department will be able to acquire sufficient media at attractive prices.

Our direct response television revenues, in part, depend on our ability to successfully develop, produce and broadcast new and updated infomercials. If we fail to regularly renew our infomercial campaigns for our existing products, sales from such products will decline.

Historically, direct response television sales of our products are highest during the first four hours immediately following the airing of a long form infomercial for that specific product.

In addition, direct response television sales from a particular long form infomercial decline as the infomercial ages. Therefore, our revenues from direct response television sales depend, in part, on the continued periodic airing of our existing infomercials and the development, production and broadcast of new and updated infomercials. Under the terms of our consulting agreement with Ronald M. Popeil, Mr. Popeil is obligated to appear in three long form infomercials per year for our products, if we choose to produce them. Mr. Popeil's consulting agreement has a term of three years beginning June 30, 2005. If we are unable to produce or broadcast new and updated infomercials, or broadcast existing infomercials, for our products in a timely manner, our revenues from direct television sales could decrease, which could have a material adverse effect on our business, financial condition and results of operations.

Our operations are based, to a certain extent, on the successful integration of certain supply chain and operating technologies. Our inability or our vendors' inability to integrate these technologies may negatively impact our customer order process, and the fulfillment and delivery of our products, which could harm our business and operating results.

Some of our operating activities are outsourced to various vendors and service providers. These operating activities include taking customer orders, product manufacturing, product fulfillment and product delivery. We rely on certain hardware and software systems, provided by third-party vendors, to perform vital functions and processes with respect to our operations. Various supply chain and operating technologies have been used to implement these functions and processes. Our inability, or our vendors' inability, to operate and integrate these technologies properly may negatively impact our product supply chain and may harm our business and operating results.

The loss of any of our major wholesale distributors could reduce our sales and substantially harm our business.

Since 2003, sales from our wholesale business distributors accounted for between 11% and 16.4% of our gross product sales annually, in the aggregate. Since 2003, we have used M. Block & Sons and Englewood Marketing Group as our two wholesale distributors to purchase and distribute our products through retail channels. M. Block & Sons accounted for approximately 7.3% and 6.8%, and Englewood Marketing Group accounted for approximately 9.1% and 7.9%, of our net sales for the years ended June 30, 2006 and June 30, 2005, respectively. As a result, our wholesale revenues have been highly concentrated. Our wholesale revenues could decline if either one of these distributors experience financial distress that interfere with its ability to purchase our products, or under perform relative to our expectations. A core component of our strategy is to expand our retail distribution by entering into direct distribution agreements with key national retailers of household and home improvement products. In September 2005, we began shipping our Showtime™ Rotisserie ovens to Wal-Mart. We also plan to re-focus our existing wholesale distribution relationships to target selected smaller or regional retail chains. There can be no assurance that we will be able to establish direct relationships with other retail chains or that we will be able to increase the number of wholesale distributors that sell our products and decrease our reliance on these two distributors.

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We may be unable to expand our retail distribution by entering into direct distribution agreements with key national retailers on favorable terms, in which case we may be unable to generate sufficient revenues or adequate margins to offset the increase in our operating costs associated with this strategy.

We plan to implement our strategy to distribute our products through large national retailers in order to leverage the strength of the Ronco brands created through our direct response television distribution channel. There can be no assurance that we will be able to negotiate attractive distribution agreements with key national retailers or otherwise achieve substantial retail distribution of our products. Furthermore, if we are successful in placing our products with key national retailers, there can be no assurance that our products will have satisfactory sell-through rates or that sales will offset any additional costs associated with this strategy.

We rely on the services of Ronald M. Popeil to develop new products and to define our marketing strategy, and the loss of his services would negatively affect our operations.

Our future success depends, in part, on the continued service of Ronco's founder and chief inventor, Ronald M. Popeil. Mr. Popeil's name and identity are closely linked to the brand identity of Ronco Corporation. Additionally, Mr. Popeil has been essential to defining the predecessor entities' brand and marketing strategies and product developments. We have entered into an exclusive consulting agreement with Mr. Popeil for an initial term of three years, under which Mr. Popeil will continue to provide us with his expertise and services with respect to new products, marketing and other aspects of our operations. This agreement also contains a provision prohibiting Mr. Popeil from competing with us. We have also entered into several other agreements with Mr. Popeil to encourage his ongoing interest in our growth and financial prospects. The loss of Mr. Popeil's services for any reason would have an adverse effect on our business.

We rely on a limited number of offshore manufacturers, vendors and suppliers for the bulk of our product production capacity and the procurement of materials required to manufacture our products, and the loss of services and materials provided to us by any of these manufacturers, vendors or suppliers could result in product shortages.

We outsource our manufacturing and procurement needs to a small number of offshore manufacturers, vendors and suppliers in multiple geographic regions, which provides us with low cost production capacity. Because a small number of manufacturers, vendors and suppliers are responsible for the production of our products and procurement of materials for us, any breakdown in the manufacturing or procurement process could result in shortages of products or materials, and our revenues could decline due to the loss of one of these manufacturers, vendors or suppliers. An early termination by one of our manufacturers, vendors or suppliers would leave limited time to seek a replacement and as such, could harm our financial results, as it is unlikely that we would be able to rapidly replace that source.

Our earnings in future periods could be unfavorably impacted in the event of political instability or fluctuations in exchange rates.

Sourcing products abroad subjects our business to a variety of risks generally associated with doing business abroad, such as political instability, currency and exchange risks and local political issues. Our future performance will be subject to these factors, which are beyond our control.

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Our prospects are dependent, to a certain extent, on our ability to successfully introduce new products on a timely basis. If we fail to continue to develop and successfully introduce new products, either directly or through third-party inventors, our revenues could decline.

Companies engaged in the direct response television marketing and consumer products industries regularly develop and introduce new products to consumers in order to grow their revenues and to compensate for the normal life cycle of any product. We are continually developing new products as well as new applications of, or modifications to, existing products. In addition, as part of our product strategy, we intend to work with third-party inventors for the first time in our history, which may result in our purchasing or licensing the rights to certain products or product lines from such parties. There can be no assurance that these efforts will be successful, or that we will be able to maintain a level of uniqueness, customer value or product quality with potential third-party products that we have experienced with products developed internally by us. There can be no assurance that we will not experience difficulties that could delay or prevent the successful development, introduction or marketing of these products, or that such new or enhanced products will adequately meet the requirements of current or prospective customers. Any failure by us to successfully design, develop, test and introduce such new products, or the failure of our recently introduced products to achieve market acceptance, could prevent us from maintaining our existing customer base, gaining new customers or expanding our markets and could have a material adverse effect on our business, financial condition and results of operations.

Our success depends largely on the value of our brands, and if the value of our brands were to diminish, our business would be adversely affected.

The prominence of our Ronco, Popeil, Showtime™ and other brands is a key component of our business. If our consumer brands or their associated merchandise lose their appeal to consumers, our business would be adversely affected. The value of our consumer brands could also be eroded by misjudgments in product development or selection, or by our failure to maintain a sufficient level of quality control. These events would likely reduce sales for our products. Moreover, we anticipate that we will expand our marketing and sales efforts through the development or acquisition of new products that will be sold under our brand names directly, through retail stores and online through our website. Misjudgments by us in the development or choice of new products could damage our existing or future brands. If any of these developments occur, our business would likely suffer and we may be required to write-down the carrying value of our goodwill.

Our ability to compete successfully will depend, in part, on our ability to protect our intellectual property rights. Litigation required to enforce these rights can be costly, and there is no assurance that courts will enforce our intellectual property rights.

We rely on a combination of patents, trademarks, trade secrets, copyrights, nondisclosure agreements and other contractual provisions and technical measures to protect our intellectual property rights. Policing unauthorized use of our intellectual property, however, is difficult, especially in foreign countries. Litigation may be necessary in the future to enforce our intellectual property rights, to protect trade secrets, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement or invalidity. Litigation could result in substantial costs and diversion of resources and could harm our business, operating results and financial condition regardless of the outcome of the litigation. In addition, there can be no assurance that the courts will enforce the contractual arrangements that we have entered into to protect our intellectual property rights. Our operating results could be harmed by the failure to protect such intellectual property.

If we fail to implement our product distribution strategy effectively, our revenue, gross margin and profitability could suffer.

We plan to use a variety of different distribution methods to sell our products, including direct response television sales, indirect sales through retail stores and sales through our internet website. Successfully managing the interaction of our direct and indirect channel efforts to reach all of the potential customer segments for our products is a complex process. Moreover, since each distribution method has distinct risks and gross margins, our failure to implement the most advantageous balance in the delivery model for our products could adversely affect our revenue and gross margins and therefore profitability.

Our financial results could be materially adversely affected if conflicts arise among our various sales channels or if we lose a distributor.

Our future operating results may be adversely affected by any conflicts that might arise among our various sales channels, the loss or deterioration of any alliance or distribution arrangement or the loss of retail shelf space. We primarily distribute our products through three channels: direct response television marketing, wholesale and retail outlets and online commerce. In order to achieve successful sales at all these channels of distribution, we must offer products that are differentiated by price or functionality through different channels of distribution. Alternatively, we must schedule the timing of our product offerings so that we are not offering the same product for sale through direct response media, and indirectly through retail and wholesale outlets, at the same time. If we do not follow this strategy, consumers may not be willing to buy our products directly from us if the same or similar products are available at retail and wholesale outlets, potentially at lower prices. If we fail to successfully manage these conflicts then our results of operations will decline.

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We plan to sell more of our products through distributors and direct to retail chains. Due to the typically large size of these orders, which fluctuate seasonally and may be changed or canceled on short notice, cost-effective management of our inventory may become more complex and costly. If we are unable to accurately forecast orders and cancellations, our profitability may suffer.

We must manage inventory effectively, particularly with respect to sales to wholesalers and retail chains, which involves forecasting demand and pricing issues. Although a comparatively small portion of our sales volume is supplied through wholesale distributors, our strategy calls for increasing such sales, and such distributors and retail chains may increase orders during periods of product shortages, cancel orders if their inventory is too high or delay orders in anticipation of new products. Wholesalers and retail chains may also adjust their orders in response to the supply of our products and the products of our competitors and seasonal fluctuations in end-user demand. Our reliance upon indirect distribution methods may reduce visibility to demand and pricing issues, and therefore make forecasting more difficult. If we have excess inventory, we may have to reduce our prices and write-down inventory. Moreover, our use of wholesale distribution channels may limit our willingness or ability to adjust prices quickly and otherwise to respond to pricing changes by competitors. We also may have limited ability to estimate future product returns for products sold through wholesale distribution channels.

Claims made against us based on product liability could have a material adverse effect on our business.

Like any other distributor or manufacturer of consumer products, we are subject to product liability litigation. Whether frivolous or with merit, these claims divert management's time and resources from general operations. Consequently, our operations would be adversely affected. Additionally, there can be no assurance that the plaintiffs in these cases will not obtain large judgments against us, which may include substantial punitive damages that we would be forced to pay. As a result, we may suffer a material adverse impact to our earnings and financial health.

Our business may be adversely affected by certain customers seeking to directly source lower cost imported products.

In some cases, our wholesale and retail customers may find substantially similar, unbranded products produced by a foreign manufacturer for significantly less than our prices. Consequently, these wholesale or retail customers may elect to purchase the cheaper, unbranded products to offer in their stores or to their customers, and we could suffer a material decrease in our sales and profitability.

If we do not execute our growth and profitability strategy successfully, our financial condition and results of operations will be adversely affected.

Our growth will depend to a significant degree on our ability to increase revenues from our direct marketing and retail businesses, to maintain existing vendor and distribution relationships and develop new relationships, and to maintain and enhance the reach and brand recognition of our existing products and any new products that we create or acquire. Our ability to implement our growth strategy will also depend on a number of other factors, many of which are or may be beyond our control including: (i) the effectiveness of our media and marketing strategies, (ii) the perception by consumers that we offer high quality products at attractive prices, (iii) our ability to develop and/or select new products that appeal to our customer base and to market such products effectively to our target audience, and (iv) our ability to attract, train and retain qualified employees and management. There can be no assurance that we will be able to implement our growth strategy successfully.

There can be no assurance that our internet technology systems will be able to handle increased traffic or that we will be able to upgrade our systems, if required, on a timely basis. If our online systems do not perform properly, we may lose online sales and our revenues may be adversely affected.

An element of our growth strategy is to generate a higher volume of traffic on, and use of, our internet website: www.ronco.com. Accordingly, the satisfactory performance, reliability and availability of www.ronco.com, transaction processing systems and network infrastructure will be critical to our reputation and our ability to attract and retain online customers, as well as to maintain adequate customer service levels. Our online revenues will depend on the number of visitors who shop on www.ronco.com and the volume of orders we can handle. Unavailability of our website or reduced order fulfillment performance could reduce the volume of goods sold and could also adversely affect consumer perception of our brand name. We may experience periodic system interruptions from time to time. If there is a substantial increase in the volume of traffic on www.ronco.com or the number of orders placed by customers, we may be required to expand and upgrade our technology, transaction processing systems and network infrastructure. There can be no assurance that we will be able to accurately project the rate or timing of increases, if any, in the use of www.ronco.com or expand and upgrade our systems and infrastructure to accommodate such increases on a timely basis. Any failure to manage the anticipated growth and expansion of our online sales could have a material adverse effect on our business.

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We could face liability for breaches of security on the internet, which could expose us to damages and harm our business.

To the extent that our activities or the activities of third-party contractors involve the storage and transmission of information, such as credit card numbers, security breaches could disrupt our business, damage our reputation and expose us to a risk of loss, litigation, governmental actions and possible liability. We could be liable for claims based on unauthorized purchases with credit card information, impersonation or other similar fraud claims. These claims could result in substantial costs and a diversion of our management's attention and resources.

We may not be able to attract, retain or integrate key personnel, which may prevent us from successfully operating our business.    

 We may not be able to retain our key personnel or attract other qualified personnel in the future. Our success will depend upon the continued service of key management personnel. The loss of services of any of the key members of our management team or our failure to attract and retain other key personnel could disrupt operations and have a negative effect on employee productivity and morale and harm our financial results.

Indemnification obligations to our directors and officers may require the use of a significant amount of our funds, which would reduce funds that otherwise would be available for business operations.

Our certificate of incorporation and bylaws provide for the indemnification of our officers and directors and we intend to enter into indemnification agreements with each of our directors and executive officers. If one of our officers or directors makes a valid claim for indemnification, the amount could be substantial and any amount in excess of our insurance coverage would be paid from our operating cash flow. As a result, the amount of funds available for our operations would be reduced.

As a result of our acquisition of the Ronco business, we have a substantial amount of goodwill on our balance sheet, which is subject to annual impairment analysis. If the value of the Ronco business we acquired declines in the future, the resulting charge would negatively impact our earnings.

We accounted for our acquisition of the Ronco business using the purchase method of accounting. The total cost of this transaction is allocated to the underlying net assets based on their respective estimated fair values. As part of this allocation process, we must identify and attribute values and estimated lives to the intangible assets acquired. Such determinations involve considerable judgment, and often involve the use of significant estimates and assumptions, including those with respect to future cash inflows and outflows, discount rates and asset lives. These determinations will affect the amount of amortization expense recognized in future periods. If we later determine that any of these estimates and assumptions is incorrect, and that the value of the Ronco business that we acquired is less than the amount then reflected on our balance sheet, we will be required to reduce our income by the amount of such decline in value, which reduction is referred to as an impairment charge.

We will test goodwill for impairment annually in accordance with accounting principles generally accepted in the United States of America. If we conclude that our goodwill is impaired, we will reduce it by the amount of the impairment charge. Such write-downs could dramatically impact our earnings and may result in lower trading prices for our common stock.

Terrorist attacks and other acts of wider armed conflict may have an adverse effect on the United States of America and world economies and may adversely affect our business.

Terrorist attacks and other acts of violence or war, such as those that took place on September 11, 2001, could have an adverse effect on our business, results of operations or financial condition. There can be no assurance that there will not be further terrorist attacks against the United States of America or its businesses or interests. Attacks or armed conflicts that directly impact the internet or our physical facilities could significantly affect our business and thereby impair our ability to achieve our expected results. Further, the adverse effects that such violent acts and threats of future attacks could have on the United States of America and world economies could similarly have a material adverse effect on our business, results of operations and financial condition. Finally, further terrorist acts could cause the United States of America to enter into a wider armed conflict, which could disrupt our operations and result in a material adverse effect on our business, results of operations and overall financial condition.

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Risks Related to Being a Public Company

The requirements of complying with the Sarbanes-Oxley Act and evolving corporate governance and public disclosure regulations may strain our resources.

We are a relatively new public company, and thus we only recently became subject to certain laws that are applicable only to public companies. Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002 and related rules and regulations, are creating uncertainty for public companies. We are presently evaluating and monitoring developments with respect to new and proposed rules and cannot predict or estimate the amount of the additional compliance costs we may incur or the timing of such costs. These new or changed laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity. As a result, their application in practice may evolve over time as new guidance is provided by courts and regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by creating initial disclosure and governance practices to comply with these laws and ongoing revisions to disclosure and governance practices. Maintaining appropriate standards of corporate governance and public disclosure may result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating activities to compliance activities. For example, as a result of these requirements, we need to form and maintain multiple board committees and adopt policies regarding internal controls and disclosure controls and procedures. These rules and regulations also make it more difficult and more expensive to obtain director and officer liability insurance. We may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage that was available to the entities that operated the Ronco business before we acquired it. As a result, it may be more difficult for us to attract and retain qualified candidates to serve on our board of directors or as executive officers. Our efforts to evaluate and monitor developments with respect to these new rules also could result in additional costs in the future. In addition, if we fail to comply with new or changed laws, regulations and standards, regulatory authorities may initiate legal proceedings against us and our business and our reputation may be harmed.

In addition, the financial statements of the predecessor entities do not reflect the additional costs of complying with the various corporate governance and public reporting requirements that now apply to us. We will incur significant legal, accounting and other expenses that are not reflected in the results of operations of our business before June 30, 2005. We estimate that these costs will be approximately $1 million annually, but they could be higher. These additional costs and the uncertainties associated with evolving requirements could materially impact our results of operations.

As of June 30, 2006, Ronco Corporation had material weakness in its internal controls, and its internal controls over financial reporting were not effective as of that date. If Ronco Corporation fails to maintain an effective system of internal controls, it may not be able to provide timely and accurate financial statements.

As more fully described in Item 9A, the Company’s management assessed the effectiveness of the Company’s internal controls over financial reporting as of June 30, 2006. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework. As a result of management’s assessment, management has concluded that, as of June 30, 2006, Ronco Corporation did not maintain effective internal controls over financial reporting.

The Public Company Accounting Oversight Board has defined a material weakness as a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim statements will not be prevented or detected. Accordingly, a material weakness increases the risk that the financial information we report contains material errors.

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We have identified control deficiencies in our internal control over financial reporting, and we are implementing new or revised controls to address these matters. The steps we have taken and are taking to address the material weaknesses may not be effective, however. Any failure to effectively address control deficiencies or implement required new or improved controls, or difficulties encountered in their implementation, could limit our ability to obtain financing, harm our reputation, disrupt our ability to process key components of our result of operations and financial condition timely and accurately and cause us to fail to meet our reporting obligations under SEC rules and our various debt arrangements. Any failure to remediate the material weakness or significant deficiencies identified in our evaluation of our internal controls could preclude our management from determining our internal control over financial reporting is effective or, otherwise, from issuing in a timely manner its management report in the future.

We do not expect to pay cash dividends on our common stock.

We presently do not expect to pay dividends on our common stock in the foreseeable future. The payment of dividends, if any, will be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The holders of our Series A Convertible Preferred Stock are entitled to receive, out of funds legally available therefore, cumulative dividends at a rate equal to $0.1885 per annum, per share, which is equivalent to 5% of the Series A Convertible Preferred Stock's original issue price, in cash or at our option in additional shares of the Series A Convertible Preferred Stock. Any accrued dividends on the Series A Convertible Preferred Stock must be paid in full before we can pay a dividend on our common stock. Because we do not plan to pay dividends on our common stock, our stock may be less attractive to some investors, which could adversely affect our stock price.

We face risks associated with the use of debt to fund our operations, such as refinancing risk, and if we are unable to satisfy our debt service obligations and default, we could lose significant rights to our products and intellectual property assets, which would harm our business.

We are subject to the risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. If principal payments due at maturity cannot be refinanced, extended or repaid with proceeds from other sources, such as new equity capital, our cash flow may not be sufficient to repay amounts under the promissory notes that we issued in connection with our purchase of the Ronco business. A default on these notes by us could cause us to lose significant intellectual property rights, which could have a material adverse effect on our business and results of operations.

If our common stock becomes subject to the SEC's penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in our securities may be severely limited.

If at any time we have net tangible assets of $5,000,000 or less and our common stock has a market price per share of less than $5.00, transactions in our common stock may be subject to the “penny stock” rules promulgated under the Securities Exchange Act of 1934. Under these rules, broker-dealers who recommend such securities to persons other than institutional investors:

· must make a special written suitability determination for the purchaser;

· receive the purchaser's written agreement to a transaction prior to sale;

· provide the purchaser with risk disclosure documents which identify risks associated with investing in “penny stocks” and which describe the market for these “penny stocks” as well as a purchaser's legal remedies; and

· obtain a signed and dated acknowledgment from the purchaser demonstrating that the purchaser has actually received the required risk disclosure document before a transaction in a “penny stock” can be completed.

As a result of these requirements, broker-dealers may find it difficult to effectuate customer transactions and trading activity in our stock will be significantly limited. Accordingly, the market price of our stock may be depressed, and you may find it more difficult to sell your shares.

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Our directors and our 5% or greater stockholders own a large percentage of us, and they could make business decisions with which you disagree that will affect the value of your investment.

Our directors and our 5% or greater stockholders beneficially own approximately 95% of our outstanding common stock. Beneficial ownership is determined in accordance with the rules and regulations of the SEC. See “Security Ownership of Officers, Directors and Principal Stockholders.” These stockholders will be able to influence significantly all matters requiring approval by our stockholders, including the election of directors. Thus, actions might be taken even if other stockholders, including those who purchase shares in this offering, oppose them. This concentration of ownership might also have the effect of delaying or preventing a change of control of us, which could cause our stock price to decline.

Provisions in our corporate documents and our certificate of incorporation and bylaws, as well as the Delaware General Corporation Law, may prevent attempts to replace or remove our current management by our stockholders.

Provisions of our certificate of incorporation and bylaws, as well as provisions of the Delaware General Corporation Law, could discourage unsolicited proposals to acquire us, even though such proposals may be beneficial to you. For example, our certificate of incorporation allows our board of directors to issue preferred stock with designations and rights that the board of directors may determine in its sole discretion. Our board of directors may be able to use this authority in a manner that could delay, defer or prevent a change in control. Additional provisions that could discourage unsolicited proposals to acquire us include:

· vacancies as a result of a director's resignation may be filled by our board of directors; and

· restrictions on our ability to cause the conversion of shares of Series A Convertible Preferred Stock into shares of our common stock.

We are also subject to the provisions of Section 203 of the Delaware General Corporation Law, which could prevent us from engaging in a business combination with a 15% or greater stockholder for a period of three years from the date it acquired that status unless appropriate board or stockholder approvals are obtained.

These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding voting stock or may delay, prevent or deter a merger, acquisition, tender offer or proxy contest, which may negatively affect our stock price.

Risks Related to Our Industry

We serve markets that are highly competitive and we may be unable to compete effectively against businesses that have greater resources than we do.

The direct response industry includes numerous companies that market their products on television through infomercials. We compete with several other companies and products in the direct response industry, including GT Brands, Telebrands Corporation, Idea Village, Guthy-Renker, Tilia (a division of Jarden, Inc.), and Sylmark. Many of our competitors, including some of those identified above, have been in business for a number of years, have established customer bases, are larger, and have greater financial resources than us. There can be no assurance that we will be able to compete successfully in our industry.

Our business is affected by general economic conditions in the U.S. retail industry, such as consumer confidence and spending, and any downturn in the retail industry could result in a decrease in our earnings and harm our business.

We are subject to broad economic factors that drive consumer spending and maintain the health of the retail industry in the United States of America. These factors include, but are not limited to, unemployment rates, consumer credit levels, consumer confidence, and household discretionary income. If any of these or other economic factors should erode, consumer spending would fall and the retail industry in the United States of America would suffer a downturn. Consequently, our earnings would be adversely impacted by lower sales.

The trend towards retail trade consolidation could cause our margins to decline and harm our business.

As we pursue our retail distribution strategy, our sales will be contingent upon the favorable wholesale prices that we can obtain from retailers. If retailers merge or the retail industry consolidates, the larger, combined retailers will have significant pricing power because of the sheer size of their retail networks. As a result, we may not be able to obtain reasonable prices for our products. Consequently, our margins will decline and our results of operations would be reduced. There can be no assurance that we will be able to obtain reasonable wholesale prices for our products under a scenario where retailers merge and consolidate into larger entities.

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Government regulations could adversely impact our operations.

Throughout the world, most federal, state, provincial and local authorities require Underwriters Laboratory, Inc. or other safety regulation certification prior to marketing electrical appliances in those jurisdictions. Most of our electrical appliance products have such certifications. However, our products may not continue to meet such specifications. A determination that we are not in compliance with such rules and regulations could result in the imposition of fines or an award of damages to private litigants.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

Our principal executive offices are located at 61 Moreland Road, Simi Valley, CA 93065 where we lease office space and a storage facility consisting of approximately 81,646 square feet. This facility serves as our principal administrative offices, customer service center and media-buying offices. Our current lease expires April 30, 2016. We anticipate that we will be able to extend the lease on terms satisfactory to us and believe that our existing facilities are well maintained and in good operating condition.

We do not own or lease any additional space.

Item 3. Legal Proceedings.

On April 3, 2006, Palisades Master Fund, L.P. (“Palisades”), a holder of our Series A Convertible Preferred Stock, filed a lawsuit against us in the United States District Court for the Southern District of New York, claiming breach of contract based on our failure to have a registration statement declared effective by October 28, 2005 for the sale of Palisades’ shares of our common stock and failure to pay dividends and penalties to Palisades. On September 29, 2006, Palisades filed an Amended Complaint, claiming that Palisades also incurred damages due to Ronco's alleged failure to timely issue documents that would allow Palisades the ability to sell its common stock pursuant to Rule 144.  Palisades claims that Ronco's alleged conduct was in breach of the Certificate of Designation.

On May 22, 2006, Evan J. Warshawsky, our former Chief Financial Officer filed a lawsuit in Los Angeles County Superior Court against the Company seeking damages in excess of $600,000 in connection with his termination. The complaint alleges causes of action for breach of employment agreement, declaratory relief and wrongful termination in violation of public policy. The lawsuit was stayed pending resolution of the arbitration. The parties have not begun arbitration proceedings.

On June 22, 2006, we received a demand letter from Mr. Paul F. Wallace, a stockholder, seeking prompt payment of $41,285 plus interest from us as partial liquidated damages for our failure to have a registration statement declared effective by October 28, 2005 for the sale of Wallace’s shares of stock.  The demand letter also seeks a monthly payment of $5,027 as partial liquidated damages until such registration statement is declared effective.  The demand letter was updated on August 21, 2006 to increase the amount owed to $50, 296.

On August 30, 2006, we received a letter from counsel to Human Electronics (a vendor to the Company) demanding payment for allegedly unpaid invoices amounting to some $488,549 for a large quantity of items manufactured and shipped to us.  Human Electronics asserts that the invoices totaled $2,058,871 and that of that amount, an insurance company paid them $1,570,323 and that the unpaid balance is still due.  Human Electronics then threatened suit if the amount claimed to be due was not paid in 7 days.  We responded to the demand on September 5, 2006 asserting a number of responses, including offsets and demanding that Human Electronics return certain of our assets (consisting of tooling, some inventory and parts) in Human Electronics' possession.  We offered to pay the balance ultimately determined to be due, subject to working out a definitive settlement agreement that includes a payment arrangement with the insurance carrier, a payment arrangement with Human Electronics and working out a resolution with respect to the disposition of the remaining issues addressed in the initial demand letter from Human Electronics.  On October 5, 2006, Human Electronics filed a complaint in California Superior Court for the County of Los Angeles, Central District (case number BC359815). We have not yet been served with the complaint. The complaint alleges, among other things, that we breached our contract with Human Electronics and that we defrauded Human Electronics by knowingly making false assertions and representations. The complaint also alleges that we became indebted to Human Electronics for goods and services delivered to us and seeks damages in the amount of at least $488,549 plus interest and attorneys’ fees.

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

None

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Common Stock

Our common stock is traded on the OTC Bulletin Board® under the symbol “RNCP.OB.” Before July 1, 2005, our common stock traded under the symbol “FTYK.OB.” The following table sets forth, for the calendar quarters indicated, the high and low bid prices per share of common stock, as reported on the OTC Bulletin Board®. The information has been adjusted to reflect a 1 for 89 reverse stock split of our common stock which took effect on June 30, 2005 in connection with our acquisition of the Ronco business. Accordingly, the stock price information has no relationship to the predecessor entities' historical financial results and we do not believe this information provides any meaningful information concerning the performance of our stock price after June 30, 2005. On September 22, 2006, the bid price of our common stock was $1.10. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Quarter Ended	Low	High
September 30, 2004	4.45	4.45
December 31, 2004	2.67	8.90
March 31, 2005	5.78	13.35
June 30, 2005	4.54	26.70
September 30, 2005	4.75	10.15
December 31, 2005	3.75	6.52
March 31, 2006	3.50	4.30
June 30, 2006	1.50	3.20

On September 28, 2006, the closing sales price of our common stock as reported on the OTC Bulletin Board® was $1.10 per share. As of September 28, 2006, there were 38 holders of record of our common stock.

Dividends

We do not currently intend to pay any cash dividends on our common stock. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, capital requirements, financial condition, contractual restrictions and other factors that our board of directors may deem relevant. In addition, the terms of our Series A Convertible Preferred Stock restrict our ability to pay dividends on our common stock. The holders of the Series A Convertible Preferred Stock are entitled to receive cumulative preferential dividends at the rate of $0.1885 per share per annum (equal to 5% of the purchase price of the preferred stock) payable quarterly in arrears in cash or, at our option in shares of Series A Convertible Preferred Stock, on January 1, April 1, July 1, and October 1 of each year. We failed to make our scheduled October 1, 2005, January 1, 2006, and April 1, 2006 dividend payments totaling approximately $1,875,000. Due to our failure to make these dividend payments and because a certain registration statement required to be filed pursuant to the terms of the Registration Rights Agreement between us and the Series A Convertible Preferred Stock shareholders we lost the option to choose unilaterally to make these dividend payments in additional shares of Series A Convertible Preferred Stock as opposed to cash. See “Description of Securities-Preferred Stock.” We may not pay any dividends on our common stock before we pay all dividends on our Series A Convertible Preferred Stock. On June 28, 2006 the Series A shareholders agreed to be paid in Series A Preferred Stock instead of cash at the rate of 0.153857 shares per share for the three quarters ended September 30, 2005, December 31, 2005 and March 31, 2006 as they agreed to waive all penalties related to the registration rights agreement. We agreed to pay a dividend of 0.020933 shares per share for the quarter ended June 30, 2006 to the Series A holders.

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Recent Sales of Unregistered Securities

None.

Item 6. Selected Financial Data

The merger on June 29, 2005 of our wholly-owned subsidiary into Ronco Marketing Corporation was treated for accounting purposes as a reverse acquisition of a public shell, and the transaction has been accounted for as a recapitalization. We accounted for our subsequent acquisition of the assets comprising the Ronco business on June 30, 2005 using the purchase method of accounting. Therefore, the historical financial statements of the predecessor entities are reflected as our historical financial statements. Proforma information has not been presented because the transaction was not a business combination with respect to Fi-Tek VII.

The following table presents selected historical consolidated and combined financial data of the successor as of and for the year ended June 30, 2006 and as of and for the one day of June 30, 2005 (date of acquisition) and of the predecessor entities for the nine months ended June 29, 2005 and September 30, 2004, and for the years ended December 31, 2003 and 2002, which has been derived from our audited consolidated and combined financial statements, and for the year ended December 31, 2001, which has been derived from our unaudited combined financial statements. Our consolidated and combined financial statements for the year ended June 30, 2006, one day June 30, 2005, nine months ended June 29, 2005 and September 30, 2004 were audited by Mahoney Cohen & Company, CPA, P.C. Our combined financial statements for the year ended December 31, 2003 were audited by VELAH Group LLP, and our combined financial statements for 2002 were audited by Weinberg & Company.

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Thefollowing selected financial data should be read in conjunction with our consolidated financial statements. The information set forth below is not necessarily indicative of results of future operations, and should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and notes thereto included in Item 8, “Financial Statements and Supplementary Data” of this Form 10-K in order to understand fully factors that may affect the comparability of the financial data presented below.

	SUCCESSOR			SUCCESSOR			PREDECESSOR
							Nine			Nine
	Year			One Day			months			months
	ended			for			ended			ended			Year ended December 31,
	June 30,			June			June 29,			September
	2006			30, 2005			2005			30, 2004			2003			2002			2001
				(Date of															(unaudited)
				Acqui-
				sition)
							(dollars in thousands, except per share data and percentages)
Income Statement Data:
Net Sales	$	58,724		$	—		$	68,985		$	63,245		$	93,500		$	98,362		$	105,420
Cost of goods sold		20,009			—			16,844			16,842			29,274			36,153			33,517
Gross profit	$	38,715		$	—		$	52,141		$	46,403		$	64,226		$	62,209		$	71,903
Gross margin		66	%		—			76	%		73	%		69	%		63	%		68	%
Selling, general and administrative		56,969			766			50,446			53,217			67,653			71,937			77,825
Impairment loss on goodwill, intangibles and equipment		24,521			—			—			771			—			—			—
Operating (loss) income		($42,775	)		($766	)	$	1,695			($7,585	)		($3,427	)		($9,728	)		($5,922	)
Operating exp. (as % of revenue)		139	%		N/A			73	%		85	%		72	%		73	%		74	%
Interest and other expense
(income)		1,335			—			2,833			120			(386	)		(254	)		(443	)
Pretax loss		($44,110	)		($766	)		($1,138	)		($7,705	)		($3,041	)		($9,474	)		($5,479	)
Income taxes (benefit)		310			(310	)		—			—			—			—			—
Net loss		($44,420	)		($456	)		($1,138	)		($7,705	)		($3,041	)		($9,474	)		($5,479	)
Preferred stock dividends		4,636			—			—			—			—			—			—
Net loss attributable to common shareholders		($49,056	)		($456	)		($1,138	)		($7,705	)		($3,041	)		($9,474	)		($5,479	)
Pro forma benefit for
income taxes (unaudited) (1)								455			3,082			1,216			3,790			2,192
Pro forma net
loss (unaudited)		—			—			(683	)		($4,623	)		($1,825	)		($5,684	)		($3,287	)
Net loss per share		($23.45	)		($0.22	)		N/A			N/A			N/A			N/A			N/A
Pro forma net loss
per share (unaudited) (2)		N/A			N/A			($0.33	)		($2.21	)		($0.87	)		($2.72	)		($1.57	)

Balance Sheet Data

Balance sheet Data (dollars in thousands):	June 30, 2006			June 30, 2005
Working Capital	$	(12,867	)	$	8,203
Total Assets	$	28,239		$	63,762
Long-term liabilities		214			10,282
Stockholders’ Equity		3,865			49,943

Notes to Selected Financial Data

Note 1: Pro forma income taxes

The predecessor entities were not liable for income taxes as they were pass through entities. We have shown for comparative purposes the pro forma effect of income taxes based on an effective tax rate of 40%.

Note 2: Pro forma loss per share

We used the outstanding shares as of June 30, 2005 as the weighted average shares in calculating the pro forma loss per share because the predecessor entities were privately held companies and comprised of different corporate structures.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Overview

We are a provider of proprietary branded consumer products for the kitchen and home, sold primarily through direct response distribution channels, which include direct response television (commonly known as infomercials), online sales through our website (www.ronco.com), telemarketing, direct mail and our customer service department. We also sell products through traditional wholesale/retail channels such as wholesale distributors. We develop and market high quality, unique and affordable products, including small kitchen appliances and accessories, food items, cookbooks, personal care products and household items.

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Before June 30, 2005, we operated as Fi-Tek VII, Inc. and we were a “blank check” company. During that time, we had no significant operations other than the search for, and identification and evaluation of, possible acquisition candidates. On June 29, 2005, we consummated a reverse merger transaction in which Ronco Marketing Corporation became our wholly-owned subsidiary. In connection with this transaction, we changed our name to Ronco Corporation and completed a reverse stock split. On June 30, 2005, we, through Ronco Marketing Corporation acquired assets comprising the business of Ronco Inventions, LLC, Popeil Inventions, Inc. and RP Productions, Inc. We also acquired certain patents and intellectual property rights directly from Mr. Ronald M. Popeil. Mr. Popeil is the primary beneficiary of the RMP Family Trust, a trust that owns and controls the predecessor entities. We also issued 13,262,600 shares of Series A Convertible Preferred Stock, not including four shares of Series A Convertible Preferred Stock that were paid for but that had not been issued as of the date of this report, to finance the cash portion of the purchase price.

Our merger with Ronco Marketing Corporation was accounted for as a recapitalization rather than as a business combination. As a result, the historical financial statements of the predecessor entities are reflected as our historical financial statements. We acquired the assets comprising the Ronco business on the last day of our fiscal year on June 30, 2005 and did not conduct any business on that day. Therefore, our financial statements for June 30, 2005 reflect no revenue and only the expenses associated with our status as a “blank check” company. The financial statements for the predecessor entities reflect the operations of the Ronco business before the date we acquired the business.

In 2004, the predecessor entities changed their year-end from December 31 to September 30. Upon completion of the merger in 2005, we adopted the year end of June 30, which was the year end of Fi-Tek VII, Inc. (the name of our company was changed on June 30, 2005 to Ronco Corporation).

In structuring our acquisition of the Ronco business, we did not assume all of the liabilities of the predecessor entities. For instance, we did not assume approximately $39 million in loans made by an affiliate of the predecessor entities to the predecessor entities. Accordingly, these liabilities are not reflected in our financial statements as of June 30, 2005 and 2006.

Components of Revenue and Gross Profit

Sources of Revenue.

