The following table sets forth our capitalization as of September 30, 2006 and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and their accompanying notes included elsewhere in this prospectus.

Notes payable (including current maturities)	$	15,062,779
Stockholders’ Equity
Series A Convertible Preferred stock, $.00001 par value; 20,000,000 shares authorized; 15,757,779 shares issued and outstanding at September 30, 2006 (1)		158
Common stock, $.00001 par value, 500,000,000 shares authorized; 2,591,605 shares issued and outstanding at September 30, 2006		26
Additional paid-in capital		54,899,003
Accumulated deficit		(54,847,710	)
Total stockholders’ equity	$	51,477
Total capitalization	$	15,114,256

(1)	Does not include four shares of Series A Convertible Preferred Stock that were paid for but that were not issued as of the date of this prospectus.

SELECTED FINANCIAL DATA

The merger on June 29, 2005 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 statement. Pro forma 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 a former independent accountant. You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated and combined financial statements and related notes, which are included elsewhere in this prospectus. Historical results are not necessarily indicative of the results to be expected in the future.

	SUCCESSOR			SUCCESSOR			PREDECESSOR															SUCCESSOR			SUCCESSOR
	Year ended June 30,			One Day for June 30, 2005 (Date of			Nine months ended June 29,			Nine months ended September 30,			Year ended December 31,									Three months ended September 30,			Three months ended September 30,
	2006			Acquisition)			2005			2004			2003			2002			2001			2006			2005
Income Statement Data:							*dollars in thousands, except per share data and percentag*es												(unaudited)			(unaudited)			(unaudited)
Net Sales	$	58,724		$	—		$	68,985		$	63,245		$	93,500		$	98,362		$	105,420		$	9,609		$	13,089
Cost of goods sold		20,009			—			16,844			16,842			29,274			36,153			33,517			(5,057	)		(4,441	)
Gross profit	$	38,715		$	—		$	52,141		$	46,403		$	64,226		$	62,209		$	71,903		$	4,552		$	8,648
Gross margin		66	%		—			76	%		73	%		69	%		63	%		68	%		47	%		66	%
Selling, general and administrative		56,969			766			50,446			53,217			67,653			71,937			77,825			8,807			13,567
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	)		($4,255	)		($4,919	)
Operating exp. (as % of revenue)		139	%		N/A			73	%		85	%		72	%		73	%		74	%		92	%		104	%
Interest and other expense
(income)		1,335			—			2,833			120			(386	)		(254	)		(443	)		(358	)		(301	)
Pretax loss		($44,110	)		($766	)		($1,138	)		($7,705	)		($3,041	)		($9,474	)		($5,479	)		($4,613	)		($5,220	)
Income taxes (benefit)		310			(310	)		—			—			—			—			—			—			(2,088	)
Net loss		($44,420	)		($456	)		($1,138	)		($7,705	)		($3,041	)		($9,474	)		($5,479	)		($4,613	)		($3,132	)
Preferred stock dividends		4,636			—			—			—			—			—			—			711			625
Net loss attributable to common shareholders		($49,056	)		($456	)		($1,138	)		($7,705	)		($3,041	)		($9,474	)		($5,479	)		($5,324	)		($3,757	)
Net loss per share		($23.45	)		($0.22	)		N/A			N/A			N/A			N/A			N/A			($2.44	)		($1.80	)
Pro forma net loss per share (unaudited) (1)		N/A			N/A			($0.54	)		($3.68	)		(1.45	)		(4.53	)		(2.62	)		N/A			N/A

Balance Sheet Data (dollars in thousands):		Successor								Predecessor
		September 30, 2006			June 30, 2006			June 30, 2005		September 30, 2004
		(unaudited)
Working Capital	$	(6,120	)	$	(12,867	)	$	8,203	$	(28	)
Total assets		28,640			28,239			63,762		24,404
Long-term liabilities		10,271			214			10,282		40,392
Stockholders’ and members’ equity (deficiency)		51			3,865			49,943		(36,390	)

Notes to Summary Financial Data

Note 1: 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.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our results of operations and financial condition should be read in conjunction with our and the predecessor entities’ financial statements and the notes to those financial statements, which are contained elsewhere in this prospectus. This discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the headings “Risks of Investing in Our Shares” and “Forward-Looking Statements.”

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.

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 prospectus, 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 and did not conduct any business on such day. Therefore, our financial statements for the one day of 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.

We also did not assume certain contracts of the predecessor entities. On April 23, 2002, the predecessor entities entered into a product development agreement with Alan Backus, a third party who co-invented the Showtime™ Rotisserie products, as well as other products. Pursuant to this agreement, as such agreement has been interpreted by the parties, the predecessor entities paid Mr. Backus 25% of the net profits, or were reimbursed by Mr. Backus for 25% of the net losses, from these products. On January 2, 1999, the predecessor entities also entered into an asset purchase agreement and a patent licensing agreement with AdVantage Partners LLC, an unrelated company that owned the patents on certain of the Ronco products. Pursuant to these agreements, as amended, the predecessor entities paid license fees that ranged from $6 to $17 per unit sold, and in the case of cooking implement patents, a fee of $150,000 per year. These agreements were scheduled to expire in 2007, but were terminated on August 31, 2004 when the seller purchased the related patents from AdVantage Partners LLC. As of December 31, 2004, the predecessor entities owed fees under these two agreements in the aggregate amount of approximately $7.8 million. We did not assume these obligations when we purchased the Ronco business.

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.

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 decrease as a percentage of total sales due to the changes in our management team, including the termination of the employment of Mr. Richard Allen, our former Chief Executive Officer, and Mr. Evan Warshawsky, our former Chief Financial Officer, as well as reduced amortization expense of approximately $4.5 million per annum associated with the impairment of intangibles at June 30, 2006.

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 the Prestige factoring agreement and our line of credit with Wells Fargo Bank, which was fully repaid and terminated in August 2006.

Income Taxes

Income tax expense 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. To the extent we believe that recoverability of our deferred tax assets is not likely, we are required to establish a valuation allowance. Based on our history of operating losses, we do not have a sufficient basis to project that future income will be sufficient to realize the deferred tax assets during the period in which our net operating loss carryforwards remain available. We have established a valuation allowance against the full value of our deferred tax assets due to the uncertainty surrounding the realization of these assets. At such time as we determine that the recoverability of deferred tax assets becomes more likely realizable than not, we will reduce the valuation allowance against our deferred tax assets. The effect of a change in judgment concerning the realizability of deferred tax assets would be included in income from ongoing operations.

The predecessor entities were incorporated as pass-through entities and, therefore, did not record income tax expense for federal or state purposes.

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-through” 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. Under the factoring agreement, we were permitted 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) upon collection of the account. We accounted for this financing as a sale of receivables in accordance with SFAS 140. In October 2006, we repaid all amounts due under these financing arrangements and terminated them. Due to the impact of all of the changes in our business, 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. Similarly, our gross margin was 47% as compared with 66% for the three months ended September 30, 2006 and September 30, 2005, respectively. Our gross margins declined in these periods primarily because we increased sales through wholesale accounts from 22% to 38% of our total net sales for the year ended June 30, 2006 and from 32% to 61% of our total net sales for the three months ended September 30, 2006. 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 ended June 30, 2006 or the three months ended September 30, 2006; however, we believe that the wholesale business has proved to be a successful one for us.

Recent Accounting Pronouncements

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections," that applies to all voluntary changes in accounting principle. This statement requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, this statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. SFAS No. 154 will be effective for us for the fiscal year ended June 30, 2007. We do not anticipate that the adoption of SFAS No. 154 will have an impact on our overall results of operations or financial position.

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. We do not anticipate that the adoption of SFAS No. 155 will have an impact on our 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. We do not anticipate that the adoption of SFAS No. 156 will have an impact on our 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. We do not plan to adopt early and we are 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. We are currently evaluating the effect, if any, of SFAS 157 on our financial statements.

Critical Accounting Policies

Included in the footnotes to the consolidated and combined financial statements in this prospectus 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.

