UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended ~~June~~September 30, 2010

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

Commission file number: 000-52685

FIRST BLUSH BRANDS, INC.

(Exact name of registrant as specified in its charter)

Delaware		26-1364883
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

9595 Wilshire Blvd., Suite 900 Beverly Hills, CA		90212
(Address of principal executive office)		(Zip Code)

(310) 717-8942

(Registrant's telephone number, including area code)

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

Yes x No o

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

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

Large Accelerated Filer o	Accelerated Filer o

Non-Accelerated Filer o	Smaller Reporting Company x
(Do not check if a smaller reporting company )

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

Yes o No x

As of ~~August~~November 1622, 2010, the Company had outstanding 89,246,000 shares of Common Stock.

TABLE OF CONTENTS

FIRST BLUSH BRANDS, INC.

FORM 10-Q

	Page
PART I FINANCIAL INFORMATION	3	3
ITEM 1 Financial Statements	3	3
ITEM 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	17	15
ITEM 3 Quantitative and Qualitative Disclosures About Market Risk		19
ITEM 3 Legal Proceedings	24
ITEM 4 Controls and Procedures		19
ITEM 4 Quantitative and Qualitative Disclosures About Market Risk	24
PART II OTHER INFORMATION		20
ITEM 5 Controls and Procedures	24
ITEM 6 Exhibits		20
PART II OTHER INFORMATION	25
SIGNATURES		21
ITEM 6 Exhibits	25
SIGNATURES	26

PART I- FINANCIAL INFORMATION

Item 1. Financial Statements

First Blush Brands, Inc.

(Formerly Known as AFH Holding II, Inc.)

FINANCIAL STATEMENTS

INDEX

· Financial Statements:
Balance Sheets, June 30, 2010, unaudited, and December 31, 2009		4
Balance Sheets, September 30, 2010, unaudited, and December 31, 2009	4
Statements of Profit and Loss, unaudited, for the three and six months ended June 30, 2010 and 2009		5
Statements of Profit and Loss, unaudited, for the three and nine months ended September 30, 2010 and 2009	5
Statements of Cash Flows, unaudited, for the six months ended June 30, 2010 and 2009		6
Statements of Cash Flows, unaudited, for the nine months ended September 30, 2010 and 2009	6
Notes to Financial Statements	7	7

First Blush Brands, Inc.

(Formerly Known as AFH Holding II, Inc.)

Balance Sheets

	(Unaudited)
	At June 30,			At December 31,
	At September 30,			At December 31,
	2010			2009
Assets
Current assets:
Cash	$	243,619		$	-
Accounts receivable		3,468			37,065
Accounts receivable, net of allowance for doubtful accounts of $21,000 at September 30, 2010 and December 31, 2009		64,788			37,065
Inventory		~~174~~235,~~662~~105			293,135
Prepaids & other		~~551~~5,112			-
Offering funds held in segregated account		58,838			-
Total current assets		308,624			330,200
Total current assets		237,543			330,200
Deferred income taxes		47,921			19,534
Deferred income taxes		35,920			19,534
Equipment, net		8,765			-
Intangible assets, net		511,~~071~~400			55,786
Total assets	$	~~324~~366,~~534~~710		$	405,520
Liabilities & Equity (Deficit)
Current liabilities:
Accounts payable	$	~~565~~755,~~562~~380		$	344,968
Liability for offering funds		58,838			-
Liability due to related party consultant		245,000			-
Promotional liability		2789,~~329~~172			27,194
Other accrued liabilities		~~256~~154,~~407~~452			160,557
Notes payable - RHG, current		955,182			927,191
Derivative liabilities		126,680			-
Notes payable related party, current		100,000			100,000
Notes payable - RHG		208,360			927,191
Total current liabilities		2,208,318			1,559,910
Notes payable - related party		-			100,000
Total current liabilities		1,579,044			1,559,910
Notes Payable		1,055,454			-
Commitments and contingencies
Equity
Equity:
Preferred stock, par value $0.001, 20,000,000 shares authorized, 0 outstanding at June 30, 2010 and December 31, 2009		-			-
Preferred stock, par value $0.001, 20,000,000 shares authorized, 0 outstanding at September 30, 2010 and December 31, 2009		-			-
Common stock, par value $0.001, 100,000,000 authorized, 8,000,000 and 7,125,000 outstanding at June 30, 2010 and December 31, 2009, respectively		8,000			7,125
Common stock, par value $0.001, 100,000,000 authorized, 9,246,000 and 7,125,000 outstanding at September 30, 2010 and December 31, 2009, respectively		9,246			7,125
Additional paid in capital		~~379~~(8,~~902~~029	)		~~306~~(250,~~578~~841	)
Retained loss		(2,~~271~~269,~~686~~005	)		(1910,~~468,093~~674	)
Total equity (deficit)		(12,~~883~~267,~~784~~788	)		(1,154,390	)
Total liabilities and equity (deficit)	$	~~324~~366,~~534~~710		$	405,520