We principally derive revenue from the sale of our products directly and indirectly to consumers. We market our products to consumers directly through direct response television, our website and customer service department. We derive the majority of our revenue from direct response television sales. We also generate revenue through shipping and handling fees for each order shipped by us to consumers who purchase our products through our direct response television and online channels. Management estimates that shipping and handling and extended service contracts accounts for approximately 23% of our direct sales. Management estimates that 78% of our customers pay for their orders in a single payment, and approximately 22% of our customers elect to make multiple payments.

We also derive revenue from sales to our wholesale distribution partners and selling directly to retailers. We are re-focusing our existing wholesale distribution relationships to target selected smaller or regional retail chains while we develop direct relationships with the larger retailers, in an effort to improve our gross margins. As part of this strategy, we have selectively re-introduced certain of our existing products into retail distribution.

A modest amount of revenue is derived each year by providing customer lists to third parties for a fee as well and from interest income from cash and security accounts.

Our net sales are determined by subtracting an allowance for returns from our gross product sales and list sales. Our returns currently average less than 4% of our gross product sales.

Costs of Goods Sold.

Cost of goods sold consists primarily of the costs of the finished goods as received by us from our third-party manufacturing partners and purchasing and inspection costs. In November 2003, we began to source product in China, starting with our cutlery products. In September 2004, we began to source our Showtime™ Rotisserie products in China as well. This change reduced our cost of goods sold. In addition, our fulfillment and shipping costs are included in selling expenses and not in costs of good sold. As a result, our gross profit margins may not be comparable with those of similar companies. We generate higher gross margins on products sold through our direct response channels (including television, online sales and our customer service department) than through wholesale accounts. We expect our costs of good sold to increase as the sale of our products through our wholesale accounts increase, and our direct response sales decrease, as a percentage of our total product sales.

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Components of Operating Expenses and Other Items

Selling Expenses.

Our selling expenses are the largest component of our cost structure and primarily consist of media expenditures, telemarketing and fulfillment costs, personnel compensation and associated expenses, license costs and royalties, credit card processing, and outbound shipping and logistics costs. Media expenditures associated with direct response television comprise the largest portion of our overall selling expenses.

We pay per-minute fees to our telemarketing partners for their services in handling our inbound call traffic as well as certain outbound marketing programs. In addition, we also pay commissions, where applicable, to our customer service and data entry departments to encourage sales. License costs and royalties have historically been significant cost items for Ronco; however, as part of our purchase of the Ronco business, we acquired substantially all of the intellectual property related to these historical expenses. Accordingly, we will incur only modest royalty expenses in the future, related to the use of intellectual property that may be held by third-parties in products we market and sell in the future.

In addition to media costs and inbound telemarketing fees, we also incur costs to third party fulfillment centers to store goods and process orders, and we incur shipping costs to FedEx and the United States Postal Service. Shipping from multiple fulfillment centers has enabled us to reduce our shipping costs and speed up delivery of product to our customers. We also pay fees to our credit card and electronic check processors for each customer transaction.

Our current sales trend is an increase in wholesale sales as a percentage of total sales. This trend will result in lower selling expenses, as a percentage of sales, in the future because the media costs for direct response is significantly greater than the other selling expenses associated with wholesale sales.

General and Administrative Expenses.

Our general and administrative expenses consist of compensation and associated costs for general and administrative personnel, facility costs, as well as certain insurance, legal, audit, technology, fulfillment and shipping and miscellaneous expenses. We expect that general and administrative expenses will increase as we hire additional senior management personnel and provide new motivational incentive programs for current and future employees, incurring costs related to the anticipated growth of our business and our operation as a public company.

Interest Expense (Income).

Interest expense for the predecessor entities consisted of interest accrued on the loans made to the predecessor entities from Ronald M. Popeil and the RMP Family Trust. These loans were not assumed by us and, therefore, this interest expense is not applicable to us. Also included in the interest expense (income) is a modest amount of interest income on cash and security accounts. Interest expense for the successor company consisted of interest accrued on a loan made by Ronald M. Popeil in connection with the purchase of the Ronco assets and interest on our borrowings under Prestige factoring agreement.

Income Taxes.

Income tax expenses is the tax payable or refundable for the period plus or minus the change during the period in the deferred income tax assets and liabilities. We record deferred income tax assets and liabilities for differences between the financial statements and income tax bases of assets and liabilities. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount expected to be realized. If we are profitable in the future, we will have significant net operating losses to offset our tax liability. The predecessor entities were incorporated as pass-through entities and, therefore, did not record income tax expense for federal or state purposes.

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Trends that Affect our Business

Seasonal trends have an impact on our business, with the largest portion of revenues coming during the six-month period from October through March. This is due to holiday shopping and increased television viewing habits during periods of cold weather. The combination of these two factors allows us to purchase a higher amount of television media and generate a significantly greater response in the second and third quarters of our fiscal year, which directly results in higher profits in those quarters. In addition, the increased level of television exposure also indirectly impacts other channels such as online, customer service, and wholesale/retail sales.

Another factor that affects our business is the age of a particular infomercial message. Typically, the response to an infomercial will decline over time, which in turn affects response rates and profitability. We monitor response rates on a daily basis and as the response rate declines below profitable levels, we will either “refresh” the show by editing in a new offer or new footage, or produce a completely new show. In this way, we attempt to extend the product line on television, and increase the cumulative brand awareness and sell-through at retail.

A number of changes have occurred since we acquired the Ronco businesses that are likely to affect the results of operations, capitalization and liquidity of the Ronco business. We did not assume certain liabilities of the predecessor entities. For instance, we did not acquire approximately $39 million of loans to an affiliate of the predecessor entities. As a result, we will not have to pay principal or interest on this amount. In addition, we acquired the patents that the predecessor entities licensed in order to operate the Ronco business. As a result, we did not acquire the product development and license agreements to which the predecessor entities were a party, and pursuant to which they paid substantial fees, and did not assume the $4.5 million liability associated with these agreements. On the other hand, we issued notes in connection with the acquisition in the adjusted amount of approximately $13.158 million. In addition, because the predecessor entities were “pass-thru” entities for tax purposes, they did not pay “corporate” federal income taxes. We are subject to federal income taxes. We are also incurring additional costs associated with compliance with laws applicable to public companies that were not applicable to the predecessor entities. Finally, we will no longer have the financial resources of the stockholder of the predecessor entities available to us for borrowings. In September 2005 we borrowed $1.2 million under a revolving line of credit and entered into a factoring agreement to provide us with liquidity and act as a partial substitute for the working capital loans we previously obtained from the stockholder of the predecessor entities. The factoring agreement permits us to sell up to $8 million of our accounts receivable to the factor and receive between 75% and 80% of the face amount of the account upon assignment to the factor, with the balance paid (less the factor’s fees) when the account is collected. We accounted for this financing as a sale of receivables in accordance with SFAS 140. Due to the impact of all of the changes in our business that are described above, we do not believe that the historical financial statements of the predecessor entities will prove to be a good indicator of our future performance, particularly as that performance is impacted by our expenses.

Our future strategy calls for us to place more emphasis on the wholesale market. If we are successful in increasing sales in this area, our gross margin is likely to decline as margins associated with wholesale revenues are typically lower than margins associated with direct response revenues. For instance, during the year ended June 30, 2006 our gross margin was 66% as compared with 76% for the year ended June 30, 2005. Our gross margins declined primarily because we increased sales through wholesale accounts from 22% to 38% of our total net sales. In addition, our advertising expense will also decline as we do not incur any advertising cost related to wholesale revenues. The growth of our wholesale business did not offset the decline in the direct response business during the year ending June 30, 2006; however, we believe that the wholesale business has proved to be a successful one for us.

Recent Accounting Pronouncements

In February 2006, the FASB issued SFAS 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140,” that allows a preparer to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a re-measurement (new basis) event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise have to be bifurcated. It also eliminates the exemption from applying Statement 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company does not anticipate that the adoption of SFAS No. 155 will have an impact on the Company's overall results of operations or financial position.

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In March 2006, the FASB issued SFAS 156, “Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140,” that applies to the accounting for separately recognized servicing assets and servicing liabilities. This Statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. An entity should adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006. The Company does not anticipate that the adoption of SFAS No. 156 will have an impact on the Company's overall results of operations or financial position.

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The Interpretation clarifies the way companies are to account for uncertainty in income tax reporting and filing and prescribes a consistent recognition threshold and measurement attribute for recognizing, derecognizing, and measuring the tax benefits of a tax position taken, or expected to be taken, on a tax return. The Interpretation is effective for fiscal years beginning after December 15, 2006, although early adoption is possible. The Company does not plan to adopt early and the Company is currently in the process of evaluating the impact, if any, the adoption of the Interpretation will have on the 2007 financial statements.

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This Statement shall be effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including any financial statements for an interim period within that fiscal year. The provisions of this statement should be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except in some circumstances where the statement shall be applied retrospectively. The Company is currently evaluating the effect, if any, of SFAS 157 on its financial statements.

Critical Accounting Policies

Included in the footnotes to the consolidated and combined financial statements in this report is a summary of all significant accounting policies used in the preparation of our consolidated and combined financial statements. We follow the accounting methods and practices as required by accounting principles generally accepted in the United States of America, also referred to as GAAP. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses. Significant accounting policies employed by us, including the use of estimates, are presented in Note 1 to our consolidated and combined financial statements.

Critical accounting policies are those that are most important to the portrayal of our financial condition and our results of operations, and require management's most difficult, subjective and complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our most critical accounting policies, discussed below, pertain to revenue recognition, our ability to collect accounts receivable, the value of inventories, the impairment of goodwill, the useful lives of our other long-lived intangible assets, and the recoverability of deferred tax assets. In applying these policies, management must use its informed judgments and best estimates. Estimates, by their nature, are based on judgments and available information. The estimates that we make are based upon historical factors, current circumstances and the experience and judgment of our management. We evaluate our assumptions and estimates on an ongoing basis and may employ outside experts to assist in our evaluations. Changes in such estimates, based on more accurate future information, may affect amounts reported in future periods.

Revenue Recognition 

We recognize revenue from the sale of products when the products are shipped to the customers, provided that the price is fixed, title has been transferred and our ability to collect the resulting receivable is reasonably assured. Net sales include revenue generated from products shipped, shipping and handling fees and revenue earned on extended service contracts, less returns and sales allowances. Revenue from free trial sales is recognized after the trial period is over and the customer has not returned the product. Returns and sales allowances are for damaged goods and anticipated customer returns.

Revenue from the sale of extended service contracts is recognized on a straight-line basis over the life of the extended service contract. Extended service contract lives begin after the six-month free warranty period and range from three to four years. Amounts received from the sale of extended service contracts before revenue is recognized are included in deferred income. Deferred revenue acquired as part of our acquisition of the Ronco business was recorded at fair value at June 30, 2005 in accordance with purchase accounting.

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We do not accrue warranty costs, since such costs have been insignificant. Shipping and handling costs are included in selling, general and administrative expenses.

Accounts Receivable 

We utilize the allowance method for accounting for losses from uncollectible accounts. We accrue our estimated product returns and record them as a part of our allowance for doubtful accounts and returns. Under this method, an allowance for doubtful accounts reflects our best estimate of probable losses inherent in the accounts receivable balance. Management has determined the allowance, based on the amount of our accounts receivable, the age of accounts receivable, known troubled accounts and historical experience regarding collection of bad debts. We also perform ongoing credit evaluations of our wholesale customers. The direct response business relates to customers who purchase our products in multiple installments and fail to make all of the required payments. Generally, we write off portions of the allowance against accounts receivable when direct response accounts are more than 180 days old or when we otherwise determine that accounts receivable will not be collected.

Inventories

Our inventories are valued at the lower of cost, determined by the first-in, first-out method, or market value. With respect to the acquisition of the Ronco business, we accounted for the inventories acquired at fair value in accordance with purchase accounting. Inventory costs are comprised primarily of product, freight and duty.  We write down inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. To date, our inventory write-downs have not resulted in the market value of the inventory falling below the cost of the inventory. This is due, in part, to our practice of refurbishing obsolete inventory, which we have been able to sell at prices that exceed the cost of the inventory, including the cost of refurbishment. Accordingly, we have not adjusted the carrying value of inventory in the past due to the application of the lower of cost or market rule.

Intangible Assets and Goodwill

 Intangible assets are comprised of patents, customer relationships, consulting agreement and trademarks. Goodwill represents acquisition costs in excess of the net assets of the businesses acquired. In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets," goodwill is no longer amortized; instead goodwill is tested for impairment on an annual basis. We assess the impairment of identifiable intangibles and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors we consider to be important that could trigger an impairment review include the following:

· Significant underperformance relative to expected historical or projected future operating results;

· Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

· Significant negative industry or economic trends.

When we determine that the carrying value of intangibles and other long-lived assets may not be recoverable based on the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, we record an impairment charge. We measure any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

Patents are amortized over 19 years, customer relationships over 1.5 to 10 years and a consulting agreement over 3 years, utilizing the straight-line method.

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Deferred Taxes

Deferred tax assets and liabilities are computed annually for difference between the financial statements and income tax bases of assets and liabilities. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount expected to be realized. The ultimate realization of the deferred tax asset is dependent upon the generation of future taxable income during the periods prior to the expiration of the related net operating losses. If our estimates and assumptions about future taxable income are not appropriate, the value of our deferred tax asset may not be recoverable.

Use of Estimates 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates. We are not aware that any of our significant estimates are reasonably likely to change.

Results of Operations

Year Ended June 30, 2006 Compared with Year Ended June 30, 2005

Before our acquisition of the Ronco business on June 30, 2005, we had no operations. As a result, the Ronco business is considered the predecessor company. For comparative purposes we have shown the predecessor company’s unaudited result for the year ended June 30, 2005.

Net Sales

Net sales for the year ended June 30, 2006 was $58.7 million, compared with $90.1 million for the year ended June 30, 2005. The decline of $31.4 million, or 34.8%, in net sales for the year ended June 30, 2006 is primarily due to a decline in direct response sales of our rotisserie ovens by approximately $12.7 million, a decline in direct response sales of our cutlery product line by $24.2 million, and an increase of approximately $1.9 million in direct response sales of our other products, including Popeil's Pasta Maker, Electric Food Dehydrator, GLH Formula Number 9 Hair System and the Pocket Fisherman. This decrease was partially offset by an increase of $0.6 million in revenue from list sales and commissions from telemarketers of $1.4 million during the year ended June 30, 2006 compared with $0.8 million in revenue from list sales and commissions for the year ended June 30, 2005. The percentages of revenue from list sales and commissions from telemarketers were 2.4% and 0.9% for the years ended June 30, 2006 and 2005, respectively. The decrease in direct response sales was partially offset by an increase in our wholesale sales by approximately $3 million.

Net sales declined primarily due to the fact that our infomercials for our rotisserie and our cutlery lines are more than 2 years old and we have not provided our other products with any significant marketing support during the last several years. Historically our infomercials generate the highest sales in the first six months to a year, then decline as the infomercial loses its freshness. Our direct response sales declined to $34.9 million or by approximately 50.0% for the year ended June 30, 2006, compared with direct response sales of $69.9 million for the year ended June 30, 2005. Our sales through wholesale accounts increased to $22.4 million or by approximately 15.6% for the year ended June 30, 2006, compared with wholesale sales of $19.4 million for the year ended June 30, 2005. We expect the direct response trend to reverse for our rotisserie and cutlery lines as we introduce new versions of these products and produce new infomercials. We also expect our wholesale revenues to continue to increase as we expand our distribution in retail stores and overseas.

Gross Profit and Gross Margin

Gross profit for the year ended June 30, 2006 was $38.7 million as compared with $68.7 million for year ended June 30, 2005. This decrease is primarily due to a decrease in our direct response sales and a relative increase in sales, both in absolute dollars and as a percentage of total sales, through wholesale accounts. Wholesale sales represented 38.1% and 21.5% of total sales for the years ended June 30, 2006 and 2005, respectively. The increase in cost of goods sold was due to the increase in wholesale sales relative to direct response sales, because the wholesale sales have a higher cost of goods sold. We also increased our cost of sales by writing down $0.5 million of inventory to market price which was lower than the original cost. Our cost of goods sold does not include fulfillment and shipping costs, which are included in selling, general and administrative expenses. Accordingly, our margins might not be comparable with those of other companies in our industry.

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The gross margin decreased from 76.3% for the year ended June 30, 2005 to 65.9% for the year ended June 30, 2006. Our gross margin decreased primarily because of an increase in our revenue from wholesalers, and a corresponding decrease in our direct response sales, as a percentage of our overall sales. Revenue from wholesalers accounted for approximately 38.1% of our net sales for the year ended June 30, 2006 as compared with 21.5% of our net sales for the year ended June 30, 2005. Revenue from our direct response sales accounted for 59.5% of sales for the year ended June 30, 2006 as compared with 77.6% of sales for the year ended June 30, 2005. Although we experienced increased cost savings from manufacturing during the year ended June 30, 2006 compared with the year ended June 30, 2005, these cost savings were offset by discounts that we provided to mass merchants which resulted in the gross margin percentages decreasing. The average gross margin percentage for our direct response business for the year ended June 30, 2006 was 80.6%, compared with 81.1% for the year ended June 30, 2005. The average gross margin percentage for our wholesale business for the year ended June 30, 2006 was 38.4%, compared with 56.8% for the year ended June 30, 2005. The higher gross margin percentages for our direct response business during the year ended June 30, 2005 were caused primarily by a backlog of orders for our Showtime™ Rotisserie product line due to production delays by our outsource manufacturers in the year ended June 30, 2005. This in turn meant that a higher percentage of our direct response sales were from our Six Star+™ Cutlery product line, which yields a higher gross margin than our Showtime™ product line. The lower gross margin percentages for our wholesale business during the year ended June 30, 2006 were caused primarily by our efforts to liquidate older inventory to generate cash. For the year ended June 30, 2005, the Seller Entities primarily sold wholesalers products through distributors. Additionally we generated revenue from list sales and commissions from telemarketers, with respect to which we incurred no cost of sales. Accordingly, our gross margin from list sales and commissions was 100%, or 3.6% and 1.2% of total gross margin, for the years ended June 30, 2006 and 2005, respectively. Our cost of goods sold does not include fulfillment and shipping costs, which are included in selling, general and administrative expenses, and as such, our margins might not be comparable to other companies in our industry.

Selling, general and administrative expenses

Selling, general and administrative expenses for the year ended June 30, 2006 were $57.0 million compared with $68.3 million for the year ended June 30, 2005. This decrease of approximately $11.3, or 16.5%, was primarily due to a $16.6 million reduction in advertising expenses associated with the decreased effectiveness of infomercials over time, a $1.7 million reduction in credit card fees and shipping and handling expense of $2.1 million due to the reduced sales. The decline was partially offset by an increase of $3.5 million in professional fees and salaries and related expenses. Salaries and related expenses were approximately $7.2 million for the year ended June 30, 2006 compared with approximately $6.1 million for the year ended June 30, 2005. The increase in salaries and related expenses was primarily due to the hiring of four additional executives and five managers to execute management's long term growth strategy, including the expansion of our retail business, international distribution and the development of new products. Professional fees increased to approximately $4.5 million for the year ended June 30, 2006 compared to approximately $2.1 million for the year ended June 30, 2005. The increase in professional fees was primarily due to accounting and legal expenses incurred for compliance with SEC filing requirements and other aspects of the transition from a private company to a public company. We also recorded approximately $1.3 million for deferred compensation expenses related to amortization of stock based compensation awards to our Chief Executive Officer and Chief Financial Officer. We did not have any deferred compensation expense related to stock based compensation for the year ended June 30, 2005. In addition, for the year ended June 30, 2006 we incurred additional amortization expense of intangible assets of approximately $6.0 million related to the acquisition of the Ronco business. Additionally, other selling, general and administrative expenses, such as travel, utilities, auto, license and royalties and repairs and maintenance, decreased by $1.7 million.

As a percentage of revenues, selling, general and administrative expenses increased from 75.9% for the year ended June 30, 2005 to 97.0% for the year ended June 30, 2006. This increase for the year was primarily due to a decrease in revenue, an increase in salaries and professional fees, deferred compensation and amortization of intangible assets related to the acquisition of the Ronco business, with a reduction in advertising expense, credit card fees and shipping and handling expense.

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Impairment of Goodwill and Intangibles

Impairment of goodwill and intangibles for the year ended June 30, 2006 was approximately $24.5 million. The impairment of our goodwill and intangibles was primarily due to our significant decline in revenues and our lack of capital to develop new products and new infomercials. The following is the breakdown of the impairment charge for the year ended June 30, 2006.

Impairment
Customer Relationships	$	485,546
Patents		5,187,121
Trademarks		12,119,036
Popeil Agreement		3,775,733
Goodwill		2,953,480
Total Impairment	$	24,520,916

Operating income/loss

Our operating loss for the year ended June 30, 2006 was $42.8 million, compared with income of $0.4 million for the year ended June 30, 2005. The increase in our operating loss of approximately $43.2 million for the year ended June 30, 2006 compared to the year ended June 30, 2005 are primarily attributable to lower sales volume in our direct response business, impairment of our goodwill and intangibles partially offset by a reduction in selling general and administrative expenses.

Net interest expense

Our net interest expense for the year ended June 30, 2006 declined by approximately $1.5 million as compared with the year ended June 30, 2005. This decline was primarily due to us not assuming approximately $39 million of debt that the Seller Entities borrowed from the RMP Family Trust, which were outstanding as of June 30, 2005. The interest expense for the year ended June 30, 2005 primarily relates to interest payable on a note issued to a shareholder of the Seller Entities in exchange for amounts loaned to finance the purchase of patents on products that the Seller Entity sold.

Income Tax

The Company recorded income tax benefit for the year ended June 30, 2006 as a reversal of deferred taxes from the prior year of $0.3 million since we do not expect to realize the net operating loss in the future. For the year ended June 30, 2005, the predecessor entities did not pay any income taxes as they were pass-through entities. For comparative purposes, we have estimated the proforma tax expense using an effective rate of 40%.

Net loss

Our net loss for the year ended June 30, 2006 was $44.4 million, compared with a loss of $2.4 million for the comparable year ended June 30, 2005. The increase in our net loss of approximately $42 million for the year ended June 30, 2006 is due to the decrease in revenue and increase in operating expenses for the reasons described above. Our net loss attributable to common stockholders for the year ended June 30, 2006 increased by an additional $4.6 million due to dividend on our preferred stock.

Ronco Corporation - June 30, 2005

We acquired the Ronco business from the predecessor entities on the last day of our fiscal year. We did not ship any products on that day because we were conducting our year-end physical inventory and thus we did not earn any revenue on that day. Prior to our acquisition of the Ronco business from the predecessor entities, we had no operations and generated no revenue. The selling, general and administrative expenses for this single day were primarily made up of compensation expense related to cash bonuses of $465,000 paid to our CEO and CFOand the stock issued to our CFOin connection with the acquisition of the predecessor entities, that constituted an expense of $300,919.

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Predecessor Entities - Nine Months Ended June 29, 2005 Compared to Nine Months Ended June 30, 2004 (unaudited)

Because we did not have any operations or generate any revenue prior to our acquisition of the Ronco business, the entities from whom we purchased the Ronco business are considered to be our predecessor company. Accordingly, the results of operations of the predecessor entities prior to June 30, 2005 are shown as our results of operations.

Net Sales.

Net sales for the nine months ended June 29, 2005 were approximately $68.9 million, a decrease of $23.9 million, or 26%, from approximately $92.8 million for the nine months ended June 30, 2004. The decline in net sales consisted of a decline of $19.5 million from the direct response business due to the age of our infomercials, and a decline of $4.6 million from our wholesale business in the first half of 2005 as we transitioned a portion of our wholesale business from distributorship arrangements to direct relationships with larger retailers. Net sales of our Showtime™ Rotisserie oven products decreased by approximately 54% during the nine months ended June, 29 2005, also due to the age of our infomercials, and net sales of our cutlery product line increased by approximately 67% during this same period. The infomercial for our cutlery products began airing in November 2003, so sales for this product were strong during the period compared to sales of our ovens, for which our newest infomercial began airing in July 2003. Sales of our cutlery products were also higher compared to the comparable period in 2004 because we only introduced this line of products in November 2003, and thus sales of cutlery products were not included for the full nine months ended June 30, 2004.

Gross Profit and Gross Margin.

Gross profit for the nine months ended June 29, 2005 was $52.1 million, a decrease of $13.4 million, or 20%, compared to the nine months ended June 30, 2004. Gross profit for the nine months ended June 29, 2005 declined compared to the comparable period in 2004 due to the reduction in net sales, which decline was partially offset by a reduction in costs of goods sold from $65.5 million for the nine months ended June 30, 2004, to $52.1 million in the comparable period in 2005. Gross margin for the nine months ended June 29, 2005 was 76% as compared to 71% for the nine months ended June 29, 2004. This increase in gross margin is primarily due to better pricing from our suppliers due to the migration of most of our outsourced production activities from Korea to China, which is a lower cost environment. Our cost of goods sold includes purchasing and inspection costs, but does not include fulfillment and shipping costs, which are included in selling, general and administrative expenses. As such, our gross margin might not be comparable to other companies in our industry.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the nine months ended June 29, 2005 were $50.4 million, a decline of $21.3 million, or 30%, compared to the nine months ended June 30, 2004. This decline occurred primarily because our royalty expense was reduced to $0.1 million for the nine months ended June 29, 2005, from approximately $7.6 million for the nine months ended June 30, 2004. Selling, general and administrative expenses also declined for the nine months ended June 29, 2005, due to a reduction in fulfillment and shipping costs from $10.5 million in 2004 to $7.6 million in 2005, which was due to the decline in net sales. In addition, our media expense declined in 2005 by $9.5 million because we purchased fewer television spots. We purchased fewer television spots because we anticipated a lower response rate to our infomercials due to their age. A lower response rate increases the per sale cost of our infomercials, which reduces the price we can pay for television spots and remain profitable.  When the price we can pay is reduced and we can only purchase less expensive television spots, we cannot generally purchase as many television spots as we would otherwise purchase. Our bad debt expense also declined by $1.5 million primarily due to our hiring during this period of an independent consultant dedicated to managing our collection of multi-pay account receivables. As a percentage of net sales, selling, general and administrative expenses for the nine months ended June 29, 2005 were 73% as compared to 77% for the nine months ended June 30, 2004. This improvement was primarily due to the elimination of our royalty expense, but was partially offset by an increase in advertising as a percentage of revenues from 40% to 43% in 2005 due to the declining response from our aging infomercials. We will not have to pay such royalties in the future because we acquired the applicable patents as part of our purchase of the Ronco business.

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Operating Income (Loss).

Our operating income for the nine months ended June 29, 2005 was $1.7 million as compared to an operating loss of ($6.3) million for the nine months ended June 30, 2004. The increase in operating income was primarily due to the 5% improvement in our gross margin and a 30% improvement in selling, general and administrative expenses, which was partially offset by the $23.9 million decrease in sales described above.

Net Loss.

Our net loss for the nine months ended June 29, 2005 decreased to ($1.1) million as compared to ($6.3) million for the nine months ended June 30, 2004. The decrease in net loss was primarily due to the 5% improvement in our gross margin and a 30% improvement in selling, general and administrative expenses, partially offset by a $23.9 million decrease in sales. This was also offset by interest expense of approximately $2.9 million for the nine months ended June 29, 2005 related to a loan from Ron Popeil, his affiliated entities and the RMP Family Trust. These loans were not assumed by us when we acquired the Ronco business.

Predecessor Entities - Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003 (unaudited)

Net Sales.

Net sales for the nine months ended September 30, 2004 were approximately $63.2 million, compared to $42.8 million for the nine months ended September 30, 2003. The increase in net sales for the nine months ended September 30, 2004 was primarily due to the introduction of a new cutlery product line in November 2003, which accounted for approximately $27.1 million of such increase, and $2.8 million in other sales. The cutlery product line was not offered during the comparable nine month period in 2003. The increase was potentially offset by a decrease in sales of our Showtime™ Rotisserie products of approximately $9.5 million in 2004 compared to the same period ended in 2003. The decrease in sales from our Showtime™ Rotisserie products is due to the shift in television media from our Showtime™ Rotisserie product line to our cutlery product line.

Gross Profit and Gross Margin.

Gross profit for the nine months ended September 30, 2004 was $46.4 million, an increase of $17.8 million, or 62%, compared to the nine months ended September 30, 2003. This increase was primarily due to the increase in net sales and proportionately smaller increase in costs of goods sold.Gross margin for the nine months ended September 30, 2004 was 73% as compared to 67% for the nine months ended September 30, 2003. This increase in gross margin is primarily due to a change in product mix with the introduction of our cutlery product line in November 2003. The gross margin on our rotisserie ovens ranges from 65% to 75% whereas the gross margin on our cutlery products averages about 76%. Our cost of goods sold includes purchasing and inspection costs, but does not include fulfillment and shipping costs, which are included in selling, general and administrative expenses. As such, our margins might not be comparable to other companies in our industry.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the nine months ended September 30, 2004 were $53.2 million, an increase of $22 million, or 71%, compared to the nine months ended September 30, 2003. This increase occurred primarily because of the higher net sales, described above, and the increase in advertising expenses from $13.1 million for the nine months ended September 30, 2003, to $31.1 million for the comparable period in 2004. As a percentage of net sales, selling, general and administrative expenses for the nine months ended September 30, 2004 were 84% as compared to 74% for the nine months ended September 30, 2003. Selling, general and administrative expenses increased as a percentage of net sales for the nine months ended September 30, 2004, due to the increase in advertising expenses, which occurred due to the declining response achieved from our aging infomercials. Selling, general and administrative expenses also included $8.1 million and $4.9 million of fulfillment, and shipping cost for the nine months ended September 30, 2004 and the nine months ended September 30, 2003, respectively.

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Impairment Loss on Tooling.

The impairment loss on tooling for the nine months ended September 30, 2004 was approximately $771,000, compared to no impairment loss for the nine months ended September 30, 2003. This impairment loss represented a write-off of out-of-date production tooling we previously used in connection with our current product lines.

Operating Loss.

Our operating loss for the nine months ended September 30, 2004 was ($7.6) million as compared to a ($3.3) million operating loss for the nine months ended September 30, 2003. The higher loss for 2004 is primarily attributable to the increase in advertising expenses during the nine months ended September 30, 2004.

Net Loss.

Our net loss for the nine months ended September 30, 2004 increased to ($7.7) million as compared to ($3.1) million for the nine months ended September 30, 2003. The higher loss for 2004 is primarily attributable to the increase in advertising expenses during the nine months ended September 30, 2004.

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Net Sales.

Net sales were $93.5 million for 2003 compared to $98.4 million in 2002, a decrease of 5%. Substantially all of this revenue was generated from sales of our Showtime™ Rotisserie line of products, as we only introduced our cutlery line of products in November 2003. Showtime™ Rotisserie product prices remained flat during both years. Of the Showtime™ Rotisseries, our compact rotisserie generated $26.1 million in net sales and our standard rotisserie generated $61.3 million in net sales in 2003. In 2002, substantially all of our net sales were derived from sales of the compact rotisserie. Our cutlery products contributed $3.5 million in net sales during 2003. The decrease in net sales in 2003 resulted from management’s decision to reduce media expenditures associated with its Showtime™ Rotisseries ovens during the first seven months of 2003 in order to reduce the number of poor performing air dates, thereby increasing overall profitability.

Gross Profit and Gross Margin.

Gross profit for the twelve months ended December 31, 2003 increased by 3% to $64.2 million from $62.2 million for the same period of 2002. Gross margin was 69% in 2003 compared to 63% in 2002. This increase is attributed to the addition of our standard rotisserie to our oven product line and the introduction of our cutlery product line in November 2003. Our margins on our standard rotisserie are approximately 75% and on our cutlery product line are approximately 76%, which are higher than the 65% margins we achieve on our compact rotisserie. Our cost of sales includes purchasing and inspection costs, but does not include fulfillment and shipping costs, which are included in selling, general and administrative expenses. As such, our margin might not be comparable to other companies in our industry.

Selling, General and Administrative Expenses.

Selling, general and administrative expenses for the twelve months ended December 31, 2003 decreased by approximately 6% to $67.7 million from $71.9 million for the twelve months ended December 31, 2002. The decrease in selling, general and administrative expenses was primarily due to a $4.1 million decrease in media expenses. The decline in media expenses was based on management’s decision to reduce media expenditures associated with the Showtime™ Rotisserie ovens to reduce the number of poor performing air dates and increase overall profitability. As a percentage of net sales, selling, general and administrative expenses were 72% and 73% for the twelve months ended December 31, 2003 and December 31, 2002, respectively. Selling, general and administrative expenses also included $8.5 million and $7.3 million of fulfillment and shipping costs for the twelve months ended December 31, 2003 and 2002, respectively. Fulfillment and shipping cost increased for the twelve months ended December 31, 2003 compared to 2002 because we changed our shipper from the U.S. postal service to FedEx. Although the cost of FedEx was greater than the U.S. postal service, the use of FedEx resulted in faster delivery times, which reduced our returns. Fulfillment costs also increased in 2003 with the introduction of our cutlery product line in November 2003 because such costs are fixed per unit shipped regardless of the unit price. Thus, our fulfillment costs per order for our cutlery product line were higher than our cost per order for our rotisserie line.

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Operating Loss.

Our operating loss for the twelve months ended December 31, 2003 decreased to ($3.4) million from ($9.7) million for the same period of 2002. The decrease in operating loss was due primarily to the 6% increase in gross margin and a $4.3 million decrease in selling, general and administrative expenses.

Net Loss.

Our net loss was ($3.0) million for the twelve months ended December 31, 2003 compared to a net loss of ($9.5) million for the twelve months ended December 31, 2002. This reduction in our net loss was due primarily to the 6% increase in gross margin and a $4.3 million decrease in selling, general and administrative expenses.

Liquidity and Capital Resources

Historically, the predecessor entities funded operations primarily through cash flow from operations and borrowings from the shareholder of the predecessor entities. Principal liquidity needs have been for television media, the majority of which is required to be prepaid two to four weeks in advance of the air date, and for cost of goods. Since our acquisition of the Ronco business, we no longer have the ability to borrow from the shareholder of the predecessor entities, so we have had to identify alternative sources of financing to replace this prior source of financing. In addition, during the year ended June 30, 2006, we increased the volume of wholesale sales whereby we give extended payment terms to our customers, which increased our receivable collection time and thus increased our liquidity needs. This liquidity need is likely to increase as our wholesale business continues to grow. Our cost for television has declined and will continue to do so if our direct response business continues to decline, which we expect will reduce our need for liquidity. However, we expect the impact of this on our liquidity will be offset by our need to purchase more inventory to support our wholesale business.

Based on our new strategy and the anticipated growth in our wholesale business, we believe that our liquidity needs will increase. The amount of such increase will depend on many factors, such as the establishment of a research and development program, whether we upgrade our technology, and the amount of inventory required for our expanding wholesale and international business.

As of June 30, 2006, our total working capital deficit was $12.9 million as compared with a working capital surplus of $8.2 million as of June 30, 2005. Our June 30, 2006 negative working capital included all of our debt to the Seller Entities and Sanders Morris Harris totaling $14.5 million. As of June 30, 2006, we could be considered to have had an incident of default on both loans. In order to assist in meeting our liquidity needs, we entered into a factoring agreement in October 2005 to fund our working capital needs. We also reached agreements with some of our principal factories who produce our products to extend our payment terms from 30 days to 60 days. Despite these developments, our cash flow from operations, and advances under our factoring agreement are not sufficient to meet our current and future working capital needs. As a result, we are seeking additional sources of capital to assure that our working capital needs are met. Specifically, we are seeking a term loan and/or line of credit and/or equity of between $10 and $15 million. We are in negotiations with a lender regarding such a facility but have not yet been able to secure a credit facility on acceptable terms. On October 6, 2006, we signed a loan agreement with Crossroads Financial on a $4 million credit facility. We made changes in our business strategy in order to conserve cash, such as delaying further expansion of our wholesale business, delaying the development and marketing of new products, delaying the expansion of our international sales, delaying the development of new infomercials. Although we obtained financing through Crossroads if we do not close a financial facility of over $10 million by January 31, 2007, we may need to make further changes in our business strategy in order to conserve cash, such as delaying further expansion of our wholesale business and/or reducing advertising directed toward our direct response business.

Cash Flows - Year Ended June 30, 2006 Compared with Year Ended June 30, 2005

For the year June 30, 2006, we used approximately $1 million in cash to fund our operations. This was primarily due to our net loss of approximately $44.4 million. This was partially offset by a decrease in net accounts receivable of $1 million and prepaid expenses and other current assets of $1.9 million due to reduced sales during the fourth quarter of the year. Accounts payable and accrued expenses increased by $5.1 million due to obtaining an extension in the payment terms from our factories in China and generally paying our other vendors later. There was also a decrease in inventory by $.6 million due to reduced purchasing in the fourth quarter. Deferred income increased by $.7 million primarily because on June 30, 2005 due to purchase accounting we wrote off most of our deferred revenues. Our current deferred revenue balance represents cash we collected for products that we had not shipped by June 30, 2006. We also recorded an impairment loss of $24.5 million related to our goodwill and intangibles, which was primarily due to our substantial decline in sales, our lack of capital to invest in new products and infomercials, and the projected revenue generated from the intangible assets that were purchased. We recorded depreciation and amortization expense of $6.4 million, bad debt of $.5 million, $1.2 million of non-cash interest expense on notes to Seller Entities and non cash compensation expense of $1.3 million, for the year ended June 30, 2006.

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For the year ended June 29, 2005, we used approximately $41.9 million in cash to fund our operations. This was primarily attributable to net loss of $2.4 million, a decrease in royalty payables of $38.5 million, a $2.5 million decrease in deferred revenues, a decrease in accrued expenses and accounts payable totaling $1.2 million and a build up of inventory of $1.4 million. The impact of this was partially offset by a decrease of $2.4 million in prepaid expenses and other current assets, depreciation and amortization expense of $.9 million and bad debt expense of $.9 million.

For the year ended June 30, 2006, we used approximately $13,000 in investing activities. We paid approximately $0.5 million to purchase equipment, including software, and used approximately $0.5 million for the purchase of short term investments set aside as a credit card reserve for Wells Fargo Market Services, our credit card processor. In addition, we received approximately $1.0 million from the redemption of investments in securities.

For the year ended June 29, 2005, we generated $.5 million from investing activities. We received approximately $1 million from redemption of investment securities, and $.1 million as a deposit on the purchase of the Ronco business. This was partially offset by the purchase of $.6 million of equipment including software.