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 majority of our bad debt allowance and our bad debts arises from the direct response business and relates to customers who purchase our products in multiple installments and fail to make all of the required payments. Before our acquisition of the Ronco business, we determined our allowance for doubtful accounts based solely on historical experience regarding collection of bad debts.

The variation in our allowance for bad debts since 2002 relates to the application of the criteria we apply in establishing this allowance, including changes in our gross accounts receivable and the age of our accounts receivable. Because over 90% of our allowance relates to our direct response business, which represents a very large number of small purchases from individual customers, we are unable to determine the reason for the variation in the amount of past due direct response accounts. The variation in our allowance also exists because of the practice of the predecessor entities of writing off portions of the allowance against accounts receivable less than annually. As a result, for years in which no write-offs occurred, the allowance increased substantially, and then declined substantially when write-offs ultimately were taken.

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 related to our core products which represents more than 90% of our revenues have not resulted in the market value of the inventory falling below the cost of the inventory other than inventory being obsolete. 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 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, 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. As of June 30, 2006, the impact of our impairment testing of goodwill and intangibles on our financial position and results of operations 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.

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.

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

We acquired the Ronco business from the predecessor entities on the last day of our fiscal year, June 30, 2005. 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. Accordingly, since 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. Therefore, for comparative purposes, we show the June 30, 2006 results relative to the results of the unaudited combined results of the predecessor company for the year ended June 30, 2005. Also, for comparative purposes, we compare the results of operations of the predecessor company for the nine months ended June 29, 2005 and September 30, 2004 to the unaudited results of operations of the predecessor company for nine months ended June 30, 2004 and September 30, 2003. We also compare the results of operations for the three months ended September 30, 2006 to the three months ended September 30, 2005.

	SUCCESSOR			SUCCESSOR			PREDECESSOR
	Year ended June 30,			One Day for June 30, 2005 (Date of			Year ended June 30,			Nine months ended June 29,			Nine months ended June 30,			Nine months ended September 30,			Nine months ended September 30,
	2006			Acquisition)			2005			2005			2004			2004			2003
							(unaudited)						(unaudited)						(unaudited)
										*(dollars in millions, except per share data and percentages)*
Income Statement Data:
Net Sales	$	58.7		$	—		$	90.1		$	68.9		$	92.8		$	63.2		$	42.8
Gross profit	$	38.7		$	—		$	68.7		$	52.1		$	65.5		$	46.4		$	28.6
Gross margin		66	%		—			76	%		76	%		71	%		73	%		67	%
Selling, general and administrative		57.0			0.8			68.3			50.4			71.7			53.2			31.2
Impairment loss on goodwill, intangibles and equipment		24.5			—			—			—			—			0.8			—
Operating (loss) income		($42.8	)		($0.8	)	$	0.4		$	1.7			($6.3	)		($7.6	)		($3.3	)
Interest and other expense (income)		1.3			—			2.8			2.8			—			0.1			(0.2	)

Income taxes (benefit)		0.3			(0.3	)		—			—			—			—			—
Net loss		($44.4	)		($0.5	)		($2.4	)		($1.1	)		($6.3	)		($7.7	)		($3.1	)

	SUCCESSOR			SUCCESSOR
	Three Months Ended September 30,			Three Months Ended September 30,
	2006			2005
	(unaudited)			(unaudited)
	(dollars in millions, except per share data and percentages)
Income Statement Data:
Net Sales	$	9.6		$	13.1
Gross profit	$	4.6		$	8.6
Gross margin		47	%		66	%
Selling, general and administrative		8.8			13.6
Operating loss		($4.3	)		($4.9	)
Interest and other expense		0.4			0.3

Income tax benefit		—			(2.1	)
Net loss		($4.6	)		($3.1	)

Ronco Corporation - Three Months Ended September 30, 2006 Compared with Three Months Ended September 30, 2005

Net Sales

Net sales for the three months ended September 30, 2006 was $9.6 million, compared with $13.1 million for the three months ended September 30, 2005. The decline of $3.5 million, or 27%, in net sales for the three months ended September 30, 2006 is primarily due to a decline in direct response sales of our rotisserie ovens by approximately $1.7 million, a decline in direct response sales of our cutlery product line by $3.2 million and a decline of approximately $.2 million in list sales and commissions on advertising. The decrease in direct response sales was partially offset by an increase in our wholesale sales by approximately $1.6 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 $3.6 million for the three months ended September 30, 2006, compared with direct response sales of $8.6 million for the three months ended September 30, 2005. Our sales through wholesale accounts increased to $5.9 million for the three months ended September 30, 2006, compared with wholesale sales of $4.3 million for the three months ended September 30, 2005. We expect the direct response trend to reverse for our rotisserie and cutlery lines as we introduce new offers on older infomercials, 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 three months ended September 30, 2006 was $4.6 million as compared with $8.6 million for the three months ended September 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. The increase in cost of sales was due to the increase in wholesale sales relative to direct response sales, because the wholesale sales have a higher cost of sales. Our cost of sales 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.

Selling, general and administrative expenses

Selling, general and administrative expenses for the three months ended September 30, 2006 were $8.8 million compared with $13.6 million for the three months ended September 30, 2005. This decrease of approximately $4.8 million, or 35%, was primarily due to a $3.8 million reduction in advertising expenses associated with the decreased effectiveness of infomercials over time, a $0.8 million reduction in credit card fees and shipping and handling expense due to the reduced sales, professional fees and salaries and related expenses decreased by approximately $0.4 million as we reduced our headcount and also spent less on legal and consulting expenses primarily to conserve our cash. In addition, for the three months ended September 30, 2006, our amortization expense of intangible assets declined by approximately $0.8 million primarily because we took an impairment charge of approximately $24 million as of June 30, 2006. This was off set by an increase of approximately $0.5 million in amortization of stock compensation and approximately $0.5 million in other selling, general and administrative expenses, such as rent, insurance and repairs and maintenance.

As a percentage of revenues, selling, general and administrative expenses decreased from 104% for the three months ended September 30, 2005 to 91% for the three months ended September 30, 2006. This decrease for the period was primarily due to a decrease in salaries and professional fees, deferred compensation and amortization of intangible assets, with a reduction in advertising expense, credit card fees and shipping and handling expense.

Operating loss

Our operating loss for the three months ended September 30, 2006 was $4.3 million, compared with a loss of $4.9 million for the three months ended September 30, 2005. The decrease in our operating loss of approximately $0.6 million for the three months ended September 30, 2006 compared to the three months ended September 30, 2005 are primarily attributable to reduced selling, general and administrative expenses that was partially offset by a decline in gross profit.

Net interest expense

Our net interest expense for the three months ended September 30, 2006 was $0.4 million as compared to $0.3 million during the three months ended September 30, 2005. The interest expense relates to interest on the sellers note and borrowings under our factor agreement. The slight increase in interest expense is due to higher loan balances.

Income Tax

For the three months ended September 30, 2005, we recorded income tax benefit of $2.1 million. For the three months ended September 30, 2006 we provided a full valuation allowance to offset the benefit since we do not expect to realize our net operating losses in the future.

Net loss

Our net loss for the three months ended September 30, 2006 was $4.6 million, compared with a loss of $3.1 million for the comparable three months ended September 30, 2005. The increase in our net loss of approximately $1.5 million for the three months ended September 30, 2006 is due to the decrease in gross profit partially offset by a decrease in operating expenses for the reasons described above. In addition, we did not record any tax benefit in 2006 as compared to 2005 when we recognized $2.1 million in tax benefit.

Ronco Corporation - Year Ended June 30, 2006 Compared With Year Ended June 30, 2005 (unaudited)

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.

Selling, general and administrative expenses

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.

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.

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 predecessor 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 predecessor entities in exchange for amounts loaned to finance the purchase of patents on products that the predecessor entities sold.

Income Tax

We 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.

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 CFO and the stock issued to our CFO in connection with the acquisition of the predecessor entities, that constituted an expense of $300,919.

Predecessor Entities - Nine Months Ended June 29, 2005 Compared With 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.

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 With 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

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.