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

First Blush Brands, Inc.

(Formerly Known as AFH Holding II, Inc.)

Statements of Profit and Loss

	Unaudited						Unaudited
	For the Three Months Ended						For the ~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2010			2009			2010			2009
Gross revenue	$	259,~~752~~091		$	~~232~~252,~~719~~411		$	~~213~~273,~~998~~089		$	~~369~~622,~~744~~155
Promotion allowance		(~~963~~47,236	)		(26126,~~548~~891	)		(74121,~~171~~407	)		(35162,~~531~~422	)
Net revenue		111,~~789~~855			~~206~~125,~~171~~520			~~139~~151,~~827~~682			~~334~~459,~~213~~733
Cost of goods sold		1324,~~506~~845			~~120~~99,~~664~~804			97122,~~768~~613			~~199~~299,~~282~~086
Gross profit (loss)		(1112,~~717~~990	)		8525,~~507~~716			4229,~~059~~069			~~134~~160,~~931~~647
Selling, general and administrative expense		~~696~~439,~~829~~252			~~268~~77,~~019~~278			~~757~~1,~~961~~197,213			~~472~~549,~~651~~929
Abnormal production losses		-			-			-			28,415
Loss on derivative liabilities		3,953			-			3,953			-
Write-off of inventory		28,613			-			28,613			-
Abnormal production costs		21,213			-			21,213			28,415
Operating loss		(737,159	)		(182,512	)		(744,515	)		(366,135	)
Write-off of intangible asset		51,071			-			51,071			-
Interest expense		39,996			33,311			75,463			60,435
Write-off of inventory		-			131,213			28,613			131,213
Pre-tax loss		(777,155	)		(215,823	)		(819,978	)		(426,570	)
Operating loss		(528,479	)		(182,775	)		(1,272,994	)		(548,910	)
Tax benefit		(15,486	)		(3,726	)		(16,385	)		(8,152	)
Interest expense		37,459			35,762			112,922			96,197
Net loss	$	(761,669	)	$	(212,097	)	$	(803,593	)	$	(418,418	)
Pre-tax loss		(565,938	)		(218,537	)		(1,385,916	)		(645,107	)
Basic loss per share	$	(0.10	)	$	(0.02	)	$	(0.11	)	$	(0.05	)
Tax benefit		(11,200	)		(4,871	)		(27,585	)		(13,023	)
Diluted loss per share	$	(0.10	)	$	(0.02	)	$	(0.11	)	$	(0.05	)
Net loss	$	(554,738	)	$	(213,666	)	$	(1,358,331	)	$	(632,084	)
Basic loss per share	$	(0.06	)	$	(0.02	)	$	(0.18	)	$	(0.07	)
Diluted loss per share	$	(0.06	)	$	(0.02	)	$	(0.18	)	$	(0.07	)

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

First Blush Brands, Inc.

(Formerly Known as AFH Holding II, Inc.)