For the year ended June 30, 2006, we generated approximately $.6 from our financing activities. In September 2005 we received net proceeds of approximately $1.2 million from a line of credit, which we used for working capital of which we repaid approximately $0.8 million in October 2005 leaving a total outstanding at June 30, 2006 of approximately $0.4 million; and $45,000 from a long-term loan in September 2005 of which we repaid approximately $7,000 through the fourth quarter leaving a balance of approximately $38,000 as of June 30, 2006, which we used to acquire a vehicle. In June 2006, we borrowed $1.5 million from Sanders Morris Harris to fund working capital. During the year ended June 30, 2006, we also paid approximately $1.3 million to the seller entities in connection with our acquisition of the Ronco business.

During the years ended June 30, 2005, loans from the predecessor entities accounted for $39.3 million, the proceeds of which were used primarily to pay license and royalty fees of $38.5 million.

Cash Flows - Nine Month Periods

For the one-day period of June 30, 2005, we did not generate any revenues, as we had just acquired the Ronco business and had not yet conducted any business. As a result, the $676,000 of cash used in operating activities was used primarily to compensate our management. For the nine months ended June 29, 2005 and September 30, 2004, we used approximately $2.4 and $41.2 million in cash, respectively, to fund our operations. Substantially all of the amounts expended during the nine months ended September 30, 2004, were used to pay accrued royalty expenses on patents relating to our core products. We will no longer incur these expenses as we have acquired all rights to these patents. We used cash during the nine months ended June 29, 2005 primarily to fund operating losses and for our working capital needs. Specifically, we used cash to reduce accounts payable net of accrued expenses ($2.2 million), deferred income ($3.4 million), inventories ($2.5 million) and accounts receivable ($1.2 million). Inventory and accounts receivable decreased during the nine months ended June 25, 2005 because this period includes our slowest sales months, compared to the increase in inventory for the nine months ended September 30, 2004, which reflects our preparation for the busy holiday sales season. The decline in accounts receivable for this same period occurred because holiday sales had not yet begun. At the same time, accounts payable declined during the nine months ended June 29, 2005, because we had not yet begun buying inventory or advertising in anticipation of the holiday season. Deferred revenue declined during the nine months ended June 29, 2005 compared to the nine months ended September 30, 2004 because such deferred revenue was unusually high during the nine months ended September 30, 2004 due to backorders we experienced with respect to our Showtime™ Rotisserie ovens.

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For the one-day period of June 30, 2005, we used approximately $45 million from investing activities to acquire the Ronco business. For the nine months ended June 29, 2005 and September 30, 2004, our investing activities provided us with approximately $146,000 and $257,000 of cash, respectively. In 2005, this amount represents approximately $500,000 from our investment in securities, which represents an asset that we acquired when we acquired the Ronco business. This was partially offset by office equipment purchases of approximately $453,000. Our investment proceeds in 2004 were approximately the same as in 2005, which represented the proceeds from the redemption of investment securities, but were offset in part by office equipment purchases of approximately $243,000.

For the one-day period of June 30, 2005, our financing activities provided approximately $46.4 million. This represents the proceeds from the issuance of our Series A Convertible Preferred Stock, less approximately $3.6 million of issuance costs. For the nine months ended June 29, 2005 and September 30, 2004, our financing activities provided approximately $12,000 and $39.1 million of cash, respectively. In 2005, this amount represented an advance from an affiliate, and in 2004, this amount represented the proceeds of a loan from one of the predecessor entities and its stockholder. The predecessor entities used the proceeds from this loan to repay accrued royalty expenses on patents relating to our core products. We acquired these patents in connection with our acquisition of the Ronco business so we will no longer incur these expenses.

Acquisition of the Ronco Business

On June 30, 2005, we acquired the Ronco business. In connection with the acquisition, we sold $50 million of our Series A Convertible Preferred Stock. The proceeds from the stock sale were $46.4 million, which excludes $3.6 million in offering costs. We used approximately $40.2 million to pay the cash portion of the purchase price for the Ronco business and $4.7 million to pay transaction costs. We used the remaining proceeds as follows: approximately $0.4 million was used to repay debt due to investors in Ronco Marketing Corporation and approximate $1.1 million was used for working capital.

The Notes

In connection with our purchase of the Ronco business, we issued promissory notes to the predecessor entities and Ronald M. Popeil. The aggregate principal amount of the notes is $16.3 million, which may be adjusted pursuant to the terms of the purchase agreement. The aggregate principal amount of the notes was based on the estimated net value of the Ronco business. The amount of the notes may be increased if the actual net value of the Ronco business exceeds the estimated amount, and decreased if the actual net value is less than the estimated amount, as provided in the notes. We completed an accounting after the closing of the acquisition to determine the actual net value of the Ronco business as of the closing date. According to our calculations, the actual net value is lower than the estimated value specified in the purchase agreement, and we expect the aggregate principal amount of the promissory notes will be reduced to approximately $13.158 million. If the predecessor entities and Mr. Popeil disagree with our calculations, they could contest the reduction of the principal amount of the promissory notes. Any dispute over the adjustment of the principal amount of the notes would be resolved through arbitration, pursuant to the asset purchase agreement.

The promissory notes bear simple interest at a rate equal to 9.5% per annum. The principal payments due with respect to the promissory notes in any period will be determined by applying a per-unit dollar amount to the volume of our products that are shipped within such period. As of June 30, 2006, Mr. Popeil contends that we owe payments on the promissory notes of $1.3 million. We believe that the amount due at June 30, 2006, is approximately $400,000. We are in negotiations with Mr. Popeil to change the payment schedule under the notes, but to date we have not reached an agreement. In light of the fact that we have not made the required payments, either by our calculations or Mr. Popeil’s, we are considering the entire note due within the current period. Any outstanding principal amount and any accrued but unpaid interest will become due and payable in full on June 29, 2010. There is no pre-payment penalty on the promissory notes.

Upon occurrence of an event of default that is not cured by the time period set forth in the promissory notes, the interest rate on the notes will increase to 11% per annum and any unpaid principal and interest will become immediately due and payable. In addition, Mr. Popeil will have the right to reclaim any ownership interest in his name and likeness previously sold or licensed to us and will receive a right of first refusal to purchase the intellectual property rights we acquired as part of our acquisition of the Ronco business before these rights may be sold or transferred to any other party.

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Revolving Line of Credit

On September 21, 2005, we borrowed $1,234,000 from Wells Fargo Bank, National Association, under a revolving line of credit note. Interest is payable monthly and the outstanding balance is due and payable on September 20, 2006. This facility is collateralized by our corporate investment bonds. The borrowings bear interest at 1% above LIBOR or ½% below prime, at the Company’s option. The Company was paying a rate of 6.375% at June 30, 2006. There is no prepayment penalty on this revolving line of credit. In October 2005, we repaid $850,000 of the borrowings because $1,000,000 of our corporate investment bonds, which were collateral for the loan, was called. The outstanding balance at June 30, 2006 was $384,000, with the loan being fully repaid and the line terminated by August 31, 2006.

Sanders Morris Harris Inc. Loan

On June 9, 2006, we entered into to a letter loan agreement with Sander Morris Harris (SMH). Under the terms of the loan agreement, we also assigned proceeds under a life insurance policy for $15 million on the life of Ron Popeil to SMH, as a lender and as agent for the other lenders under the loan agreement. As consideration for the loan, we issued to SMH a subordinated promissory note in the principal amount of $1,500,000. As of June 9, 2006, A. Emerson Martin, II and Gregg A. Mockenhaupt were members of our Board of Directors and managing directors of SMH.

Pursuant to the loan agreement, SMH agreed to loan us an additional $1,500,000 subject to certain closing conditions, including the mailing of an offer to each of the holders of the Company's Series A Convertible Preferred Stock to the extent of their pro rata share of the Company's outstanding shares of Series A Convertible Preferred Stock to participate in our closing on a credit agreement for a facility of not less than $15 million. This facility did not close within the stated time frame specified in the note but management believes that SMH will extend the additional $1.5 million if the credit agreement specified above closes by October 31, 2006.

The loans under the loan agreement bear interest at a rate of 4.77% per annum. Interest will be due and payable on the first and second anniversary of the issuance of the notes and at the maturity date.

The principal and interest payable on the notes issued under the loan agreement are convertible into shares of our common stock at conversion price based on the weighted average of the stock sale price for the forty days after the registration is effective. We filed a registration statement covering the resale of shares issuable upon conversion of these notes. To date, however, our registration statement has not been declared effective. Accordingly, the notes cannot be converted into shares.

Under the terms of the loan agreement, we agreed to retain Richard F. Allen, Sr. as our Chief Executive Officer. On August 9, 2006, we terminated Richard F. Allen, Sr. as President and Chief Executive Officer of our company, at which point we have occurence of default of our obligations under the loan agreement.

Factoring Agreement

On October 25, 2005, we entered into a purchase and sale agreement with Prestige Capital Corporation ("Prestige") , pursuant to which Prestige agreed to buy and accept, and we agreed to sell and assign, certain accounts receivable owing to us with recourse except for payment not received due to insolvency. This agreement provides that upon the receipt and acceptance of each assignment of accounts receivable, Prestige will pay us 75% of the face amount of the accounts so assigned. Under the agreement, Prestige agreed to purchase accounts with a maximum aggregate face amount of $8,000,000. The fee payable by us to Prestige under the agreement ranges from 2% to 5.75% of the face amount of assigned accounts if the receivable is collected within 15 to 75 days. Thereafter, the rate goes up by 1% for each additional fifteen day period following the 75 day period until the account is paid. There is no maximum rate. In addition, Prestige may require us to repay the amount it has advanced to us, in certain cases, if the receivable is not paid within 90 days. In such case Prestige would not retain the account receivable. If an account receivable is not paid due to the bankruptcy of the customer, or due to certain similar events of insolvency, we will not be required to repay the cash advance to Prestige.  The initial terms of the agreement expired on May 1, 2006, and we gave notice not to renew the agreement for another one-year term. Prestige agreed to extend the term on a month to month basis. On October 6, 2006 we extended the term of our agreement with Prestige until October 1, 2007. There is no prepayment penalty associated with this extension.

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Pursuant to the terms of the agreement, we granted to Prestige a continuing security interest in our tangible and general intangible assets to secure our obligations under the agreement. If a receivable is not paid within 90 days, Prestige has the right to charge back our company.

We accounted for this agreement with Prestige as a sale of receivables in accordance with SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities." As of June 30, 2006, we had no outstanding borrowings under the agreement.

Crossroads Financial, LLC

On October 6, 2006 we entered into a Loan and Security Agreement with Crossroads Financial, LLC, as the lender.  This facility consists of a revolving loan facility of up to $4,000,000 of which we borrowed $4,000,000 at the initial funding, to be used to pay certain existing indebtedness and fund general operating and working capital needs. This credit facility has a term expiring September 1, 2007 at which time all amounts due under the facility become due and payable, but is automatically renewed for consecutive one year terms unless terminated by written notice of either party 60 days prior to the end of the initial term or any renewal term.  The amount our Company may borrow under this credit facility is determined by a percentage of the cost of eligible inventory, up to a maximum of $4,000,000.  Interest under this facility is payable monthly, commencing October 1, 2006, with the interest rate equal to 18% per year.  We authorized the lender to collect all payments of interest, monthly monitoring fees, principal payments and any over advance (as defined in the Loan and Security Agreement) directly from our factor, Prestige Capital Corporation, which provides an accounts receivable factoring facility for our Company.  In connection with the transactions contemplated by the loan agreement, we entered into a pledge agreement and Ronco Marketing Corporation executed a guaranty in favor of Crossroads Financial. Under these agreements, our obligations under this facility are secured by a lien on substantially all the assets of our Company including a pledge of the equity interests of its subsidiary, Ronco Marketing Corporation, and a secured guaranty by Ronco Marketing Corporation. This facility contains limited covenants, including covenants that we not sell or dispose of assets or properties other than inventory sold in the ordinary course of business, and that we keep the collateral free and clear of liens, except certain permitted liens. This facility includes customary default provisions, and all outstanding obligations may become immediately due and payable in the event of a default.  The loan can be prepaid upon payment of a prepayment penalty of $12,000 per month for each month remaining in the prepayment period (which includes the number of months remaining in the term at the time of the prepayment), with a minimum prepayment penalty of $100,000.

Going Concern

We incurred net losses of approximately $44.4 million for the year ended June 30, 2006, and had a working capital deficiency of approximately $12.9 million as of June 30, 2006. We have suffered significant losses from continuing operation and have negative cash flows from operation. These conditions raise substantial doubt about our ability to continue as a going concern.

We currently plan to raise additional capital through one or more debt or equity financing transactions. On October 6, 2006, we closed a debt financing transaction with Crossroads Capital relating to a credit facility of up to $4.0 million. However, funds available through this facility with Crossroads Capital may not be sufficient to finance our working capital requirements, and we may need to obtain additional funds in the immediate future. The additional funding we require may not be available on acceptable terms or at all and, if obtained through an equity financing transaction, could result in significant dilution.

If we are unable to obtain adequate funding or sufficiently increase our revenues from the sale of our products to support our working capital needs, we could be required to significantly curtail or even shutdown our operations.

Capital Resources

We have not incurred any significant capital expenses during the periods presented and do not have any significant anticipated capital expenditures for the coming year. If capital needs should arise, we will fund them from cash from operations or will obtain financing in connection with their acquisition.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Contractual Obligations and Commercial Commitments

The following table illustrates our contractual obligations and commercial commitments as of June 30, 2006 and include the effects of our acquisition of the Ronco business.

Contractual Obligations	Payments due by period
	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations (1)		45,613		10,947		21,894		12,772		—
Long-Term Debt Obligations, reclassified as Current Debt (2)		15,131,724		15,131,724		—		—		—
Operating Lease Obligations		7,351,532		495,605		1,379,393		1,464,408		4,012,126
Purchase Obligations (3)		5,867,494		5,867,494		—		—		—
Total		28,396,363		21,505,770		1,401,287		1,477,180		4,012,126

(1) Excludes contractual obligations with a term of 30 days or less.

(2) Includes promissory notes to Seller Entities of $13,591,539 and the loan from Sander, Morris Harris of $1,540,185 that may have an occurence of default, and are classified as current on the financial statements.

(3) $5,867,494 are purchase orders for future sales.

Our principal executive offices are located at 61 Moreland Road, Simi Valley, CA 93065, where we lease office space and a storage facility for approximately $56,000 per month.

Effects of Inflation and Foreign Currency Fluctuations

We do not believe that foreign currency fluctuations significantly affected our financial position and results of operations as of and for the fiscal year ended June 30, 2006.

We do not believe that inflation or changing prices has had a material impact on our net sales, revenues or income from continuing operations for the year ended June 30, 2006.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks, which includes changes in interest rates and, to a lesser extent, foreign exchange rates. We do not engage in financial transactions for trading, speculative or hedging purposes.

Our revolving line of credit with Wells Fargo in the original principal amount of $1,234,000 bears interest at 1% above LIBOR, which was 6.375% at June 30, 2006 or ½% below prime, at the Company’s option. This facility expires, and all outstanding amounts become due, on September 20, 2006. As of August 31, 2006, the loan was fully repaid.

The fees due under our factoring agreement also vary between 2% and 5.75% depending on whether the account is collected in less than 15 days or in up to 75 days. The rate goes up by 1% every 15 days thereafter and there is no maximum rate. The fees are not tied to interest rates. As of September 28, 2006 we had assigned $2.9 million of our accounts receivable to this factor. Our factoring agreement terminated on May 1, 2006, but the agreement has been extended on a month to month basis. On October 6, 2006 we extended our factoring agreement until October 1, 2007.

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We enter into a significant amount of purchase obligations outside of the United States, primarily in China, which are settled in U.S. dollars. Therefore, we believe we have minimal exposure to foreign currency exchange risks. We do not hedge against foreign currency risks.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See pages F-1 through F-25 at the end of this report.

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

None.

ITEM 9A. CONTROLS AND PROCEDURES

The Company establishes and maintains disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed by the Company in the reports it files under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to provide reasonable assurance that such information is accumulated and reported to management, including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our management, including our CEO and CFO, does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in control systems, misstatements due to error or fraud may occur and not be detected. These limitations include the circumstances that breakdowns can occur as a result of error or mistake, the exercise of judgment by individuals or that controls can be circumvented by acts of misconduct. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and the operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934.

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Based on their evaluation, as of June 30, 2006, the Chief Executive Officer and the Chief Financial Officer, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) were not effective to ensure that the information required to be disclosed by us in this annual report on Form 10-K was recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. This conclusion is based on our identification of three weaknesses in our internal controls over financial reporting as of June 30, 2006. The material weaknesses are:

Accounts Receivables and Sales

We have inadequately designed processes to properly account for our direct response sales and account receivables balance on a timely basis.

Our reporting system includes free trials in sales and accounts receivable when the free trial order is shipped. In addition, for items shipped as free trial offers, if upon 30 day free trial period expiration the product was not returned, and the credit card could not be charged because it was cancelled, the reporting system will recognize the amount in accounts receivable but not in the sales reports.

For some multiple payment customers with orders with multiple ship dates, it was noted that while the unearned revenue is properly recorded for the unshipped portion at the time of the first shipment, accounts receivable due shows the entire balance of the order, shipped or unshipped. While this error is automatically fixed when the entire order is shipped, it may impact sales cut-off at the end of a reporting period.

We are in the process of upgrading the reporting capabilities on our direct response sales and accounts receivable database and expect to have this issue resolved by December 31, 2006.

Journal Entries

We have inadequately documented the journal entries made to our general ledger.

During our year end audit our independent auditors upon their review of our general journal entries revealed that the explanations accompanying the entries were inadequate in many instances.

We have instituted revised documentation policies relating to routine and non- routine journal entries, and as of October 12, 2006, believe that these issues have been resolved.

Inventory

We have inadequately designed processes to properly account for our inventory balance on a timely basis.

Our perpetual inventory records are maintained on spreadsheets through a collaborative effort of the sales and purchasing departments. The individual SKU’s in the spreadsheets are then assigned values obtained through the Inventory Great Plains Accounting system landed cost module. The module tracks goods received and shipments of inventory to wholesale customers but is not integrated with the accounts receivable system for direct response orders. There is also no automated or integrated warehouse management system in place to track shipments, receipts and returns.

In addition, it is the Company’s current practice to dispose of the signed and dated inventory pick tickets once the shipping information is entered into the accounts receivable system for direct response by customer service. Documents requesting inventory shipment are being prepared but there is no consistent documentation that the items were actually shipped.

We are currently evaluating and researching various warehouse software solutions to determine which one best fits our business. We expect to complete our evaluation and implementation by June 30, 2007. In addition, we are currently implementing procedures to keep all inventory pick tickets and creating a standardize document for shipped items. We expect to have this fully implemented by March 31, 2007.

These matters have been discussed among management, the audit committee and our independent registered public accountants.

As a result of this determination and as part of the work undertaken in connection with this report, we have applied compensating procedures and processes as necessary to ensure the reliability of our financial reporting. Accordingly, management believes, based on its knowledge, that (i) this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading with respect to the period covered by this report and (ii) the financial statements, and other financial information included in this report, fairly reflect the form and substance of transactions and fairly present in all material respects our financial condition, results of operations and cash flows as at, and for, the periods presented in this report.

ITEM 9B. OTHER INFORMATION

None

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth the name, age and position of each of our directors, executive officers and significant employees as of September 30, 2006.

Name	Age	Position(s)
Paul Kabashima	62	Interim Chief Executive Officer, Interim President, Chief Operating Officer
Ronald C. Stone	48	Chief Financial Officer
Harold D. Kahn	60	Director
Thomas J. Lykos, Jr.	49	Director
John S. Reiland	57	Director
Richard F. Allen, Sr.	58	Director

Paul Kabashima was appointed as the Company's Chief Operating Officer on November 8, 2005 and as its interim Chief Financial Officer on April 18, 2006, In addition, Mr. Kabashima was also appointed as the Interim Chief Executive Officer and Interim President on August 9, 2006. From 1990 to 2005, Mr. Kabashima was employed by Mitsui & Co. (U.S.A.), Inc., the largest wholly owned subsidiary of Mitsui & Co. Ltd. Japan which, through its operating divisions, is an exporter of American products throughout the world. Mr. Kabashima served in several capacities at Mitsui U.S.A., including business coordinator, administrative manager, senior manager, accounting and administration and deputy general manager. From 1997 to the present, he was a director and member of the executive compensation committee of Hannibal Industries, Inc. a privately owned fabricator of industrial tubing and warehouse storage racks. From 1993 to 2003, Mr. Kabashima was a director of Weisner Steel Products, Inc., a privately owned distributor of steel safety and harnessing products and from 1991 to 1999 he was a director of Davis Wire Corporation, a privately owned manufacturer of wire products for agricultural, construction, communication and industrial users. Mr. Kabashima received a Bachelor of Science in Business Administration from California State University at Los Angeles and is a certified public accountant.

Richard F. Allen, Sr.  is our former Chief Executive Officer, President and a member of our board of directors since February 2005. Between February 2005 and June 2005, Mr. Allen was the Chief Executive Officer and President of the predecessor entities. Between 2003 and February 2005, Mr. Allen was a consultant to the predecessor entities, assisting them with structuring financial components for their marketing and sales departments. From 2000 through 2003, Mr. Allen was the President and Chief Executive Officer of Design Textiles International, LLC, a distributor and manufacturer of textile products. Mr. Allen has more than 30 years of experience in international marketing, product development, sourcing, manufacturing, international and domestic retail sales, brand management, financing, exporting and importing. Mr. Allen was the President of American Marketing & Events, Inc. between 1993 and 1995. Mr. Allen served in various executive positions with Milliken & Company (New York) and West Point Pepperell (New York) between 1972 and 1975. Mr. Allen graduated from the University of Arizona with a degree in Political Science and Economics and received a Masters degree in International Management from the American Graduate School of International Management.

Harold D. Kahn is a member of our board of directors, a position he has held since June 2005. From March 2004 until present, Mr. Kahn was an independent retail consultant. For nearly 30 years, Mr. Kahn served in a variety of capacities for R. H. Macy & Co., Inc. and its successor, Federated Department Stores, Inc. Most recently, he was the Chairman and Chief Executive Officer of Macy's East, a position he held from 1994 to 2004 and for which he had full operating responsibility for a $5 billion, 90 branch retail business. Prior to 1994, Mr. Kahn served in a succession of senior executive roles within Macy's / Federated, including: President of Montgomery Ward (1992 - 1994), Chairman and Chief Executive Officer of Macy's South & Bullock's (1989 - 1992), Chairman and Chief Executive Officer of Macy's California (1985 - 1989), and President of Macy's Atlanta (1981 - 1985). Mr. Kahn received a Bachelors degree in Business Administration from City College of New York and a Masters in Business Administration from the University of Maryland.

Thomas J. Lykos, Jr., is a member of our board of directors, a position he has held since December 2005. From May 1995 to the present, Mr. Lykos has been a founder and President of Home and Hearth, Inc., a developer and operator of economy extended-stay hotels. From 1990 to 1995, Mr. Lykos served as Director of the Financial Institutions Group at Rauscher Pierce Refsnes, a full service investment bank, where he specialized in public and private offerings and mergers and acquisitions in a variety of industries including banks, thrifts, real estate investment trusts, mortgage banks and insurance companies. From 1988 to 1990, Mr. Lykos served as a Deputy Director of the FSLIC specializing in the resolution of insolvent financial institutions. From 1983 to 1988, Mr. Lykos served as Legal Counsel to the Senate Committee on Banking, Housing and Urban Affairs and Legal Counsel to the House Committee of Energy and Commerce in Washington, D.C. From 1982 to 1983, Mr. Lykos was an attorney for the United States Securities and Exchange Commission in the Division of Enforcement, and between 1981 and 1982, he was a corporate litigation attorney with the law firm of Bracewell and Patterson in Washington, D.C. Mr. Lykos received a Bachelor of Arts degree from Harvard College and a Juris Doctor from the University of Texas School of Law.

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John S. Reiland was appointed to the Company’s Board of Directors on June 9, 2006 pursuant to the terms of the Loan Agreement described above. Subject to the Board of Directors final confirmation of Mr. Reiland’s compliance with all of the independence and knowledge requirements imposed by the Sarbanes-Oxley Act of 2002, the NASDAQ Stock Market, and the other rules and regulations promulgated by the Securities and Exchange Commission, the Board of Directors appointed Mr. Reiland to serve on its audit committee. Mr. Reiland also serves on the board of directors of Nova Oil, Inc. and New England Pantry, Inc. Since March 2006, Mr. Reiland has been a Senior Financial Analyst for Sanders Morris Harris, the largest investment banking firm headquartered in Texas. From March 2003 until March 2006, he served as the Chief Financial Officer of US Dataworks, a developer of payment processing software focused on the financial services market, federal, state and local governments, billers and retailers. From March 2002 until December 2002, Mr. Reiland was the Interim Chief Executive Officer of New England Pantry, a New England-based convenience store chain. From November 2000 to February 2002, he was Chief Executive Officer of ServiceIQ, a privately held developmental stage company developing wireless communications devices for the field service industry. Mr. Reiland is a certified public accountant and began his career at Price Waterhouse & Co. from 1973 to 1978. He received his B.B.A. from the University of Houston in 1973.

Ronald C. Stone served as the Company’s Vice President of Finance and Corporate Controller from September 2005 to September 2006. From May 2005 to August 2005, Mr. Stone served as the named principle of Stone Consulting, a provider of business consulting services. Mr. Stone served as the Chief Financial Officer and Chief Operating Officer of Jill Kelly Productions, Inc., a production company, from September 2003 to April 2005. From May 2002 to August 2003, Mr. Stone served as the Controller of Jill Kelly Productions. Mr. Stone served as Chief Financial Officer of Linear Industries, Ltd. and Lintech Motion Control, Inc., which are each manufacturing and engineering companies in the motion control field, from January 1997 to April 2002. Mr. Stone received a B.A. in History from the University of California, Los Angeles and is a certified public accountant.

Karen Allen, our former Vice President of Product Development, is the wife of Mr. Allen, our former Chief Executive Officer, President and member of our board of directors. Mrs. Allen received an annual salary of $170,000. There are no other family relationships among our directors and executive officers.

None of our directors, executive officers, promoters or control persons has, within the last five years: (i) had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer at the time of the bankruptcy.; (ii) been convicted in a criminal proceeding or is currently subject to a pending criminal proceeding (excluding traffic violations or similar misdemeanors); (iii) been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; (iv) been found by a court of competent jurisdiction (in a civil action), the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and where judgment has not been reversed, suspended or vacated.

Board of Directors and Committees

As of September 30, 2006, our board of directors consisted of four members. We established audit and compensation committees that meet the criteria for independence under, and other applicable requirements of, the Sarbanes-Oxley Act of 2002, the current rules of the NASDAQ Stock Market and the rules and regulations adopted by the SEC. In addition, we plan to establish a nominating committee consisting of our entire board of directors. Our board of directors has adopted charters for these three committees. We are currently redesigning our website and intend to make the text of these charters available on our website at www.ronco.com.

Audit Committee

The audit committee provides assistance to our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting, internal control and legal compliance functions by approving the services performed by our independent accountants and reviewing the adequacy of our accounting practices and systems of internal accounting controls. The audit committee oversees the audit efforts of our independent accountants and reviews their independence.

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John S. Reiland, Thomas J Lykos JR and Harold D Kahn are members of our audit committee. Our board of directors has appointed John S. Reiland as the chairman of the audit committee. Mr. Reiland is qualified as an audit committee financial expert. Before June 30, 2005, our business was operated by companies that were not subject to public reporting requirements and these companies were not historically required to include on their board any person meeting the qualifications of an audit committee financial expert. We plan to change the composition of our board of directors to include at least one person qualifying as an audit committee financial expert.

Compensation Committee

The compensation committee is responsible for recommending to our board of directors the compensation for our executives. The compensation committee determines our general compensation policies and the compensation provided to our directors and executive officers. The compensation committee reviews and recommends bonuses for our officers and certain other employees. In addition, the compensation committee will review and determine equity-based compensation for our directors, officers, employees and consultants, and administer our stock option plans, employee stock purchase plans and other benefit plans. Our compensation committee members are John S. Reiland, Thomas J Lykos JR and Harold D Khan.

Executive Committee

Our executive committee consists of John S. Reiland, Thomas J. Lykos, Jr. and Harold D. Kahn. Our executive committee has been established by the Board and is authorized to the fullest extent permitted by the Delaware General Corporation Law and the Bylaws. The executive committee has the power and the authority, among other things, to declare a dividend and to authorize the issuance of stock, setting the agenda for board of directors meetings, establishing procedures for our shareholders to communicate with our board of directors and reviewing and approving our management operating plan.

Nominating Committee

Our executive committee will act as our nominating committee and will be responsible for assisting in the selection of individuals as nominees for election to the board of directors at annual meetings of our stockholders and for filling any vacancies or newly created directorships on our board of directors. The nominating committee will make recommendations to our board of directors regarding candidates for directorships and the size and composition of our board of directors.

Election of Directors and Officers

Holders of our common stock and Series A Convertible Preferred Stock are entitled to one vote for each share held on all matters submitted to a vote of our stockholders, including the election of directors. Cumulative voting with respect to the election of directors is not permitted by our certificate of incorporation. Our board of directors is elected at the annual meeting of our stockholders or at a special meeting called for that purpose. Each director holds office until the next annual meeting of the stockholders and until the director's successor is elected and qualified. If a vacancy occurs on our board of directors, including a vacancy resulting from an increase in the number of directors, the vacancy may be filled by the board of directors or by the stockholders at the next annual stockholders' meeting or at a special meeting of the stockholders called for that purpose.

Code of Business Conduct and Ethics

In August 2005, our board of directors adopted a code of business conduct and ethics applicable to all of our employees, officers and directors. Our code of business conduct and ethics is currently not available on our website. We recently completed the acquisition transactions of the Ronco business. Before such time, we were a “blank check” company with no operations. As a result of these changes, we are redesigning and reconfiguring our website at www.ronco.com to include links to the text of our code of business conduct and ethics. We intend to satisfy the disclosure requirement relating to amendments to or waivers from any provision of our code of business conduct and ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller by either filing a Form 8-K with the SEC or posting this information on our website within five business days following the date of any amendment or waiver. Upon request, we will provide to any person, without charge, a copy of our code of business conduct and ethics.

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Corporate Governance Guidelines

In August 2005, we also adopted corporate governance guidelines, which provide the framework for our governance. Our corporate governance guidelines require non-employee directors to meet independently from the other members of our board of directors and set qualification standards for prospective members of the board of directors. These guidelines require our board of directors to evaluate its effectiveness annually and the effectiveness of management, define director independence and establish a minimum number of meetings per year for the board of directors and its committees. The text of our corporate governance guidelines is currently not available on our website. As described above, we are redesigning and reconfiguring our website and intend to make our corporate governance guidelines available on our website. Upon request, we will provide to any person, without charge, a copy of our corporate governance guidelines.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires our directors and executive officers and persons who own more than ten percent of our common stock file with the SEC initial reports of ownership and reports of changes in ownership of our common stock. These individuals are required by the SEC's regulations to furnish us with copies of all Section 16(a) reports filed by such persons. To our knowledge, based solely on our review of the copies of such reports furnished to us, all Section 16(a) filing requirements applicable to our directors, executive officers and greater than ten percent beneficial owners for the fiscal year ended June 30, 2006 were complied with on a timely basis.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth compensation for services rendered to us in all capacities for the year ended June 30, 2006, nine months ended June 30, 2005, September 30, 2004 and year ended December 31, 2003, for our Chief Executive Officer and our Chief Financial Officer.

Summary Compensation Table

	Annual Compensation							Long-Term Compensation Awards
Name and Principal Position	Year	Salary (1)($)		Bonus ($)		Other Annual Compensation ($)		Restricted Stock Awards ($)
Richard F. Allen, Sr.	2006	$246,154		-		$58,546	(3)	-
Former President, Chief	2005	$108,933	(4)	$315,000	(5)			$3,009,177	(6)
Executive Officer and Current Director	2004	-		-		-		-
Evan Warshawsky	2006	$169,024		-		$18,508	(2)	-
Chief Financial Officer	2005	$112,500	(7)	$150,000	(8)			601,837	(9)
and Secretary	2004	$112,500	(10)	-		-		-
	2003	$123,333	(12)	-		-		-
Paul Kabashima	2006	$130,769	(11)	-		$9,305	(2)	-
President, Interim Chief Executive Officer
Chief Operating Officer	2005	-		-		-		-

(1) Includes medical insurance reimbursements.

(2) Perquisites, including car allowances, and other personal benefits received by the named executive officers, in the aggregate, do not exceed the lesser of $50,000 or 15% of any such named executive officer's total annual compensation.

(3) Perquisites received by Mr. Allen, include car allowances of $22,420 and other personal benefits of $36,126.

(4) Reflects amount received by Mr. Allen as Chief Executive Officer of Ronco Inventions, LLC, one of the predecessor entities, for the nine months ended June 29, 2005.

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(5) Reflects bonus paid to Mr. Allen upon completion of the acquisition of the Ronco business that closed on June 30, 2005.

(6) Reflects value of 480,188 shares of our common stock issued, and 320,125 shares of our common stock to be issued, to Mr. Allen pursuant to the terms of his employment agreement and restricted stock purchase agreement with us. Half of the 320,125 shares will be issued to Mr. Allen on each of the first two anniversaries of June 30, 2005. Mr. Allen purchased 480,188 shares from us at $0.01 per share on June 30, 2005 and will purchase the remaining 320,125 shares at the same price. The fair market value of Mr. Allen's common stock is based on the $3.77 per share price of the Series A Convertible Preferred Stock sold to investors on June 30, 2005. These shares are subject to repurchase by us, at our option, for $0.01 per share, exercisable if Mr. Allen voluntarily terminates his employment with us prior to June 30, 2008 or if certain performance targets are not satisfied. Additionally, if we terminate Mr. Allen's employment on or before June 30, 2007 for “cause,” we have the option to repurchase, for $0.01 per share, the shares issued to him on the first and second anniversaries of his employment.

(7) Reflects amount paid to Mr. Warshawsky as an executive of Ronco Inventions, LLC, one of the predecessor entities, for the nine months ended June 29, 2005.

(8) Reflects bonus paid to Mr. Warshawsky upon completion of the acquisition of the Ronco business that closed in June 2005.

(9) Reflects value of 160,063 shares of our common stock issued to Mr. Warshawsky under his employment agreement and restricted stock purchase agreement with us. Mr. Warshawsky purchased these shares for $0.01 per share on June 30, 2005, subject to our right to repurchase the shares upon Mr. Warshawsky's voluntary termination of his employment or our termination of his employment for “cause.” The fair market value of Mr. Warshawsky's common stock is based on the $3.77 per share price of the Series A Convertible Preferred Stock sold to investors on June 30, 2005. Our repurchase option lapsed with respect to 50% of the shares on June 30, 2005. Our repurchase right will lapse with respect to 25% of the shares on each of the first two anniversaries of June 30, 2005. In addition, our option to repurchase the shares will immediately lapse if Mr. Warshawsky's employment is terminated without “cause.”

(10) Reflects amount paid to Mr. Warshawsky as President of Ronco Inventions, LLC, one of the predecessor entities, for the nine months ended September 30, 2004.

(11) Reflects the amounts paid to Mr. Kabashima from November 2005 to June 30, 2006.

(12) Reflects amount paid to Mr. Warshawsky as President of Ronco Inventions, LLC, one of the predecessor entities, for the year ended December 31, 2003.

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Employment Agreement with Richard F. Allen, Sr.

We entered into an employment agreement with Richard F. Allen, Sr., commencing on June 30, 2005, which has an initial term of four years and a provision for automatic renewal for additional one year periods if the employment agreement is not earlier terminated. Mr. Allen served as our President and Chief Executive Officer and is a member of our board of directors. Mr. Allen receives a base salary of $250,000 per year and is entitled to a discretionary bonus of up to $600,000 per year. The amount of Mr. Allen's bonus will be determined by our compensation committee, and will be based on the achievement of certain financial milestones as determined by the compensation committee.

On June 30, 2005, the commencement date of Mr. Allen's employment agreement, we paid Mr. Allen a one-time cash bonus of $315,000 in consideration of his role in the consummation of the transactions that resulted in the acquisition of the Ronco business. Mr. Allen also received the right to purchase 800,313 restricted shares of our common stock pursuant to a restricted stock purchase agreement at a price of $0.01 per share. Mr. Allen purchased 60% of these shares (480,188) on June 30, 2005, and is entitled to purchase an additional 160,063 shares on June 30, 2006 and an additional 160,062 shares on June 30, 2007. These shares are subject to repurchase by us, at our option, for $0.01 per share, if Mr. Allen voluntarily terminates his employment with us prior to June 30, 2008 or if certain performance targets are not satisfied. Additionally, if we terminate Mr. Allen's employment on or before June 30, 2007 for “cause,” we have the option to repurchase, for $0.01 per share, the shares issued to him on the first and second anniversaries of his employment. In addition, our option to repurchase these shares will immediately lapse if we terminate Mr. Allen's employment without “cause.”

Mr. Allen's employment agreement would be terminated under its terms upon the death or disability of Mr. Allen. We will also pay for a $1,000,000 life insurance policy for Mr. Allen with the proceeds to be paid to his estate. If we terminate his employment agreement for “cause” (as defined in the agreement) or if Mr. Allen terminates his employment voluntarily for any reason before the end of the term, Mr. Allen will be entitled to receive his base salary through the termination date in addition to his pro rata bonus. If Mr. Allen's employment is terminated by us without “cause,” then he will be entitled to receive: (i) accrued compensation through the termination date; (ii) a single sum payment of $1,000,000; and (iii) reimbursement for the cost of up to the first 12 months of continuing group health plan coverage that Mr. Allen and his covered dependents would be entitled to receive under federal law.

Mr. Allen's employment agreement entitles him to participate in our employee benefit plans, including any pension, group health, long term disability, group life insurance, and any other welfare and fringe benefit plans, arrangements and programs we sponsor or maintain for our employees or senior executives. We will also reimburse Mr. Allen for any reasonable expenses he incurs in carrying out his duties and responsibilities for and on our behalf and we will provide him with the use of an automobile of his choice including monthly lease payments of up to $1,000 and other costs including fuel, maintenance and insurance coverage.

Mr. Allen's employment agreement also contains non-competition and non-solicitation provisions, which restrict him from (1) competing with our business during his employment with us and for a period of three years after his employment terminates, and (2) soliciting any of our employees or customers during his employment with us and for a period of two years after his employment

terminates.