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 and the three months ended September 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 September 30, 2006, our total working capital deficit was $6.1 million. Our September 30, 2006, negative working capital included the current portion of our debt to the predecessor entities of $4.9 million and accounts payable of approximately $10.3 million. 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 predecessor entities and Sanders Morris Harris totaling $14.5 million.

On October 6, 2006, we signed a loan agreement with Crossroads Financial on a $4 million credit facility. On October 18, 2006, we secured a $4 million term loan and a credit line of up to $11 million from Laurus Master Fund Ltd. (“Laurus”). We also received an additional $1.5 million under our loan letter agreement with Sanders Morris Harris, which was amended concurrently with the consummation of the Laurus transaction on October 18, 2006. We used a portion of the proceeds available under the Laurus loan and credit line to repay amounts owed to certain of our lenders, including all amounts owed to Crossroads as well as amounts owed under our factoring agreement. Also, on October 18, 2006, we used $1,250,000 of the loan proceeds to reduce our debt to Mr. Popeil and the predecessor entities. 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 Laurus, we may need additional financing in the near future and 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. We were sued by our vendor, Human Electronics, and were contacted by the counsel of the Korean Export Insurance Company demanding payment on the on the funds they advance on behalf of Human Electronics. We are also required to increase our cash reserves to support its credit card processing. These issues make the future funding of our Company uncertain.

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 Laurus, we may need additional financing in the near future and 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.

Sources and Uses of Cash

The following tables sets forth cash flow for the periods presented:

	Successor			Predecessor			Successor			Predecessor			Predecessor			Predecessor
	Year ended			Year ended			Period for One Day (Date of Acquisition)			Nine months ended			Nine months ended			Year ended
	June 30, 2006			June 30, 2005			June 30, 2005			June 29, 2005			September 30, 2004			December 31, 2003
Net cash (used in) operating activities		(1,032,920	)		(41,862,660	)		(675,538	)		(2,383,605	)		(41,227,132	)		659,443

Net cash provided by (used in) investing activities		(12,802	)		493,761			(44,934,093	)		146,481			256,919			(554,842	)

Net cash provided by (used in) financing activities		636,509			39,282,801			46,443,989			12,339			39,068,564			(363,400	)

Net increase (decrease) in cash		(409,213	)		(2,086,098	)		834,358			(2,224,785	)		(1,901,649	)		(258,799	)
Cash and cash equivalents, beginning of period		834,358			2,920,456			-			2,421,984			4,323,633			4,582,432

Cash and cash equivalents, end of period		425,145			834,358			834,358			197,199			2,421,984			4,323,633

	Successor			Successor
	For the three months ended
	September 30, 2006			September 30, 2005
Net cash used in operating activities		(495,459	)		(534,086	)

Net cash provided by (used in) investing activities		488,902			(661,603	)

Net cash provided by (used in) financing activities		(392,170	)		561,842

Net decrease in cash		(398,727	)		(633,847	)
Cash and cash equivalents, beginning of period		425,145			834,358

Cash and cash equivalents, end of period		26,418			200,511

Cash Flows - Three Months ended September 30, 2006 Compared with Three Months ended September 30, 2005

For the three months ended September 30, 2006, we used approximately $0.5 million in cash to fund our operations. This was primarily due to our net loss of approximately $4.6 million, increase in due from factor of approximately $0.8 million, increase in inventory of $1.2 million and an increase in prepaid and other current assets of $0.2 million. This was partially offset by an increase in accounts payable and accrued expenses of $3.4 million and an increase in deferred income of $0.7 million. Accounts payable and accrued expenses increased due to an extension in the payment terms from our factories in China and generally paying our other vendors later. Our current deferred income balance represents cash we collected for products that we had not shipped by September 30, 2006. We recorded depreciation and amortization expense of $0.8 million, bad debt of $0.2 million, for amortization of deferred compensation expense of $0.8 million and non-cash interest expense of $0.3 million on notes to the Seller Entities for the three months ended September 30, 2006.

For the three months ended September 30, 2005 we used approximately $0.5 million to fund our operations. This amount was used to fund operating losses of $3.1 million, purchase inventory of $8.1 million and finance accounts receivable of $1.4 million. This was partially offset by an increase in accounts payable and accrued liabilities of $11.2 million and depreciation and amortization of $1.6 million. Our inventory increased during our first quarter to meet the increased sales demands typical during our second quarter. In addition, our accounts receivable increased because our wholesale sales, for which we incur accounts receivable, increased by 17% for the three months ended September 30, 2005 as compared to the same period in 2004. We also received an income tax benefit during this quarter. Accounts payable rose during the first quarter due to our build up of inventory during the three months ended September 30, 2005. Depreciation and amortization also increased due to the amortization of intangible assets acquired in connection with our purchase of the Ronco business in June 2005.

For the three months ended September 30, 2006, we generated approximately $0.5 million in investing activities. We paid approximately $0.1 million to purchase equipment, including software, and received approximately $0.6 million from the sale of short term investments.

For the three months ended September 30, 2005, we used approximately $0.7 million for investing activities. We paid approximately $0.2 million to purchase equipment, including software, and used $0.5 million for the purchase of short term investments set aside as a credit card reserve for Wells Fargo Merchant Services, our credit card processor.

For the three months ended September 30, 2006, we used approximately $0.4 million from our financing activities, primarily to pay off our Wells Fargo Line of credit.

For the three months ended September 30, 2005, we generated approximately $0.6 million from financing activities. We received net proceeds of $1.2 million from a line of credit, which we used for working capital, and $45,000 from a long term loan, which we used to acquire a vehicle. During the quarter ended September 30, 2005, we also repaid approximately $717,000 on notes payable to the Seller Entities in connection with our acquisition of the Ronco business. We did not obtain any loans from the Seller Entities or their affiliates during the quarter ended September 30, 2005.

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.

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 Months ended June 30, 2005 Compared With Nine Months ended September 30, 2004

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 with 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.

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 and determined that the actual net value is lower than the estimated value specified in the purchase agreement. Under the terms of an agreement with Mr. Popeil that we signed in connection with Laurus loan transaction we completed in October 2006, Mr. Popeil agreed and confirmed that the original aggregate principal amount of the Seller Entities promissory notes was $13,158,180. Through September 30, 2006, we repaid approximately $1.29 million of the original principal amount under these notes. Since October 18, 2006, we repaid an additional $1.99 million of the principal amount of these notes pursuant to our agreement with Mr. Popeil and the predecessor entities that we signed in October 2006. As of November 30, 2006, the balance on these notes was approximately $11.5 million, including accrued interest of $1.6 million.

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. 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, the promissory notes provide that upon the occurrence of an event of default 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.

In connection with the Laurus financing transaction, on October 18, 2006, we entered into a letter agreement with Ronald M. Popeil, the RMP Family Trust, Ronco Inventions, LLC, Popeil Inventions, Inc. and RP Productions, Inc., which were among the predecessor entities from which we originally purchase the Ronco business. Under this agreement, Mr. Popeil agreed to enter into a subordination agreement with Laurus and an additional limited subordination agreement with SMH and the other lenders under the loan agreement with SMH. Under these agreements, Mr. Popeil agreed that the debt owed by us to Mr. Popeil is subordinate and junior in right of payment to our obligations to Laurus, SMH and other lenders, on the terms and conditions set forth in these agreements.

Delaware	5960	84-1148206
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification No.)