Statements of Cash Flows

	Unaudited
	For the Six Months Ended
	For the Nine Months Ended
	June 30,
	September 30,
	2010			2009
Cash flow used by operating activities:
Cash collected from customers	$	~~162~~165,~~362~~113		$	~~108~~324,~~800~~020
Cash paid to suppliers		(70206,~~717~~852	)		(~~111~~126,~~370~~280	)
Cash paid for employees & management services		-			(348,003	)
Cash paid to employees & contractors		(22,583	)		(374,914	)
Cash paid for other selling, general & administrative costs		(~~193~~237,~~811~~147	)		(~~231~~256,~~322~~208	)
Net cash used by operating activities		(102,166	)		(581,895	)
Cash paid for interest		(288,951	)		-
Net cash used by operating activities		(590,420	)		(433,382	)
Cash flow from financing activities:
Payments on notes payable		(98818,~~594~~831	)		-
Proceeds from issuing notes payable		~~126~~1,~~585~~055,454			~~371~~157,~~930~~646
Proceeds from the sale of common stock		-			250,000
Proceeds from the sale of common stock and warrants		293,462			274,989
Proceeds from recapitalization		74,199			-
Net cash from financing activities		~~102~~604,~~190~~284			~~621~~432,~~930~~635
Increase/(decrease) in cash		24			40,035
Cash flow used by investing activities:
Purchase of long-lived assets		(10,245	)		-
Net cash used by investing activities		(10,245	)		-
Increase/(decrease) in cash		3,619			(747	)
Cash at the start of the period		-			874
Cash at the end of the period	$	243,619		$	~~40,909~~127

Reconciliation of net loss to cash used by operating activities:

	Unaudited
	For the Six Months Ended
	For the Nine Months Ended
	June 30,
	September 30,
	2010			2009
Net loss	$	(~~803~~1,~~593~~358,331	)	$	(~~418~~632,~~418~~085	)
Amortization expense		4,714			4,714
Amortization & depreciation expense		4,794			7,072
(Increase)/decrease in A/R		33,597			(155,874	)
Increase in A/R		(27,723	)		(52,856	)
Decrease in inventory		~~118~~58,~~473~~030			13232,~~230~~530
Decrease in deposits		-			2
Increase in prepaids		(5,112	)		-
Increase in prepaids		(551	)		-
Increase in deferred tax asset		(28,387	)		(13,023	)
Increase in offering funds held in segregated account		(58,838	)		-
Increase/(decrease) in accounts payable & promotional liability		472,390			(42,353	)
Increase in deferred tax asset		(16,385	)		(8,952	)
Increase in liability to related party consultant		245,000			-
Increase/(decrease) in accounts payable & promotional liability		220,729			(26,452	)
(Decrease)/increase in other accrued liabilities		(6,105	)		67,333
Increase in liability for offering funds		58,838			-
Write off of intangible asset		51,071			-
Increase in liability to consulting banker		245,000			-
Change in derivative liability		3,953			-
Decrease in other accrued		95,850			9,855
Net cash flows used by operating activity	$	(590,420	)	$	(433,382	)
Net cash flows used by operating activity	$	(102,166	)	$	(581,895	)
Supplemental disclosure of cash flow information
Cash paid for interest	$	-		$	-

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

First Blush Brands, Inc.

(Formerly Known as AFH Holding II, Inc.)

Notes to Financial Statements

1. The Company

As used herein, “we” and “our” refers to First Blush, Inc. prior to the Exchange (See ~~note~~footnote #3 History and Recapitlization) and to First Blush Brands, Inc. and its consolidated subsidiary after the Exchange. First Blush, Inc. and First Blush Brands, Inc., are each a Delaware corporations and are based in Beverly Hills, California. Currently, we produce and market two product lines:

An all natural, premium grape juice crafted from 100% pure, fine wine grapes. We currently offer four juices: Cabernet, Merlot, Syrah and Chardonnay juice under the name “First Blush.”