On August 9, 2006, we terminated the employment of Richard F. Allen, Sr. as President and Chief Executive Officer of the Company effective as of this date. Mr. Allen continues to serve as a director of the Company.

Employment Agreement with Evan J. Warshawsky

Effective June 30, 2005, we entered into an employment agreement with Evan J. Warshawsky, which has an initial term of three years. Mr. Warshawsky serves as our Chief Financial Officer. Mr. Warshawsky receives a base salary of $200,000 per year and will be entitled to a discretionary bonus of up to $300,000. The amount of Mr. Warshawsky's bonus will be determined by our board of directors, or compensation committee, based on the achievement of certain financial milestones as determined by our board of directors or compensation committee.

On June 30, 2005, the commencement date of Mr. Warshawsky's employment agreement, we paid Mr. Warshawsky a one-time cash bonus of $150,000 in consideration of his role in the transactions that resulted in our acquisition of the Ronco business. In addition, Mr. Warshawsky also received the right to purchase 160,063 restricted shares of our common stock pursuant to a restricted stock purchase agreement, at a price of $0.01 per share, subject to our right to repurchase the shares upon Mr. Warshawsky's voluntary termination of his employment or our termination of his employment for “cause.” Our repurchase option lapsed on June 30, 2005 with respect to 50% of the shares. Our repurchase right will lapse with respect to 25% of the shares on each of the first two anniversaries of June 30, 2005. In addition, our option to repurchase the shares will immediately lapse if Mr. Warshawsky's employment is terminated without “cause.” On June 30, 2005, Mr. Warshawsky exercised his right to purchase the shares and we issued such shares of our common stock to Mr. Warshawsky as of that date.

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Mr. Warshawsky's employment agreement would be terminated under its terms upon his death or disability. In the event of his death or disability, we will pay Mr. Warshawsky any accrued base salary through the termination date and the cost of six months (in the event of his death) or twelve months (in the event of his disability) of continuing group health plan coverage that he and his covered dependents would be entitled to receive under federal law. If we terminate his employment agreement for “cause” or if Mr. Warshawsky terminates his employment voluntarily for any reason before the end of the term, Mr. Warshawsky will be entitled to receive his base salary through the date his employment terminates in addition to his pro rata bonus. If Mr. Warshawsky's employment is terminated by us without “cause” then he will be entitled to receive: (i) accrued compensation through the termination date; (ii) an amount equal to three times his then current base salary; and (iii) reimbursement for the cost of up to the first 12 months of continuing group health plan coverage that Mr. Warshawsky and his covered dependents would be entitled to receive under federal law.

Mr. Warshawsky's employment agreement entitles him to participate in our employee benefit plans, including any pension, group health, long term disability, group life insurance, and any other welfare and fringe benefit plans, arrangements and programs we sponsor or maintain for our employees or senior executives. We will also reimburse Mr. Warshawsky for any reasonable expenses he incurs in carrying out his duties and responsibilities for and on our behalf and we will provide him with the use of an automobile of his choice including monthly lease payments of up to $750 and other costs including fuel, maintenance and insurance coverage.

Mr. Warshawsky's employment agreement also contains non-competition and non-solicitation provisions, which restrict him from (1) competing with our business during his employment with us and for a period of two years after his employment terminates voluntarily or for cause or for a period of one year if his employment is terminated by us without cause, and (2) soliciting any of our employees or customers during his employment with us and for a period of two years after his employment terminates.

In April 2006, we terminated Mr. Warshawsky’s employment.

Compensation of Directors

Each member of our board of directors who is not one of our employees receives an annual retainer of $25,000 and $1,500 for each meeting of our board of directors attended. In addition, we will pay for reasonable travel expenses. Under the stock incentive plan that we intend to adopt, non-employee directors may be granted options to purchase shares of our common stock. Former directors, Messrs. Martin and Mockenhaupt have each waived the right to the $25,000 annual retainer and the grant of stock options. Mr. Reiland has also waived the right to the $25,000 annual retainer and the grant of stock options.

Our former employee director did not receive any additional compensation for serving on our board of directors or any committee of our board of directors, and our non-employee directors do not receive any compensation from us other than the retainer, attendance fees and stock option grants described above. We currently have no employee directors.

Stock Incentive Plan

We intend to adopt a stock incentive plan that we anticipate will provide for the grant of options and other equity based awards to purchase our common stock. We intend to reserve not less than 100,000 shares of our common stock for issuance under the stock incentive plan.

Compensation Committee Interlocks and Insider Participation

None of our executive officers serves as a member of the board of directors or the compensation committee of any other company that has one or more executive officers serving as a member of our board of directors. None of our employees or current or former officers will be appointed to our compensation committee.

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ITEM 12. SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS

Set forth below is information as of September 28,2006, as to each class of our equity securities, beneficially owned by all of our directors and each of our executive officers, and all of our directors and executive officers as a group, and each beneficial owner of more than 5% of any class of our voting securities.

Name and Address of		Number of Shares		Percent of
Beneficial Owner	Title of Class	Beneficially Owned(1)		Class
Directors and Executive Officers
Richard F. Allen, Sr.(2)	Common Stock	511,346	(4)	19.5%
	Series A Convertible	31,158	(5)	*
	Preferred Stock
Evan J. Warshawsky (3)	Common Stock	191,226	(6)	7.3%
	Series A Convertible	31,163		*
	Preferred Stock
Harold D. Kahn	Common Stock	0		*
	Series A Convertible	0		*
	Preferred Stock
Thomas J. Lykos	Common Stock	0		*
	Series A Convertible	0		*
	Preferred Stock
Paul Kabashima	Common Stock	0		*
	Series A Convertible	0		*
	Preferred Stock
John S. Reiland (7) (8)	Common Stock	0		*
	Series A Convertible	0		*
	Preferred Stock
All directors and executive	Common Stock	702,572	(9)	26.5%
(current and former) officers
as a group (7 persons)
	Series A Convertible	62,321		*
	Preferred Stock

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Name and Address of		Number of Shares		Percent of
Beneficial Owner	Title of Class	Beneficially Owned(1)		Class
5% or greater holders
Entities affiliated with	Common Stock	5,180,802	(7)	66.7%
Sanders Morris Harris, Inc.
320 Park Avenue	Series A Convertible	4,914,135	(8)	32.6%
New York, NY 10022	Preferred Stock
Bookbend & Co.	Common Stock	1,869,694	(10)	41.9%
C/O State Street Bank & Trust
Box 5756	Series A Convertible	1,869,694	(10)	12.4%
Boston, MA 02206	Preferred Stock
	Preferred Stock
Heartland Group, Inc.,	Common Stock	1,762,186	(11)	40.5%
solely on behalf of the
Heartland Value Fund	Series A Convertible	1,762,186	(11)	11.7%
789 North Water Street	Preferred Stock
Suite 500
GLG Partners American Opp Fund	Common Stock	1,174,790	(12)	31.2%
P.O. Box 9080t
Georgetown, Grand Cayman	Series A Convertible	1,174,790	(12)	7.8%
Cayman Islands	Preferred Stock
LBI Group, Inc.	Common Stock	934,847	(13)	26.5%
Lehman Brothers
399 Park Avenue	Series A Convertible	934,847	(13)	6.2%
New York, NY 10022	Preferred Stock
The Quaker Investment Trust -	Common Stock	892,842	(14)	25.6%
Quaker Strategic
Growth Fund	Series A Convertible	892,842	(14)	5.9%
260 Franklin St., 16th Floor	Preferred Stock
#1600
Boston, MA 02110
Topwater Exclusive Fund II LLC	Common Stock	508,685	(15)	16.4%
80 Washington Street
Suite 2-2	Series A Convertible	508,685	(15)	3.4%
South Norwalk, CT 06854	Preferred Stock
Palisades Master Fund L.P.	Common Stock	587,396	(16)	21.9%
C/O PEF Advisors LLC
200 Mansell Court East Suite 5	Series A Convertible	87,396		*
Roswell, GA 30076	Preferred Stock

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Name and Address of		Number of Shares		Percent of
Beneficial Owner	Title of Class	Beneficially Owned(1)		Class
BFS US Special Opportunities Trust PLC	Common Stock	311,616	(17)	10.7%
8080 North Central Pkwy	Series A Convertible	311,616	(17)	2.1%
#210	Preferred Stock
Dallas, TX 75206
Renaissance US Growth Investment Trust PLC	Common Stock	311,616	(18)	10.7%
8080 North Central Express	Series A Convertible	311,616	(18)	2.1%
Suite 210, LB59	Preferred Stock
Dallas, TX 75206
Stanley Shopkorn	Common Stock	311,616	(19)	10.7%
Shopkorn Associates
410 Park Avenue	Series A Convertible	311,616	(19)	2.1%
New York, NY 100922	Preferred Stock
Tom and Nancy Juda Living Trust	Common Stock	311,616	(20)	10.7%
410 S. Lucerne Boulevard
Los Angeles, California 90020	Series A Convertible	311,616	(20)	2.1%
	Preferred Stock
Apogee Fund, L.P.	Common Stock	233,713	(21)	8.3%
201 Main St, #1555
Ft Worth, TX 76102	Series A Convertible	233,713	(21)	1.5%
	Preferred Stock
Coll International	Common Stock	177,778		6.9%
1330 Avenue of the Americas,
40th Floor	Series A Convertible	0		*
New York, NY 10019	Preferred Stock
Content Holding LLC	Common Stock	177,778		6.9%
1330 Avenue of the Americas,
40th Floor	Series A Convertible	0		*
New York, NY 10019	Preferred Stock
Gilbert Azafrani	Common Stock	160,063	(22)	6.2%
1725 Oceanfront Walk #318
Santa Monica, CA 90401	Series A Convertible	0		*
	Preferred Stock
Sandor Capital Master Fund, L.P.	Common Stock	158,597	(23)	5.8%
2828 Routh Street, #500
Dallas, TX 75201	Series A Convertible	158,597	(23)	1.1%
	Preferred Stock

54

Name and Address of		Number of Shares		Percent of
Beneficial Owner	Title of Class	Beneficially Owned(1)		Class
Copper Beech Equity Partners LLC	Common Stock	156,862		6.1%
445 Park Avenue, 10th Floor
New York, NY 10022	Series A Convertible	0		*
	Preferred Stock
Anthony & Sandra Mansour Family	Common Stock	155,809	(24)	5.7%
Revocable Trust 12/17/85
4477 Golden Foothill Parkway	Series A Convertible	155,809	(24)	1.0%
El Dorado Hills, CA 95762	Preferred Stock
Alpha Capital	Common Stock	155,808	(25)	5.7%
LH Financial
160 Central Park, S., #2701	Series A Convertible	155,808	(25)	1.0%
New York, NY 10021	Preferred Stock
Paul Wallace	Common Stock	133,334		5.1%
156 West 56th Street, Suite 1604
New York, NY 10019	Series A Convertible	0		*
	Preferred Stock

* Indicates less than one percent.

(1) Beneficial ownership is determined in accordance with the rules and regulations of the SEC. Under these rules, a person is deemed to beneficially own a security if that person has or shares voting power or investment power with respect to that security, or has the right to acquire beneficial ownership of that security within 60 days, including through the exercise of any option, warrant or other right or the conversion of any other security. More than one person may be considered to beneficially own the same security. Percentage of class is based on 2,591,605 shares of common stock outstanding as of September 28, 2006. Percentage of Series A Convertible Preferred Stock is based on 15,080,932 shares of Series A Convertible Preferred Stock outstanding as of September 28, 2006, not including an additional four shares of Series A Convertible Preferred Stock that were paid for but that have not yet been issued. Securities that are exercisable or convertible into shares of our common stock within 60 days of the date of this prospectus are deemed outstanding for computing the percentage of the person or entity holding such securities but are not deemed outstanding for computing the percentage of any other person or entity. Percentage of class does not include shares of Series A Convertible Preferred Stock payable as a dividend on the outstanding shares of Series A Convertible Preferred Stock or issuable in payment of penalties associated with this registration statement. See “Description of Securities-Preferred Stock.”

(2) The address for Mr. Allen and Warshawsky is 21344 3445 Twin Lake Ridge, Westlake Village CA 91361.

(3) The address for Mr. Warshawsky is 11768 J Moorpark St, Studio City CA 91604.

(4) Consists of 480,188 shares of our common stock held individually by Mr. Allen and 31,158 shares of our Series A Convertible Preferred Stock, including an additional four shares of Series A Convertible Preferred Stock that were paid for but that were not issued as of the date of this prospectus held by The Allen Peyser Family Trust of which Mr. Allen and his spouse, Karen Allen, are trustees and who both exercise voting and investment power over the shares. Mr. Allen and his spouse disclaim beneficiary ownership of the shares held by The Allen Peyser Family Trust. The shares of common stock are subject to repurchase by us, at our option, for $0.01 per share, exercisable if Mr. Allen voluntarily terminates his employment with us prior to June 30, 2008 or if certain performance targets are not satisfied. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(5) Consists of 31,158 shares of Series A Convertible Preferred Stock including four shares of Series A Convertible Preferred Stock that were paid for but that were not issued as of the date of this prospectus held by The Allen Peyser Family Trust of which Mr. Allen and his spouse, Karen Allen, are trustees and who both exercise voting and investment power over the shares. Mr. Allen and his spouse disclaim beneficiaries ownership of the shares held by The Allen Peyser Family Trust.

(6) Consists of 160,063 shares of our common stock and 31,163 shares of our Series A Convertible Preferred Stock. Mr. Warshawsky acquired the shares of common stock subject to repurchase by us, at our option, for $0.01 per share, exercisable if Mr. Warshawsky voluntary terminates his employment or we terminate his employment for “cause.” Our repurchase option lapsed with respect to 50% of these shares on June 30, 2005. Our repurchase option will lapse with respect to 25% of these shares on each of the first two anniversaries of June 30, 2005. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

55

(7) Consists of an aggregate of 4,914,135 shares of our Series A Convertible Preferred Stock held by Sanders Opportunity Fund (Institutional), L.P., and Sanders Opportunity Fund, L.P. and a warrant to purchase 266,667 shares of our common stock held by Sanders Morris Harris, Inc., our placement agent and a subsidiary of Sanders Morris Harris Group, Inc. Don Sanders exercises voting and investment powers for these shares. Although Don Sanders may be deemed to be the beneficial owner, Don Sanders disclaims beneficial ownership of the shares owned by Sanders Opportunity Fund (Institutional), L.P., Sanders Opportunity Fund, L.P. and Sanders Morris Harris Inc. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder. Mr. Reiland is a member of our board of directors and a Senior Financial Analyst at Sanders Morris Harris, Inc. Mr. Reiland disclaims beneficial ownership of the shares owned by Sanders Opportunity Fund (Institutional), L.P., Sanders Opportunity Fund, L.P. and Sanders Morris Harris, Inc.

(8) Consists of an aggregate of 4,914,135 shares of our Series A Convertible Preferred Stock held by Sanders Opportunity Fund (Institutional), L.P. and Sanders Opportunity Fund, L.P. Don Sanders exercises voting and investment powers for these shares. Although Don Sanders may be deemed to be the beneficial owner, Don Sanders disclaims beneficial ownership of the shares owned by Sanders Opportunity Fund (Institutional) L.P. and Sanders Opportunity Fund, L.P. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder. Mr. Reiland is a member of our board of directors and a Senior Financial Analyst at Sanders Morris Harris, Inc. Mr. Reiland disclaims beneficial ownership of the shares owned by Sanders Opportunity Fund (Institutional), L.P., Sanders Opportunity Fund, L.P. and Sanders Morris Harris, Inc.

(9) Consists of shares beneficially owned by Messrs. Allen and Warshawsky.

(10) Consists of 1,869,694 shares of our Series A Convertible Preferred Stock. William Bales exercises voting and investment powers for these shares. Although Mr. Bales may be deemed to be the beneficial owner, Mr. Bales disclaims beneficial ownership of the shares owned by Bookbend & Co. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(11) Consists of 1,762,186 shares of our Series A Convertible Preferred Stock. Paul Beste exercises voting and investment powers for these shares. Although Mr. Beste may be deemed to be the beneficial owner, Mr. Beste disclaims beneficial ownership of the shares owned by Heartland Group, Inc. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(12) Consists of 1,174,790 shares of our Series A Convertible Preferred Stock. Noam Gottesman exercises voting and investment powers for these shares. Although Mr. Gottesman may be deemed to be the beneficial owner, Mr. Gottesman disclaims beneficial ownership of the shares owned by GLG Partners American Opp Fund. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(13) LBI Group, Inc. is a wholly-owned subsidiary of Lehman Brothers, Inc., which is a wholly-owned subsidiary of Lehman Brothers Holdings, Inc., which is a public company.

(14) Consists of 892,842 shares of our Series A Convertible Preferred Stock. Manu Daftary exercises voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(15) Consists of 508,685 shares of our Series A Convertible Preferred Stock. Travis Taylor and Manu Daftary exercise voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(16) Consists of 500,000 shares of our common stock and 87,396 shares of our Series A Convertible Preferred Stock. The shares of common stock are subject to repurchase by us, at our option, for $0.01 per share, Paul Mannion and Andy Reckles exercise voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(17) Consists of 311,616 shares of our Series A Convertible Preferred Stock. Russell Cleveland exercises voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(18) Consists of 311,616 shares of our Series A Convertible Preferred Stock. Russell Cleveland exercises voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(19) Consists of 311,616 shares of our Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(20) Consists of 311,616 shares of our Series A Convertible Preferred Stock. Tom Juda and Nancy Juda exercise voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(21) Consists of 233,713 shares of our Series A Convertible Preferred Stock. Emmett Murphy exercises voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(22) Mr. Azafrani was our general counsel.

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(23) Consists of 158,597 shares of our Series A Convertible Preferred Stock. John Lemak exercises voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(24) Consists of 155,809 shares of our Series A Convertible Preferred Stock. Anthony Mansour exercises voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

(25) Consists of 155,808 shares of our Series A Convertible Preferred Stock. Konrad Ackerman and Rainer Posch exercise voting and investment powers for these shares. Each share of Series A Convertible Preferred Stock may be converted into one share of common stock at the option of the holder.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Origins of the Ronco Asset Purchase

In October 2003, Richard F. Allen, Sr., our former President and Chief Executive Officer, commenced discussions with Mr. Ronald M. Popeil regarding the possibility of affecting the purchase of the business of Ronco Inventions, LLC and other entities affiliated with Mr. Popeil, which we refer to as the predecessor entities. Mr. Allen enlisted the assistance of UCC Capital Corporation, an advisory firm based in New York, and certain of its principals, who we refer to collectively as the promoters to provide advice on the specific structure of the proposed asset purchase.

Ronco Marketing Corporation was formed in October 2004 for the purpose of acquiring the assets of the predecessor entities. Pursuant to the terms of an advisory agreement in connection with the structuring, negotiation and financing of the purchase of these assets, we paid cash fees consisting of (i) a base fee of $1,800,000 and (ii) an incremental fee equal to five percent (5%) of any of our cash and cash equivalents in excess of $6 million at the closing to Copperfield Equity Partners LLC, Coll International LLC, and Content Holding LLC. As compensation for their services in connection with the merger, we also issued Cooper Beech Equity Partners, Coll International and Content Holding an aggregate of 533,334 shares of common stock at a price of $0.01 per share. We also reimbursed Copperfield Equity Partners, Coll International, and Content Holding for certain expenses totaling approximately $700,000 that Copperfield Equity Partners, Coll International, and Content Holding incurred in connection with the purchase of these assets. As of December 31, 2005, Copper Beech Equity Partners, Coll International and Content Holding each beneficially owned 8.5% of our outstanding common stock. See “Business-The Ronco Acquisition.”

Prior to the execution of the asset purchase agreement on December 10, 2004, Ronco Marketing Corporation secured its initial working capital through the sale of restricted shares and approximately $392,000 in promissory notes of Ronco Marketing Corporation to a group of private accredited investors consisting of Frank Milewski, Paul Wallace and the Terra Nova Group. Upon the closing, the promissory notes held by these individuals and entity were redeemed at face value. In addition, as of June 30, 2005, Frank Milewski, Paul Wallace and the Terra Nova Group collectively owned 266,668 shares of common stock or 12.7% of our outstanding common stock.

The shares of our common stock held by Copper Beech Equity Partners, Coll International, Content Holding, Frank Milewski, Paul Wallace and the Terra Nova Group are restricted shares, as defined by the Securities Act. We are in the process of registering the shares held by Copper Beech LLC , Content Holding LLC, Frank Milewski, Paul Wallace and the Terra Nova Group. The shares of common stock held by Copper Beech LLC and Content Holding LLC are held under the terms of a 12-month lock-up agreement, which permits re-hypothecation and private sales of such shares of common stock, but prohibits the sale of common stock through the public market. The placement agent, Sanders Morris Harris, may waive such lockup agreement in its discretion.

We have agreed to indemnify and hold harmless and generally release Content Holding, Copper Beech Equity Partners, Copperfield Equity Partners (an affiliate of Copper Beech Equity Partners), Coll International, their managers, directors and officers from and against any loss, claim, damage, liability or expense arising out of or in connection with the purchase of assets from the predecessor entities and Mr. Popeil, including, without limitation, attorneys' fees, disbursements and any other costs and expenses in connection therewith, except to the extent such loss, claim, damage, liability or expense related to or resulted from the fraud, gross negligence, bad faith or willful misconduct of such party.

Copper Beech Equity Partners, Coll International, Content Holding, Frank Milewski, Paul Wallace and the Terra Nova Group have discussed with the placement agent the possibility of engaging in private re-sales of some or all of the 800,002 shares of our common stock that they received as a group in connection with these various transactions. Such re-sales would be permitted under the terms of the lock-up agreements between us and Copper Beech Equity Partners and Content Holding and would have to be done in compliance with an exemption from the registration requirements of the federal securities laws and any applicable state securities laws. The proceeds from any such private re-sales would go to Copper Beech Equity Partners, Coll International, Content Holding, Frank Milewski, Paul Wallace or the Terra Nova Group and would not go to us.

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Preferred Stock Financing

On June 30, 2005, we issued and sold 13,262,600 shares of Series A Convertible Preferred Stock for a purchase price of $3.77 per share to certain investors, including to certain beneficial owners of more than 5% of our voting securities and Messrs. Richard F. Allen, Sr. and Evan J. Warshawsky, our former Chief Executive Officer and former Chief Financial Officer, respectively. We sold the Series A Convertible Preferred Stock for total proceeds of $50 million to finance the cash portion of the purchase price of the assets that we acquired from Mr. Ronald M. Popeil and the predecessor entities. The shares of Series A Convertible Preferred Stock are convertible into an aggregate of 13,262,600 shares of our common stock, as such number may be adjusted in the future. See “Business-The Ronco Acquisition.”

Registration Rights Agreement

On June 30, 2005, we entered into a registration rights agreement with the purchasers of our Series A Convertible Preferred Stock (including certain beneficial owners of more than 5% of our voting securities, Messrs. Richard F. Allen, Sr. and Evan J. Warshawsky, our former Chief Executive Officer and former Chief Financial Officer, respectively), Sanders Morris Harris and certain holders of our common stock. Under the terms of the agreement, we were obligated to file a registration statement covering the resale of certain outstanding shares of common stock, the shares of common stock into which the outstanding shares of Series A Convertible Preferred Stock are convertible and into which the warrant issued to Sanders Morris Harris is exercisable. We were obligated to have the registration statement declared effective by October 28, 2005. Because we were unable to meet this deadline, we are liable for a cash payment to the stockholders who are party to the registration rights agreement, equal to one percent of the per share price of the Series A Convertible Preferred Stock, or $500,000, per month. The registration rights agreement also provides that parties to the agreement have the right, under certain circumstances and subject to certain conditions, to require us to register under the Securities Act shares of our common stock held by them, but not registered as discussed above. The registration agreement also provides that we will pay all expenses in connection with any registration. To date we have been unable to complete the registration statement. In June 2006 the Series A Preferred shares holders agreed to waive all penalties related to the registration statement and also agreed to settle all accrued dividends for 2,318,332 shares of Series A Preferred Stock.

Placement Agent Agreement

On May 26, 2005, we entered into a placement agent agreement with Sanders Morris Harris in connection with the preferred stock financing described above. Pursuant to the terms of the placement agent agreement and in consideration of services provided by Sanders Morris Harris, we paid Sanders Morris Harris $3,500,000, issued Sanders Morris Harris a warrant to purchase 266,667 shares of our common stock and reimbursed it for certain out-of-pocket expenses. The warrant has an exercise price of $3.77 per share and is exercisable for five years from July 1, 2005. Messrs. A. Emerson Martin, II and Gregg A. Mockenhaupt are each managing directors of Sanders Morris Harris and were also members of our board of directors when the warrants were issued.

Ronco Marketing Corporation Merger

On June 29, 2005, we closed a merger transaction pursuant to an agreement and plan of merger dated May 23, 2005, by and among us, certain of our stockholders, Ronco Acquisition Corporation (our wholly-owned subsidiary) and Ronco Marketing Corporation. Pursuant to the merger agreement, we acquired Ronco Marketing Corporation by merging Ronco Acquisition Corporation with and into Ronco Marketing Corporation. Ronco Marketing Corporation was the surviving corporation and became our wholly-owned subsidiary. Pursuant to the agreement: (i) each share of our common stock issued and outstanding immediately prior to June 29, 2005 remained issued and outstanding; (ii) each share of Ronco Acquisition Corporation's common stock issued and outstanding immediately prior to June 29, 2005 ceased to be outstanding and was converted into one share of common stock of Ronco Marketing Corporation; and (iii) each share of Ronco Marketing Corporation's common stock issued and outstanding immediately prior to June 29, 2005 ceased to be outstanding and was converted into and exchanged for 1.6452794 shares of our common stock, for an aggregate of 800,002 shares of our common stock.

Indemnification of Directors and Officers

Our certificate of incorporation and bylaws provide for the indemnification of our officers and directors. We intend to enter into indemnification agreements with each of our directors and executive officers.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following is a summary of the fees billed to us by Mahoney Cohen & Company, CPA, P.C., our independent registered public accounting firm, for professional services rendered for the period ended June 30, 2006:

	Period Ended
Fee Category	June 30, 2006
Audit Fees (1)	$	427,000
Audit-related fees (2)		205,000
Tax fees (3)		13,000
All other fees		0
Total Fees	$	645,000

(1) Consists of fees associated with the annual audit and quarterly review of our financial statements.

(2) Consists of fees associated with the filing of our S-1.

(3) Consists of fees associated with the preparation of our corporate income tax return.

Our Board of Directors appointed Mahoney Cohen & Company, CPA, P.C. as our independent auditors for the period ended June 30, 2006. We did not procure any other services from Mahoney Cohen & Company, CPA, P.C. in fiscal 2006 other than as described above.

The board of directors pre-approves all audit services and permitted non-audit services (including the fees and terms thereof) to be performed by our independent registered public accounting firm, subject to the de minimus exceptions for non-audit services described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934, which are approved by the board of directors prior to the completion of the audit. The board of directors may form and delegate authority to committees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such committee to grant pre-approvals shall be presented to the full board of directors at its next scheduled meeting.

During fiscal 2006, the board of directors pre-approved all audit services and permitted non-audit services performed by our independent registered public accounting firm and did not rely upon the de minimus exceptions described in Section 10A(i)(1)(B) of the Securities Exchange Act of 1934.

The board of directors has considered and determined that Mahoney Cohen & Company, CPA, P.C.'s provision of these services is compatible with maintaining its independence.

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) Financial Statements.

See pages F-1 through F-24 at the end of this report.

FINANCIAL STATEMENT SCHEDULES

RONCO CORPORATION

Schedule II - Valuation and Qualifying Accounts

Description	Balance at beginning of period			Additions Charged to costs and expenses			Deductions				Balance at end of period
Allowance for doubtful accounts and sales returns
Successor:
Year ended June 30, 2006 (a)	$	--	(b)	$	4,868,944.00	(c)	$	(4,505,427	)	(d)	$	363,517
Predecessor:
Nine months ended June 29, 2005	$	1,480,000		$	--		$	(1,180,000	)	(d)	$	300,000
Nine months ended September 30, 2004	$	5,526,430		$	1,474,147		$	(5,520,577	)	(d)	$	1,480,000
Year ended December 31, 2003	$	1,835,421		$	3,691,009		$	--			$	5,526,430
Year ended December 31, 2002	$	1,075,385		$	760,036		$	--			$	1,835,421

Notes:

(a) Prior to June 30, 2005, the Predecessor did not track allowance for bad debt and sales returns separately. Since June 30, 2005, the Successor has tracked bad debt and sales returns separately.

(b) In accordance with purchase accounting, accounts receivable have been recorded at fair value at June 30, 2005 and accordingly no allowance for doubtful accounts and sales returns have been provided.

(c) Includes $502,517 of bad debt expenses and $4,366,427 of sales returns.

(d) Accounts written-off against the allowance net of recoveries.

See Exhibit Index.

59

SIGNATURES

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

Date: October 12, 2006		RONCO CORPORATION
By:	/s/ Paul Kabashima
	Paul Kabashima . Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this amended report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Title	Date
/s/ Richard F. Allen, Sr.
Richard F. Allen, Sr.	Director	October 12, 2006
/s/ Harold D. Kahn
Harold D. Kahn	Director	October 12, 2006
/s/ Thomas J. Lycos, Jr.
Thomas J. Lykos, Jr.	Director	October 12, 2006
/s/ John S. Reiland
John S. Reiland	Director	October 12, 2006
/s/ Ronald C Stone
Ronald C Stone	Chief Financial Officer	October 12, 2006

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EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger dated May 20, 2005, among Ronco Corporation (fka Fi-Tek VII, Inc.), the "FTK Insiders", Ronco Acquisition Corporation and Ronco Marketing Corporation.(4)
2.2	Asset Purchase Agreement dated December 10, 2004, as amended, among Ronco Marketing Corporation and Ronco Inventions, LLC, Popeil Inventions, Inc., RP Productions, Inc., RMP Family Trust and Ronald M. Popeil.(4)
3.1(i)	Certificate of Incorporation of Ronco Corporation (fka Fi-Tek VII, Inc.), as amended.(4)
3.1(ii)	Bylaws of Ronco Corporation (fka Fi-Tek VII, Inc.). (4)
4.1	Certificate of Designation of Powers, Preferences and Rights of the Series A Convertible Preferred Stock of Ronco Corporation. (4)
4.2	Warrant between Ronco Corporation and Sanders Morris Harris Inc. (3)
4.3	Form of Registration Rights Agreement between Ronco Corporation, the parties set forth on the signature page and Exhibit A thereto and other stockholders of the Company. (1)
10.1	Promissory Note dated June 30, 2005 between Ronco Marketing Corporation and Ronco Inventions, LLC. (5)
10.2	Lock-Up Agreement for Copper Beech Equity Partners dated June 29, 2005. (4)
10.3	Lock-Up Agreement for Content Holding LLC dated June 28, 2005.(4)
10.4	Assignment and Assumption Agreement dated June 30, 2005, between Ronco Marketing Corporation and Ronald M. Popeil. (4)
10.5	Promissory Note dated June 30, 2005 between Ronco Marketing Corporation and Popeil Inventions, Inc. (5)
10.6	Consulting and Advisory Services Agreement dated June 30, 2005 between Ronco Marketing Corporation and Ronald M. Popeil. (4)
10.7	Trademark Co-Existence Agreement dated June 30, 2005 between Ronco Marketing Corporation and Ronald M. Popeil. (4)
10.8	New Product Development Agreement dated June 30, 2005 by and among Ronald M. Popeil and Ronco Marketing Corporation. (5)
10.9	Placement Agent Agreement dated May 26, 2005, between Ronco Marketing Corporation and Sanders Morris Harris. (4)
10.10	Advisory Agreement dated May 20, 2005, between Ronco Marketing Corporation and Copper Beech LLC, Copperfield Equity Partners LLC, Coll International LLC, and Content Holding LLC. (4)
10.11	Revolving Line of Credit Note dated September 20, 2005 between Ronco Corporation and Wells Fargo Bank, National Association. (5)
10.12	Securities Agreement Securities Account dated September 20, 2005 between Ronco Corporation and Wells Fargo Bank National Association. (5)
10.13	Employment Agreement between Ronco Corporation and Richard F. Allen, Sr. (4)
10.14	Employment Agreement between Ronco Corporation and Evan J. Warshawsky. (4)
10.15	Restricted Stock Purchase Agreement between Ronco Corporation and Richard F. Allen, Sr. dated June 28, 2005. (4)*
10.16	Restricted Stock Purchase Agreement between Ronco Corporation and Evan Warshawsky dated June 29, 2005. (4)*

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10.17	Purchase and Sale Agreement by and between Prestige Capital Corporation and Ronco Corporation dated as of October 25, 2005 (2)
10.18	Restricted Stock Purchase Agreement between Ronco Corporation and Gilbert Azafrani dated June 28, 2005. (4)*
10.19	Letter Loan Agreement dated June 9, 2006 between Ronco Corporation and Sanders Morris Harris, Inc. (5)
10.20	Subordinated Promissory Note dated June 9, 2006 issued to Sanders Morris Harris, Inc. in the principal amount of $1,500,000 (5)
10.21	Security Agreement dated June 9, 2006 by Ronco Corporation in favor of Sanders Morris Harris, Inc. (5)
10.22	Assignment of Life Insurance Policy dated June 9, 2006 by Ronco Corporation in favor of Sanders Morris Harris, Inc. (5)
14.1	Code of Business Conduct and Ethics (4)
21.1	Subsidiaries of Ronco Corporation (4)
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act (5)
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act (5)
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act (5)
32.2	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act (5)

(1) Incorporated by reference from Exhibits 10.10 to Form 8-K filed July 1, 2005.

(2) Incorporated by reference from Exhibit 10.1 to Form 8-K filed October 31, 2005.

(3) Incorporated by reference from exhibit 10.11 to the Form 10-K filed on November 4, 2005.

(4) Incorporated by reference from the corresponding exhibit to the Form 10-K filed on November 4, 2005.

(5) Filed Herewith.

* Management Compensation Plan or Arrangements

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RONCO CORPORATION AND SUBSIDIARY

INDEX TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULE

Report of Independent Registered Public Accounting Firm, Mahoney Cohen & Company, CPA, P.C.	F-2 - F-3
Independent Auditors' Report, VELAH Group LLP	F-4
Consolidated Balance Sheets at June 30, 2006 and 2005	F-5
Consolidated and Combined Statements of Operations for the year ended June 30, 2006, June 30, 2005 (Date of Acquisition) (Successor), for the nine months ended June 29, 2005 and September 30, 2004, and for the year ended December 31, 2003 (Predecessor)	F-6
Consolidated and Combined Statements of Stockholders' and Members' Equity (Deficiency) for the year ended June 30, 2006 (Successor), October 15, 2004 (Date of Inception) to June 30, 2005 (Successor), for the nine months ended June 29, 2005 and September 30, 2004, and for the year ended December 31, 2003 (Predecessor)	F-7
Consolidated and Combined Statements of Cash Flows for the year ended June 30, 2006 (Successor), June 30, 2005 (Date of Acquisition) (Successor) for the nine months ended June 29, 2005 and September 30, 2004 and the year ended December 31, 2003 (Predecessor)	F-8 - F-9
Notes to Consolidated and Combined Financial Statements	F-10 - F-24
The following consolidated and combined financial statement schedule is included in Item 15(b):
Schedule II - Valuation and Qualifying Accounts

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Ronco Corporation and Subsidiary

We have audited the accompanying consolidated balance sheets of Ronco Corporation and subsidiary (the “Successor” or “Company”) as of June 30, 2006 and 2005 and the related consolidated statements of operations and cash flows for the year ended June 30, 2006 and for the one day June 30, 2005 (Date of Acquisition) and stockholders' equity for the year ended June 30, 2006 and for the period October 15, 2004 (Date of Inception) to June 30, 2005. Our audits also included the financial statement schedule listed in the index as Item 15(b) for the year ended June 30, 2006. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Ronco Corporation and subsidiary as of June 30, 2006 and 2005, and the results of their operations and their cash flows for the year ended June 30, 2006 and for the one day June 30, 2005 (Date of Acquisition) in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule for the year ended June 30, 2006, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s net loss of approximately $44,420,000 and working capital deficiency of approximately $12,867,000 raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

/s/ Mahoney Cohen & Company, CPA, P.C.

New York, New York

September 22, 2006, except for Note 22, for which the date is October 6, 2006

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Members and Stockholders

Ronco Inventions, LLC and Affiliated Companies

We have audited the accompanying combined statements of operations, stockholders' and members' deficiency and cash flows of Ronco Inventions, LLC and Affiliated Companies (the “Predecessor” or the “Company”) for the nine months ended June 29, 2005 and September 30, 2004. Our audits also included the financial statement schedule listed in the index as Item 15(b) for the nine months ended June 29, 2005 and September 30, 2004. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined statements of operations, stockholders' and members' deficiency and cash flows of Ronco Inventions, LLC and Affiliated Companies referred to above present fairly, in all material respects, the results of their operations and their cash flows for the nine months ended June 29, 2005 and September 30, 2004 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule for the nine months ended June 29, 2005 and September 30, 2004, when considered in relation to the basic combined financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ Mahoney Cohen & Company, CPA, P.C.