Title of Each Class of Securities to be Registered		Amount to be Registered			Proposed Maximum Offering Price per Share			Proposed Maximum Aggregate Offering Price			Amount of Registration Fee
Common Stock, $.00001 par value per share			24,776,050		$	1.60 (1	)	$	39,641,680		$	4,241.66 (2	)

		PAGE
PROSPECTUS SUMMARY		1
RISKS OF INVESTING IN OUR SHARES		9
FORWARD LOOKING STATEMENTS		22
USE OF PROCEEDS		22
MARKET FOR OUR SECURITIES		23
DIVIDEND POLICY		24
CAPITALIZATION		25
SELECTED FINANCIAL DATA		26
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		29
BUSINESS		55
EXECUTIVE OFFICERS AND DIRECTORS		75
SECURITY OWNERSHIP OF OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS		83
CERTAIN TRANSACTIONS		90
SELLING STOCKHOLDERS		92
PLAN OF DISTRIBUTION		99
DESCRIPTION OF SECURITIES		101
LEGAL MATTERS		105
EXPERTS		105
WHERE YOU CAN FIND MORE INFORMATION		106
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS		F-1

·	Showtime Rotisserie & BBQ	·	Popeil's Pasta Maker

·	Six Star+ Cutlery Set	·	Solid Flavor Injector

·	Electric Food Dehydrator

Common stock being offered by selling stockholders:		(i) 16,839,528 shares issued or issuable upon conversion of outstanding shares of our Series A Convertible Preferred Stock (including four shares for which we received payment but which had not been issued as of the date of this prospectus), (ii) 4,086,829 shares issuable upon conversion of shares of Series A Convertible Preferred Stock that may be issued in the future as payment of dividends on our Series A Convertible Preferred Stock, (iii) 266,667 shares issuable upon exercise of a warrant issued to the placement agent in connection with our sale of Series A Convertible Preferred Stock on June 30, 2005, (iv) 762,102 shares issued to the pre-acquisition stockholders of Ronco Marketing Corporation in connection with the merger, (v) an aggregate of 11,236 shares issued to two of our former stockholders, (vi) 13,650 shares issued to Wesley Ramjeet for consulting services provided by Profit Planners, Inc., (vii) 525,916 shares issued to two shareholders pursuant to the conversion of previously held Series A Convertible Preferred Stock (viii) 1,750,000 shares issuable upon exercise of a warrant issued to Laurus Master Fund Ltd. under the terms of the debt financing transaction completed in October 2006, (ix) 200,000 shares issuable upon exercise of a warrant issued to Mr. Ronald M. Popeil under the terms of the agreement he signed in connection with the debt refinancing transaction completed in October 2006; and (x) an aggregate of 320,126 shares issued to our former chief financial officer and our former general counsel.

Common stock to be outstanding after the offering:		22,027,642 shares, assuming that all shares of the Series A Convertible Preferred Stock outstanding as of the date of this prospectus, including shares of Series A Convertible Preferred Stock issued as dividends on the Series A Convertible Preferred Stock, are fully converted into shares of common stock, and the warrants issued to the placement agent, Mr. Ronald M. Popeil and Laurus Master Fund Ltd. are exercised in full, but excluding the shares underlying the Series A Convertible Preferred Stock reserved for future stock dividends.

Use of proceeds:		We will not receive any proceeds from the sale of common stock by the selling stockholders. We will only receive proceeds upon the exercise of the warrants issued to the placement agent, Mr. Ronald M. Popeil and Laurus Master Fund Ltd., which proceeds, if any, will be used for working capital requirements and other general corporate purposes. See “Use of Proceeds.”

OTC Bulletin Board(R) symbol:		RNCP.OB

Quarter Ended	Low		High
September 30, 2004		4.45		4.45
December 31, 2004		2.67		8.90
March 31, 2005		2.67		6.23
June 30, 2005		4.90		22.25
September 30, 2005		4.50		11.50
December 31, 2005		3.75		6.50
March 31, 2006		3.50		4.30
June 30, 2006		1.50		3.26
September 30, 2006		0.56		2.25

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		—		—		—
Estimated Future Interest on Debt (3)		1,300,000		1,300,000		—		—		—
Operating Lease Obligations		7,351,532		495,605		1,379,393		1,464,408		4,012,126
Purchase Obligations (4)		5,867,494		5,867,494		—		—		—
Total		29,696,363		22,805,770		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 $13,026,85, the Wells Fargo line of credit of $384,000 and the loan from Sanders, Morris Harris of $1,540,185 that may have an occurrence of default, and are classified as current on the financial statements.
	(3)	The future interest for the Seller Note was only calculated for one year because the debt is shown as current on the financial statements.
	(4)	$5,867,494 are purchase orders for future sales.

Name	Age	Position(s)
Paul Kabashima	62	Chief Executive Officer, 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

	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		-			-			-			-

Ronald C. Stone		2006	$	137,308	(13)		-		$	8,420	(2)		-
Chief Financial Officer		2005		-			-			-			-

5% or greater holders

Entities affiliated with	Common Stock	2,099,922	(7	)	44.50	%
Sanders Morris Harris, Inc.
320 Park Avenue	Series A Convertible	1,672,784	(8	)	10.60	%
New York, NY 10022	Preferred Stock

Bookbend & Co.	Common Stock	2,141,018	(10	)	45.00	%
C/O State Street Bank & Trust
Box 5756	Series A Convertible	1,953,608	(10	)	12.40	%
Boston, MA 02206	Preferred Stock
	Preferred Stock

Heartland Group, Inc.,	Common Stock	2,017,909	(11	)	43.50	%
solely on behalf of the
Heartland Value Fund	Series A Convertible	1,841,275	(11	)	11.70	%
789 North Water Street	Preferred Stock
Suite 500

GLG Partners American Opp Fund	Common Stock	1,345,272	(12	)	33.90	%
P.O. Box 9080t
Georgetown, Grand Cayman	Series A Convertible	1,227,516	(12	)	7.80	%
Cayman Islands	Preferred Stock

LBI Group, Inc.	Common Stock	1,070,509	(13	)	29.00	%
Lehman Brothers
399 Park Avenue	Series A Convertible	976,804	(13	)	6.20	%
New York, NY 10022	Preferred Stock

The Quaker Investment Trust -	Common Stock	1,022,409	(14	)	28.10	%
Quaker Strategic
Growth Fund	Series A Convertible	932,914	(14	)	5.90	%
260 Franklin St., 16th Floor	Preferred Stock
#1600
Boston, MA 02110

Topwater Exclusive Fund II LLC	Common Stock	582,504	(15	)	18.20	%
80 Washington Street
Suite 2-2	Series A Convertible	531,516	(15	)	3.40	%
South Norwalk, CT 06854	Preferred Stock

Palisades Master Fund L.P.	Common Stock	579,179	(16	)	21.30	%
C/O PEF Advisors LLC
200 Mansell Court East Suite 5	Series A Convertible	91,319			*
Roswell, GA 30076	Preferred Stock

BFS US Special Opportunities Trust PLC	Common Stock	356,837	(17	)	12.00	%

8080 North Central Pkwy	Series A Convertible	325,602	(17	)	2.10	%
#210	Preferred Stock
Dallas, TX 75206

Renaissance US Growth Investment Trust PLC	Common Stock	356,837	(18	)	12.00	%

8080 North Central Express	Series A Convertible	325,602	(18	)	2.10	%
Suite 210, LB59	Preferred Stock
Dallas, TX 75206

Stanley Shopkorn	Common Stock	356,837	(19	)	12.00	%
Shopkorn Associates
410 Park Avenue	Series A Convertible	325,602	(19	)	2.10	%
New York, NY 100922	Preferred Stock

Tom and Nancy Juda Living Trust	Common Stock	356,837	(20	)	12.00	%
410 S. Lucerne Boulevard
Los Angeles, California 90020	Series A Convertible	325,602	(20	)	2.10	%
	Preferred Stock

Apogee Fund, L.P.	Common Stock	267,629	(21	)	9.30	%
201 Main St, #1555
Ft Worth, TX 76102	Series A Convertible	244,203	(21	)	1.60	%
	Preferred Stock

Coll International	Common Stock	177,778			6.80	%
1330 Avenue of the Americas,
40th Floor	Series A Convertible	0			*
New York, NY 10019	Preferred Stock

Content Holding LLC	Common Stock	177,778			6.80	%
1330 Avenue of the Americas,
40th Floor	Series A Convertible	0			*
New York, NY 10019	Preferred Stock

Gilbert Azafrani	Common Stock	160,063	(22	)	6.10	%
1725 Oceanfront Walk #318
Santa Monica, CA 90401	Series A Convertible	0			*
	Preferred Stock

Sandor Capital Master Fund, L.P.	Common Stock	181,537	(23	)	6.50	%
2828 Routh Street, #500
Dallas, TX 75201	Series A Convertible	141,999	(23	)	0.90	%
	Preferred Stock