An all natural ready-to-drink tea crafted from 50% of our premium grape juice and 50% brewed organic white tea. We currently offer two teas: Cabernet White Tea and Chardonnay White Tea, also under the name “First Blush.”

We flash pasteurize all of our products for safety and product quality. The result is that our products have a 24-month shelf life.

We sell our products in over 1,500 retail outlets in the United States, primarily through grocery stores.

We purchase all of our grape juice concentrate from third-party suppliers and outsource all production, warehousing and distribution. As well, we utilize brokers to help us initiate new sales and service existing customers.

2. Basis of Presentation

We ~~have~~ have prepared our accompanying unaudited financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). Accordingly, the financial statements do not include all of the information and notes required by GAAP for annual financial statements as permitted under applicable rules and regulations. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. The results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2010 are ~~not~~ not necessarily indicative of the results to be expected for the full year ~~ending~~ ending December 31, 2010. For further information, refer to our financial statements and notes thereto included with our ~~Form~~ 8-K filed with the Securities and Exchange Commission on May 13, 2010, as amended.

Except for the authorized and outstanding capital stock appearing on the balance sheet, the financial statements as of and for the year ended December 31, 2009 are for First Blush, Inc. and have been audited. The financial statements for ~~the~~ the three and ~~six~~nine months ended ~~June~~September 30, 2009 are also for First Blush, Inc. Financial statements post the Exchange represent the ~~consolidated~~ consolidated results of First Blush Brands, Inc. and its subsidiary First Blush, Inc. The information on the balance sheet for the authorized and outstanding capital stock at December 31, 2009 is restated to show the effect of the Exchange as a recapitalization.

3. History and Recapitalization

First Blush Brands, Inc. (“FBBI”), formerly known as AFH Holding II, Inc. (“AFH”), was incorporated as a Delaware corporation on April 16, 2007 as a development stage company with no assets and no business operations. AFH was organized to provide a method for a foreign or domestic private company to become a reporting (“public”) company. FBBI registered its shares of common stock under Section 12(g) of the Exchange Act. FBBI was what is commonly known as a “shell” company. At the time of the Exchange, AFH Holding and Advisory, LLC was the sole shareholder of FBBI.

On May 12, 2010, FBBI and its sole shareholder entered into a share exchange agreement with First Blush, Inc. and its security holders (the “Exchange Agreement”). Pursuant to the terms of the Exchange Agreement, each outstanding share of common stock and Series A Preferred Stock of First Blush, Inc. was transferred to FBBI in exchange for shares of the common stock, $0.001 par value per share, of FBBI. Upon consummation of the Exchange ~~Agreement~~ Agreement (the “Exchange” or “reorganization”), First Blush, Inc. became a wholly owned subsidiary of FBBI, and the security holders of First Blush became ~~our~~ our shareholders, owning approximately 89.06% of our outstanding common stock. On ~~June~~September 8, 2010, AFH Holding II, Inc. changed its name to First Blush Brands, Inc.

The Exchange was accounted for as a capital-raising transaction under the guidance of the SEC’s staff’s Accounting Disclosure Rules and Practices, Appendix B. Under that guidance, a transaction between a private operating company and a non-operating public shell company in which the shell company is the issuer of securities and the operating company is determined to be the accounting enterprise for accounting purposes is accounted for as an issuance of securities by the operating company under capital-raising transaction rather than a business combination.

InThe ~~January~~Exchange ~~2007,~~was ~~First~~accounted ~~Blush~~for ~~business~~as ~~operations~~a ~~were~~capital-raising ~~commenced~~transaction byunder ~~Victoria~~the ~~Briggs~~guidance ~~and~~of ~~her~~the ~~husband,~~SEC’s ~~Christopher~~staff’s ~~Bagdasarian~~Accounting Disclosure Rules and Practices, ~~through~~Appendix ~~Rose~~B. Under ~~Hill~~that ~~Gardens~~guidance, ~~LLC~~a ~~(“RHG”)~~transaction between a private operating company and a non-operating public shell company in which isthe shell ~~100%~~company ~~owned~~is bythe ~~Ms.~~issuer ~~Briggs. On~~of ~~August~~securities 1,and ~~2008~~the ~~First~~operating ~~Blush,~~company is ~~Inc.~~determined ~~was~~to ~~formed~~be the accounting enterprise for accounting purposes is accounted for as ~~Delaware~~an ~~corporation~~issuance of securities by the operating company under capital-raising transaction rather than a business combination.