New York, New York

October 20, 2005

F-3

INDEPENDENT AUDITORS’ REPORT

To the Members and Stockholder

Ronco Inventions, LLC and Affiliated Companies:

We have audited the accompanying combined statements of operations, stockholders’ and members’ deficiency, and cash flows of Ronco Inventions, LLC and Affiliated Companies (collectively, the “Company”), which are under common ownership and common management, for the year ended December 31, 2003. Our audit also includes the financial statement scheduled listed in the index as Item 15(b) for the year ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the combined statements of operations, stockholders’ and members’ deficiency, and cash flows referred to above present fairly, in all material respects, the results of its operations and its cash flows of the Company for the year then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule when considered in relation to the basic combined financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/ VELAH Group LLP

Los Angeles, California

August 19, 2004

F-4

RONCO CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2006 AND 2005

	June 30, 2006			June 30, 2005
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	425,145		$	834,358
Short-term investments		501,942			-
Accounts receivable, net of allowance for doubtful accounts and returns of $363,517 at June 30, 2006		759,758			2,264,315
Inventories		8,372,362			8,968,199
Prepaid expenses and other current assets		632,376			2,537,506
Due from seller entities		-			135,676
Investments		601,783			-
Total current assets		11,293,366			14,740,054
INVESTMENTS		-			1,627,823
PROPERTY AND EQUIPMENT, Net		1,185,227			925,000
OTHER ASSETS:
Production costs, net of accumulated amortization $135,805 at June 30, 2006		71,610			100,000
Deposits		278,578			182,500
DEFERRED INCOME TAXES		-			310,000
INTANGIBLE ASSETS, Net of accumulated amortization and impairment writedown of
$27,513,161 at June 30, 2006		15,410,439			42,923,600
GOODWILL		-			2,953,481
	$	28,239,220		$	63,762,458
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Line of credit	$	384,000		$	-
Current maturities of notes payable to seller entities		13,026,085			2,876,000
Current maturities of notes payable		1,507,715			-
Accounts payable		7,432,957			3,156,080
Accrued expenses		1,223,005			430,251
Deferred income		586,363			75,000
Total current liabilities		24,160,125			6,537,331
LONG-TERM LIABILITIES:
Deferred income		182,430			-
Notes payable, less current maturities		31,182			10,282,180
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Series A Convertible Preferred stock, $.00001 par value; 20,000,000 shares authorized; 15,580,932 and 13,262,600 shares issued and outstanding at June 30, 2006 and 2005, respectively		156			133
Common stock, $.00001 par value; 500,000,000 shares authorized; 2,091,605 shares issued and outstanding at June 30, 2006 and 2005		21			21
Common stock to be issued		1,206,870			1,206,870
Additional paid-in capital		54,188,321			49,513,066
Deferred compensation		(2,006,118	)		(3,310,096	)
Accumulated deficit		(49,523,767	)		(467,047	)
TOTAL STOCKHOLDERS' EQUITY		3,865,483			46,942,947
	$	28,239,220		$	63,762,458

See accompanying notes.

F-5

RONCO CORPORATION AND SUBSIDIARY

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED JUNE 30, 2006, ONE DAY (DATE OF ACQUISITION) JUNE 30, 2005, NINE MONTHS

ENDED JUNE 29, 2005 AND SEPTEMBER 30, 2004, AND THE YEAR ENDED DECEMBER 31, 2003

	Successor			Successor			Predecessor			Predecessor			Predecessor
	Year Ended			(Date of Acquisition)			Nine Months			Nine Months Ended			Year Ended
	June 30, 2006			June 30, 2005			Ended June 29, 2005			September 30, 2004			December 31, 2003
Net sales	$	58,723,826		$	-		$	68,985,101		$	63,245,257		$	93,500,173
Cost of sales		(20,009,445	)		-			(16,844,057	)		(16,842,282	)		(29,274,097	)
Gross profit		38,714,381			-			52,141,044			46,402,975			64,226,076
Selling, general and administrative expenses		56,968,807			765,967			50,446,473			53,216,762			67,652,570
Impairment loss on goodwill		2,953,481			-			-			-			-
Impairment loss on intangibles		21,567,435			-			-			-			-
Impairment loss on equipment		-			-			-			771,048			-
		81,489,723			765,967			50,446,473			53,987,810			67,652,570
Income (loss) from operations		(42,775,342	)		(765,967	)		1,694,571			(7,584,835	)		(3,426,494	)
Other income (loss), net		-			-			(7,840	)		-			385,992
Interest expense, net of interest income of $112,915, $104,251, and $133,830 - June 30, 2006, June 29, 2005 and September 30, 2004, respectively		(1,335,038	)		-			(2,824,260	)		(120,482	)		-
Loss before income taxes (benefit)		(44,110,380	)		(765,967	)		(1,137,529	)		(7,705,317	)		(3,040,502	)
Income taxes (benefit)		310,000			(310,000	)		-			-			-
Net loss		(44,420,380	)		(455,967	)		(1,137,529	)		(7,705,317	)		(3,040,502	)
Preferred stock dividends		4,636,340			-			-			-			-
Net loss attributable to common stockholders	$	(49,056,720	)	$	(455,967	)		(1,137,529	)		(7,705,317	)	$	(3,040,502	)
Pro forma tax benefit (unaudited)								(455,012	)		(3,082,127	)
Pro forma net loss (unaudited)							$	(682,517	)	$	(4,623,190	)
NET LOSS PER SHARE:
Loss per share attributable to common stockholders - basic and diluted	$	(23.45	)	$	(0.22	)		N/A			N/A			N/A
Pro forma loss per share attributable to common stockholders- basic and diluted (unaudited)		N/A			N/A		$	(0.33	)	$	(2.21	)		N/A
Weighted average shares outstanding - basic and diluted		2,091,605			2,091,605			N/A			N/A			N/A
Pro forma weighted average shares outstanding - basic and diluted (unaudited)		N/A			N/A			2,091,605			2,091,605			N/A

See accompanying notes.

F-6

RONCO CORPORATION AND SUBSIDIARY

CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS'

AND MEMBERS' EQUITY (DEFICIENCY)

FOR THE YEAR ENDED JUNE 30, 2006, THE PERIOD FROM OCTOBER 15, 2004

(DATE OF INCEPTION) TO JUNE 30, 2005, NINE MONTHS

ENDED JUNE 29, 2005 AND SEPTEMBER 30, 2004 AND YEAR ENDED DECEMBER 31, 2003

Successor:
					Series A Convertible
	Common Stock				Preferred Stock				Common Stock		Additional
	Shares		Amount		Shares		Amount		To Be Issued		Paid-InCapital			Deferred Compensation			Accumulated Deficit			Total
BALANCE, beginning at October 15, 2004 (Date of Inception)		-	$	-		-	$	-	$	-	$	-		$	-		$	-		$	-
Issuance of Common Stock		800,002		8								3,237									3,245
Recapitalization of Fi-Tek VII, Inc.		477,639		5								11,784									11,789
Issuance of Preferred Stock						13,262,600		133				49,999,867									50,000,000
Issuance costs on Preferred Stock												(3,570,460	)								(3,570,460	)
Issuance of Common Stock to officers at fair value (cash received $6,403)		640,251		6								2,413,741			(2,106,426	)					307,321
Issuance of Common Stock for transaction costs at fair value (cash received $1,601)		173,713		2								654,897									654,899
Common Stock to be issued to officer as deferred compensation at fair value (cash received $3,200)										1,206,870					(1,203,670	)					3,200
Net Loss																		(467,047	)		(467,047	)
BALANCE, June 30, 2005		2,091,605	$	21		13,262,600	$	133	$	1,206,870	$	49,513,066		$	(3,310,096	)	$	(467,047	)	$	46,942,947
Preferred Stock dividends						2,318,332		23				4,636,317						(4,636,340	)		-
Amortization of deferred compensation expense															1,303,978						1,303,978
Options issued to member of the Board of Directors												38,938									38,938
Net Loss																		(44,420,380	)		(44,420,380	)
BALANCE, June 30, 2006		2,091,605	$	21		15,580,932	$	156	$	1,206,870	$	54,188,321		$	(2,006,118	)	$	(49,523,767	)	$	3,865,483

Predecessor:
	Popeil Inventions, Inc.						R.P. Productions, Inc.												Ronco
	Common Stock						Common Stock						Additional						Inventions, LLC
	Shares			Amount			Shares			Amount			Paid-In Capital			Accumulated Deficit			Members' Deficit			Total
BALANCE, December 31, 2002		1,000		$	1,000			100		$	1		$	1,194,375		$	(18,417,039	)	$	(8,422,230	)	$	(25,643,893	)
Net loss																	(364,024	)		(2,676,478	)		(3,040,502	)
BALANCE, December 31, 2003		1,000		$	1,000			100			1			1,194,375			(18,781,063	)		(11,098,708	)		(28,684,395	)
Net loss																	(5,018,727	)		(2,686,590	)		(7,705,317	)
BALANCE, September 30, 2004		1,000		$	1,000			100			1			1,194,375			(23,799,790	)		(13,785,298	)		(36,389,712	)
Net loss (Income)																	2,110,822			(3,248,351	)		(1,137,529	)
Sale of assets to Successor		(1,000	)		(1,000	)		(100	)		(1	)		(1,194,375	)		21,688,968			17,033,649			37,527,241
BALANCE, June 29, 2005		-		$	-			-		$	-		$	-		$	-		$	-		$	-

See accompanying notes.

F-7

RONCO CORPORATION AND SUBSIDIARY

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

FOR THE YEAR ENDED JUNE 30, 2006, ONE DAY (DATE OF ACQUISITION) JUNE 30, 2005,

NINE MONTHS ENDED JUNE 29, 2005 AND SEPTEMBER 30, 2004

AND YEAR ENDED DECEMBER 31, 2003

	Successor			Successor			Predecessor			Predecessor			Predecessor
				Period for
	For the Year Ended			One Day (Date of			Nine Months			Nine Months			Year Ended
	Ended June 30, 2006			Acquisition)June 30, 2005			June 29, 2005			September 30, 2004			December 31, 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		(44,420,380	)		(455,967	)		(1,137,529	)		(7,705,317	)		(3,040,502	)
Adjustments to reconcile net loss to net cash used in
(provided by) operating activities:
Depreciation and amortization		6,358,204			-			601,671			953,928			1,391,671
Non-cash interest expense		1,154,293			-			-			-			-
Gain on sale of property and equipment		-			-			-			-			(624	)
Impairment loss on goodwill, intangibles and equipment		24,520,916			-			-			771,048			-
Bad debt expense		502,517			-			-			1,474,147			3,691,009
Non-cash board of director fees		38,938			-			-			-			-
Deferred income taxes		310,000			(310,000	)		-			-			-
Compensation expense from the issuance of common stock and amortization of deferred compensation		1,303,978			300,919			-			-			-
Changes in operating assets and liabilities, net of effect of acquisition of businesses:
Accounts receivable		1,002,040			-			1,214,221			4,612,403			(4,361,600	)
Inventories		595,837			-			2,497,350			(5,652,929	)		1,338,015
Prepaid expenses and other current assets		1,905,130			(210,490	)		668,872			2,222,083			(57,213	)
Due from seller entities		135,676			-			-			-			-
Other assets		(203,493	)		-			(6,705	)		(454,214	)		(361,481	)
Accounts payable		4,276,877			-			(4,994,730	)		206,150			1,030,675
Accrued expenses		792,754			-			2,798,142			177,827			237,059
Royalty and license fees payable		-			-			(580,027	)		(40,380,573	)		1,497,327
Deferred income		693,793			-			(3,444,870	)		2,548,315			(704,893	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(1,032,920	)		(675,538	)		(2,383,605	)		(41,227,132	)		659,443
CASH FLOWS FROM INVESTING ACTIVITIES
Property and equipment purchased		(536,900	)		-			(453,519	)		(243,084	)		(555,842	)
Proceeds from sale of property and equipment					-			-			-			1,000
Deposit received on acquisition of Successor		-			-			100,000			-			-
Proceeds from investment in securities		1,026,040			-			500,000			500,003			-
Acquisition of businesses, net of cash acquired of $12,293 at June 30, 2005		-			(44,934,093	)		-			-			-
Purchase of short-term investments		(501,942	)		-			-			-			-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(12,802	)		(44,934,093	)		146,481			256,919			(554,842	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from loans from stockholder and affiliate		-			-			-			39,150,000			-
Proceeds from notes payable		1,544,597			391,810			-			-			-
Payments on notes payable		(1,292,088	)		(391,810	)		-			-			(375,000	)
Net advances to affiliates		-			-			12,339			(81,436	)		11,600
Net borrowings on line of credit		384,000			-			-			-			-
Proceeds from issuance of preferred stock, net of issuance costs $3,570,460 at June 30, 2005, respectively		-			46,429,540			-			-			-
Issuance of common stock		-			14,449			-			-			-
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		636,509			46,443,989			12,339			39,068,564			(363,400	)
NET INCREASE (DECREASE) IN CASH		(409,213	)		834,358			(2,224,785	)		(1,901,649	)		(258,799	)
CASH AND CASH EQUIVALENTS, beginning of period		834,358			-			2,421,984			4,323,633			4,582,432
CASH AND CASH EQUIVALENTS, end of period		425,145			834,358			197,199			2,421,984			4,323,633
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest		286,715			-			-			-			-
Income taxes		-			-			1,600			1,600			1,600

See accompanying notes.

F-8

RONCO CORPORATION AND SUBSIDIARY

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (CONTINUED)

FOR THE YEAR ENDED JUNE 30, 2006, ONE DAY (DATE OF ACQUISITION) JUNE 30, 2005,

NINE MONTHS ENDED JUNE 29, 2005 AND SEPTEMBER 30, 2004

AND YEAR ENDED DECEMBER 31, 2003

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING

AND FINANCING ACTIVITIES:

During 2006, the Company paid a preferred stock dividend in the amount of $4,636,340 to the holders of Series A Convertible Preferred Stock

On June 30, 2005, the Company acquired businesses (see Note 2).

The following table summarizes the purchase transaction on the date of acquisition:

Purchase Price:

Cash	$	40,209,000
Transaction costs (including $653,298 of common stock issued)		5,728,859
Notes Payable		13,158,180
Total purchase price		59,096,039
Less Fair Value of:
Assets acquired		59,454,129
Liabilities assumed		(3,311,571	)
Goodwill	$	2,953,481
On June 30, 2005, the Company issued common stock at fair value of $3,310,096 for deferred compensation.
On June 30, 2005, the Company accrued $338,175 of transaction costs.

See accompanying notes.

F-9

RONCO CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION, MERGER, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business

Ronco Corporation (the “Company” or the “Successor”), a Delaware corporation, is a provider of proprietary consumer products for the kitchen and home. The Company markets its products primarily in the United States through the broadcast of direct response commercial announcements known as infomercials, internet advertising, its in-house customer service department, tele-marketing and through wholesale distributors to retailers.

On June 29, 2005, Fi-Tek VII, Inc. (“Fi-Tek”), a publicly traded shell corporation, acquired all of the outstanding shares of Ronco Marketing Corporation (“RMC”) through the merger of a wholly-owned subsidiary of Fi-Tek with and into RMC. RMC continued as the surviving corporation after this transaction and became a wholly-owned subsidiary of the Company. Upon closing of the merger, Fi-Tek changed its name to Ronco Corporation and completed a 1 to 89 stock split of Fi-Tek outstanding shares of common stock. In exchange for their shares of RMC, the former holders of RMC common stock received 800,002 post-reverse split shares of the Company's stock. The Company's existing stockholders (the stockholders of the Company when it was operating as Fi-Tek) retained the remaining 477,639 shares of the outstanding common stock of the Company following the merger and reverse stock split of the common stock. The transaction was accounted for as a reverse acquisition into a publicly traded shell corporation, and accordingly, no goodwill was recorded. As a result of the reverse acquisition, the historical financial statements of Fi-Tek for the periods prior to the date of the transaction are not presented.

Effective June 30, 2005, the Company through its wholly-owned subsidiary, RMC, completed a series of transactions to acquire certain assets and assumed certain liabilities of Ronco Inventions, LLC (“RI” or “LLC”), a California limited liability company; Popeil Inventions, Inc. (“PII”), a Nevada S corporation; RP Productions, Inc. (“RPP”) a Nevada S corporation (collectively, the “Seller Entities” or the “Predecessor”); and certain patents and other intellectual property rights from Ronald M. Popeil (“Popeil”).

Principles of Consolidation and Combination

Successor - The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, RMC.

Predecessor - The accompanying combined financial statements include the accounts of the Seller Entities, which are affiliated through common ownership and management.

All significant intercompany balances and transactions have been eliminated in consolidation or combination.

Cash and Cash Equivalents

Cash and cash equivalents include all short-term, highly liquid investments purchased with original maturities of three months or less.

Short-Term Investments

Short-term investments are comprised of certificates of deposit used as a credit card reserve by the Company’s credit card processor.

Inventories

Our inventories are valued at the lower of cost, determined by the first-in, first-out method, or market value. With respect to the acquisition of the Ronco business, we accounted for the inventories acquired at fair value in accordance with purchase accounting. Inventory costs are comprised primarily of product, freight and duty. The Company writes down inventory for estimated obsolescence equal to the difference between cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

Revenue Recognition

The Company and Seller Entities recognize revenue from the sale of products when the products are shipped to the customers, provided that the price is fixed, title has been transferred and collectibility of the resulting receivable is reasonably assured. Net sales include revenue generated from products shipped, shipping and handling fees and revenue earned on extended service contracts, less returns and sales allowances. Revenue from free trial sales are recognized after the trial period is over and the customer has not returned the product. Returns and sales allowances are for damaged goods and anticipated customer returns.

F-10

NOTE 1 - ORGANIZATION, MERGER, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (continued)

For the year ended June 30, 2006, nine months ended June 29, 2005 and September 30, 2004 and for the year ended December 31, 2003, the Company and the Seller Entities generated approximately 93%, 99%, 98%, and 92% of sales, respectively, from two kitchen products. The Company and the Seller Entities total sales are comprised of direct response and wholesale business of approximately 62% and 38%, 81% and 19%, 80% and 20%, and 74% and 26% for the year ended June 30, 2006, the nine months ended June 29, 2005 and September 30, 2004 and the year ended December 31, 2003, respectively.

Revenue from the sale of extended service contracts is recognized on a straight-line basis over the life of the extended service contract. Extended service contract lives begin after the six-month free warranty period and range from three to four years. Amounts received from the sale of extended service contracts prior to revenue being recognized are included in deferred income on the consolidated balance sheet for June 30, 2006. At June 30, 2005, deferred income has been recorded at fair value in accordance with purchase accounting, see Note 3.

The Company and Seller Entities do not accrue warranty costs, since such costs were insignificant for the periods presented.

Shipping and Handling Costs

Shipping and handling costs are included in selling, general and administrative expenses. For the year ended June 30, 2006, nine months ended June 29, 2005 and September 30, 2004, and for the year ended December 31, 2003 shipping and handling costs approximated $7,370,000, $7,124,000, $7,491,000, and $8,468,000, respectively.

Investments

At June 30, 2006, investments consist of securities that are available-for-sale and are recorded at fair value, which approximated cost at June 30, 2006. The change in fair value of available-for-sale securities during the period is reported net of tax as part of comprehensive income as a separate component of equity.

At June 30, 2005, the Company has accounted for investments as held to maturity which consist of securities that management has the ability and intent to hold to maturity and are carried at amortized cost which is equivalent to the fair value at June 30, 2005, in accordance with purchase accounting, see Note 3. The Company determines specific identification for computing realized gains or losses for securities sold.

Stock-Based Compensation

Previously, pursuant to Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," the Company accounted for stock based employee compensation arrangements using the intrinsic value method. Accordingly, no compensation expense was recorded in the financial statements with respect to option grants, since the options were granted at/or above market value.

Effective January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), "Share Based Payment" ("SFAS No. 123R") which eliminates the use of APB 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The Company has adopted the modified prospective method whereby compensation cost is recognized in the financial statements beginning with the effective date based on the requirements of SFAS No. 123R for all share-based payments granted after that date. The Company did not issue any stock options prior to the effective date.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 revenue and expenses during the reporting period. Actual results could differ from those estimates.

F-11

NOTE 1 - ORGANIZATION, MERGER, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

The Company records property and equipment at cost for purchases subsequent to June 30, 2005. Property and equipment acquired on June 30, 2005 was accounted for at fair value in accordance with purchase accounting, see Note 3. The Company provides for depreciation utilizing straight-line methods based on the estimated useful lives ranging from three to seven years. Leasehold improvements are amortized over the shorter of the estimated life of the asset or lease term.

The Seller Entities provided for depreciation and amortization utilizing accelerated methods based on the estimated useful lives ranging from three to seven years. Leasehold improvements are amortized over the shorter of the estimated life of the asset or lease term.

Impairment of Long-Lived Assets

The Company and Seller Entities evaluate long-lived assets for impairment in accordance with SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If the estimated future cash flows (undiscounted and without interest charges) from the use of an asset are less than the carrying value, a write-down would be recorded to reduce the related asset to its estimated fair value.

During the nine months ended September 30, 2004, the Seller Entities recorded an impairment charge of approximately $771,000 for tooling that is no longer being used.

Goodwill, Intangible Assets and Impairment

Intangible assets are comprised of patents, customer relationships, consulting agreement and trademarks. Goodwill represents acquisition costs in excess of the net assets of businesses acquired. In accordance with SFAS 142, “Goodwill and Other Intangible Assets” goodwill is no longer amortized; instead goodwill is tested for impairment on an annual basis. The Company assesses the impairment of identifiable intangibles and goodwill whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers to be important which could trigger an impairment review include the following:

- Significant underperformance relative to expected historical or projected future operating results;

- Significant changes in the manner of use of the acquired assets or the strategy for the overall business; and

- Significant negative industry or economic trends.

When the Company determines that the carrying value of intangibles and other long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment and the carrying value of the asset cannot be recovered from projected undiscounted cash flows, the Company records an impairment charge. The Company measures any impairment based on a projected discounted cash flow method using a discount rate determined by management to be commensurate with the risk inherent in the current business model. Significant management judgment is required in determining whether an indicator of impairment exists and in projecting cash flows.

As required by SFAS No.142, the impairment test is accomplished using a two-stepped approach. The first step screens for impairment and, when impairment is indicated, a second step is employed to measure the impairment. The Company performed its annual goodwill and unamortizable intangible asset impairment analysis using the SFAS No. 142 approach described above, and amortizable intangible asset impairment analysis using the SFAS No. 144 approach, during the fourth quarter of fiscal 2006. Based on the analysis performed, the Company recorded a goodwill and intangible asset impairment charge during the fourth quarter of fiscal 2006 of approximately $24,521,000 presented as an operating expense which resulted primarily from a decline in the profitability of the Company. The goodwill impairment was recorded due to the decreased sales in direct response primarily because of our lack of new product development and limited capital to spend on sales and marketing. The reduced sales activity during the year resulted in lower future cash flow projections than the Company had anticipated upon acquiring the business. This in turn resulted in a reduced fair market value of the Company.

F-12

NOTE 1 - ORGANIZATION, MERGER, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Goodwill, Intangible Assets and Impairment (continued)

The following was the breakdown of the impairment charge for the year ended June 30, 2006:

Impairment
Customer Relationships	$	485,546
Patents		5,187,121
Trademarks		12,119,036
Popeil Agreement		3,775,733
Goodwill		2,953,480
Total Impairment	$	24,520,916

Patents are being amortized over 19 years, customer relationships over 1.5 to 10 years and consulting agreements over 3 years, utilizing the straight-line method. Amortization expense recorded at June 30, 2006 was approximately $6 million. Amortization expense was not recorded at June 30, 2005 since the Acquisition occurred on June 30, 2005, see Note 3.

Trademarks have an indefinite life.

Production Costs

Production costs of infomercials are amortized on a straight-line basis using an estimated useful life of three years.

Income Taxes

Successor - Deferred income tax assets and liabilities are computed annually for differences between the financial statements and income tax bases of assets and liabilities. Such deferred income tax asset and liability computations are based on enacted tax laws and rates applicable to periods in which the differences are expected to reverse. A valuation allowance is established, when necessary, to reduce deferred income tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred income tax assets and liabilities.

Predecessor - PII and RPP have elected to be treated as S corporations for federal and state income tax purposes. Pursuant to these elections, the income or loss of the companies is included in the income tax returns of their stockholders. In addition, RI is a limited liability company, which is a non-taxable entity for federal and state income tax purposes. Accordingly, the members' have responsibility for payment of tax on their individual shares of income or losses. For comparative purposes, for the nine months ended June 29, 2005 and September 30, 2004 the Company used an effective tax rate of 40% to calculate the pro forma tax benefit.

Advertising Costs

Advertising costs are expensed when broadcast. Amounts paid for advertising prior to the broadcast are deferred as prepaid advertising costs until such time that the advertising has been broadcast.

Advertising expense amounted to approximately $23,341,000, $29,907,000, $31,096,000, and $29,419,000 for year ended June 30, 2006, the nine months ended June 29, 2005 and September 30, 2004 and year ended December 31, 2003, respectively.

Fair Value of Financial Instruments

The carrying amounts of significant financial instruments, which includes accounts receivable, accounts payable, accrued expenses and notes payable approximated fair value as of June 30, 2006 due to their short-term maturities. As of June 30, 2005, the carrying amounts of significant financial instruments, which includes accounts receivable, accounts payable and accrued expenses are at fair value in accordance with purchase accounting, see Note 3.

F-13

NOTE 1 - ORGANIZATION, MERGER, DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Loss Per Share

Successor - Basic and diluted net loss per share information for the year ended June 30, 2006 and one day of June 30, 2005 (Date of Acquisition) is presented in accordance with SFAS No. 128, Earnings Per Share. Basic loss per share is calculated by dividing the net loss attributable to common stockholders by the weighted-average common shares outstanding during the period. Diluted loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average common shares outstanding. The dilutive effect of preferred stock, options and warrants convertible into an aggregate of approximately 15,857,000 and 13,529,000 of common shares as of June 30, 2006 and June 30, 2005, respectively, are not included as the inclusion of such would be anti-dilutive for all periods presented.

Predecessor - Loss per share for the nine months ended June 29, 2005 and September 30, 2004 and year ended December 31, 2003 is not applicable to the Seller Entities as they were a combination of privately held companies that were different legal entities, and accordingly, the weighted-average number of common shares outstanding is not determinable. For comparative purposes the Company calculated earnings per share on a Pro forma basis using the outstanding common shares of 2,091,605 as of June 30, 2005 for the nine months ended June 29, 2005 and September 30, 2004 as the weighted-average common shares outstanding.

Accounting Pronouncements

In February 2006, the FASB issued SFAS 155, “Accounting for Certain Hybrid Financial Instruments—an amendment of FASB Statements No. 133 and 140,” that allows a preparer to elect fair value measurement at acquisition, at issuance, or when a previously recognized financial instrument is subject to a re-measurement (new basis) event, on an instrument-by-instrument basis, in cases in which a derivative would otherwise have to be bifurcated. It also eliminates the exemption from applying Statement 133 to interests in securitized financial assets so that similar instruments are accounted for similarly regardless of the form of the instruments. This Statement is effective for all financial instruments acquired or issued after the beginning of an entity's first fiscal year that begins after September 15, 2006. The Company does not anticipate that the adoption of SFAS No. 155 will have an impact on the Company's overall results of operations or financial position.

In March 2006, the FASB issued SFAS 156, “Accounting for Servicing of Financial Assets—an amendment of FASB Statement No. 140,” that applies to the accounting for separately recognized servicing assets and servicing liabilities. This Statement requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable. An entity should adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006. The Company does not anticipate that the adoption of SFAS No. 156 will have an impact on the Company's overall results of operations or financial position.

In July 2006 the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes. The Interpretation clarifies the way companies are to account for uncertainty in income tax reporting and filing and prescribes a consistent recognition threshold and measurement attribute for recognizing, derecognizing, and measuring the tax benefits of a tax position taken, or expected to be taken, on a tax return. The Interpretation is effective for fiscal years beginning after December 15, 2006, although early adoption is possible. The Company does not plan to adopt early and the Company is currently in the process of evaluating the impact, if any, the adoption of the Interpretation will have on the 2007 financial statements.

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurement” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This Statement shall be effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including any financial statements for an interim period within that fiscal year. The provisions of this statement should be applied prospectively as of the beginning of the fiscal year in which this Statement is initially applied, except in some circumstances where the statement shall be applied retrospectively. The Company is currently evaluating the effect, if any, of SFAS 157 on its financial statements.

NOTE 2 - GOING CONCERN

The Company incurred net losses of approximately $44,420,000 for the year ended June 30, 2006, and had a working capital deficiency of approximately $12,867,000 as of June 30, 2006. The 2006 loss included an impairment of goodwill and intangibles of $24,520,916.

F-14

The Company has suffered significant losses from continuing operations and has negative cash flows from operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The Company plans to continue its efforts to identify ways of reducing operating costs and to increase liquidity through equity and debt financing.  On October 6, 2006, the Company secured a $4.0 million loan to help meet its business plan for the next four months and plans to arrange new debt or equity of at $10 to $15 million to meet its long-term goals. The Company has also taken steps to reduce expenditures, salaries and other operating costs.

NOTE 3 - BUSINESS ACQUISTION

On June 30, 2005, the Company completed the acquisition of certain of the Seller Entities' assets and assumption of certain liabilities; and the acquisition of patents and of certain intellectual property rights from Popeil (collectively, the “Acquisition”). The Acquisition was made pursuant to a purchase agreement between RMC and the Seller Entities and Popeil. The Board of Directors agreed to purchase the Seller Entities because of its leadership position in the direct response industry.

The stated purchase price in the purchase agreement between RMC and the Seller Entities and Popeil was $56,509,000, of which the Company delivered $40,209,000 in cash on or before the closing. The remainder of $16,300,000 was made up of promissory notes issued to the Seller Entities. The promissory notes were based on the estimated net value of the acquired assets, as defined. The preliminary determination by management of the Company of the net value of the acquired assets, resulted in approximately $3,142,000 reduction to the promissory notes.

The promissory notes to the Seller Entities are subject to finalization between the Company and the Seller Entities as to the calculation of the estimated net value of the acquired assets, as defined. As of the date hereof this issue was still not finalized. The Company has not made certain payment due on this note and as such the entire amount is classified as current for financial statement purposes.

The purchase price subject to final agreement between the Company and the Seller Entities was $59,096,039, which consisted of the cash payment of $40,209,000, the adjusted promissory notes of $13,158,180, and transaction costs of $5,728,859, and are allocated as follows:

Accounts receivable	$	2,264,315
Inventories		8,968,199
Prepaid expenses and other current assets		2,327,016
Due from predecessor entities		135,676
Investments		1,627,823
Property and equipment		925,000
Production costs		100,000
Deposits		182,500
Intangibles		42,923,600
Goodwill		2,953,481
Accounts payable		(3,155,576	)
Accrued expenses		(80,995	)
Deferred income		(75,000	)
Total Purchase Price	$	59,096,039

The Company's management and the Board of Directors believes that the purchase of certain assets and assumption of certain liabilities of the Seller Entities and Popeil that resulted in approximately $2,953,000 of goodwill at June 30, 2005 was justified because of the Seller Entities position in the marketplace and expected increased cash flows to the Company. The Company expects all of the goodwill will be deductible for income tax purposes.

F-15

NOTE 4 - INTANGIBLE ASSETS

Intangible assets consist of the following at June 30, 2006 and 2005:

	Balance at				Amortization		Net book value at
Amortizable Intangibles:	June 30, 2005		Impairment		Expense		June 30, 2006
Patents	$	9,890,000	$	5,187,121	$	520,526	$	4,182,353
Customer relationships		5,680,000		485,546		3,537,333		1,657,121
Popeil consulting agreement		5,663,600		3,775,733		1,887,867		-
Total amortizable intangibles		21,233,600		9,448,400		5,945,726		5,839,474
Unamortizable intangible assets:
Trademarks		21,690,000		12,119,035		-		9,570,965
Goodwill		2,953,481		2,953,481		-		-
Total unamortizable intangibles		24,643,481		15,072,516		-		9,570,965

Estimated future amortization expense at June 30, 2006:
For year ending June 30, 2007	$	1,556,656
For year ending June 30, 2008		291,074
For year ending June 30, 2009		291,074
For year ending June 30, 2010		291,074
For year ending June 30, 2011		291,074
For year ending June 30, 2012 and beyond		3,118,469

NOTE 5 - CONCENTRATIONS OF RISK

Cash and Cash Equivalents

The Company and Seller Entities maintain most of its cash balances at a bank located in California. Accounts at this institution are insured by the Federal Deposit Insurance Corporation up to $100,000.

Accounts Receivable.

The Company utilizes the allowance method for accounting for losses from uncollectible accounts. Under this method, an allowance for doubtful accounts reflects the Company's best estimate of probable losses inherent in the accounts receivable balance. Management has determined the allowance based on known troubled accounts, historical experience and other currently available evidence. The Company accrues its estimated product returns and records this as a reduction of accounts receivable.

Suppliers

The Company and Seller Entities purchased approximately 84%, 99% and 94% of merchandise from four vendors for the year ended June 30, 2006, and three vendors for the nine months ended June 29, 2005 and September 30, 2004, respectively. The Seller Entities purchased approximately 94% of their merchandise from one vendor for the year ended December 31, 2003. These vendors have suppliers and manufacturing locations in Korea and China. Management believes that other vendors could provide the materials on comparable terms.

NOTE 6 - INVESTMENTS

At June 30, 2006 and 2005, investments classified as available-for-sale and held to maturity, respectively, consisted of obligations of states and political subdivisions, including municipal bonds, which are valued at amortized cost which is equivalent to fair value of $601,783 and $1,627,823, respectively. During the year ended June 30, 2006 $601,783 of investments were transferred from held to maturity to available for sale.

All investments are pledged to a bank as collateral (see Note 12). In July and September 2006, the Company redeemed all obligations to utilize the proceeds to repay a bank loan and for working capital.

F-16

NOTE 7 - PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following at June 30, 2006 and 2005:

	June 30, 2006		June 30, 2005
Prepaid advertising	$	112,963	$	1,474,447
Deposits		147,482		716,232
Prepaid insurance		203,992		210,490
Other		167,939		136,337
	$	632,376	$	2,537,506

NOTE 8 - INVENTORIES

Inventories, consisting of finished goods, are valued at the lower of cost, determined by the first-in, first-out method, or market value. With respect to the acquisition of the Ronco business, the inventories acquired were recorded at fair value in accordance with purchase accounting. Inventory costs are comprised primarily of product, freight and duty. The Company writes down inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions.

NOTE 9 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at June 30, 2006 and 2005:

	June 30, 2006		June 30, 2005
Transportation equipment	$	110,671	$	62,000
Office furniture and equipment		608,804		388,000
Tooling		611,371		475,000
Software		35,515		-
Leasehold improvements		95,540		-
		1,461,901		925,000
Less: Accumulated depreciation and amortization		276,674		-
	$	1,185,227	$	925,000

Depreciation and amortization expense for the year ended June 30, 2006 was $276,674. There was no depreciation expense for the period ended June 30, 2005 as the Acquisition closed on the last day of the year-end.

Depreciation and amortization expense was approximately $455,000, $804,000, and $1,199,000 for the nine months ended June 29, 2005 and September 30, 2004 and year ended December 31, 2003, respectively.

NOTE 10 - DEFERRED INCOME

As of June 30, 2006, deferred income consists of unamortized extended service contracts amounting to $235,499 and cash received on unshipped orders of $533,294. On June 30, 2005, the Company accounted for deferred income at fair value in accordance with purchase accounting, see Note 3, which was valued at $75,000.

For the year ended June 30, 2006, nine months ended June 29, 2005 and September 30, 2004 and for the year ended December 31, 2003, revenues generated from extended services contracts were approximately $6,000, $1,008,000, $1,183,000, and $2,263,000, respectively.

NOTE 11 - LONG-TERM DEBT

Long-term debt consists of the following at June 30, 2006 and 2005:

	June 30, 2006		June 30, 2005
Promissory note to Seller Entities (including accrued interest of $1,154,293 at June 30, 2006)	$	13,026,085	$	13,158,180
Note payable to Sanders Morris Harris, Inc. (Note 14)		1,500,000		-
Note payable - other		38,897		-
Total debt		14,564,982		13,158,180
Less estimated current maturities		14,533,800		2,876,000
	$	31,182	$	10,282,180

F-17

The face value of the promissory notes to the Seller Entities is management's best estimate based on the estimated net value of the assets acquired, as defined, see Note 3. These promissory notes bear simple interest at a rate of 9.5% per annum. The required payment amounts under these promissory notes will be determined by applying a per-unit dollar amount, as defined, to the volumes of products, as defined, that are shipped to the Company, within a period. Any outstanding principal amount and accrued but unpaid interest will become due and payable in full by June 29, 2010; and there is no pre-payment penalty on the promissory notes. The Company has an incident of default on this note by not making certain required payments due. As such, the entire amount is classified as current for financial statement purposes.

Upon occurrence of an event of default, as defined, that is not cured by the time period defined in the promissory notes the interest rate on the notes will increase to 11% per annum and any unpaid principal and interest will become immediately due and payable. In addition, Popeil will have the right to reclaim any ownership interest in his name and likeness previously sold or licensed to the Company and will receive a right of first refusal to purchase the intellectual property rights acquired before these rights may be sold or transferred to any other party.

NOTE 12 - REVOLVING LINE OF CREDIT

On September 21, 2005, the Company borrowed $1,234,000 from Wells Fargo Bank, National Association under a Revolving Line of Credit Note. The outstanding balance is due and payable on September 20, 2006 and is collateralized by municipal bonds held by the Company. The borrowings bear interest at 1% above LIBOR, or 1/2% below prime, at the Company's option. At June 30, 2006, the Company’s interest rate was 6.375%. There is no prepayment penalty on this revolving line of credit. As of June 30, 2006, the balance due under this line of credit was $384,000 which is the maximum availability based on the available collateral. In August 2006, the outstanding balance was repaid in full and the line of credit expired in September 2006.

NOTE 13 - FACTORING AGREEMENT

On October 25, 2005, the Company, and Prestige Capital Corporation ("Prestige"), entered into a Purchase and Sale Agreement (the "Agreement") pursuant to which Prestige agreed to buy and accept, and the Company agreed to sell and assign, certain accounts receivable owing to the Company with recourse except for payment not received due to insolvency. Under the terms of the Agreement, upon the receipt and acceptance of each assignment of accounts receivable (“Accounts”), Prestige shall pay the Company 75% of the face amount of the Accounts so assigned. Under the Agreement, Prestige has agreed to purchase Accounts with a maximum aggregate face amount of $8,000,000. The fee payable by the Company to Prestige under the Agreement is 2% of the face amount of assigned Accounts if the receivable is collected within 15 days, 2.75% of the face amount if the receivable is collected within 30 days, 3.75% of the face amount if the receivable is collected within 45 days, 4.75% of the face amount if the receivable is collected within 60 days, and 5.75% of the face amount if the receivable is collected within 75 days. Thereafter, the rate goes up by 1% for each additional fifteen day period until the Account is paid. There is no maximum rate. In addition, Prestige may require the Company to repay the amount it has advanced to it, in certain cases, if the receivable is not paid within 90 days. In such case Prestige would not retain the account receivable. If an account receivable is not paid due to the bankruptcy of the customer, or due to certain similar events of insolvency, the Company will not be required to repay the cash advance to Prestige.     The initial term of the Agreement expired on May 1, 2006, but the Agreement will thereafter be automatically extended for additional one-year terms unless either party provides written notice of cancellation at least sixty days prior to the expiration of the initial or renewal term. The Company has given notice not to renew and Prestige has agreed to extend the term on a month to month basis. On October 6, 2006 the Company extended the term of the agreement with Prestige until October 1, 2007. There is no prepayment penalty associated with this extension.