Copper Beech Equity Partners LLC	Common Stock	160,778			6.10	%
445 Park Avenue, 10th Floor
New York, NY 10022	Series A Convertible	0			*
	Preferred Stock

Anthony & Sandra Mansour Family	Common Stock	178,420	(24	)	6.40	%
Revocable Trust 12/17/85
4477 Golden Foothill Parkway	Series A Convertible	162,802	(24	)	1.00	%
El Dorado Hills, CA 95762	Preferred Stock

Alpha Capital	Common Stock	178,419	(25	)	6.40	%
LH Financial
160 Central Park, S., #2701	Series A Convertible	162,801	(25	)	1.00	%
New York, NY 10021	Preferred Stock

Paul Wallace	Common Stock	133,334			5.10	%
156 West 56th Street, Suite 1604
New York, NY 10019	Series A Convertible	0			*
	Preferred Stock

Laurus Master Fund, Ltd.	Common Stock	1,750,000	(26	)	40.10	%
c/o Laurus Capital Management, L.L.C.
825 Third Avenue, 14th Floor	Series A Convertible	0			*
New York, NY 10022	Preferred Stock

Ronald Popeil		200,000	(27	)	7.10	%
c/o Popeil Inventions
1672 Waynecrest Drive		0			*
Beverly Hills, CA 90210

	(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 2,617,521 shares of common stock outstanding as of December 14, 2006. Percentage of Series A Convertible Preferred Stock is based on 15,734,147 shares of Series A Convertible Preferred Stock outstanding as of December 14, 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

	(2)	The address for Mr. Allen is 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 32,557 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 certain performance targets are not satisfied. Each share of Series A Convertible Preferred Stock may be converted into 1.09275 shares of common stock at the option of the holder.

	(5)	Consists of 32,557 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 32,562 shares of our Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock may be converted into 1.09275 shares of common stock at the option of the holder.

	(7)	Consists of an aggregate of 1,672,784 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 1.09275 shares 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., Sande


	(8)	Consists of an aggregate of 1,672,784 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 1.09275 shares 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 1,953,608 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 1.09275 shares of common stock at the option of the holder.

	(11)	Consists of 1,841,275 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 1.09275 shares of common stock at the option of the holder.

	(12)	Consists of 1,227,516 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 1.09275 shares 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 932,914 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 1.09275 shares of common stock at the option of the holder.

	(15)	Consists of 531,516 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 1.09275 shares of common stock at the option of the holder.

	(16)	Consists of 500,000 shares of our common stock and 91,319 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 1.09275 shares of common stock at the option of the holder.

	(17)	Consists of 325,602 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 1.09275 shares of common stock at the option of the holder.

	(18)	Consists of 325,602 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 1.09275 shares of common stock at the option of the holder.

	(19)	Consists of 325,602 shares of our Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock may be converted into 1.09275 shares of common stock at the option of the holder.

	(20)	Consists of 325,602 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 1.09275 shares of common stock at the option of the holder.

	(21)	Consists of 244,203 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 1.09275 shares of common stock at the option of the holder.

	(22)	Mr. Azafrani was our general counsel.


	(23)	Consists of 167,915 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 1.09275 shares of common stock at the option of the holder.

	(24)	Consists of 162,802 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 1.09275 shares of common stock at the option of the holder.

	(25)	Consists of 162,801 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 1.09275 shares of common stock at the option of the holder.

	(26)	Consists of a warrant to purchase 1,750,000 shares of our common stock held by Laurus Master Fund, Ltd. our senior lender. The Fund is managed by Laurus Capital Management, LLC. Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and share sole voting and investment power over the securities owned by the Fund registered in this Registration Statement, as amended.

	(27)	Consists of a warrant to purchase 200,000 shares of our common stock held by Ronald Popeil, our consultant.

Aaron Sullivan and Janelle Sullivan TIC	13,416	16,597	--	--
Advantage Advisors Catalyst Int’l Ltd.(2)	19,257	23,823	--	--
Advantage Advisors Catalyst Partners L.P. (2)	29,034	35,920	--	--
Alan J. Rubin	35,582	44,020	--	--
Almak Family Trust/Mike & Lisa Maddux TTEES DTD 02/12/93 (3)	13,416	16,597	--	--
Andrew R. Midler Family Trust (4)	88,952	110,047	--	--
Anne Lindsay Cohn Holstead	20,121	24,893	--	--
Anthony & Sandra Mansour Family Revocable Trust 12/17/85 (5)	177,902	220,092	--	--
Apogee Fund, L.P. (6)	266,854	330,137	--	--
Arthur A. Johnson, Jr.	8,897	11,007	--	--
Arthur Cole Nilson	8,897	11,007	--	--
Barbara A. Vines Trust	17,792	22,011	--	--
Bascom Baynes (7)	35,582	44,020	--	--
Ben T. Morris (7)	20,121	24,893	--	--
Benjamin P. Abney	8,896	11,006	--	--
Bessie Montesano	8,896	11,006	--	--
BFS US Special Opportunities Trust PLC (8)	355,803	440,180	--	--
Bill Haak & Johnnie S. Haak JTWROS	8,896	11,006	--	--
Bill Birdwell & Willie C. Birdwell JTWROS	8,721	10,790	--	--
Bobby Smith Cohn	20,121	24,893	--	--
Bonner S. Ball (9)	26,829	33,191	--	--
Brad D. Sanders (7)	20,121	24,893	--	--
Bret D. Sanders (7)	20,121	24,893	--	--
Brian Keller & Lesley Lipshultz Keller JT TEN	20,121	24,893	--	--
Brian Kuhn	33,537	41,490	--	--
Bruce A. Davidson and Laura A. Davidson JT TEN	20,121	24,893	--	--
Bruce Cummings & Myrna Cummings JT Ten (7)	8,721	10,790	--	--
Bruce Mendleson	13,416	16,597	--	--
Bruce R. McMaken (7)	4,026	4,981	--	--
Bruce Slovin	67,070	82,975	--	--

Charles & Iris Peterson	8,897	11,007	--	--
Charles E. Campbell	5,618	5,618	--	--
Charles M. Darling IV	16,769	20,746	--	--
Christine M. Sanders (10)	33,537	41,490	--	--
Coll International LLC (7) (11)	177,778	177,778	--	--
Content Holding LLC (12)	177,778	177,778	--	--
Copper Beech Equity Partners LLC (13)	160,778	160,778	--	--
Courtney Cohn Hopson Separate Account	20,121	24,893	--	--
Craig & Katrina Juda JTWROS	26,829	33,191	--	--
Crescent International LTD (14)	178,404	220,712	--	--
CT Capital Associates, L.P. (15)	134,139	165,949	--	--
Daniel Palmer	8,896	11,006	--	--
Daryl James Woodard 1995 Revocable Trust (7) (16)	17,792	22,011	--	--
Dave Fendrick and Brenda Fendrick JTWROS	13,416	16,597	--	--
David Gregarek	4,026	4,981	--	--
David L. Shadid	8,897	11,007	--	--
David Towery	20,121	24,893	--	--
Don Sanders and Tanya Drury TTEES FBO Tanya Jo Drury Trust	26,829	33,191	--	--
Don Weir and Julie Ellen Weir Ten In Com	8,050	9,959	--	--
Donald L. Poarch	20,121	24,893	--	--
Donald V. Weir TTEE Sanders 1998 Children’s Trust DTD 12/01/97 (7) (17)	67,070	82,975	--	--
Donna Moss	8,050	9,959	--	--
Dror Zadok	67,070	82,975	--	--
DUDDLESTEN HOLDINGS LTD		23,823
Dwight W. Fate	8,897	11,007	--	--
E. Dean Catlett & Jo Ann Catlett Ten In Com	13,416	16,597	--	--
Edward F. Heil	67,070	82,975	--	--
Edwin Freedman	33,537	41,490	--	--
Elizabeth Kirby Cohn	20,121	24,893	--	--
Evan J. Warshawsky (18)	195,645	204,083	--	--
Evans Capital Growth Fund, L.P. (19)	35,548	43,979	--	--
Frank Milewski	66,667	66,667	--	--
Fred A. Stone, Jr.	20,121	24,893	--	--
G. Douglas Dillard, Jr.	35,582	44,020	--	--
George L. Ball (7) (8)	33,537	41,490	--	--
George Moorehead	33,537	41,490	--	--
Gerald Golub	35,582	44,020	--	--
Gerald H. Hunsicker and Irene H. Hunsicker JTWROS (7)	20,121	24,893	--	--
Gerald W. Pope Revocable Trust (20)	8,897	11,007	--	--
Gilbert Azafrani	160,063	160,063	--	--
Glenn A. Welsch & Constance Welsch TTEE FAO Welsch Family Living Trust Special Account UAD 9/14/95 (21)	13,416	16,597	--	--
GLG North American Opportunity Fund (22)	1,341,373	1,659,473	--	--
Grant E. Sims and Patricia Sims JT TEN	20,121	24,893	--	--