The proceeds of $74,199 from recapitalization consist of the following:

We agreed to pay a fee to AFH Holding and Advisory, LLC in the amount of $250,000, subject to satisfaction of certain conditions. Our CEO Mr. Tony Roth paid $75,000 of that amount. We issued to Mr. Roth 75,000 shares of our common stock in satisfaction of this indebtedness. We consider the $75,000 to be cash proceeds to us.

We issued 800,000 shares to AFH Holding and Advisory, LLC as part of the recapitalization at a par value of $0.001 per share. We consider the aggregate $800 to be cash proceeds to us.

We reduced Additional Paid in Capital by $1,601 as a reduction of cash flow from the recapitalization as part of our recapitalization accounting and the roll forward of Additional Paid in Capital.

In January 2007, First Blush business operations were commenced by Victoria Briggs and her husband, Christopher Bagdasarian, through Rose Hill Gardens LLC (“RHG”) which is 100% owned by Ms. Briggs. On August 1, 2008 First Blush, Inc. was formed as a Delaware corporation.

On December 31, 2008 the assets related to First Blush were transferred from RHG to First Blush, Inc. In exchange First Blush, Inc. issued a promissory note to RHG for $828,698. RHG also extended to us the option to borrow additional funds up to a combined aggregate borrowing of $1,000,000. The promissory note accrues annual interest at 12%.

The transfer of the assets by RHG into First Blush, Inc. was between entities under common control pursuant to Accounting Standards Codification 805, Business Combinations. The transfer of the assets also constituted a set of activities and assets to be a business in accordance with FASB ASC 805. For a transferred set of activities and assets to be a business, it must contain all of the inputs and processes necessary for it to continue to conduct normal operations after the transferred set of assets is separated from the transferor, which include the ability to sustain a revenue stream by providing its outputs to customers. First Blush, Inc. obtained the inputs and processes necessary for normal operations. The transaction has been accounted for as a recapitalization of RHG. Accordingly, the assets were carried over to First Blush, Inc. at the historical carrying values and the historical operations of those assets by RHG are presented in the accompanying financial statements as the historical operations of First Blush, Inc. for all periods presented.

4. Summary of Significant Accounting Policies

a. Use of estimates in preparation of financial statements

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

~~b. Cash~~8

~~We consider overdraws on checking accounts to be part of accounts payable~~b. ~~On June 30, 2010 we had an overdrawn balance of $50,029 for~~ ~~checks~~Inventory ~~cut~~ and ~~mailed~~inventory ~~on June 30, 2010. We deposited funds in July 2010 to cover these checks out of the proceeds of our May 26, 2010 Offering discussed in Note 12.~~valuation

c. Offering funds held in segregated account

At June 30, 2010 we had $58,838 in funds held in a segregated account from our May 26, 2010 Offering. We closed the offering for these funds on July 1, 2010 and transferred the funds into our operating accounts. These funds were shown as a liability at June 30, 2010 because if we did not close the offering, we would have been obligated to return the funds.

d. Inventory and inventory valuation

Our inventory consists of raw materials and finished goods as follows:

	At June 30,		At December 31,
	At September 30,		At December 31,
	2010		2009
Finished goods
First Blush Juice	$	-11,318	$	57,782
First Blush Tea		-		34,003
Total finished goods	$	-11,318	$	91,785
Raw materials
Concentrate	$	~~172~~153,~~737~~924	$	172,737
Other		169,~~925~~863		28,613
Total raw materials	$	~~174~~223,~~662~~787	$	201,350
Total Inventory	$	~~174~~235,~~662~~105	$	293,135