Under the terms of the Agreement, the Company granted to Prestige a continuing security interest in, and lien upon, all accounts, instruments, inventory, documents, chattel paper and general intangibles, whether now owned or hereafter created or acquired, as security for the prompt performance and payment of all obligations of the Company to Prestige under the Agreement. If the customers do not pay their receivable within 90 days, Prestige has the right to charge back the Company. The Company has accounted for this as a sale of receivables in accordance with SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities." As of June 30, 2006 the Company had no outstanding borrowings under the agreement.

NOTE 14 - LOAN AGREEMENT

On June 9, 2006, the Company entered to a Letter Loan Agreement with the Lenders, a Security Agreement in favor of Sanders Morris Harris Inc. (“SMH”), individually and as agent for the Lenders an Assignment of Life Insurance Policy in favor of SMH, individually and as agent for the Lenders and the Company issued a Subordinated Promissory Note in the principal amount of $1,500,000 to SMH. As of June 9, 2006, A. Emerson Martin, II and Gregg A. Mockenhaupt were members of the Company's Board of Directors and managing directors of SMH.

F-18

Pursuant to the Loan Agreement, SMH agreed to loan the Company an additional $1,500,000 (the “Second Loan”) subject to certain closing conditions, including the mailing of an offer to each of the holders of the Company's Series A Convertible Preferred Stock to the extent of their pro rata share of the Company's outstanding shares of Series A Convertible Preferred Stock to participate in the Company's closing on a credit agreement for a facility of not less than $15 million. The Notes bear interest at a rate of 4.77% per annum. Interest will be due and payable on the first and second anniversary of the issuance of the notes and at the maturity date.

The Notes are convertible into shares of the Company's common stock based on the principal amount outstanding plus accrued and unpaid interest through, the conversion dated divided by the conversion price. To date the Company has not completed its registration statement and as such the note cannot be converted into shares.

Subsequent to June 30, 2006 the Company was in default of the SMH loan as one of the conditions of the Note was Richard F. Allen Sr. remaining as the Chief Executive Officer of the Company. On August 9, 2006 the Company terminated Richard F. Allen, Sr. as President and Chief Executive Officer of the Company. As such, the note is classified as current for financial statement purposes.

NOTE 15 - STOCKHOLDERS' EQUITY

Series A Convertible Preferred Stock

In connection with the Acquisition, on June 30, 2005, the Company sold 13,262,600 shares of Series A Convertible Preferred Stock for $50 million in a private placement. The preferred stock has certain special rights, as defined, and the qualifications of the preferred stock are as follows:

Conversion - The conversion ratio of the preferred stock is at the rate of one share of common stock for each share of preferred stock at the option of the holder. The Company, at its option, may cause all of the outstanding shares of preferred stock to be converted into shares of common stock, as defined, (representing an 85% ownership, as of September 28, 2006, of the Company after redemption).

Voting Rights - Holders of preferred stock are entitled to the number of votes per share that would be equivalent to the number of shares of common stock into which a share of preferred stock is convertible.

Dividends - The holders of preferred stock are entitled to receive cumulative preferred dividends at the rate of $0.1885 per share per annum, payable quarterly in arrears on January 1, April 1, July 1, and October 1 of each year. The cumulative dividends may be paid in cash or, at the Company's option, in additional shares of Series A Convertible Preferred Stock. Because the Company failed to make its scheduled October 1, 2005, January 1, 2006 and April 1, 2006 dividend payments on a timely basis and because its registration statement has not yet been declared effective, the Company lost the option to choose unilaterally to make these dividend payments in additional shares of Series A Convertible Preferred Stock as opposed to cash. On June 28, 2006 the Series A shareholder’s agreed to be paid in Series A Preferred Stock instead of cash at the rate of 0.153857 shares per share for the three quarters ended October 1, 2005, December 31, 2005 and March 31, 2006 as they agreed to waive all penalties related to the registration rights agreement. The Company agreed to pay a dividend of 0.020933 shares per share for the quarter ended June 30, 2006 to the Series A holders. The Company recorded the dividend based on the fair market value on the date the Series A shareholders agreed to the terms of the dividend agreement.

Liquidation - The holders of preferred stock will have the right to receive, after payment of all creditors, the sum of $3.77 per share of the preferred stock held, plus any accrued and unpaid dividends, as defined, prior to any distributions with respect to the common stock. Subject to certain restrictions, the terms of the Series A Convertible Preferred Stock provide that the Company may, at its option, cause all of the outstanding shares of Series A Convertible Preferred Stock to be converted into shares of common stock, at any time and from time to time, if the market price of the common stock equals or exceeds 200% of the conversion price then in effect for any 20 days during the most recent consecutive 30 trading days prior to giving the notice of conversion and the daily trading volume of the common stock for any 20 days during the most recent consecutive 30 trading days prior to giving the notice of conversion equaled or exceeds 50,000 shares. In the event that the Company fails to declare or pay in full any dividend payable on the Series A Convertible Preferred Stock on the applicable dividend date and fails to correct such failure within thirty days of the applicable dividend date then the Company loses its ability to cause all of the outstanding shares of Series A Convertible Preferred Stock to be converted into shares of common stock at anytime. The Company failed to make such a dividend payment on October 1, 2005 and, therefore, cannot cause all of the outstanding shares of Series A Convertible Preferred Stock to be converted into shares of common stock at any time.

F-19

Registration Rights Agreement

On June 30, 2005, the Company entered into a Registration Rights Agreement (“Registration Rights Agreement”) and under the terms of the agreement, the Company is obligated to file a shelf registration statement (Form S-1) covering the resale of the shares of common stock into which the shares of Series A Convertible Preferred Stock purchased are convertible. The Company is obligated to have the registration statement declared effective by October 28, 2005. The Company was unable to meet this deadline and the Company is liable for a cash payment to the stockholders who are party to the Registration Rights Agreement, as liquidated damages. The amount will be equal to one percent of the per share price of the Series A Convertible Preferred Stock per month (pro rated for periods less than a month), or $500,000, until the Company has cured the deadline default, as defined. To date the Company has been unable to complete the registration statement. In June 2006 the Series A Preferred shares holders agreed to waive all penalties related to the registration statement noted above.

Warrants

On June 30, 2005, the Company issued a warrant to purchase 266,667 shares of common stock. The warrant has an exercise price of $3.77 per share and is exercisable for five years from July 1, 2005. The warrant is exercisable for cash or pursuant to a cashless exercise option provision.

The warrant contains certain anti-dilution provisions, which will adjust the number of shares underlying the warrant and the exercise price in the event of stock splits, stock dividends, or other re-capitalizations of the Company.

Deferred compensation

On June 30, 2005, in connection with an employment agreement, the Company sold 800,313 shares of common stock to its Chief Executive Officer (“CEO”) for $.01 a share. These shares are subject to certain performance milestones. The Company has recorded deferred compensation of $3,009,177 based on the fair value of the common stock at June 30, 2005, the market value was $3.77 a share. The deferred compensation will be amortized over three years based on the CEO's contract.

The CEO received 60% of these shares (480,188) in connection with his employment agreement, and will be entitled to receive an additional 20% of these shares (160,063) on each of the first two anniversaries from June 30, 2005. The initial 480,188 shares are subject to repurchase by the Company, at its option, for $0.01 per share, exercisable if the CEO voluntarily terminates his employment with the Company prior to June 30, 2008 or if certain performance targets are not satisfied. Additionally, if the Company terminates the CEO's employment on or before June 30, 2007 for “cause” the Company has the option to repurchase, for $0.01 per share, the shares issued to him on the first and second anniversaries of his employment. On August 9, 2006 Ronco Corporation (the "Company") terminated Richard F. Allen, Sr. as President and Chief Executive Officer of the Company effective immediately. The Company is evaluating the financial affect of Mr. Allen’s termination.

 On June 30, 2005, in connection with an employment agreement, the Company sold 160,063 shares of common stock to its Chief Financial Officer ("CFO") for $.01 a share. The Company has valued these shares at $601,838 based on the fair value of the common stock at June 30, 2005, the market value was $3.77 a share. The Company recorded $300,919 as compensation expense for the period from October 15, 2004 (Date of Inception) to June 30, 2005, and the remainder of $300,919 has been recorded as deferred compensation and was being amortized over three years based on CFO's contract. The balance of deferred compensation was expensed as of June 30, 2006.

The Company has the option to repurchase 50% of these shares (80,032) at $.01 per share, exercisable if the CFO's employment is terminated voluntarily or for "cause," as defined. The Company's repurchase right will lapse with respect to each 25% (40,016) of these shares on each of the first two anniversaries from June 30, 2005.

On April 18, 2006, the Company terminated Evan J. Warshawsky as its Chief Financial Officer and Secretary. The Company is currently negotiating with Mr. Warshawsky to settle any obligations that it may have under his employment agreement. If the Company is unable to reach a settlement with him, and it is ultimately determined that Mr. Warshawsky was terminated by the Company without cause under the terms of his employment agreement, the Company would have to pay Mr. Warshawsky $600,000, which has been accrued and recorded in accrued expenses at June 30, 2006, and reimburse him for the cost of up to the first twelve months of continuing group health plan coverage that Mr. Warshawsky and his covered dependents are entitled to receive under federal law. In addition, the Company's repurchase option would lapse with respect to 80,032 shares of the Company's common stock held by Mr. Warshawsky.

For the year ended June 30, 2006 and the one day June 30, 2005, the Company recognized $ 1,303,978 and $300,919, respectively, of amortization expense related to the former CEO and former CFO deferred compensation.

Transaction Costs

In connection with the Acquisition, the Company issued 13,650 shares of common stock to a consulting company for services rendered. These shares were valued at $51,460 based on the fair market value of the stock and are treated as transaction costs for the one day June 30, 2005.

In connection with the Acquisition, the Company sold 160,063 shares of common stock to an attorney for services rendered for $1,601. These shares were valued at $603,438 based on the fair market value of the stock and are treated as transaction costs for the one day June 30, 2005. In addition, the Company incurred $128,500 of transaction costs to this attorney which was accrued at June 30, 2005. Subsequent to June 30, 2005, the attorney became the General Counsel of the Company.

F-20

Stock Option Plan

In October, 2005, the Board of Directors granted a fully vested option to purchase 10,000 shares of the Company’s common stock to a former board member, Anthony Brown, in connection with the termination of a consulting agreement between the Company and a company controlled by Mr. Brown. The option has a term of ten years and has an exercise price of $5.75 per share. In connection with the option, the Company recorded compensation expense of $38,938 for the year ended June 30, 2006 using the Black-Scholes option pricing model.

NOTE 16 - INCOME TAXES

The income taxes (benefit) for the year ended June 30, 2006 and the period ended June 30, 2005 (date of acquisition) consisted of the following:

	June 30, 2006		June 30, 2005
Current	$	310,000	$	-
Deferred:
Federal		-		(241,000	)
State		-		(69,000	)
Total deferred		-		(310,000	)
Income taxes (benefit)	$	310,000		(310,000	)

The income tax effects of significant items, comprising the Company's net deferred income tax assets and liabilities, are as follows:

	June 30, 2006			June 30, 2005
Deferred income tax assets:
Current
Contingent settlement	$	240,000		$	-
Others		199,000			-
Total current		439,000			-
Net operating loss carry forwards		9,250,000			433,000
Goodwill and intangible impairments		4,768,000			-
Difference between book and tax basis of depreciation and amortization		1,034,000			(123,000	)
Deferred compensation		519,000			-
		18,010,000			310,000
Valuation Allowance		(18,010,000	)		-
Net deferred income tax asset	$	-		$	310,000

Reconciliation of the U.S. statutory rate with the Company's effective tax rate is summarized as follows:

				Period from October 15, 2004
	Year Ended			(Date of Acquisition) to
	June 30, 2006			June 30, 2005
Federal statutory tax benefit		(34	)%		(34	)%
State income tax benefit, net of federal tax benefit		(6	)		(6	)
Valuation allowance		40	%
Effect of reversal of deferred tax asset		0.70	%
Effective tax rate (benefit)		0.70	%		(40	)%

F-21

The Company establishes a valuation allowance in accordance with the provision of SFAS No. 109, “Accounting for Income Taxes.” The Company continually review the adequacy of the valuation allowance and recognizes a benefit from income taxes only when reassessment indicates that it is more likely than not that the benefits will be realized. As of June 30, 2006, the Company has recorded a valuation allowance against the entire deferred tax asset.

As of June 30, 2006, the Company had net operating loss carry forwards available in future periods to reduce income taxes that may be payable at those dates. For federal and California income tax purposes, net operating loss carry forwards amounted to approximately $15,690,000 and expire during the years 2026 and 2016, respectively.

As described in Note 1 under Income Taxes, the Seller Entities did not pay income taxes, as the losses are included in the individual income tax returns of their stockholders and members for PII, RPP, and LLC.

NOTE 17 - PRODUCT DEVELOPMENT AND LICENSE AGREEMENTS

Predecessor - The Seller Entities entered into a product development agreement with a third party who co-invented the Showtime™ Rotisserie products, as well as a number of other products for the Seller Entities. Under the terms of the agreement, the Seller Entities incur an expense in an amount equal to 25% of net profits, as defined, or is reimbursed by the third party for 25% of net losses, as defined. For the nine months ended June 29, 2005 and September 30, 2004 and for the year ended December 31, 2003, the Seller Entities recorded income (expense) from the reimbursement of losses (payment of product development fees) of approximately $468,000, $1,407,000, and ($1,777,000), respectively, which is included in selling, general and administrative expenses in the accompanying combined statements of operations. The Successor is not a party to this agreement.

The Seller Entities also entered into licensing agreements with an unrelated company that holds the patents on certain of its products. Under the terms of the licensing agreements, as amended, the Seller Entities incur license fees ranging from $6 to $17 per unit sold through 2007. Licensing expense under these agreements for the nine months ended September 30, 2004 and for the year ended December 31, 2003 amounted to approximately $3,251,000 and $10,004,000, respectively. In December 2004, the license agreements were amended and terminating them effective August 31, 2004.

NOTE 18 - COMMITMENTS AND CONTINGENCIES

Letters of Credit

As of June 30, 2006, the Company is contingently liable to a bank for open letters of credit for purchases of inventory of approximately $242,000 which is secured by a deposit account at the bank.

Leases

In November 2005, the Company entered into a lease for 81,646 square feet of space located in Simi Valley, California. The lease has a 10-year term beginning on May 1, 2006 and ending on April 30, 2016. The monthly base rent under the lease is $44,905 for the first year and increases by approximately 0.97% each year thereafter. The lease also provides that the Company must pay approximately $9,800 each month for taxes, insurance, landscaping, management and reserves.

Rent expense under operating leases, including related party rent, for the year ended June 30, 2006, nine months ended June 29, 2005 and September 30, 2004 and for the year ended December 31, 2003 were approximately $391,000, $324,000, $303,000 and $403,000, respectively.

The Seller Entities leased office space from a related party, Popeil. Rent expense paid to this related party under the month-to-month lease was $45,000, $45,000 and $60,000 for the nine months ended June 29, 2005 and September 30, 2004 and for the year ended December 31, 2003, respectively.

Future minimum lease payments on all non cancelable operating leases as of June 30, 2006 are as follows:

Year ending June 30,
2007	$	496,000
2008		680,000
2009		700,000
2010		721,000
2011		744,000
Thereafter	$	4,012,000
	$	7,353,000

F-22

Popeil Agreements

On June 30, 2005, the Company entered into several agreements with Popeil which include a Consulting Services Agreement, a Trademark Co-Existence Agreement, a New Product Development Agreement, and an agreement that the Company will pay Popeil a percentage of the gross profits generated from the sale of the Company's products which result from Popeil's ongoing personal appearances on QVC, a wholesale customer, or other television or online shopping venues.

The Consulting Agreement is for a term of three years for an annual base fee of $500,000 per year, paid in equal weekly installments. In addition, the Company will pay certain fees for personal appearances, as defined. Popeil will be eligible to receive incentive stock options at the sole discretion of the Board of Directors.

The Trademark Co-Existence Agreement was entered into with respect to the names “Popeil,” “Ron Popeil” and the name form of the likeness approved by Popeil, including the image, silhouette and voice (the “Marks”), as defined. The term of this agreement continues as long as the Marks are protected by the laws of the United States of America. Popeil retains the right to approve all uses of the name and likeness for any purpose, as defined.

The New Product Development Agreement has terms that the Company will be offered a fifteen-day right of first refusal on all new consumer products, as defined, that are created by Popeil during the term. The purchase price of each new product will include the cost of any product designs, prototypes, tooling and a completed commercial or infomercial. Popeil will have creative control over all new consumer product created, as defined. Popeil has the right to terminate this agreement, if a breach to any provisions of this agreement or to any other of the above discussed agreements are breached and not cured to Popeil satisfaction within fifteen-days of such breach.

Litigation

On April 3, 2006, Palisades Master Fund, L.P. (“Palisades”), a holder of our Series A Convertible Preferred Stock, filed a lawsuit against us in the United States District Court for the Southern District of New York, claiming breach of contract based on our failure to have a registration statement declared effective by October 28, 2005 for the sale of Palisades’ shares of our common stock and failure to pay dividends and penalties to Palisades. On September 29, 2006, Palisades filed an Amended Complaint, claiming that Palisades also incurred damages due to Ronco's alleged failure to timely issue documents that would allow Palisades the ability to sell its common stock pursuant to Rule 144.  Palisades claims that Ronco's alleged conduct was in breach of the Certificate of Designation.

On May 22, 2006, Evan J. Warshawsky, our former Chief Financial Officer filed a lawsuit in Los Angeles County Superior Court against the Company seeking damages in excess of $600,000 in connection with his termination which was accrued at June 30, 2006 as part of accrued expenses. The complaint alleges causes of action for breach of employment agreement, declaratory relief and wrongful termination in violation of public policy. The lawsuit was stayed pending resolution of the arbitration. The parties have not begun arbitration proceedings.

On June 22, 2006, we received a demand letter from Mr. Paul F. Wallace, a stockholder, seeking prompt payment of $41,285 plus interest from us as partial liquidated damages for our failure to have a registration statement declared effective by October 28, 2005 for the sale of Wallace’s shares of stock.  The demand letter also seeks a monthly payment of $5,027 as partial liquidated damages until such registration statement is declared effective.   The demand letter was updated on August 21, 2006 to increase the amount owed to $50,296.

On August 30, 2006, we received a letter from counsel to Human Electronics (a vendor to the Company) demanding payment for allegedly unpaid invoices amounting to some $488,549 for a large quantity of items manufactured and shipped for us.  Human Electronics asserts that the invoices totaled $2,058,871 and that of that amount, an insurance company paid them $1,570,323 and that the unpaid balance is still due.  Human Electronics then threatened suit if the amount claimed to be due was not paid in 7 days.  We responded to the demand on September 5, 2006 asserting a number of responses, including offsets and demanding that Human Electronics return certain of our assets (consisting of tooling, some inventory and parts) in Human Electronics' possession.  We offered to pay the balance ultimately determined to be due, subject to working out a definitive settlement agreement that includes a payment arrangement with the insurance carrier, a payment arrangement with Human Electronics and working out a resolution with respect to the disposition of the remaining issues addressed in the initial demand letter from Human Electronics. 

F-23

NOTE 19 - RELATED PARTY TRANSACTIONS

As part of the Acquisition, the Company had a due from the Seller Entities of approximately $136,000 of assets that were not transferred at June 30, 2005 that were subsequently transferred.

Pursuant to the terms stated in the lease (See Note 18), the Company executed in November 2005, the Company's general counsel at that time, Gilbert Azafrani, was entitled to receive an aggregate of approximately $156,000 as a broker's commission for negotiating the lease of which he is required to pay to a co-broker approximately $52,000. The commission was payable in two installments, half upon execution of the lease and the balance upon occupancy. In addition, subject to certain terms and conditions, Mr. Azafrani is also entitled to a commission equal to 2.5% of the purchase price if the Company exercises its option to purchase the property subject to the lease. The Company believes that the terms of the lease are no less favorable to the Company as terms that the Company could have obtained in a transaction where an unaffiliated party acted as a real estate broker.

As described in Note 1 under Business, the Company entered into certain transactions to acquire the assets of the Seller Entities and Popeil and issued stock to a group of entities owned, controlled and/or affiliated with the promoters; these entities collectively and inclusive of their affiliates are considered the “Venture Group.” The Venture Group collectively held 533,334 shares of common stock of the Company. In addition, in connection with the Acquisition, the Company paid cash fees consisting of (i) a base fee of $1,800,000, and (ii) an incremental fee equal to five percent of any cash and cash equivalent the Company received in excess of $6 million at June 30, 2005, as mutually agreed.

Prior to the Acquisition, RMC secured its initial working capital from a group of private accredited investors, collectively, the “Ronco Private Group” through the sales of shares and approximately $392,000 in promissory notes of RMC. On June 30, 2005, the promissory notes held by the Ronco Private Group were redeemed at face value plus accrued interest. In addition, the Ronco Private Group collectively owns 266,688 shares of common stock.

The shares held by both the Venture Group and the Ronco Private Group are restricted shares. These shares are subject to the Registration Rights Agreement.

The Company has agreed to indemnify and hold harmless and generally release the members of the Venture Group, their managers, directors and officers from and against any loss, claim, damage, liability or expense arising from the Acquisition, as defined.

NOTE 20 - EMPLOYEE BENEFIT PLAN

The Company sponsors a 401(k) defined contribution benefit plan covering substantially all of its employees. Under the plan, employees can make annual voluntary contributions not to exceed the lesser of an amount equal to 15% of their compensations or limits established by the Internal Revenue Service Code. The Company does not provide for matching contributions, but does pay a 3% safe harbor contribution for each employee.

NOTE 21 - QUARTERLY DATA (Unaudited)

	Revenue		Gross Profit		Earnings (Loss) from operations			Net Earnings (Loss)			Net Loss attributable to common stockholders			Proforma Net Earnings (Loss) attributable to common stockholders			Loss per share attributable to common stockholders - Basic and Diluted			Proforma Earnings (loss) per share attributable to common stockholders - Basic and Diluted
Successor
Fiscal 2006 Quarter ended
September 30, 2005	$	13,089,410	$	8,648,624	$	(4,918,672	)	$	(3,131,190	)	$	(3,756,190	)	$	-		$	(1.80	)	$	-
December 31, 2005		29,644,381		20,166,283		(474,716	)		(562,898	)		(2,235,898	)		-			(1.07	)		-
March 31, 2006		10,093,898		7,716,298		(4,401,171	)		(2,811,754	)		(4,936,741	)		-			(2.36	)		-
June 30, 2006		5,896,137		2,183,176		(32,980,783	)		(37,914,538	)		(38,127,891	)		-			(18.22	)		-
	$	58,723,826	$	38,714,381	$	(42,775,342	)	$	(44,420,380	)	$	(49,056,720	)	$	-		$	(23.45	)	$	-
Predecessor
Fiscal 2005 Quarter ended
September 30, 2004	$	21,083,983	$	16,551,980	$	(1,350,835	)	$	(1,300,222	)	$	-		$	(780,133	)	$	-		$	(0.37	)
December 31, 2004		43,690,709		32,715,771		2,843,052			1,898,407			-			1,139,044			-			0.54
March 31, 2005		14,593,089		10,271,908		(444,810	)		(1,377,650	)		-			(826,590	)		-			(0.40	)
June 30, 2005		10,701,303		9,153,365		(703,671	)		(1,658,286	)		-			(994,972	)		-			(0.48	)
	$	90,069,084	$	68,693,024	$	343,736		$	(2,437,751	)	$	-		$	(1,462,651	)	$	-		$	(0.71	)

Note: Proforma balances were used to calculate Earnings (Loss) per share attributable to common stockholders for the predecessor entity.

NOTE 22 - SUBSEQUENT EVENTS

Debt — On October 6, 2006 Ronco Corporation entered into a Loan and Security Agreement with Crossroads Financial, LLC, as the lender.  This facility consists of a revolving loan facility of up to $4,000,000 of which the company borrowed $4,000,000 at the initial funding, to be used to pay certain existing indebtedness and fund general operating and working capital needs. This credit facility has a term expiring September 1, 2007 at which time all amounts due under the facility become due and payable, but is automatically renewed for consecutive one year terms unless terminated by written notice of either party 60 days prior to the end of the initial Term or any renewal Term.  The amount the company may borrow under this credit facility is determined by a percentage of the cost of eligible inventory, up to a maximum of $4,000,000.  Interest under this facility is payable monthly, commencing October 1, 2006, with the interest rate equal to 18% per year.  The Company has authorized the lender to collect all payments of interest, monthly monitoring fees, principal payments and any Over Advance (as defined in the Loan and Security Agreement) directly from the Company's factor, Prestige Capital Corporation, which provides an accounts receivable factoring facility for the Company.  The Company's obligations under this facility are secured by a lien on substantially all the assets of the company including a pledge of the equity interests of its subsidiary, Ronco Marketing Corporation, and a secured guaranty by Ronco Marketing Corporation. This facility contains limited covenants, including covenants that the Company not sell or dispose of assets or properties other than inventory sold in the ordinary course of business, and that the company keep the Collateral free and clear of liens, except Permitted Liens. This facility includes customary default provisions, and all outstanding obligations may become immediately due and payable in the event of a default.  The loan can be prepaid upon payment of a prepayment penalty of $12,000 per month for each month remaining in the Prepayment Period (i.e., the number of months remaining in the Term at the time of the prepayment), with a minimum prepayment penalty of $100,000.

On October 6, 2006 Ronco Corporation executed a Modification and Extension Agreement with Prestige Capital Corporation which extended the existing factoring agreement until October 1, 2007. Thereafter the Agreement shall renew itself automatically for additional one (1) year period unless either party receives written notice of cancellation from the other, at minimum, sixty (60) days prior to the expiration date of each sixty (60) day period. In addition to the factoring of Ronco Corporation, Prestige will collect all cash receipts of Ronco Corporation as part of its agreement with Crossroads Financial LLC. The fee for Prestige’s collection services shall be 10 basis points of the total collections (excluding factored accounts) received by Prestige.

F-24

EX-10.1

THIS NOTE AND THE SECURITIES ISSUABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED.

SUBORDINATED PROMISSORY NOTE

$1,500,000.00 June 9, 2006

FOR VALUE RECEIVED, the undersigned, RONCO CORPORATION, a Delaware corporation, and any successor corporation under the Loan Agreement (as hereinafter defined) (“Borrower”), promises to pay to the order of SANDERS MORRIS HARRIS INC., a Texas corporation, at its office at 600 Travis Street, Suite 3100, Houston, Harris County, Texas 77002, or at such other place as the holder of this Note (“Lender”) may from time to time designate in writing, the sum of One Million Five Hundred Thousand Dollars ($1,500,000.00), or such lesser amount as shall equal the outstanding principal amount hereof, with interest on the unpaid principal balance from the date of disbursement by Lender until paid at the rates set forth below.

Interest accruing on this Note will be calculated on the basis of the actual number of days elapsed for any whole or partial month in which interest is being calculated and on the basis of a 360-day year.

This Note is one of a duly authorized issue of Notes of Borrower (which term includes any successor corporation under the Loan Agreement hereinafter referred to) in the aggregate principal amount of up to $6,000,000.00, issued pursuant to a Letter Loan Agreement dated as of June 9, 2006 (the “Loan Agree-ment”), among the undersigned and the Lenders identified on Schedule 1 thereto. The terms of this Note include those stated in the Loan Agreement. Reference is hereby made to the Loan Agreement and all supple-ments thereto for a statement of the respective rights, limitations of rights, duties and immunities thereunder of Borrower and Lender and of the terms upon which the Notes are, and are to be, and delivered.

1.Interest Rate.

The per annum interest rate hereunder (the “Note Rate”) shall be 4.77%, being the short-term “applicable federal rate” for May 2006. Unpaid interest shall be compounded annually. Interest shall be payable on the first and second anniversary of this Note and at maturity.

2.Maturity.

Any and all remaining unpaid principal of and interest on this Note shall be due and payable in full on June 9, 2009 (the “Maturity Date”); provided, however that the principal amount of this Note and all accrued and unpaid interest thereon shall be due and payable contemporaneous with the closing of any refinancing of the Credit Agreement (as hereinafter defined).

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3.Application of Payments.

So long as no Event of Default (as used in this Note, the term “Event of Default” have the meanings given to those terms in the Loan Agreement) exists, payments under this Note and the Security Documents (as defined below) shall be applied: (a) first, to the payment of accrued interest; (b) second, at the option of Lender, to the payment of any expenses owing under this Note; and (c) third, to the reduction of the principal amount of this Note. After the occurrence and during the continuance of an Event of Default, Lender may apply such payments to the obligations secured by the Security Instrument in such manner as it may elect in its sole discretion.

4.Prepayment.

Borrower may prepay, without premium or penalty, its obligation under this Note in whole or in part from time to time upon giving Lender at least five days prior written notice of its intention to prepay the Note specifying the amount of such prepayment.

5.Subordination. No payment (whether principal, interest, or other) on account of this Note shall be made if prior to the time of such payment Lender has received written notice from Wells Fargo, National Association or Laurus Master Fund, Ltd., as the case may be, (each, the “Senior Lender”) that a default has occurred under the credit agreement (the “Credit Agreement”) between Borrower and such Senior Lender and such event of default shall not have been cured or waived or shall not have ceased to exist. The foregoing provision is not intended to and shall not impair as between the Borrower, its creditors other than the Senior Lender, and the holder of this Note, the obligation of Borrower, which shall be absolute and unconditional, to pay to the holder of this Note the principal of and interest on this Note, as and when the same shall become due and payable in accordance with the terms hereof, or to affect the relative rights of the holder of this Note and creditors of Borrower other than the Senior Lender, nor shall anything herein prevent the holder of this Note from exercising all remedies otherwise permitted by applicable law upon default, subject to the rights, under this Section 5, of the Senior Lender in respect of any required notice of the exercise of any such remedy or cash, property, or securities of Borrower received upon exercise of such remedy. The holder of this Note by acceptance hereof shall be deemed to acknowledge and agree that the subordination provisions of this Section 5 are, and are intended to be, an inducement and a consideration to the Senior Lender to enter into the Credit Agreement with Borrower. Notwithstanding the foregoing, in the event Lender shall receive payments in contravention of the terms and conditions of this Note then (a) all amounts so received shall be deemed to be held in trust for the benefit of the Senior Lender; and (b) all such amounts shall be, at the written request of Senior Lender, either paid directly to Senior Lender or to Borrower.

6.Security.

This Note is secured by a security agreement and an assignment of life insurance policy (the “Security Instruments”) of even date herewith executed by Borrower, encumbering the property described in the Security Instruments. The Security Instruments and any and all other documents securing this Note are collectively referred to as the “Security Documents.”

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7.Conversion.

(a)After the later to occur of (i) seventy-five (75) days after the Initial Closing (as defined in the Loan Agreement) or (ii) the end of the Pricing Period (as defined below), Lender is entitled, at Lender’s option, at any time and from time to time prior to the Maturity Date (except that, in the case Borrower defaults on the payment of this Note on the Maturity Date, such right to convert shall terminate at the close of business on the date the Note is paid in full) and prior to payment of this Note, to convert all or a portion of the outstanding principal amount of and all accrued and unpaid interest under this Note into that number of shares of the Borrower’s common stock, $0.00001 par value (the “Common Stock”) as is determined by dividing such principal amount and accrued and unpaid interest by the Conversion Price, determined as hereinafter provided, in effect at the time of conversion. The price at which shares of Common Stock shall be delivered upon conversion of this Note (the “Conversion Price”) shall be the greater of (i) the Current Market Price (as hereinafter defined) or (ii) $1.00, subject to adjustment, as hereinafter provided, for a stock split, stock dividend or other similar event and for merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event.

(b)In order to exercise the conversion privilege, the holder of this Note shall surrender the Note, duly endorsed or assigned to Borrower or in blank, at the principal executive office of Borrower, accompanied by written notice to Borrower at such office that the holder elects to convert this Note or, if less than the entire principal amount hereof is to be converted, the portion thereof to be converted.

(c)This Note shall be deemed to have been converted immediately prior to the close of business on the day of surrender of this Note, duly endorsed or assigned to Borrower or in blank, for conversion in accordance with the foregoing provisions, and at such time the rights of the holder of this Note as a holder shall cease, and the person or persons entitled to receive the shares of Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock at such time. As promptly as practicable on or after the conversion date, Borrower shall issue and shall deliver to the holder of this Note, or its designated assigns, a certificate or certificates for the number of full shares of Common Stock issuable upon conversion (bearing such legends as are required by the Loan Agreement and applicable state and federal securities laws in the opinion of counsel to the Borrower). No payment or adjustment is to be made on conversion for interest accrued hereon after the date of conversion or for dividends on the Common Stock issued on conversion. In the case of this Note that is converted in part only, promptly following such conversion Borrower shall execute and Borrower shall deliver to the holder hereof, at the expense of Borrower, a new Note or Notes of authorized denominations in aggregate principal amount equal to the unconverted portion of the principal amount of this Note.

(d)If, prior to the conversion of this Note, (i) the number of outstanding shares of Common Stock is increased by a stock split, stock dividend, or other similar event, the Conversion Price shall be proportionately reduced, (ii) the number of outstanding shares of Common Stock is decreased by a combination or reclassification of shares, or other similar

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event, the Conversion Price shall be proportionately increased, (iii) (A) there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock shall be changed into the same or a different number of shares of the same or another class or classes of stock or securities of the Borrower or another entity or (B) there occurs a sale of all or substantially all of the Borrower’s assets that is not deemed to be a liquidation, dissolution or winding up of the Borrower, then the holder of this Note shall have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities, and/or other assets which the holder of this Note would have been entitled to receive in such transaction had this Note, together with all unpaid and accrued interest thereon, been converted immediately prior to such transaction, and in any such case appropriate provisions shall be made with respect to the rights and interests of the holder of this Note to the end that the provisions hereof (including, without limitation, provisions for the adjustment of the Conversion Price) shall thereafter be applicable, as nearly as may be practicable in relation to any securities thereafter deliverable upon the exercise hereof.

(e)No fractional shares shall be issued upon conversion of this Note. In lieu of the Borrower issuing any fractional shares to Lender upon the conversion of this Note, the Borrower shall pay to Lender an amount equal to the product obtained by multiplying the Conversion Price by the fraction of a share not issued pursuant to the previous sentence. Upon conversion of this Note in full and the payment of any amounts specified in this Section 7(e), the Borrower shall be forever released from all its obligations and liabilities under this Note.

(f)“Current Market Price” means at any date the average of the closing price of the Common Stock on all securities exchanges (including the Nasdaq Stock Market) on which it may at the time be listed, or, if there if there have been no sales on any such exchange on any day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted on the Nasdaq Stock Market as of 4:00 p.m., New York time, or if on any day such security is not quoted in the Nasdaq Stock Market, the average of the highest bid and lowest ask prices on such day in the domestic over-the-counter market as reported by the OTC Bulletin Board, Pink Sheets LLC, or any similar successor organization, in each case for the 40 consecutive trading days (the “Pricing Period”) commencing on the earlier of the first trading day immediately following the effective date (the “Effective Date”) of (i) Borrower’s Registration Statement on Form S-1 (File No. 333-127056) originally filed with the Securities and Exchange Commission (the “SEC”) on Form SB-2 on July 29, 2005 (the “Original Registration Statement”) or (ii) such other registration statement as may be filed by the Borrower with the SEC covering shares of Common Stock issuable upon conversion of the Borrower’s Series A Convertible Preferred Stock (the “Contingent Registration Statement” and together with the Original Registration Statement, the “Current Registration Statement”). Lender agrees that it will not, without the prior written consent of Borrower, sell, offer, contract or grant any option to sell (including without limitation any short sale), transfer, or otherwise dispose of any shares of Common Stock of Borrower, options, or warrants to acquire shares of Common Stock, or securities exchangeable or exercisable for or convertible into shares of Common Stock owned by Lender during the Pricing Period.

(g)Borrower shall pay all documentary, stamp, transfer or other transactional taxes attributable to the issuance or delivery of shares of Common Stock of Borrower or other securities or property upon conversion of any Notes: provided, however, that Borrower shall not be required to pay any taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificate for such shares or securities in the name other than that of the holder of this Note in respect of which such shares are being issued.

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(h)Borrower shall reserve at all times so long as this Note remains outstanding, free from preemptive rights, out of its treasury stock or its authorized but unissued shares of Common Stock, or both, solely for the purpose of effecting the conversion of this Note, sufficient shares of Common Stock to provide for the conversion of this Note.

(i)If any shares of Common Stock or other securities to be reserved for the purpose of conversion of this Note require registration with or approval of any governmental authority under any Federal or state law before such shares or other securities may be validly issued or delivered upon conversion, then Borrower and the holders of this Note will in good faith and as expeditiously as possible endeavor to secure such registration or approval, as the case may be.

(j)All shares of Common Stock or other securities which may be issued upon conversion of this Note will upon issuance by Borrower be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges with respect to the issuance thereof and Borrower shall take no action which will cause a contrary result.

(k) Borrower shall use its commercially reasonable efforts to register the shares issuable upon conversion of this Note on the Current Registration Statement; provided, however, that if the Borrower’s counsel determines in good faith that the shares issuable upon conversion of this Note cannot be registered on such Current Registration Statement thenthe Borrower agrees to use its commercially reasonable efforts to file an additional Registration Statement on Form S-1 (the “Additional Registration Statement”) or such other appropriate form for the general registration of the resale of the shares issuable upon conversion of this Note within 60 days following the Effective Date. The Borrower agrees to use commercially reasonable efforts to cause the Additional Registration Statement to be declared effective within 90 days of the date of filing of such Additional Registration Statement. Sections 4, 5, 6, 8, 9, 10, 11 and 12(a), 12(b), 12(e), 12(g) (the “Incorporated Sections”) of that certain Registration Rights Agreement dated as of June 30, 2005 between the Borrower and the parties set forth on the signature page and Exhibit A to such agreement (the “Existing Registration Rights Agreement”) are incorporated herein by reference and made a part of this Note. Terms used in the Incorporated Sections not otherwise defined in this Note shall have the meaning assigned to them under Section 1 of the Existing Registration Rights Agreement. The term Registrable Securities in the Incorporated Sections shall be deemed to include the shares issuable upon conversion of this Note. Nothing contained herein shall be construed to incorporate by reference any other section of the Existing Registration Rights Agreement except those specifically set forth herein.

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8.Default; Remedies.