Heartland Group Inc., solely on behalf of the Heartland Value Fund (23)	2,012,060	2,489,211	--	--
I-Global Trading (24)	134,139	165,949	--	--
IRA FBO Anthony Jacobs Pershing LLC as Custodian Rollover Account	150,905	186,691	--	--
IRA FBO Brett Robinson Pershing LLC as Custodian	20,121	24,893	--	--
IRA FBO Cynthia L. McBride Pershing LLC as Custodian	6,708	8,299	--	--
IRA FBO Dave Fendrick / Pershing LLC as Custodian	13,416	16,597	--	--
IRA FBO Don A. Sanders Pershing LLC as Custodian (7) (10)	136,823	169,270	--	--
IRA FBO Mark E. Wise Pershing LLC as Custodian Rollover Account	20,121	24,893	--	--
IRA FBO Robert C. Clifford, Pershing LLC as Custodian	13,416	16,597	--	--
IRA FBO Robert E. Witt Pershing LLC as Custodian Rollover Account	26,829	33,191	--	--
IRA FBO Tanya Drury Pershing LLC as Custodian	26,829	33,191	--	--
IRA FBO Thomas W. McBride Pershing LLC as Custodian Rollover Account	33,537	41,490	--	--
IRA FBO William D. Bain, Jr. Pershing LLC as Custodian Rollover Account	10,061	12,446	--	--
IRA FBO: Katherine U. Sanders/Pershing LLC as Custodian	84,507	104,547	--	--
Iridian Opportunity Master Fund, LTD (25)	53,370	66,026	--	--
J. Livingston Kosberg TTEE FBO Livingston Kosberg Trust UW of Dorothy R. Kosberg (26)	17,440	21,576	--	--
Jack Richman TTEE of the 2000 Jack Family Trust U/D/T 02/10/00 (27)	26,829	33,191	--	--
Jackie S. Moore	20,121	24,893	--	--
J-All Partnership (28)	53,657	66,383	--	--
James A. Murray	17,792	22,011	--	--
James A. Rosen	20,121	24,893	--	--
James W. Christmas	33,537	41,490	--	--
Jan Rask	17,792	22,011	--	--
Janus Investment Fund (29)	2,134,812	2,641,067	--	--
Jay Williamson	8,897	11,007	--	--
Jeff Sanguinet	8,896	11,006	--	--
Joe M. Bailey	20,121	24,893	--	--
Joel Revill	17,792	22,011	--	--
John H. Gray and Sandra A. Gray JTWROS	20,121	24,893	--	--
John H. Malanga & Jodi F. Malanga, JT Ten (7)	5,367	6,640	--	--
John I. Mundy Separate Property	10,061	12,446	--	--
John M. O’Quinn	67,070	82,975	--	--
John Rick Henry	17,792	22,011	--	--
John W. Johnson	20,121	24,893	--	--
Jonathan Day	13,416	16,597	--	--
Jurek Krasnodebski	8,896	11,006	--	--
Keenan Limited Partnership/Special (30)	26,829	33,191	--	--
Kendall C. Montgomery	26,829	33,191	--	--
Kyle Andres	8,896	11,006	--	--
Lance Clemons and Abbe Hoenscheld JTTEN (7)	9,747	12,059	--	--
Larry Don Henry	8,897	11,007	--	--
Larry Martin	33,537	41,490	--	--
Laura K. Sanders	33,537	41,490	--	--
Laurus Master Fund, Ltd. (31)	0	1,750,000	--	--
LBI Group Inc. (32)	1,067,406	1,320,532	--	--
Leonard Rauch Special	33,537	41,490	--	--
Lewis Wilkenfeld 1994 Trust, J. Livingston Kosberg, TTEE (33)	8,721	10,790	--	--
Lisa Dawn Weir	20,121	24,893	--	--
Lori Kosberg Trust, Mark J. Brookner TTEE (34)	8,721	10,790	--	--

M. St. John Dinsmore	6,708	8,299	--	--
Marie K. Mildren	8,896	11,006	--	--
Mariko Osceola Gordon	8,896	11,006	--	--
Mark Leszczynski	8,896	11,006	--	--
Mark Newton Davis	17,792	22,011	--	--
Michael Needleman	13,416	16,597	--	--
Morton A. Cohn	67,070	82,975	--	--
Neil Grossman	5,618	5,618	--	--
Nancy G. Kinder	26,829	33,191	--	--
Nite Capital, L.P. (35)	88,952	110,047	--	--
Noreen McKee	8,896	11,006	--	--
Palisades Master Fund, LP (36)	578,889	602,554	--	--
Patrice Leigh Ferguson	13,416	16,597	--	--
Paul Tate and Lara M. Tate TIC	6,708	8,299	--	--
Paul Wallace	133,334	133,334	--	--
Philip J. Andrews	8,896	11,006	--	--
The Quaker Investment Trust - Quaker Strategic Growth Fund (37)	1,019,445	1,261,202	--	--
Renaissance US Growth Investment Trust PLC (38)	355,803	440,180	--	--
Richard D. Kinder	67,070	82,975	--	--
Richard Nahas	53,657	66,383	--	--
Ridgecrest Partners QP L.P. (2)	67,070	82,975	--	--
Ridgecrest Partners LTD (2)	18,781	23,235	--	--
Robert A. Lurie	56,339	69,699	--	--
Robert Alpert	33,537	41,490	--	--
Robert B. Lyons, Jr.	8,897	11,007	--	--
Robert Larry Kinney (7)	33,537	41,490	--	--
Robin Kosberg Elkin Trust, Mark J. Brookner TTEE	8,721	10,790	--	--
Roger P. Lindstedt	26,829	33,191	--	--
Ronald Popeil	0	200,000	--	--
Rosen Family Trust UAD 5/31/89 (39)	67,070	82,975	--	--
Roy T. Rimmer, Jr.	33,537	41,490	--	--
Rune Medhus and Elisa Medhus	17,792	22,011	--	--