Finished goods include all of the costs to produce cases of completed juice and tea bottles that are ready to sell. These costs include: 1) cost of physical inputs such as the cost of the juice and tea, the bottle, the cap, etc. and 2) cost of service inputs such as cost to mix the juice, fill the bottles, shipping raw materials to the bottler and storage of the finished goods. In addition, we include in the cost of finished goods the cost of normal production losses expected to be incurred during the bottling process. We use the industry norm of 5% of total production cost to calculate the loss factor to include in our inventory. We expense any losses above 5% of total production cost in the period of production and report it separate from cost of goods sold in our statement of profit and loss.

8During the nine months ended September 30, 2010 we wrote off $28,613 of raw materials (labels and trays) that were unsuitable for future production due to our switch to boxes instead of trays and our change to a new UPC codes that specifically identifies First Blush Brands. During the quarter ended September 30, 2010 we had $21,213 of abnormal production costs related to shipping raw materials from our old bottler to our new bottler, air freight costs and performing non-routine testing on our bottlers’ equipment in preparation for production.

~~During~~In 2009 ~~the~~we ~~quarter~~had ~~ended~~abnormal ~~June~~production ~~30,~~losses ~~2010~~in weexcess ~~wrote~~of ~~off~~the ~~$28,613~~5% ofnorm ~~raw~~equating ~~materials~~to ~~(labels~~$28,415 ~~and~~due ~~trays)~~to ~~that~~issues ~~were~~with ~~unsuitable~~our ~~for~~bottler. These ~~future~~were ~~production~~expensed ~~due~~as ~~to:~~part ~~1) trays – we are~~of ~~switching~~operating toincome ~~boxes~~separate ~~instead~~from cost of ~~trays~~goods ~~for~~sold ~~future~~in ~~production,~~our ~~and~~statement 2)of ~~labels~~profit ~~– we~~and ~~changed~~loss ~~UPC~~for ~~codes~~the tonine ~~new~~months ~~UPC~~ended ~~codes~~September ~~specifically~~30, ~~identifying First Blush Brands~~2009.

In 2009, we ~~had~~also ~~abnormal~~switched ~~production~~from ~~losses~~using inglass ~~excess~~bottles ofto ~~the~~PET 5%(Polethylene ~~norm equating to $28,415~~terephthalate) ~~due~~bottles toand ~~issues~~as ~~with~~a ~~our~~result ~~bottler. These~~disposed ~~were expensed as part~~ of ~~operating~~ ~~income~~$131,213 ~~separate from cost~~ of ~~goods~~finished ~~sold~~inventory in ~~our statement of profit and~~glass ~~loss for the six months ended June 30, 2009~~bottles.

We value our inventory using a first-in first-out cost flow assumption adjusted for lower of cost or market valuation, if needed. To date, no lower of cost or market valuation adjustments have been necessary. In addition, our finished goods have a two year shelf-life; to date we have not had a loss related to expiration of our inventory’s shelf-life.

ec. ~~Revenue~~ Revenue and related cost recognition

We recognize revenue when the following revenue recognition criteria are met:

•

We have persuasive evidence of a sales arrangement;

•

We have evidence that delivery of goods has occurred;

•

We have a sales price that is fixed or determinable; and

•

We have reasonable assurance of collectability.

We generally sell our product FOB destination and therefore transfer title and the related risks of ownership when the customer accepts the product at their receiving dock.

We report revenue net of any state imposed redemption requirements, which we collect from the purchaser and remit to the respective state. We are not required to collect sales taxes as we sell to retailers, who are responsible for collecting sales taxes from the ultimate consumer.