Upon the occurrence of an Event of Default, and without notice or demand, all amounts owed under this Note, including all accrued but unpaid interest, shall thereafter bear interest at the rate of 5% per annum above the Note Rate (the “Default Rate”) until all Events of Default are cured. Failure to exercise any option granted to Lender hereunder shall not waive the right to exercise the same in the event of any subsequent Event of Default. Interest at the Default Rate shall commence to accrue upon the occurrence of any Event of Default, including the failure to pay this Note at maturity.

9.Attorneys’ Fees.

The Borrower agrees to pay all costs of collection incurred in enforcing this Note, including attorneys' fees and costs at both trial and appellate levels and in any bankruptcy action. In the event any legal proceedings are instituted in connection with, or for the enforcement of this Note, the Lender shall be entitled to recover its costs of suit, including attorneys' fees and costs, at both trial and appellate levels and in any bankruptcy action.

10.Miscellaneous

Every person or entity at any time liable for the payment of the indebtedness evidenced hereby waives presentment for payment, demand, and notice of nonpayment of this Note. Every such person or entity further hereby consents to any extension of the time of payment hereof, the release of all or any part of the security herefor or the release of any party liable for the payment of the indebtedness evidenced hereby at any time and from time to time at the request of anyone now or hereafter liable therefor. Any such extension or release may be made without notice to any of such persons or entities and without discharging their liability.

The entity that signs this Note is liable for the full repayment of the entire indebtedness evidenced hereby and the full performance of each and every obligation contained in the Security Documents.

The headings to the various sections have been inserted for convenience of reference only and do not define, limit, modify, or expand the express provisions of this Note.

Any provision of this Note may be amended, waived or modified upon the written consent of the Borrower and the Lender.

Time is of the essence under this Note and in the performance of every term, covenant, and obligation contained herein.

This Note is made with reference to and is to be construed in accordance with the laws of the state of Texas, without regard to its conflict of law principles.

If this Note or any of the Security Documents are lost, stolen, mutilated or destroyed and Lender delivers to Borrower an indemnification agreement in a form reasonably satisfactory to Borrower reasonably indemnifying Borrower against any loss or liability resulting therefrom, Borrower will execute and deliver to Lender a replacement thereof in form and content identical to the original document which will have the effect of the original for all purposes.

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11.Transfer of this Note or Securities Issuable on Conversion Hereof.

With respect to any offer, sale or other disposition of this Note or securities into which such Note may be converted, Lender will give written notice to the Borrower prior thereto, describing briefly the manner thereof, together with a written opinion of Lender’s counsel, or other evidence reasonably satisfactory to the Borrower, to the effect that such offer, sale, or other distribution may be effected without registration or qualification under any applicable federal or state law then in effect. Upon receiving such written notice and reasonably satisfactory opinion or other evidence, the Borrower, as promptly as practicable, shall notify Lender that Lender may sell or otherwise dispose of this Note or such securities, all in accordance with the terms of the notice delivered to the Borrower. If a determination has been made pursuant to this Section 11 that the opinion of counsel for Lender, or other evidence, is not reasonably satisfactory to the Borrower, the Borrower shall so notify Lender promptly after such determination has been made. Each Note thus transferred and each certificate representing the securities thus transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Securities Act of 1933, as amended (the “Act”), unless in the opinion of counsel for the Borrower such legend is not required in order to ensure compliance with the Act. The Borrower may issue stop transfer instructions to its transfer agent in connection with such restrictions. Subject to the foregoing, transfers of this Note shall be registered upon registration books maintained for such purpose by or on behalf of the Borrower as provided in the Loan Agreement. Prior to presentation of this Note for registration of transfer, the Borrower shall treat the registered holder hereof as the owner and holder of this Note for the purpose of receiving all payments of principal and interest hereon and for all other purposes whatsoever, whether or not this Note shall be overdue and the Borrower shall not be affected by notice to the contrary. Notwithstanding the foregoing, this Section 11 shall not apply to securities into which this Note may be converted following the registration of such securities pursuant to Section 7(k) of this Agreement. Notwithstanding the foregoing, this Note may not be transferred prior to the completion of the Rights Offering (as defined in the Loan Agreement and the registration rights granted pursuant to Section 7(k) of this Note may not be transferred.

12.Notices.

All notices, requests, demands, consents, instructions, or other communications required or permitted hereunder shall in writing and faxed, mailed, or delivered to each party at the respective addresses of the parties as set forth in the Loan Agreement, or at such other address or facsimile number as the Borrower shall have furnished to Lender in writing. All such notices and communications will be deemed effectively given the earlier of (a) when received, (b) when delivered personally, (c) one business day after being delivered by facsimile (with receipt of appropriate confirmation), (d) one business day after being deposited with an overnight courier service of recognized standing or (e) four days after being deposited in the U.S. mail, first class with postage prepaid.

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13.Pari Passu Notes.

Lender acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Notes issued pursuant to the Loan Agreement or pursuant to the terms of such Notes. In the event Lender receives payments in excess of its pro rata share of the Borrower’s payments to the Lenders of all of the Notes, then Lender shall hold in trust all such excess payments for the benefit of the holders of the other Notes and shall pay such amounts held in trust to such other holders upon demand by such holders.

14.Consent to Jurisdiction.

Borrower irrevocably submits to the jurisdiction of any state or federal court sitting in Houston, Texas, over any suit, action, or proceeding arising out of or relating to this Note or the loan evidenced hereby. Borrower irrevocably waives, to the fullest extent permitted by law, any objection that Borrower may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum. Borrower further consents and agrees to service of any summons, complaint or other legal process in any such suit, action or proceeding by registered or certified U.S. mail, postage prepaid, to Borrower at the address for notices set forth following its signature, and consents and agrees that such service shall constitute in every respect valid and effective service (but nothing herein shall affect the validity or effectiveness of process served in any other manner permitted by law).

15.WAIVER OF JURY TRIAL.

LENDER AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THE LOAN, THIS NOTE OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN), OR ACTIONS OF LENDER OR BORROWER. THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN TO BORROWER.

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DATED as of the day and year first above written.

RONCO CORPORATION, a Delaware corporation

By:/s/Paul Kabashima                                              

Name: Paul Kabashima

Title: Chief Operating Officer

Address:

21344 Superior Street

Chatsworth, California 91311

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EX-10.2

SECURITY AGREEMENT

THIS SECURITY AGREEMENT (“Agreement”) is made as of June 9, 2006, by RONCO CORPORATION, a Delaware corporation (hereinafter called “Debtor”), whose address is 21344 Superior Street, Chatsworth, California 91311 in favor of SANDERS MORRIS HARRIS INC., a Texas corporation, individually and as agent for the Lenders (“Secured Party”), whose address is 600 Travis Street, Suite 3100, Houston, Harris County, Texas 77002. Debtor hereby agrees with Secured Party as follows:

1.Definitions. As used in this Agreement, the following terms shall have the meanings indicated below:

(a)The term “Borrower” means Debtor.

(b)The term “Collateral” means all of Debtor’s right, title, and interest in and to the life insurance policy issued by John Hancock Life Insurance on Ronald M. Popeil, and all products and proceeds of the foregoing. The designation of proceeds does not authorize Debtor to sell, transfer, or otherwise convey any of the foregoing property.

(c)The term “Indebtedness” means the outstanding principal amount of and all accrued and unpaid interest on the promissory notes executed by Borrower and payable to the order of Secured Party under the Loan Agreement (as hereinafter defined) (the “Notes”); and (ii) all obligations of Borrower to Secured Party under any documents evidencing, securing, governing and/or pertaining to all or any part of the indebtedness described in (i) above.

(d)The term “Lenders” means Lenders as defined in the Loan Agreement.

(e)The term “Loan Documents” means this Agreement, the Letter Loan Agreement dated as of the date hereof (the “Loan Agreement”), among the Borrower and the Lenders, the Note, and the Insurance Assignment (as defined in the Loan Agreement).

2.Security Interest. As security for the Indebtedness, Debtor, for value received, hereby pledges and grants to Secured Party a continuing security interest in the Collateral.

3.Representations and Warranties. In addition to any representations and warranties of Debtor set forth in the Loan Documents, which are incorporated herein by this reference, Debtor hereby represents and warrants the following to Secured Party as of the date hereof:

(a)Accuracy of Information. To the knowledge of Debtor, all information heretofore or herein supplied to Secured Party in writing by or on behalf of Debtor with respect to the Collateral is true and correct in all material respects.

(b)Ownership and Liens. Debtor has good and marketable title to the Collateral free and clear of all liens, security interests, encumbrances or adverse claims (collectively “Liens”), except for liens held by Wells Fargo Bank, National Association, Prestige Capital Corporation, Laurus Master Fund, Ltd. and Permitted Liens (as defined in the Loan

Agreement). To Debtor’s knowledge, no dispute, right of setoff, counterclaim, or defense exists with respect to all or any part of the Collateral. Except with respect to the Security Agreement Securities Account between Ronco Corporation and Wells Fargo Bank National Association and the Purchase and Sale Agreement by and between Prestige Capital Corporation and Ronco Corporation dated as of October 25, 2005, Debtor has not executed any other security agreement currently affecting the Collateral and no effective financing statement or other instrument similar in effect covering all or any part of the Collateral (other than filed on behalf of Wells Fargo Bank, National Association or Prestige Capital Corporation) is on file in any recording office except as may have been executed or filed in favor of Secured Party.

(c)No Conflicts or Consents. Neither the ownership, the intended use of the Collateral by Debtor, the grant of the security interest by Debtor to Secured Party herein nor the exercise by Secured Party of its rights or remedies hereunder, will (i) materially conflict with any provision of (A) to Debtor’s knowledge, any domestic or foreign law, statute, rule or regulation, (B) the certificate of incorporation or bylaws of Debtor, or (C) to Debtor’s knowledge, any agreement, judgment, license, order, or permit applicable to or binding upon Debtor, or (ii) to Debtor’s knowledge, result in or require the creation of any material Lien upon any assets or properties of Debtor or of any person except as may be expressly contemplated in the Loan Documents. Except as expressly contemplated in the Loan Documents, no consent, approval, authorization, or order of, and no notice to or filing with, any court, governmental authority, or third party, other than John Hancock Life Insurance, by Debtor is required in connection with the grant by Debtor of the security interest herein or the exercise by Secured Party of its rights and remedies hereunder.

(d)Security Interest. Debtor has full right, power, and authority to grant a security interest in the Collateral to Secured Party in the manner provided herein, free and clear of any Liens, except for liens held by Wells Fargo Bank, National Association, Prestige Capital Corporation, Laurus Master Fund, Ltd. and Permitted Liens. Subject to any security interest that as of the date of this Agreement has a higher priority, this Agreement creates a legal, valid, and binding security interest in favor of Secured Party in the Collateral securing the Indebtedness.

(e)Location. Debtor’s residence or chief executive office, as the case may be, and the office where the records concerning the Collateral are kept is located at its address set forth on the first page hereof or the addresses specified on Schedule 1 to this Agreement. Except as specified elsewhere herein, all Collateral shall be kept at such address.

(f)Solvency of Debtor. As of the date hereof, and after giving effect to this Agreement and the completion of all other transactions contemplated by Debtor at the time of the execution of this Agreement, (i) Debtor is and will be solvent, (ii) the fair saleable value of Debtor’s assets exceeds and will continue to exceed Debtor’s liabilities (both fixed and contingent), and (iii) subject to consummation of the transactions contemplated by the Loan Agreement, including Section 2(a)(ii)(G) of the Loan Agreement, Debtor will have sufficient capital to carry on Debtor’s businesses and all businesses in which Debtor is about to engage.

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4.Affirmative Covenants. In addition to all covenants and agreements of Debtor set forth in the Loan Documents, which are incorporated herein by this reference, Debtor will comply with the covenants contained in this Section 4 at all times during the period of time this Agreement is effective unless Secured Party shall otherwise consent in writing.

(a)Ownership and Liens. Other than assignment of the Collateral pursuant to the provisions of the Insurance Assignment, Debtor will maintain good and marketable title to all Collateral free and clear of all Liens, except for Liens held by Wells Fargo Bank, National Association, Prestige Capital Corporation, Laurus Master Fund, Ltd. and the Permitted Liens. Debtor will cause any financing statement or other security instrument with respect to the Collateral, other than those held by Wells Fargo Bank, National Association and Prestige Capital Corporation, to be terminated, except as may exist or as may have been filed in favor of Secured Party. Debtor will defend at its reasonable expense Secured Party’s right, title and security interest in and to the Collateral against the claims of any third party other than Wells Fargo Bank, National Association, Laurus Master Fund, Ltd. and Prestige Capital Corporation.

(b)Further Assurances. Debtor will from time to time at its expense promptly execute and deliver all further instruments and documents and take all further action necessary or appropriate or that Secured Party may reasonably request in order (i) to perfect and protect the security interest created or purported to be created hereby and the priority of such security interest, (ii) to enable Secured Party to exercise and enforce its rights and remedies hereunder in respect of the Collateral, and (iii) to otherwise effect the purposes of this Agreement, including without limitation executing and filing such financing or continuation statements, or amendments thereto.

(c)Inspection of Collateral. Debtor will keep adequate records concerning the Collateral and will permit Secured Party and all representatives and agents appointed by Secured Party to inspect the Collateral upon reasonable prior notice during normal business hours, to make and take away photocopies or photographs thereof and to write down and record any such information.

(d)Payment of Taxes. Debtor (i) will pay prior to delinquency all lawful claims which, if unpaid, might become a lien or charge upon the Collateral or any part thereof, and (ii) will maintain appropriate accruals and reserves for all such liabilities in a timely fashion in accordance with generally accepted accounting principles. Debtor may, however, delay paying or discharging any such taxes, assessments, charges, claims or liabilities so long as the validity thereof is contested in good faith by proper proceedings and provided Debtor has set aside on Debtor’s books adequate reserves therefor.

5.Negative Covenants. Debtor will comply with the covenants contained in this Section 5 at all times during the period of time this Agreement is effective, unless Secured Party shall otherwise consent in writing.

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(a)Transfer or Encumbrance. Debtor will not other than pursuant to the Insurance Assignment and subject to the rights of Wells Fargo Bank, National Association, Laurus Master Fund, Ltd., Prestige Capital Corporation and the holders of Permitted Liens, (i) sell, assign (by operation of law or otherwise), transfer, exchange, lease or otherwise dispose of any of the Collateral, (ii) grant a lien or security interest in or execute, file or record any financing statement or other security instrument with respect to the Collateral to any party other than Secured Party, or (iii) deliver actual or constructive possession of any of the Collateral to any party other than Secured Party.

(b)Impairment of Security Interest. Debtor will not take or fail to take any action which would in any manner impair the value or enforceability of Secured Party’s security interest in any Collateral.

(c)Financing Statement Filings. Debtor recognizes that financing statements pertaining to the Collateral have been or may be filed where Debtor maintains any Collateral, has its records concerning any Collateral or has its residence or chief executive office, as the case may be. Without limitation of any other covenant herein, Debtor will not cause or permit any change in the location of (i) any Collateral, (ii) any records concerning any Collateral, or (iii) Debtor’s residence or chief executive office, as the case may be, to a jurisdiction other than as represented in Subsection 3(e) unless Debtor shall have notified Secured Party in writing of such change at least thirty (30) days prior to the effective date of such change, and shall have first taken all action required by Secured Party for the purpose of further perfecting or protecting the security interest in favor of Secured Party in the Collateral. In any written notice furnished pursuant to this Subsection, Debtor will expressly state that the notice is required by this Agreement and contains facts that may require additional filings of financing statements or other notices for the purpose of continuing perfection of Secured Party’s security interest in the Collateral.

6.Rights of Secured Party. Secured Party shall have the rights contained in this Section 6 at all times during the period of time this Agreement is effective.

(a)Additional Financing Statements Filings. Debtor hereby authorizes Secured Party to file, without the signature of Debtor, one or more financing or continuation statements, and amendments thereto, relating to the Collateral. Debtor further agrees that a carbon, photographic or other reproduction of this Security Agreement or any financing statement describing any Collateral is sufficient as a financing statement and may be filed in any jurisdiction Secured Party may deem appropriate.

(b)Power of Attorney. Debtor hereby irrevocably appoints Secured Party as Debtor’s attorney-in-fact, such power of attorney being coupled with an interest, with full authority in the place and stead of Debtor and in the name of Debtor or otherwise, to: (i) to execute and file financing or continuation statements, or amendments thereto in the name of Debtor, (ii) to demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of the Collateral; and (iii) to file any claims or take any action or institute any proceedings which Secured Party may deem necessary for the collection and/or preservation of the Collateral or otherwise to enforce the rights of Secured Party with respect to the Collateral; provided, however, that Secured Party shall not exercise any such powers granted pursuant to subsections (ii) and (iii) prior to the occurrence of an Event of Default (as defined below) and shall only exercise such powers during the continuance of an Event of Default.

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(c)Performance by Secured Party. If Debtor fails to perform any agreement or obligation provided herein, Secured Party may itself perform, or cause performance of, such agreement or obligation, and the expenses of Secured Party incurred in connection therewith shall be a part of the Indebtedness, secured by the Collateral and payable by Debtor on demand; provided, however, that Secured Party shall not exercise any such powers prior to the occurrence of an Event of Default and shall only exercise such powers during the continuance of an Event of Default.

(d)Debtor’s Receipt of Proceeds. All amounts and proceeds (including instruments and writings) received by Debtor in respect of the Collateral shall be received in trust for the benefit of Secured Party hereunder and, upon request of Secured Party, shall be segregated from other property of Debtor and shall be forthwith delivered to Secured Party in the same form as so received (with any necessary endorsement) and applied to the Indebtedness in such manner as Secured Party deems appropriate in its sole discretion. Notwithstanding the foregoing, all amounts and proceeds in respect of the Collateral received by Secured Party in excess of the Indebtedness shall be promptly paid to Debtor.

7.Events of Default. Each of the following constitutes an “Event of Default” under this Agreement:

(a)Default under Loan Agreement. Debtor shall be deemed in default under this Security Agreement upon the occurrence and during the continuance of an Event of Default (as defined in the Loan Agreement);

(b)Execution on Collateral. The Collateral or any portion thereof is taken on execution or other process of law in any action against Debtor; or

(c)Abandonment. Debtor abandons the Collateral or any portion thereof.

8.Remedies and Related Rights. If an Event of Default shall have occurred and be continuing, and without limiting any other rights and remedies provided herein, under any of the other Loan Documents or otherwise available to Secured Party, Secured Party may exercise one or more of the rights and remedies provided in this Section.

(a)Remedies. Secured Party may from time to time at its discretion, without limitation and without notice except as expressly provided in any of the Loan Documents:

(i)exercise in respect of the Collateral all the rights and remedies of a secured party under the Uniform Commercial Code of the State of Texas;

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(ii)require Debtor to, and Debtor hereby agrees that it will at its expense and upon request of Secured Party, assemble the Collateral as directed by Secured Party and make it available to Secured Party at a place to be designated by Secured Party which is reasonably convenient to both parties;

(iii)reduce its claim to judgment or foreclose or otherwise enforce, in whole or in part, the security interest granted hereunder by any available judicial procedure;

(iv)sell or otherwise dispose of, at its office, on the premises of Debtor or elsewhere, the Collateral, as a unit or in parcels, by public or private proceedings, and by way of one or more contracts (it being agreed that the sale or other disposition of any part of the Collateral shall not exhaust Secured Party’s power of sale, but sales or other dispositions may be made from time to time until all of the Collateral has been sold or disposed of or until the Indebtedness has been paid and performed in full), and at any such sale or other disposition it shall not be necessary to exhibit any of the Collateral;

(v)buy the Collateral, or any portion thereof, at any public sale;

(vi)buy the Collateral, or any portion thereof, at any private sale if the Collateral is of a type customarily sold in a recognized market or is of a type which is the subject of widely distributed standard price quotations;

(vii)apply for the appointment of a receiver for the Collateral, and Debtor hereby consents to any such appointment; and

(viii)at its option, retain the Collateral in satisfaction of the Indebtedness whenever the circumstances are such that Secured Party is entitled to do so.

Debtor agrees that in the event Debtor is entitled to receive any notice under the Uniform Commercial Code, as it exists in the state governing any such notice, of the sale or other disposition of any Collateral, reasonable notice shall be deemed given when such notice is deposited in a depository receptacle under the care and custody of the United States Postal Service, postage prepaid, at Debtor’s address set forth on the first page hereof, fifteen (15) days prior to the date of any public sale, or after which a private sale, of any of such Collateral is to be held. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b)Application of Proceeds. If any Event of Default shall have occurred, Secured Party may at its discretion apply or use any cash held by Secured Party as Collateral, and any cash proceeds received by Secured Party in respect of any sale or other disposition of, collection from, or other realization upon, all or any part of the Collateral as follows in such order and manner as Secured Party may elect:

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(i)to the repayment or reimbursement of the reasonable costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) incurred by Secured Party in connection with (A) the administration of the Loan Documents, (B) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, the Collateral, and (C) the exercise or enforcement of any of the rights and remedies of Secured Party hereunder;

(ii)to the payment or other satisfaction of any liens and other encumbrances upon the Collateral;

(iii)to the satisfaction of the Indebtedness;

(iv)by continuing to hold such cash and proceeds as Collateral under this Agreement;

(v)to the payment of any other amounts required by applicable law; and

(vi)by delivery to Debtor or any other party lawfully entitled to receive such cash or proceeds whether by direction of a court of competent jurisdiction or otherwise.

(c)Deficiency. In the event that the proceeds of any sale of, collection from, or other realization upon, all or any part of the Collateral by Secured Party are insufficient to pay all amounts to which Secured Party is legally entitled, Borrower and any party who guaranteed or is otherwise obligated to pay all or any portion of the Indebtedness shall be liable for the deficiency, together with interest thereon as provided in the Loan Documents.

(d)Other Recourse. To the extent permitted by applicable law, Debtor waives any right to require Secured Party to proceed against any third party, exhaust any Collateral or other security for the Indebtedness, or to have any third party joined with Debtor in any suit arising out of the Indebtedness or any of the Loan Documents, or pursue any other remedy available to Secured Party. Until all of the Indebtedness shall have been paid in full, Debtor shall have no right of subrogation and Debtor waives the right to enforce any remedy which Secured Party has or may hereafter have against any third party, and waives any benefit of and any right to participate in any other security whatsoever now or hereafter held by Secured Party.

9.Indemnity. Debtor hereby indemnifies and agrees to hold harmless Secured Party, and its officers, directors, employees, agents and representatives (each an “Indemnified Person”) from and against any and all liabilities, obligations, claims, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature (collectively, the “Claims”) which may be imposed on, incurred by, or asserted against, any Indemnified Person arising in

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connection with this Agreement, except to the extent that any such indemnified liability is finally determined by a court of competent jurisdiction to have resulted solely from such Indemnified Person’s gross negligence or willful misconduct. The indemnification provided for in this Section shall survive the termination of this Agreement and shall extend and continue to benefit each individual or entity who is or has at any time been an Indemnified Person hereunder. Each Indemnified Person shall give notice to Debtor promptly after such Indemnified Person has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Debtor to assume the defense of such claim or any litigation resulting therefrom; provided that counsel for the Debtor, who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Person (whose approval shall not be unreasonably withheld), and the Indemnified Person may participate in such defense at such party’s expense; and providedfurther that the failure of any Indemnified Person to give notice as provided herein shall not relieve Debtor of its obligations under this Section 9, to the extent such failure is not prejudicial. Debtor, in the defense of any such claim or litigation, shall not, except with the consent of each Indemnified Person, consent to entry of any judgment or enter into any settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Person of a release from all liability in respect to such claim or litigation. Each Indemnified Person shall furnish such information regarding itself or the claim in question as Debtor may reasonably request in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

10.Miscellaneous.

(a)Entire Agreement. This Agreement contains the entire agreement of Secured Party and Debtor with respect to the Collateral. If the parties hereto are parties to any prior agreement, either written or oral, relating to the Collateral, the terms of this Agreement shall amend and supersede the terms of such prior agreements as to transactions on or after the effective date of this Agreement, but all security agreements, financing statements, guaranties, other contracts and notices for the benefit of Secured Party shall continue in full force and effect to secure the Indebtedness unless Secured Party specifically releases its rights thereunder by separate release.

(b)Amendment. No modification, consent or amendment of any provision of this Agreement shall be valid or effective unless the same is in writing and signed by the party against whom it is sought to be enforced.

(c)Knowledge. For purposes of this Agreement, “Debtor’s knowledge” refers to the knowledge, information, and belief of the Debtor’s Chief Executive Officer, President or Chief Financial Officer after making inquiry of their respective direct reports and other appropriate officers or employees of Debtor reasonably likely to have knowledge of the matter to which such reference relates.

(d)Actions by Secured Party. The lien, security interest and other security rights of Secured Party hereunder shall not be impaired by (i) any renewal, extension, increase or modification with respect to the Indebtedness, (ii) any surrender, compromise, release, renewal, extension, exchange or substitution which Secured Party may grant with respect to the Collateral, or (iii) any release or indulgence granted to any endorser, guarantor or surety of the Indebtedness. The taking of additional security by Secured Party shall not release or impair the lien, security interest or other security rights of Secured Party hereunder or affect the obligations of Debtor hereunder.

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(e)Waiver by Secured Party. Secured Party may waive any Event of Default without waiving any other prior or subsequent Event of Default. Secured Party may remedy any default without waiving the Event of Default remedied. Neither the failure by Secured Party to exercise, nor the delay by Secured Party in exercising, any right or remedy upon any Event of Default shall be construed as a waiver of such Event of Default or as a waiver of the right to exercise any such right or remedy at a later date. No single or partial exercise by Secured Party of any right or remedy hereunder shall exhaust the same or shall preclude any other or further exercise thereof, and every such right or remedy hereunder may be exercised at any time. No waiver of any provision hereof or consent to any departure by Debtor therefrom shall be effective unless the same shall be in writing and signed by Secured Party and then such waiver or consent shall be effective only in the specific instances, for the purpose for which given and to the extent therein specified. No notice to or demand on Debtor in any case shall of itself entitle Debtor to any other or further notice or demand in similar or other circumstances.

(f)Costs and Expenses. Debtor will upon demand pay to Sanders Morris Harris Inc. the amount of any and all reasonable costs and expenses (including without limitation, attorneys’ fees and expenses), which Sanders Morris Harris Inc. may incur in connection with (i) the transactions which give rise to this Agreement, (ii) the preparation of this Agreement and the perfection and preservation of the security interests granted under the this Agreement, (iii) the administration of this Agreement, (iv) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, the Collateral, (v) the exercise or enforcement of any of the rights of Sanders Morris Harris Inc. under this Agreement, or (vi) the failure by Debtor to perform or observe any of the provisions hereof.

(f)GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS.

(g)Venue. This Agreement has been entered into in the county in Texas where Secured Party’s address for notice purposes is located, and it shall be performable for all purposes in such county. Courts within the State of Texas shall have jurisdiction over any and all disputes arising under or pertaining to this Agreement and venue for any such disputes shall be in the county or judicial district where this Agreement has been executed and delivered.

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(h)Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be illegal, invalid or unenforceable under present or future laws, such provision shall be fully severable, shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision held to be illegal, invalid or unenforceable.

(i)Notices. All notices, requests, demands or other communications required or permitted to be given pursuant to this Agreement shall be in writing and given by (i) personal delivery, (ii) expedited delivery service with proof of delivery, or (iii) United States mail, postage prepaid, registered or certified mail, return receipt requested, sent to the intended addressee at the address set forth on the first page hereof or to such different address as the addressee shall have designated by written notice sent pursuant to the terms hereof and shall be deemed to have been received either, in the case of personal delivery, at the time of personal delivery, in the case of expedited delivery service, as of the date of first attempted delivery at the address and in the manner provided herein, or in the case of mail, five days after deposit in a depository receptacle under the care and custody of the United States Postal Service. Either party shall have the right to change its address for notice hereunder to any other location within the continental United States by notice to the other party of such new address at least thirty (30) days prior to the effective date of such new address.

(j)Binding Effect and Assignment. This Agreement (i) creates a continuing security interest in the Collateral, (ii) shall be binding on Debtor and the successors and assigns of Debtor, and (iii) shall inure to the benefit of Secured Party and its successors and assigns. The Secured Party may assign the Note issued to such Secured Party under the terms of the Loan Agreement pursuant to the terms of Section 11 of the Note, provided that prior to such assignment the assignee agrees in writing to be bound by the terms and conditions of this Agreement and the other Loan Documents. Secured Party’s rights and obligations hereunder may not be assigned or otherwise transferred without the prior written consent of the Debtor. Debtor’s rights and obligations hereunder may not be assigned or otherwise transferred without the prior written consent of Secured Party.

(k)Cumulative Rights. All rights and remedies of Secured Party hereunder are cumulative of each other and of every other right or remedy which Secured Party may otherwise have at law or in equity or under any of the other Loan Documents, and the exercise of one or more of such rights or remedies shall not prejudice or impair the concurrent or subsequent exercise of any other rights or remedies.

(l)Termination of Security Interest. Upon the payment in full of all Indebtedness, the security interest granted herein shall terminate and all rights to the Collateral shall revert to Debtor. Upon such termination Secured Party hereby authorizes Debtor to file any UCC termination statements necessary to effect such termination and Secured Party will execute and deliver to Debtor any additional documents or instruments as Debtor shall reasonably request to evidence such termination.

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(m)Descriptive Headings. The headings in this Agreement are for convenience only and shall in no way enlarge, limit or define the scope or meaning of the various and several provisions hereof.

EXECUTED as of the date first written above.

DEBTOR:

RONCO CORPORATION

By: /s/Richard F. Allen, Sr.                             

Name: Richard F. Allen, Sr.

Title: President and Chief Executive Officer

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SCHEDULE 1

TO

SECURITY AGREEMENT

DATED JUNE 9, 2006

The other addresses referenced in Subsection 3(e) are as follows:

Ronco Corporation

61 Moreland Road

Simi Valley, CA 93065

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EX-10.3

LETTER LOAN AGREEMENT

June 9, 2006

The Lenders Identified on

Schedule 1

c/o Sanders Morris Harris Inc.

600 Travis Street, Suite 3100

Houston, Texas 77002

Ladies and Gentlemen:

The undersigned, RONCO CORPORATION, a Delaware corporation (“Borrower”), has requested that Sanders Morris Harris Inc., a Texas corporation, individually and as administrative agent (the “Lead Lender”), and the persons and entities listed on the schedule of lenders attached hereto as Schedule 1 (each, together with the Lead Lender, a “Lender” and,collectively, the“Lenders”) lend to Borrower the net sum of up to $3,000,000.00. Subject to the terms of this Loan Agreement (this “Agreement”), Borrower and each of the Lenders hereby agree as follows:

1.Loan.

(a)At the Initial Closing (as defined below), on the terms and subject to the conditions set forth in this Agreement, the Lead Lender agrees to lend to Borrower the sum of $1,500,000.00 (the “Initial Loan”) for working capital and other general corporate purposes as set forth on Schedule 2 hereto. The Initial Loan shall be evidenced by a subordinated promissory note in substantially the form attached hereto as Exhibit A (the “Initial Note”).

(b)At the Second Closing (as defined below), on the terms and subject to the conditions set forth in this Agreement, the Lead Lender agrees to lend to Borrower the additional sum of $1,500,000.00 (the “Second Loan”) for working capital and other general corporate purposes as set forth on Schedule 2 hereto. The Second Loan shall be evidenced by a subordinated promissory note in substantially the form attached hereto as Exhibit B (the “Second Note”).

(c)At the Third Closing (as defined below), on the terms and subject to the conditions set forth in this Agreement, each Rights Lender (as defined below) severally agrees to purchase a subordinated promissory note in substantially the form attached hereto as Exhibit C (each, a “SubsequentNote” and, collectively with the Initial Note and the Second Note, the “Notes” or a “Note”) in the principal amount set forth opposite the Rights Lender’s name on Schedule 1 hereto (the “Multiple Lender Loan,” and collectively with the Initial Loan and the Second Loan, the “Loans”). The aggregate principal amount of the Subsequent Notes sold at the Third Closing shall not exceed $3,000,000.00(the “Aggregate Subsequent Loan Amount”). Principal and interest on the Notes shall be due and payable in the manner and at the times set forth in the Notes.

(d)Each Loan shall be made at a closing (each of which is referred to in this Agreement as a “Closing”). The Initial Loan shall be made at an initial Closing to be held as of the date of this Agreement (the “InitialClosing”).

(e)The Second Loan shall be made at a second Closing by the Lead Lender (the “Second Closing”). The Second Closing shall take place at such date, time, and place as shall be agreed by the Borrower and the Lead Lender following the fulfillment or waiver of the conditions precedent set forth in Section 2(a)(ii) of this Agreement.

(f)The Multiple Lender Loan shall be made at a third Closing (the “Third Closing”) by such persons or entities that indicate their intent to participate in the Rights Offering (as defined below) (the “Rights Lenders”). The Third Closing shall take place at such date, time, and place as determined by the Borrower in its sole discretion; provided, however, that the Third Closing shall occur no later than seventy-five (75) days after the Initial Closing. The Rights Lenders shall, upon execution and delivery of the relevant signature pages, become parties to, and be bound by, this Agreement, without the need for an amendment to this Agreement except to add such person’s or entity’s name to Schedule 1, and shall have the rights and obligations of a Lender hereunder as of the date of the Third Closing. Immediately prior to the Third Closing, Schedule 1 will be amended to list the Rights Lenders participating in the Third Closing hereunder and the principal amount of the Note being purchased by such Rights Lender hereunder. At the applicable Closing, the Borrower will deliver to each Lender the respective Note to be purchased by such Lender, against receipt by the Borrower of the corresponding purchase price set forth on Schedule 1 hereto.

(g)Notwithstanding the foregoing, in the event that the aggregate principal amount of the Notes purchased at the Initial Closing, the Second Closing and the Third Closing exceeds $3,000,000.00 (the “Excess”), then Borrower and the Lead Lender agree that Borrower shall prepay its obligations under the Initial Note and the Second Note to the extent of the Excess. The Lead Lender waives all notice provisions in the Initial Note and the Second Note with respect to the prepayment of the Excess.

2.Conditions Precedent.

(a)To Obligations of the Lenders

(i)The obligation of the Lead Lender to make the Initial Loan to Borrower at the Initial Closing is subject to the conditions precedent, unless waived in writing by the Lead Lender, that:

(A) the Lead Lender shall have received duly executed copies of this Agreement, the Initial Note, the Security Agreement in substantially the form attached hereto as Exhibit D (the “Security Agreement”), and the Assignment of Life Insurance Policy in substantially the form attached hereto as Exhibit E (the “Insurance Assignment”) (all such documents and any other security documents relating to the Loans and any modifications thereof, are hereinafter collectively referred to as the “Loan Documents”);

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(B)all representations and warranties (as modified by the disclosures on the Schedule of Exceptions) made by Borrower to the Lead Lender under this Agreement and the other Loan Documents, if applicable, are true and correct in all material respects as of the date of the Initial Closing;

(C) all documents and proceedings shall be reasonably satisfactory to legal counsel for the Lead Lender;

(D) no condition or event exists which constitutes an Event of Default (as hereinafter defined) or which, with the lapse of time and/or giving of notice, would constitute an Event of Default; and

(E)no material adverse change in the financial condition of Borrower since the effective date of the most recent financial statements furnished to the Lead Lender by Borrower shall have occurred and be continuing.

(ii)The Lead Lender’s obligation to make the Second Loan at the Second Closing shall be further subject to the conditions precedent (other than Section 2(a)(ii)(G), which closing shall occur simultaneously with the Second Closing), unless waived in writing by the Lead Lender, that:

(A)all representations and warranties (as modified by the disclosures on the Schedule of Exceptions) made by Borrower to Lead Lender under this Agreement and the other Loan Documents, if applicable, are true and correct in all material respects as of the date of the Second Closing;

(B) all documents and proceedings shall be reasonably satisfactory to legal counsel for the Lead Lender;

(C) no condition or event exists which constitutes an Event of Default (as hereinafter defined) or which, with the lapse of time and/or giving of notice, would constitute an Event of Default;

(D) the Lead Lender shall have received duly executed copies of the Second Note;

(E)no material adverse change in the financial condition of Borrower since the effective date of the most recent financial statements furnished to Lead Lender by Borrower shall have occurred and be continuing;

(F)To the extent permissible under applicable federal and state securities laws, Borrower shall have sent by regular first class mail (the “Mailing”) to all holders of Borrower’s Series A Convertible Preferred Stock, at such holder’s address as is shown in the Borrower’s records at the time of such Mailing, an offer to participate as a Rights Lender in the

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Third Closing to the extent of their Pro Rata Share (as defined below) (the “Rights Offering”). For purposes of this Agreement, “Pro Rata Share” means (x) the Aggregate Subsequent Loan Amount multiplied by (y) a fraction, (i) the numerator of which shall be the number of shares of Series A Convertible Preferred Stock held by such Rights Lender on the date hereof and (ii) the denominator of which shall be the total number of outstanding shares of Series A Convertible Preferred Stock as of the date hereof. Borrower agrees that a Rights Lender shall have no more than thirty days from the date of the Mailing to indicate that such Rights Lender intends to participate in the Rights Offering;

(G)Borrower shall close simultaneously with the Second Closing on a credit agreement (the “Senior Credit Agreement”) for a facility of not less than $15 million between Borrower and Wells Fargo Bank, National Association on terms substantially equivalent to those contained in the commitment letter dated May 20, 2006, or Borrower shall have closed on a Senior Credit Agreement for a facility of not less than $15 million with Laurus Master Fund, Ltd.; and

(H)Wells Fargo Bank, National Association or Laurus Master Fund, Ltd. shall have received a subordination/consent agreement from Ronco Inventions, LLC, Popeil Inventions, Inc., RP Productions, Inc., RMP Family Trust, and Ronald M. Popeil.

(b)To Obligations of Borrower.

The Borrower’s obligation to sell and issue the Notes at each Closing is subject to the fulfillment on or before such Closing of the following conditions, unless waived in writing by the Borrower:

(i) Borrower shall have received duly executed copies of this Agreement from each of the Lenders participating in such Closing;

(ii)all representations and warranties made by Lenders to Borrower under this Agreement and the other Loan Documents, if applicable, in such Closing are true and correct in all material respects;

(iii) all documents and proceedings shall be reasonably satisfactory to legal counsel for the Borrower;

(iv) the Borrower shall be satisfied that the offer and sale of the Notes and the shares issuable upon conversion of the Notes (the “Conversion Shares”) shall be qualified or exempt from registration or qualification under all applicable federal and state securities laws (including receipt by the Borrower of all necessary blue sky law permits and qualifications required by any state, if any); and

(v)Borrower shall have received the purchase price for the applicable Note as set forth on Schedule 1 hereto.