Sanders Morris Harris, Inc. (40)	0	266,667	--	--
Sanders Opportunity Fund (Institutional), L.P. (40)	1,402,050	1,734,538	--	--
Sanders Opportunity Fund, L.P. (40)	425,890	526,888	--	--
Sandor Capital Master Fund, L.P. (41)	181,086	217,883	--	--
Sanford B. Prater	20,121	24,893	--	--
Scott Juda	26,829	33,191	--	--
SEP FBO Frederick A. Huttner/Pershing LLC as Custodian	10,061	12,446	--	--
SEP FBO Higdon O. Compton Pershing LLC as Custodian	10,061	12,446	--	--
Sharetron Limited Partnership (42)	20,121	24,893	--	--
Sharon Perry Wise Separate Property Account	26,829	33,191	--	--
Stanley & Antoinette McCabe	8,897	11,007	--	--
Stanley Katz	35,582	44,020	--	--
Stanley Shopkorn	355,803	440,180	--	--
Stellar Capital Fund, LLC (43)	134,139	165,949	--	--
Stephen Falk TTEE FBO Benjamin Falk & Sylvia Falk 1995 Trust U/A/D 3-22-95 (44)	20,121	24,893	--	--
Stephen J. Heyman	53,657	66,383	--	--
Stephen K. Gardner TTEE FBO Charles M. Darling V Irrevocable Trust UAD 12-30-85 (45)	22,757	28,154	--	--
Stephen K. Gardner TTEE FBO Christopher B. Darling Irrevocable Trust UAD 12-30-85 (45)	17,486	21,633	--	--
Stephen S. Oswald	20,121	24,893	--	--
Steven J. Mayer	8,896	11,006	--	--
Steve Scott	53,657	66,383	--	--
Steven R. Elliot	8,897	11,007	--	--
Steven R. Elliott	17,792	22,011	--	--
Susan Sanders Separate Property	20,121	24,893	--	--
Talbot M. Smith	20,121	24,893	--	--
TerraNova Explorer’s Fund I LLC	66,667	66,667	--	--
The Allen Peyser Family Trust (46)	35,577	44,014	--	--
Thomas Brady & Daniel Brady TTEES E P Brady Ltd Partner Sharing Plan & Trust (47)	33,537	41,490	--	--
Thomas W. Custer	14,758	18,258	--	--
Tom and Nancy Juda Living Trust	355,803	440,180	--	--
Tom Juda Jr. and Rosemary T. Juda, JTWROS	26,829	33,191	--	--
Topwater Exclusive Fund II LLC (48)	580,816	718,553	--	--
Vivian B. Darling	16,769	20,746	--	--
VLC Properties, LP (49)	17,791	22,010	--	--
W. Roger Clemens, Special Retirement Account	33,537	41,490	--	--
Wayne B. Duddlesten	864	1,070	--	--
Wendy Kosberg Starr Trust, Mark J. Brookner TTEE (33)	8,721	10,790	--	--
Wesley Ramjeet	13,650	13,650	--	--
William Lester	8,897	11,007	--	--
William Randolph Piper and Sara Lynn Greed-Piper	8,896	11,006	--	--
William A. Solemene	107,312	132,760	--	--
Wolf Canyon, Ltd.—Special (30)	26,829	33,191	--	--
Zadok Jewelry Inc. 401K Profit Sharing Plan (50)	13,416	16,597	--	--
TOTAL:	18,528,808	24,776,050	--	--

(1)	Assumes conversion of shares of Series A Convertible Preferred Stock held by the registered owner.

(2)	Sanford Prater exercises voting and investment control of shares held by Advantage Catalyst Int’l Ltd, Advantage Advisors Catalyst Partners L.P., Ridgecrest Partners QP L.P. and Ridgecrest Partners LTD and may be deemed to beneficially own all of the shares held by these entities.

(3)	Mike Maddux and Lisa Maddux are co-Trustees of the Almak Family Trust dated February 12, 1993, exercise voting and investment control, and may be deemed to beneficially own all of the shares held by the trust.

(4)	Andrew Midler exercises voting and investment control of the shares held by the Andrew R. Midler Family Trust and may be deemed to beneficially own all shares held by Andre RE. Midler Family Trust.

(5)	Anthony Mansour exercises voting and investment control of the shares held by the Anthony & Sandra Mansour Family Trust and may be deemed to beneficially own all shares held by Anthony & Sandra Mansour Family Trust.

(6)	Emmett M. Murphy exercises voting and investment control of the shares held by Apogee Fund, L.P. and may be deemed to beneficially own all shares held by Apogee Fund, L.P.

(7)	Each of the identified selling stockholders is, or at the time of acquisition of their shares, was an associated person of Sanders Morris Harris Inc. In June 2005 Sanders Morris Harris Inc. acted as our placement agent in connection with the sale of our Series A Convertible Preferred Stock. In June and October 2006, Sanders Morris Harris Inc. entered into loan transactions with us. Mr. A. Emerson Martin, II and Mr. Gregg A. Mockenhaupt, each of whom was a member of our board of directors, are also Managing Directors of Sanders Morris Harris, Inc., an affiliated investment banking firm. Mr. John S. Reiland, who is a member of our board of directors, is a Managing Director of Sanders Morris Harris Inc.


(8)	Russell Cleveland exercises voting and investment control of the shares held by BFS US Special Opportunities Trust PLC and may be deemed to beneficially own all shares held by BFS US Special Opportunities Trust.

(9)	George S. Ball and Bonner S. Ball are husband and wife.

(10)	Don Sanders and Christine Sanders are husband and wife.

(11)	Barry Levine exercises voting and investment control of the shares held by Coll International LLC and may be deemed to beneficially own all shares held by Coll International LLC.

(12)	Bob Deloren exercises voting and investment control of the shares held by Content Holdings LLC and may be deemed to beneficially own all shares held by Content Holdings LLC.

(13)	Karl Douglas exercises voting and investment control of the shares held by Copper Beach Equity Partners LLC and may be deemed to beneficially own all shares held by Copper Beach Equity Partners LLC.

(14)	Mel Crow, Maxi Brezzi and Bachir-Taleb-Ibrahimi, in their capacity as managers of Cantara (Switzerland) SA, the investment advisors to Crescent International, LTD exercise voting and investment control of the shares held by Crescent International LTD. Messrs. Crow, Brezzi and Taleb-Ibrahimi disclaim beneficial ownership of such shares.

(15)	J. Howard Coale exercises voting and investment control of the shares held by CT Capital Associates L.P. and may be deemed to beneficially own all shares held by CT Capital Associates L.P.

(16)	Daryl James Woodard exercises voting and investment control of the shares held by the Daryl James Woodard 1995 Revocable Trust and may be deemed to beneficially own all of the shares held by the Daryl James Woodard 1995 Revocable Trust.

(17)	Donald Weir is the trustee and exercises voting and investment control of the shares held by the Sanders 1998 Children’s Trust dated December 1, 1997, and may be deemed to beneficially own all shares held by the Sanders 1998 Children’s Trust dated December 1, 1997.

(18)	Evan J. Warshawsky is our former Chief Financial Officer.

(19)	Justin Evans exercises voting and investment control of the shares held by Evans Capital Growth Fund L.P. and may be deemed to beneficially own all shares held by Evans Capital Growth Fund L.P.

(20)	Gerald W. Pope is the trustee and exercises voting and investment control of the shares held by the Gerald W. Pope Revocable Trust, and may be deemed to beneficially own all shares held by the Gerald W. Pope Revocable Trust.

(21)	Glenn A. Welsch and Constance Welsch exercise voting and investment control of the shares held by the FAO Welsch Family Living Trust Special Account UAD 9/14/95 and each may be deemed to beneficially own all of the shares held by the FAO Welsch Family Living Trust Special Account UAD 9/14/95.

(22)	Philippe Tabre and Emmanuel Roman exercise voting and investment control of the shares held by GLG Partners American Opportunity Fund and may be deemed to beneficially own all shares held by GLG Partners American Opportunity Fund.

(23)	William J. Nasgovitz, through Heartland Group, Inc., exercises voting and investment control of the shares held by Heartland Value Fund and may be deemed to beneficially own all shares held by Heartland Value Fund.

(24)	Kevin Waltzer exercises voting and investment control of the shares held by I-Global Trading and may be deemed to be the beneficial owner of all shares held by I-Global Trading.

(25)	Jeff Silver, through Iridian Asset Management LLC, exercises voting and investment control of shares held by Iridian Opportunity Master Fund LTD and may be deemed to beneficially own all of the shares held by Iridian Opportunity Master Fund, LTD.

(26)	J. Livingston Kosberg is the trustee and exercises voting and investment control of the shares held by the Livingston Kosberg Trust UW of Dorothy R. Kosberg and may be deemed to beneficially own all shares held by the Livingston Kosberg Trust UW of Dorothy R. Kosberg.

(27)	Jack Richman is the trustee and exercises voting and investment control of the 2000 Jack Family Trust U/D/T/ 02/10/00 and may be deemed to beneficially own all shares held by the 2000 Jack Family Trust U/D/T 02/10/00.

(28)	Dennis Wilkerson exercises voting and investment control of the shares held by J-All Partnership and may be deemed to be the beneficial owner of all shares held by J-All Partnership.

(29)	William H. Bales exercises voting and investment control of the shares held by Janus Investment Fund and may be deemed to beneficially own all shares held by Janus Investment Fund.

(30)	Carolyn Frost Keenan, through Polywog, LC and Wolf Canyon, LC exercises voting and investment control of the shares held by Keenan Limited Partnership/Special and Wolf Canyon, Ltd. - Special and may be deemed to beneficially own all of the shares held by Keenan Limited Partnership/Special and Wolf Canyon, Ltd. - Special.

(31)	Eugene Grin and David Grin, through other entities, are the controlling principals of Laurus Capital Management, LLC and share sole voting and investment power over the securities owned by the Fund registered in this Registration Statement.

(32)	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.

(33)	J. Livingston Kosberg is the trustee and exercises voting and investment control of the shares held by the Lewis Wilkenfeld 1994 Trust and may be deemed to be the beneficial owner of all shares held by the Lewis Wilkenfeld 1994 Trust.

(34)	Mark Brookner is the trustee and exercises voting and investment control of the shares held by the Lori Kosberg Trust, the Wendy Kosberg Starr Trust and the Robin Kosberg Elkin Trust and may be deemed to beneficially own all the shares held by the Lori Kosberg Trust, the Wendy Kosberg Starr Trust and the Robin Kosberg Elkin Trust.

(35)	Keith Goodman exercises voting and investment control of shares held by Nite Capital L.P. Mr. Goodman disclaims beneficial ownership of the shares held by Nite Capital L.P.

(36)	Paul Mannion and Andy Reckles exercise voting and investment control of shares held by Palisades Master Fund LP and each may be deemed to beneficially own all shares held by Palisades Master Fund LP.

(37)	Manu Daftary exercises voting and investment control of the shares held by The Quaker Investment Trust - Quaker Strategic Growth Fund and may be deemed to beneficially own all of the shares held by The Quaker Investment Trust - Quaker Strategic Growth Fund.

(38)	Russell Cleveland exercises voting and investment control of the shares held by Renaissance US Growth Investment Trust PLC and may be deemed to beneficially own all shares owned by Renaissance US Growth Investment Trust PLC.

(39)	Albert Rosen exercises voting and investment control of the shares held by the Rosen Family Trust and may be deemed to beneficially own all shares held by the Rosen Family Trust.

(40)	Don Sanders exercises voting and investment control of the shares held by Sanders Morris Harris, Sanders Opportunity Fund (Institutional) L.P. and Sanders Opportunity Fund L.P. and may be deemed to beneficially own all shares held by Sanders Opportunity Fund (Institutional) L.P. and Sanders Opportunity Fund L.P. Mr. A. Emerson Martin, II and Mr. Gregg A. Mockenhaupt, each of whom was a member of our board of directors, are also Managing Directors of Sanders Morris Harris, Inc., an affiliated investment banking firm. Mr. John S. Reiland, who is a member of our board of directors, is a Managing Director of Sanders Morris Harris, Inc.

(41)	John Lemak exercises voting and investment control of the shares held by Sandor Capital Master Fund, L.P. and may be deemed to beneficially own all shares held by Sandor Capital Master Fund, L.P.

(42)	John Hazleton exercises voting and investment control of the shares held by Sharetron Limited Partnership and may be deemed to beneficially own all shares held by Sharetron Limited Partnership.

(43)	Richard Schmidt exercises voting and investment control of the shares held by Stellar Capital Fund, LLC and may be deemed to beneficially own all shares held by Stellar Capital Fund, LLC.

(44)	Stephen Falk is the trustee and exercises voting and investment control of the shares held by the Benjamin Falk & Sylvia Falk 1995 Trust U/A/D 3-22-95 and may be deemed to beneficially own all shares held by the Benjamin Falk and Sylvia Falk 1995 Trust U/A/D 3-22-95.

(45)	Stephen Gardener is the trustee and exercises voting and investment control of shares held by the Charles M. Darling V Irrevocable Trust UAD 12-30-85 and the Christopher B. Darling Irrevocable Trust UAD 12-30-85 and may be deemed beneficial owners of all shares held by the Charles M. Darling V Irrevocable Trust UAD 12-30-85 and the Christopher B. Darling Irrevocable Trust UAD 12-30-85.

(46)	Richard F. Allen, Sr. is trustee of The Allen Peyser Family Trust and he exercises voting and investment power over the shares. The number of shares beneficially owned by The Allen Peyser Family Trust includes four shares of Series A Convertible Preferred Stock that were paid for but that were not issued as of the date of this prospectus. The shares described in this footnote are also listed as part of the beneficial ownership of Mr. Allen described elsewhere in this table.

(47)	Thomas Brady and Daniel Brady are co-trustees and exercise voting and investment control of the shares held by the E.P. Brady Ltd Partner Sharing Plan & Trust and may be deemed to beneficially own all of the shares held by the E.P. Brady Ltd Partner Sharing Plan & Trust.

(48)	Mann Daftery (through DG Capital) and Travis Taylor exercise voting and investment control of the shares held by Topwater Exclusive Fund II LLC and may be deemed to beneficially own all shares held by Topwater Exclusive Fund II LLC.

(49)	Virginia L. Christy exercises voting and investment control of the shares held by VLC Properties, LP and may be deemed to beneficially own all shares held by VLC Properties, LP.

(50)	Dror Zadok exercises voting and investment control of the shares held by Zadok Jewelry Inc. 401k Profit Sharing Plan and may be deemed to beneficially own all shares held by Zadok Jewelry Inc. 401k Profit Sharing Plan.

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-25

Index to Interim Financial Statements for the three months ended September 30, 2006 and 2005		F-26

The following consolidated and combined financial statement schedule is included in Item 16(b):
Schedule II - Valuation and Qualifying Accounts

	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		52,182,203			49,513,066
Deferred compensation		-			(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

					Series A Convertible						Additional
	Common Stock				Preferred Stock				Common Stock		Paid-In			Deferred			Accumulated
	Shares		Amount		Shares		Amount		To Be Issued		Capital			Compensation			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
Reclassification of deferred compensation as a result of adopting SFAS 123(R)												(2,006,118	)		2,006,118						-
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	$	52,182,203		$	-		$	(49,523,767	)	$	3,865,483

	Popeil Inventions, Inc. Common Stock						R.P. Productions, Inc. Common Stock						Additional Paid-In			Accumulated			Ronco Inventions, LLC Members'
	Shares			Amount			Shares			Amount			Capital			Deficit			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		-		$	-			-		$	-		$	-		$	-		$	-		$	-

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.

	9 Months Ended 6/29/05			9 Months Ended 6/30/04			9 Months Ended 9/30/2004			9 Months Ended 9/30/2003
				(Unaudited)						(Unaudited)
Net sales	$	68,985,101		$	92,823,959		$	63,245,257		$	42,195,654

Cost of goods sold		(16,844,057	)		(27,312,386	)		(16,842,282	)		(14,271,989	)

Gross Profit		52,141,044			65,511,573			46,402,975			27,923,665

Selling and general administrative expenses		50,446,473			71,762,668			53,216,762			31,194,972
Impairment loss on equipment								771,048

Operating income (loss)		1,694,571			(6,251,095	)		(7,584,835	)		(3,271,307	)

Interest income (expense), net		(2,824,260	)		49,946			(120,482	)		158,836
Other Income (expense)		(7,840	)		(131,977	)		—			—

Net Loss	$	(1,137,529	)	$	(6,333,126	)	$	(7,705,317	)	$	(3,112,471	)

Pro forma net loss per share (unaudited)	$	(0.33	)	$	(3.03	)	$	(3.68	)	$	(1.49	)

Pro forma weighted shares outstanding (unaudited)		2,091,605			2,091,605			2,091,605			2,091,605

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

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

	Nine Months ended June 29, 2005			Nine Months ended September 30, 2004

Net sales		68,985,101			63,245,257
Net loss		(2,874,298	)		(11,689,346	)
Loss attributable to common stockholders		(4,749,298	)		(12,500,348	)

Pro forma loss per share - basic and diluted	$	(2.27	)	$	(7.17	)

Pro forma weighted average shares outstanding		2,091,605			2,091,605

Amortizable Intangibles:	Balance at June 30, 2005		Impairment		Amortization Expense		Net book value at 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