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3.Representations and Warranties of Borrower. A Schedule of Exceptions (each, a “Schedule of Exceptions”) shall be delivered to the applicable Lenders participating in each Closing. Except as set forth on the Schedule of Exceptions delivered to the Lender at the applicable Closing, the Borrower hereby represents and warrants to such Lenders as of the date of such Closing:

(a)Borrower is a corporation duly organized validly existing and in good standing under the laws of the State of Delaware and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except for where the failure to have such requisite authority would not result in a material adverse effect on the Borrower’s financial condition or business as now conducted (a “Material Adverse Effect”).

(b)The execution, delivery, and performance of this Agreement and the other Loan Documents have been duly authorized by all necessary action by Borrower and are the legal, valid, and binding obligations of Borrower, enforceable in accordance with their respective terms, except (i) as limited by bankruptcy, insolvency, or other laws of general application relating to the enforcement of creditors’ rights, (ii) as limited by rules of law governing specific performance, injunctive relief or other equitable remedies and by general principles of equity and (iii) to the extent the indemnification provisions contained in the Loan Documents may further be limited by applicable laws and principles of public policy.

(c)The Borrower has delivered to the Lead Lender its consolidated balance sheet as of June 30, 2005 and the related consolidated statements of operations and cash flows for the one day June 30, 2005 (Date of Acquisition) and stockholders' equity for the period October 15, 2004 (Date of Inception) to June 30, 2005 and its unaudited consolidated balance sheet at March 31, 2006, its unaudited Consolidated and Combined Statements of Operations for the three and nine months ended March 31, 2006, its unaudited Consolidated Statement of Stockholders' Equity for the nine months ended March 31, 2006 and its unaudited Consolidated and Combined Statements of Cash Flows for the nine months ended March 31, 2006 (the “Financial Statements”). Each Financial Statement is true and correct in all material respects, fairly presents in all material respects the financial condition of Borrower as of the date(s) and during the period(s) indicated therein, and has been pre-pared in accordance with generally accepted accounting principles, consistently applied throughout the period indicated, except as disclosed therein. Except as set forth on the Schedule of Exceptions, as of the date of this Agreement, there are no obligations, liabilities, or indebtedness (including contingent and indirect liabilities) which are material to Borrower, and not reflected in such Financial Statements; and no material adverse changes have occurred in the financial condition or business of Borrower since the date of the most recent Financial Statements.

(d)Neither the execution and delivery of this Agree-ment and the other Loan Documents, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or thereof, will (i) contravene or conflict with any provision of law, statute, or regulation to which Borrower is subject or any judgment, license, order, or permit applicable to Borrower that would

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result in a Material Adverse Effect, (ii) contravene or conflict with any provision of any indenture, mortgage, deed of trust, or other instrument to which Borrower may be subject that would result in a Material Adverse Effect, or (iii) require the consent, approval, authorization, or order of any court, governmental authority, or, to Borrower’s knowledge, third party in connection with the execution and delivery by Borrower of this Agreement or the transactions contemplated herein or therein, which have not previously been obtained and which failure to obtain would result in a Material Adverse Effect.

(e)Except as set forth on Schedule of Exceptions, no litigation, investigation, or governmental proceeding is pending or, to the Borrower’s knowledge, threatened against or affecting Borrower that would have a Material Adverse Effect.

(f)The Borrower has good and marketable title to its properties and assets, and has good title to all its leasehold interests, in each case subject to no material mortgage, pledge, lien, lease, encumbrance or charge, other than (i) liens for current taxes not yet due and payable, (ii) liens imposed by law and incurred in the ordinary course of business for obligations not past due, (iii) liens in respect of pledges or deposits under workers’ compensation laws or similar legislation, and (iv) liens, encumbrances and defects in title which do not in any case materially detract from the value of the property subject thereto or have a Material Adverse Effect, and which have not arisen otherwise than in the ordinary course of business.

(g)The principal office, chief executive office, and principal place of business of Borrower are in Chatsworth, California; provided, however, that the Borrower intends to move its principal office, chief executive office, and principal place of business to Simi Valley, California.

(h)All tax reports and returns required by any law or regulation to be filed have been filed and all taxes required to be paid by Borrower have in fact been paid, except (i) where the failure to do so would not have a Material Adverse Effect or (ii) the taxes are being contested in good faith by appropriate proceedings for which adequate reserves have been established.

(i)To the Borrower’s knowledge, no written certificate or written statement herewith or heretofore delivered by Borrower to Lender in connection herewith, or in connection with any transaction contemplated hereby, contains any untrue statement of a material fact or fails to state any materi-al fact necessary to keep the statements contained therein from being misleading.

(j)To Borrower’s knowledge, Borrower and its subsidiaries are in compliance with all laws, ordinances, governmental rules, or regulations the conduct of Borrower’s and its subsidiaries’ business, the ownership of its assets, and otherwise, except for where the failure to so comply would not have a Material Adverse Effect. To Borrower’s knowledge, no event of default exists under any material agreement, contract, or understanding to which Borrower or any subsidiary is a party, which violation or event of default would have a Material Adverse Effect.

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(k)To Borrower’s knowledge, no event of default under this Agreement or default under the other Loan Documents to which Borrower is a party has occurred and to Borrower’s knowledge, the Borrower is not in default with respect to any writ, injunction, decree, or demand of any court or any government authority which would have a Material Adverse Effect.

4.Representations and Warranties of Lender. Each Lender, severally and not jointly, represents and warrants to Borrower upon the acquisition of a Note as follows:

(a)Binding Obligation. Such Lender has full legal capacity, power, and authority to execute and deliver this Agreement and to perform its obligations hereunder. Each of this Agreement and the Note issued to such Lender is a valid and binding obligation of the Lender, enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally and general principles of equity.

(b)Securities Law Compliance. Such Lender has been advised that the Note and the underlying securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or any state securities laws and, therefore, cannot be resold unless it is registered under the Securities Act and applicable state securities laws or unless an exemption from such registration requirements is available. Such Lender is aware that, Borrower is under no obligation to effect any such registration with respect to the Note or to file for or comply with any exemption from registration. Such Lender has not been formed solely for the purpose of making this investment and is purchasing the Note to be acquired by such Lender hereunder for its own account for investment, not as a nominee or agent, and not with a view to, or for resale in connection with, the distribution thereof. Such Lender has such knowledge and experience in financial and business matters that such Lender is capable of evaluating the merits and risks of such investment, is able to incur a complete loss of such investment and is able to bear the economic risk of such investment for an indefinite period of time. Such Lender is an accredited investor as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act.

(c)Access to Information. Such Lender acknowledges that Borrower has given such Lender access to the corporate records and accounts of the Borrower, has made its officers and representatives available for interview by such Lender, and has furnished such Lender with all documents and other information required for such Lender to make an informed decision with respect to the purchase of the Note.

5.Affirmative Covenants. Until payment in full of the Note and all other obligations and liabilities of Borrower under this Agreement, Borrower agrees and covenants that (unless the Lead Lender shall otherwise consent in writing):

(a)Richard F. Allen, subject to his ability to serve, is and shall continue to (i) serve as Chief Executive Officer of the Borrower and report to the Board of Directors and (ii) serve as a member of the Board of Directors of the Borrower (subject to the approval of the Borrower’s stockholders at any annual or other stockholder meeting where directors are to be elected).

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(b)Subject to (i) the earlier resignations of Gregg Mockenhaupt and A. Emerson Martin from the Borrower’s Board of Directors, (ii) his ability to serve, and (iii) the approval of the Borrower’s stockholders at any annual or special meeting of the Borrower’s stockholders where directors are to be elected, the Board of Directors of Borrower shall appoint John Reiland as a member of the Board of Directors of the Borrower and, if Mr. Reiland meets the independence and other applicable requirements of, the Sarbanes-Oxley Act of 2002, the rules of the Nasdaq Stock Market, and the rules and regulations adopted by the Securities and Exchange Commission (the “SEC”), the Board of Directors of Borrower shall appoint Mr. Reiland as a member of the Audit Committee of the Board of Directors of the Borrower (the “Audit Committee”). In such capacities, Mr. Reiland shall have access to all financial and related records of Borrower and be provided an office and customary senior management support in Borrower’s executive office. Upon payment in full of the Note and all other obligations and liabilities of Borrower under this Agreement, then the Board of Directors of Borrower may at such time request that Mr. Reiland resign from Borrower’s Board of Directors, and within five (5) days following such request, Mr. Reiland shall resign from Borrower’s Board of Directors.

(c)Borrower will use the proceeds of the Loan for working capital and other general corporate purposes but only as set forth on Schedule 2 hereto.

(d)Borrower shall use reasonable commercial efforts to conduct its business in an orderly and efficient manner consistent with good business practices and in accordance with all valid regulations, laws, and orders of any governmental authority the violation of which would have a Material Adverse Effect and will act in accordance with customary industry standards in maintaining and operating its assets, properties, and investments.

(e)Borrower shall maintain complete and accurate books and records of its transactions in accordance with general-ly accepted accounting principles, and will give Lead Lender, following reasonable advance notice, access during business hours to all books, records and documents of Borrower and permit Lead Lender to make and take away copies thereof. Notwithstanding any provision of this Agreement to the contrary, Borrower shall not be required to disclose, permit the inspection, examination, copying or making extracts of, or discuss, any document, information or other matter that (i) constitutes non-financial trade secrets or non-financial proprietary information, or (ii) the disclosure of which to the Lead Lender, or its designated representative, is then prohibited by (A) law or (B) an agreement binding on Borrower that was not entered into by Borrower for the primary purpose of concealing information from the Lead Lender.

(f)Borrower shall furnish to Lead Lender and each Significant Lender, immediately upon becoming aware of the existence of any condition or event consti-tuting an Event of Default or event which, with the lapse of time and/or giving of notice, would constitute an Event of Default, written notice specifying the nature and period of existence thereof and any action which Borrower is taking or proposes to take with respect thereto. For purposes of this Section 5(f),“Significant Lender” means a Lender that has a Significant Investment. For purposes of this Section 5(f),“Significant Investment” means the sum of the principal amount of the Note held by such Lender and the aggregate purchase price of the shares of the Company’s Series A Convertible Preferred Stock held by such Lender equals at least $1,000,000.

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(g)Borrower shall maintain or cause to be maintained insurance from responsible and reputable companies in such amounts and covering such risks as is reasonably acceptable to Lead Lender, is prudent and is usually carried by companies engaged in business similar to that of Borrower including, without limitation, insurance, comprehensive liability insurance, fire and extended insurance, with Borrower named as a co-loss payee; Borrower shall furnish Lead Lender, on request, with certified copies of insurance policies or other appropriate evidence of compliance with the foregoing covenant.

(h)Borrower shall promptly notify the Lead Lender of the filing of any Current Report on Form 8-K with the SEC that reports (i) any material adverse change in its financial condition or business, (ii) any default under any material agreement, contract, or other instrument to which Borrower is a party or by which any of its properties are bound, or any acceleration of any maturity of any indebtedness owing by Borrower, (iii) any material adverse claim against or affecting Borrower or any of its subsidiaries or any of their properties, and (iv) any litigation or any claim or controversy which might become the subject of litigation, against Borrower or affecting any of Borrower’s property, if such litigation or potential liti-gation might, in the event of an unfavorable outcome, have, in the Lead Lender’s reasonable judgment, a Material Adverse Effect.

(i)Borrower shall maintain and preserve its existence under the laws of the State of Delaware and Borrower shall preserve and maintain all licenses, privileges, franchises, certificates and the like necessary for the operation of its and its subsidiaries business the loss of which would have a Material Adverse Effect.

(j)Borrower agrees to furnish to Lead Lender within such time period as the Lead Lender may reasonably request such additional information and statements, lists of assets and liabilities, tax returns, publicly available financial statements, reporting statements or any other reports with respect to Borrower’s financial condition, business operations, and properties as the Lead Lender may reasonably request from time to time. Notwithstanding any provision of this Agreement to the contrary, Borrower shall not be required to disclose, permit the inspection, examination, copying or making extracts of, or discuss, any document, information or other matter that (i) constitutes non-financial trade secrets or non-financial proprietary information, or (ii) the disclosure of which to the Lead Lender, or its designated representative, is then prohibited by (A) law or (B) an agreement binding on Borrower that was not entered into by Borrower for the primary purpose of concealing information from the Lead Lender.

(k)Borrower shall, at the request of the Lead Lender, (i) execute, acknowledge, deliver, or record such further reasonable instruments and do such further reasonable acts deemed necessary, desirable, or proper by the Lead Lender to carry out the purposes of the Loan Documents or to protect the liens or security interests under the Loan Documents against the rights or interests of third persons, and (ii) do such further reasonable acts deemed necessary, desirable, or proper by the Lead Lender to comply with the requirements of any agency having jurisdiction over the Lead Lender.

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(l)Borrower agrees to reimburse the Lead Lender for all reasonable costs and expenses of the Lead Lender, including reasonable attorney’s fees, incurred in connection with the making of the Loan, the preparation, execution, delivery, and performance of this Agreement and the other agreements referred to herein and any subsequent amendments thereto or waivers thereof, and the charges for recording fees and legal fees in connection with the Loan transaction, whether or not the Loan transaction contemplated hereunder or under any other Loan Documents is closed; and further Borrower’s obligations hereunder shall survive the delivery of the Loan Documents, the closing of the Loan transaction contemplated hereunder, and the release or termination of the Loan Documents, or any other event whatsoever.

6.Negative Covenants. Until payment in full of the Notes and all other obligations and liabilities of Borrower hereunder, and the performance of all covenants and agreements of Borrower hereunder, Borrower covenants that (unless the Lead Lender shall otherwise consent in writing) Borrower shall not:

(a)endorse, guarantee, or otherwise become liable for the obligations of any person, firm, or corporation except for endorsements of negotiable instruments by Borrower in the ordinary course of business;

(b)mortgage, assign, encumber, incur, assume, or grant a security interest in or lien upon any of the assets of Borrower (collectively, a “Lien”), except for Permitted Liens. For purposes of this Section 6, “Permitted Liens” means (i) Liens for taxes not yet delinquent or Liens for taxes being contested in good faith and by appropriate proceedings for which adequate reserves have been established; (ii) Liens in respect of property or assets imposed by law which were incurred in the ordinary course of business, such as carriers’, warehousemen’s, materialmen’s and mechanics’ Liens and other similar Liens arising in the ordinary course of business which are not delinquent or remain payable without penalty or which are being contested in good faith and by appropriate proceedings; (iii) Liens incurred or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other types of social security, and mechanic’s Liens, carrier’s Liens, and other Liens to secure the performance of tenders, statutory obligations, contract bids, government contracts, performance and return of money bonds, and other similar obligations, incurred in the ordinary course of business, whether pursuant to statutory requirements, common law or consensual arrangements; (iv) Liens in favor of Lenders; (v) Liens upon any equipment acquired or held by Borrower or any of its subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition of such equipment, so long as such Lien extends only to the equipment financed, and any accessions, replacements, substitutions, and proceeds (including insurance proceeds) thereof or thereto; (vi) Liens arising from judgments, decrees, or attachments in circumstances not constituting an Event of Default under Section 6 of this Agreement; (vii) Liens in favor of customs and revenue authorities arising as a matter of l

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aw to secure payments of customs duties in connection with the importation of goods, (viii) Liens which constitute rights of setoff of a customary nature or banker’s liens, whether arising by law or by contract; (ix) Liens on insurance proceeds in favor of insurance companies granted solely as security for financed premiums; (x) leases or subleases and licenses or sublicenses granted in the ordinary course of Borrower’s business; and (xi) Liens in favor of Wells Fargo Bank, National Association or Laurus Master Fund, Ltd.

(c)liquidate, dissolve, or merge or consolidate with, or acquire all or substantially all of the assets of, any other company, firm, or association; or make any other substantial change in Borrower’s capitalization; or engage in any business, other than the businesses currently engaged in by Borrower and any business substantially similar or related thereto;

(d)sell any of its assets, except (i) in the ordinary course of business; (ii) the sale or other disposition of assets no longer used or useful in the conduct of its business; (iii) the sale, lease, assignment, or other transfer of a subsidiary’s assets to the Borrower; or (iv) the sale of Borrower’s assets to any other person, firm, or corporation with the agreement that such assets shall be leased back to Borrower, unless replaced with assets of equal value;

(e)make any material change in the nature of Borrower’s business as carried on as of the date of this Agreement; or

(f)transfer, assign, or encumber Borrower’s rights or obligations under any Loan Documents or the proceeds of the Loan without the prior written consent of the Lead Lender, except for Permitted Liens.

7.Default. An “Event of Default” shall exist if any one or more of the following events (herein collectively called “Events of Default”) shall occur:

(a)Borrower shall fail to pay when due any principal of, or interest on, the Notes or any other fee or payment, due hereunder or under any of the Loan Documents and such payment shall not have been made within ten days of Borrower’s receipt of written notice to Borrower of such failure to pay from the applicable Lenders or the Lead Lender on behalf of all the Lenders;

(b)any representation or warranty made in any of the Loan Documents shall prove to be untrue or inaccurate in any material respect as of the date on which such representation or warranty is made;

(c)material default shall occur in the performance of any of the covenants or agreements of Borrower contained herein in any of the other Loan Documents and such default (other than a monetary default) shall continue for a period of 30 days after the affected Lender or the Lead Lender on behalf of any affected Lender sends Borrower notice thereof;

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(d)Borrower shall (i) apply for or consent to the appointment of a receiver, custodian, trustee, intervenor, or liquidator of it or of all or a substantial part of its assets, (ii) voluntarily become the subject of a bankruptcy, reorganization, or insolvency proceeding or be insolvent or admit in writing that it is unable to pay its debts as they become due, (iii) make a general assignment for the benefit of creditors, (iv) in connection with any voluntary bankruptcy or insolvency, file a petition or answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy or insolvency laws, (v) in connection with any involuntary bankruptcy or insolvency proceedings, file an answer admitting the material allegations of, or consent to, or default in answering, a petition filed against it in any bankruptcy, reorganization or insolvency proceeding, (vi) become the subject of an order for relief under any bankruptcy, reorganization or insolvency pro-ceeding, and such order shall continue unstayed and in effect for a period of 60 days, or (vii) fail to pay any money judgment against it before the expiration of 60 days after such judgment becomes final and no longer subject to appeal;

(e)an order, judgment, or decree shall be entered by any court of competent jurisdiction or other competent authority approving a petition appointing a receiver, custodian, trustee, intervenor, or liquidator of Borrower or of all or substantially all of its assets, and such order, judgment or decree shall continue unstayed and in effect for a period of 60 days; or a complaint or petition shall be filed against Borrower seeking or instituting a bankruptcy, insolvency, reorganization, rehabilitation, or receivership proceeding of Borrower, and such petition or complaint shall not have been dismissed within 60 days;

(f)an event of default shall have occurred with respect to the payment of any material indebtedness of the Borrower, including without limitation the indebtedness evidenced by the Senior Credit Agreement, or in the performance of any of its material obligations, including without limitation any of its material obligations under the Senior Credit Agreement or any of the agreements between the Company and Ronald M. Popeil and any such event of default shall continue for more than any applicable period of grace;

(g)the Lead Lender shall not have received completed and executed consents to release of medical records of Ronald M. Popeil relating to the Life Insurance Policy referred to in the Insurance Agreement within 45 days following the date of the Initial Closing;

(h)the Lead Lender shall not have received a subordination/consent agreement from Ronco Inventions, LLC, Popeil Inventions, Inc., RP Productions, Inc., RMP Family Trust, and Ronald M. Popeil subordinating payment of Borrower’s indebtedness to them to the Loans within 45 days following the Initial Closing; and

(i)the Third Closing shall not have occurred within 75 days following the Initial Closing.

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8.Remedies Upon Event of Default. If an Event of Default shall have occurred and be continuing, then Required Lenders (as defined below), or the Lead Lender at the direction of Required Lenders, may (a) declare the principal of, and all interest then accrued on, the Notes and any other liabilities of Borrower owed to Lenders to be forthwith due and payable, whereupon the same shall forthwith become due and payable without notice, presentment, demand, protest, notice of intention to accelerate, or other notice of any kind, all of which Borrower hereby expressly waives, anything contained herein or in the Note to the contrary notwithstanding, or (b) without notice of default or demand, pursue and enforce any of Lenders’ rights and remedies under the Loan Documents or otherwise provided under or pursuant to any applicable law or agreement. “Required Lenders” means (a) the Lead Lender and (b) Lenders whose aggregate principal balance of Notes exceeds 66-2/3% of the aggregate principal amount of all Notes.

9.Collateral. Repayment of the Notes shall be secured by a collateral assignment of the Life Insurance Policy issued by John Hancock Life Insurance Company on the life of Ronald M. Popeil, as set forth in that certain Insurance Assignment of even date herewith.

10.Miscellaneous.

(a)No Waiver. No failure to exercise, and no delay on the part of a Lender in exercising any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The rights of a Lender hereunder and under the other Loan Documents shall be in addition to all other rights provided by law. No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand.

(b)Notices. All notices or other communications required or permitted under any of the Loan Documents must be given in writing and must be personally delivered, sent by facsimile transmission or mailed by prepaid certified or registered mail, return receipt requested, to the party to whom such notice or communication is directed at the address of such party as follows:

(i)	Borrower:	Ronco Corporation
		21344 Superior Street
		Chatsworth, California 91311
		Attention: Chief Financial Officer
		Telecopy No.: ________________
(ii)	Lead Lender:	Sanders Morris Harris Inc.
		600 Travis Street, Suite 3100
		Houston, Texas 77002
		Attn: Bruce R. McMaken
		Telecopy No.: 713-250-4294
(iii)	All other Lenders:	To the address set forth opposite their name on Schedule 1.

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All notices and communications hereunder will be deemed effectively given the earlier of (i) when received, (ii) when delivered personally, (iii) one business day after being delivered by facsimile (with receipt of appropriate confirmation), (iv) one business day after being deposited with an overnight courier service of recognized standing, or (v) four days after being deposited in the U.S. mail, first class with postage prepaid.

(c)Knowledge. For purposes of this Agreement, “Borrower’s knowledge” refers to the knowledge, information, and belief of Borrower’s Chief Executive Officer, President, or Chief Financial Officer after making inquiry of their respective direct reports or other appropriate officers or employees of Borrower reasonably likely to have knowledge of the matter to which such reference relates.

(d)Governing Law. This Agreement and the other Loan Documents are being executed and delivered, and are intended to be performed, in the State of Texas, and the substantive laws of Texas shall govern the validity, construction, enforcement and interpretation of this Agreement and all other Loan Documents, except to the extent: (i) otherwise specified therein; or (ii) federal laws governing maximum interest rates shall provide for rates of interest higher than those permitted under the laws of the State of Texas.

(e)Invalid Provisions. If any provision of this Agreement is held to be illegal, invalid or unenforceable under present or future laws effective during the term of this Agreement, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Agreement, and the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Agreement.

(f)Entirety and Amendments. The Loan Documents embody the entire agreement between the parties and supersede all prior agreements and understandings, if any, relating to the subject matter hereof and thereof, and no waiver, consent, release, modification, or amendment of or supplement to this Agreement or the other Loan Documents shall be valid or effective against any party hereto unless the same is in writing and signed by (i) if such party is Borrower, by Borrower, (ii) if such party is \the Lead Lender, by such party, and (iii) if such party is a Lender, by such Lender or by the Lead Lender on behalf of Lenders with the written consent of Required Lenders. Notwithstanding the foregoing or anything to the contrary herein, the Lead Lender shall not, without the prior consent of each individual Lender, execute and deliver on behalf of such Lender any waiver or amendment which would: (A) waive any of the conditions specified in Section 2(a)(ii), (B) increase the maximum amount which such Lender is committed hereunder to lend, (C) reduce any fees payable to such Lender hereunder, or the principal of, or interest on, such Lender’s Note, (D) extend the maturity date or postpone any date fixed for any payment of any such fees, principal or interest on such Lender’s Note, (E) amend the definition herein of Required Lenders (F) release Borrower from its obligation to pay such Lender’s Note, or (G) amend this Section 10(f). Notwithstanding the foregoing, Rights Lenders purchasing Notes in the Third Closing may become parties to this Agreement in accordance with Section 1(f) without any amendment of this Agreement pursuant to this paragraph or any consent or approval of the Lead Lender.

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(g)Headings. Paragraph and section headings are for convenience of reference only and shall in no way affect the interpretation of this Agreement.

(h)Construction and Conflicts. The provisions of this Agreement shall be in addition to those of the Notes and the other Loan Documents. Nothing herein contained shall prevent the Required Lenders from enforcing the Notes and the Loan Documents in accordance with their respective terms. To the extent of any conflict or contradiction between the terms of this Agreement and the terms of such Lender’s Note or the other Loan Documents or any other document executed in connection herewith, the terms of this Agreement shall control.

(i)Financial Terms. As used in this Agreement, all financial and accounting terms not otherwise defined herein shall be defined and calculated in accordance with generally accepted accounting principles consistently applied.

(j)Expenses of Lender. Borrower will, on demand, reimburse the Lead Lender for all of its reasonable expenses except as otherwise provided herein, including the reasonable fees and expenses of legal counsel for the Lead Lender, incurred by Lead Lender in connection with the preparation, administration, amendment, modification, or enforcement of this Agreement, the Note, and the Loan Documents and the collection or the attempted collection of the Note.

11.Confidentiality. Each Lender acknowledges that the information received by them pursuant to this Agreement is confidential and for its use only, and it will not use such confidential information in violation of the Securities Act or the Securities Exchange Act of 1934, as amended, or reproduce, disclose, or disseminate such information to any other person (other than its employees or agents having a need to know the contents of such information, and its attorneys), except in connection with the exercise of rights under this Agreement, unless Borrower has made such information available to the public generally.

12.Right to Assign. A Lender may assign the Note issued to such Lender under the terms of this Agreement pursuant to the terms of Section 11 of the Note, provided that prior to such assignment the assignee agrees in writing to be bound by the terms and conditions of this Agreement and the other Loan Documents. In case of such assignment, Borrower shall accord full recognition thereto and hereby agrees that all rights and remedies of such Lender in connection with the Note so assigned shall be enforceable against Borrower by the assignee thereof. Other than as set forth in the preceding sentence, Lender shall have no right to assign all or any portion of its rights, interests, or obligations under this Agreement without the prior written consent of the Borrower. Borrower shall have no right to assign all or any portion of its rights, interests, or obligations under this Agreement without the prior written consent of the Lead Lender. Notwithstanding the foregoing, the Notes may only be assigned pursuant to this Section 12 following the Third Closing and such Notes may not be assigned to a competitor of Borrower without the prior written consent of Borrower.

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13.Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement.

14.NO ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT AND THE LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

If a Lender agrees to the foregoing, such Lender should execute this Agreement in the space indicated below.

BORROWER

RONCO CORPORATION

By:  /s/ Richard F. Allen, Sr.                            

Name:   Richard F. Allen, Sr.

Title:     President and Chief Executive Officer

ACCEPTED:

LENDER

SANDERS MORRIS HARRIS INC.

By:_/s/ Ben T. Morris                                              

Name: Ben T. Morris

Title: Chief Executive Officer

____________________________________

____________________________________      

List of Loan Documents

1.   Letter Loan Agreement

2.   Promissory Note(s)

3.   Security Agreement

4.   Insurance Assignment

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SCHEDULE 1

Lenders

Name and Address	Loan
Sanders Morris Harris Inc.	$1,500,000 in the Initial Closing
600 Travis, Suite 3100	$1,500,000 in the Second Closing
Houston, Texas 77002

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SCHEDULE 2

Use of Proceeds

[Please provide schedule]

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EX-10.4

ASSIGNMENT OF LIFE INSURANCE POLICY

THIS ASSIGNMENT OF LIFE INSURANCE POLICY (“Assignment”) is made as of June 9, 2006, by Ronco Corporation, a Delaware corporation (hereinafter called “Assignor), whose address is 21344 Superior Street, Chatsworth, California 91311 in favor of Sanders Morris Harris Inc., a Texas corporation (“Lead Lender”), individually and on behalf of the Lenders (“Lenders”) parties to the Letter Loan Agreement dated as of the date hereof, among Assignor and such Lenders (the “Loan Agreement”), whose address is 600 Travis Street, Suite 3100, Houston, Texas 77002.

In consideration of certain financial accommodations extended by Lenders to Assignor, Assignor does hereby assign, transfer, and set over to Lenders all of Assignor’s right, title and interest in and to Policy No. 81 070 567, issued by John Hancock Life Insurance Company (herein called the “Insurer”) and any supplementary contracts issued in connection therewith (said policy and contracts being herein called the “Policy”), upon the life of Ronald M. Popeil, and all claims, options, privileges, rights, title, and interest therein and thereunder (except as provided in Paragraph 2 hereof), subject to all the terms and conditions of the Policy and to all superior liens, if any, which the Insurer, Wells Fargo Bank, National Association, Prestige Capital Corporation, Laurus Master Fund, Ltd. or the holders of Permitted Liens (as defined in the Loan Agreement) (collectively, the “Lienholders”) may have against the Policy. Assignor by this instrument agrees, and Lenders by the acceptance of this Assignment agree, to the conditions and provisions herein set forth.

1.Subject to the terms and conditions of the Policy, it is expressly agreed that, without detracting from the generality of the foregoing, the following specific rights are included in this Assignment and pass by virtue hereof:

(a)The sole right to collect from the Insurer the net proceeds of the Policy when it becomes a claim by death or maturity;

(b)The sole right to surrender the Policy and receive the surrender value thereof at any time provided by the terms of the Policy and at such other times as the Insurer may allow;

(c)The sole right to obtain one or more loans or advances on the Policy, either from the Insurer or, at any time, from other persons, and to pledge or assign the Policy as security for such loans or advances;

(d)The sole right to collect and receive all distributions or shares of surplus, dividend deposits or additions to the Policy now or hereafter made or apportioned thereto, and to exercise any and all options contained in the Policy with respect thereto; provided, that unless and until the Lead Lender shall notify the Insurer in writing to the contrary, the distributions or shares of surplus, dividend deposits and additions shall continue on the plan in force at the time of this Assignment;

(e)The sole right to exercise all nonforfeiture rights permitted by the terms of the Policy or allowed by the Insurer and to receive all benefits and advantages derived therefrom;

(f)The sole right to designate and change the beneficiary of the Policy;

(g)The sole right to elect any optional mode of settlement permitted by the Policy or allowed by the Insurer;

(h)The sole right to return the Policy for cancellation or redemption;

(i)The sole right to make deposits for the purpose of paying future premiums on the Policy;

(j)The sole right to change the Policy to a plan of whole life or endowment insurance; and

(k)The sole right to transfer, assign, or otherwise dispose of the Policy.

2.It is expressly agreed that the following specific rights, so long as the Policy has not been surrendered, are reserved and excluded from this Assignment and do not pass by virtue hereof:

(a)The right to collect from the Insurer any disability benefit payable in cash that does not reduce the amount of insurance, so long as the Policy has not been surrendered; and

(b)The right to elect any optional mode of settlement permitted by the Policy or allowed by the Insurer; but the reservation of these rights shall in no way impair the right of Lenders to surrender the Policy completely with all its incidents or impair any other right of Lenders hereunder, and any designation or change of beneficiary or election of a mode of settlement shall be made subject to this Assignment and to the rights of Lenders hereunder.

3.This Assignment is made and the Policy is to be held as collateral security for the outstanding principal amount of and all accrued and unpaid interest on the promissory notes executed by Assignor and payable to the order of Lenders under the Loan Agreement; and (ii) all obligations of Assignor to Lenders under any documents evidencing, securing, governing and/or pertaining to all or any part of the indebtedness described in (i) above (the “Indebtedness”).

4.Assignor warrants and represents to Lenders, their successors and assigns that:

(a)the terms and condition of the Policy are fully set out and disclosed in the copy thereof, which has been delivered by Assignor to Lenders;

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(b)the Policy has been accepted by John Hancock Life Insurance Company, is in full force and effect, and has not been amended, altered or revoked in any manner; and

(c)Assignor has not executed any prior assignment or pledge of its rights under the Policy, except to the Lienholders, and holds full and complete power and authority to transfer, pledge and assign its rights, as ownerandbeneficiary under the Policy, to Lenders free and clear of any rights of any third party whatsoever, other than the Lienholders.

5.Assignor hereby covenants and agrees with Lenders, their successors and assigns, that Assignor shall not alter, amend, modify, endorse, borrow funds under, or otherwise affect the Policy without the prior written consent of the Lead Lender, shall keep the Policy in full force and effect, provide for the prompt and timely payment of all premiums and other charges required to be made to keep said Policy in full force and effect, and, at the written direction of the Lead Lender shall do or cause to be done all proceedings, acts and things necessary or proper to effect the performance and recovery under the Policy at its own cost and expense.

6.The Lenders covenant and agree with Assignor as follows:

(a)That any proceeds of the Policy received by the Lenders from the Insurer shall be applied by Lenders to pay the then existing Indebtedness and any remaining proceeds of the Policy after the payment of such Indebtedness shall be promptly paid by Lenders to Assignor;

(b)That Lenders shall not exercise any rights under the Policy other than (i) the right to collect from the Insurer the net proceeds of the Policy when it becomes a claim by death or maturity, (ii) the right to collect and receive all distributions or shares of surplus, dividend deposits, or additions to the Policy, and (iii) the right to make deposits for the purpose of paying future premiums on the Policy, until there has been an Event of Default (as defined in the Loan Agreement) that shall have occurred and be continuing; and

(c)If the original Policy is in possession of Lenders, Lenders will upon request forward without unreasonable delay to the Insurer the Policy for endorsement of any designation or change of beneficiary or any election of an optional mode of settlement.

7.The Insurer is hereby authorized to recognize Lenders’ claims to rights hereunder without investigating the reason for any action taken by Lenders, or the validity or the amount of the Indebtedness or the existence of any default therein, or the giving of any notice under Paragraph 6(b) above or otherwise, or the application to be made by Lenders of any amounts to be paid to Lenders. The sole signature of the Lead Lender shall be sufficient for the exercise of any rights under the Policy assigned hereby and the sole receipt of the Lead Lender for any sums received shall be a full discharge and release therefor to the Insurer. Checks for all or any part of the sums payable under the Policy and assigned herein shall be drawn to the exclusive order of the Lead Lender if, when, and in such amounts as may be, requested by Lenders.

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8.The Assignor agrees to pay when due and before becoming delinquent, all premiums necessary to keep the Policy in full force and effect and the amounts due on any loans or advances on the Policy. The Assignor agrees that it will not exercise the right to obtain policy loans from the Insured. The Lenders shall be under no obligation to pay any premium, or the principal of or interest on any loans or advances on the Policy obtained by Assignor, or any other charges on the Policy, but any such amounts so paid by Lenders from their own funds shall become a part of the Indebtedness hereby secured, shall be due immediately, and shall draw interest at the highest rate permitted by applicable law.

9.Lenders may take or release other security, may release any party primarily or secondarily liable for any of the Indebtedness, may grant extensions, renewals or indulgences with respect to the Indebtedness, or may apply to the Indebtedness in such order Lenders shall determine the proceeds of the Policy hereby assigned or any amount received on account of the Policy by the exercise of any right permitted under this Assignment, without resorting or regard to other security.

10.Assignor declares, represents, and warrants that no insolvency proceedings or proceedings in bankruptcy are pending against it, that its Policy is not subject to any assignment for the benefit of creditors (other than the Lienholders), that the Policy is in full force and effect, that Assignor has made no material representation or omission in the application for the Policy, that Assignor has no current knowledge of any event which might cause the Policy to be unenforceable and that there are no loans outstanding from the Policy.

11.In the event of any conflict between the provisions of this Assignment and provisions of the Notes (as defined in the Loan Agreement), the Loan Agreement, or other evidence of any liability, with respect to the Policy or rights of collateral security therein, the provisions of this Assignment shall prevail.

12.Upon payment in full of all of the Indebtedness, this Assignment shall be of no further force and effect.

13.THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS.

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IN WITNESS WHEREOF, the undersigned executes and delivers this Assignment as of the first day written above.

ASSIGNOR:	LEAD LENDER:
Ronco Corporation	Sanders Morris Harris Inc.
By: /s/ Richard F. Allen, Sr.	By: /s/ Ben T. Morris
Name:  Richard F. Allen, Sr.	Name:  Ben T. Morris
Title:    President and Chief Executive Officer	Title:    Chief Executive Officer

5

THE STATE OF CALIFORNIA  §

                                                         §

COUNTY OF ___________       §

This instrument was acknowledged before me on the ___ day of ________________, 2006, by ____________________, ________________________ of Ronco Corporation, a Delaware corporation, on behalf of said corporation.

___________________________________

Notary Public in and for the State of Texas]

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THE STATE OF TEXAS     §

                                                §

COUNTY OF HARRIS        §

This instrument was acknowledged before me on the 9 day of June, 2006, by Ben T. Morris, Chief Executive Officer of Sanders Morris Harris, Inc., a Texas corporation, on behalf of said association.

_/s/Susan Eva Bailey___________________

Notary Public in and for the State of Texas

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ACKNOWLEDGMENT OF ASSIGNMENT BY INSURER

__________________________ hereby acknowledges receipt of a duplicate of this Assignment of Life Insurance Policy Number 81070567 and waives all prohibitions against assignment, if any, contained in the above-described policy and consents to the assignment of all right, title, and interest by the Assignor in that policy to the full extent described in the Assignment.

EXECUTED on this the _____ day of _____________________, 2006.

John Hancock Life Insurance Company

By:_______________________________

Name:_____________________________

Title:______________________________

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EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Paul Kabashima certify that:

1. I have reviewed this annual report on Form 10-K of Ronco Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: OctoberXX, 2006.

/s/ Paul Kabashima

Paul Kabashima

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Ronald C Stone, certify that:

1. I have reviewed this annual report on Form 10-K of Ronco Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: October XX, 2006.

/s/ Ronald C Stone

Ronald C Stone

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Ronco Corporation (the “Company”) for period from July 1, 2005 to June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Kabashima, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October XX, 2006

/s/ Paul Kabashima

Paul Kabashima

Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K of Ronco Corporation (the “Company”) for the period from July 1, 2005 to June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald C Stone Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

October XX, 2006

/s/ Ronald C Stone

Ronald C Stone

Chief Financial Officer