Consistent with our revenue recognition practices, we recognize related cost of goods sold when our product is received by our customers.

fd. Allowance for Doubtful Trade ~~Promotional~~Accounts ~~liability~~Receivable

~~Many~~The ~~of our~~Company ~~promotional~~establishes ~~programs are based on discounts given to the ultimate consumer~~an atallowance ~~the point of purchase. For these programs we generally reduce our cost to the retailer~~ for ~~all~~doubtful ~~product~~or ~~sold~~uncollectible ~~under~~trade ~~promotion~~accounts soreceivable ~~there~~based ~~is no, or limited, impact~~ on the ~~retailer’s gross profit. Because we do not~~ ~~know~~age ~~the ultimate amount~~ of ~~product~~outstanding ~~that~~invoices ~~will~~and ~~be sold under promotional programs~~management’s ~~and~~evaluation ~~because retailers pay us 100%~~ of ~~the~~collectability ~~purchase price upon purchase~~ of ~~our product,~~outstanding ~~we accrue an estimated liability for the amount we expect we will have to refund to the retailers due to these programs~~balances. ~~As a result we have an accrual for promotional programs of $27,329 and $27,194 at June 30, 2010 and December 31, 2009, respectively.~~

~~We treat~~e. ~~promotional~~Promotional allowance as contra revenue and recorded promotional allowance of $963 and $26,548 for the three months ended June, 30 2010 and 2009, respectively and $74,171 and $35,531 for the six months ended June, 30 2010 and 2009, respectively.liability

gMany of our promotional programs are based on discounts given to the ultimate consumer at the point of purchase. For these programs we generally reduce our cost ~~Income~~to ~~Taxes~~the retailer for all product sold under promotion so there is no, or limited, impact on the retailer’s gross profit. Because we do not know the ultimate amount of product that will be sold under promotional programs and because retailers pay us 100% of the purchase price upon purchase of our product, we accrue an estimated liability for the amount we expect we will have to refund to the retailers due to these programs. As a result we have an accrual for promotional programs of $89,172 and $27,194 at September 30, 2010 and December 31, 2009, respectively.

We ~~account~~ ~~for income taxes under the Financial Accounting Standards Board’s, FASB,~~treat ~~accounting~~promotional ~~guidance~~allowance ~~for~~as ~~income~~contra ~~taxes.~~revenue Inand ~~accordance~~recorded ~~with~~promotional ~~FASB’s~~allowance ~~accounting~~of ~~guidance~~$47,236 weand ~~recorded~~$126,891for ~~a deferred tax asset for~~ the ~~net~~three ~~operating~~months ~~loss, NOL, carry forward resulting from losses in our year~~ ended ~~December 31~~September, ~~2009. The~~ ~~asset is a result of our ability to utilize the NOL in future periods to offset future taxable income and therefore reduce our taxes payable in the future. At June~~ 30, 2010 and ~~December 31,~~ 2009 ~~we had~~, anrespectively ~~asset~~and ~~for the NOL of~~ $~~718~~121,~~395~~407and ~~and~~ $~~390~~162,~~687,~~422 ~~respectively.~~for ~~However,~~the ~~given~~nine ~~our current~~months ~~going~~ended ~~concern~~September, ~~issues we determined that this asset may not be realized~~30 as2010 itand is2009, ~~dependent~~respectively. For onthe usquarter ~~generating~~ended ~~sufficient~~September ~~future~~30, ~~operating income and~~2010 ~~accordingly~~expect ~~we created~~ a ~~valuation~~promotional allowance of ~~$682,475~~50% ~~and~~or $~~371~~29,~~153~~546 atfor ~~the respective dates based on~~ our ~~judgment~~new ~~and estimates~~promotional program. In The ~~the~~additional ~~future, we~~promotional ~~may~~allowance ~~determine~~of ~~that~~$17,690 weis ~~will~~an ~~be able~~ adjustment to ~~realize~~our ~~all~~promotional orliability ~~most~~for offirst ~~this asset~~ and we ~~will~~second ~~adjust~~quarters ~~our~~of ~~valuation~~2010 ~~allowance accordingly, which will result in a~~promotional ~~reduction~~activity inat ~~income~~Safeway ~~tax~~where ~~expense reported in~~ our ~~financial~~product ~~statements~~was instill ~~the period~~being ofsold ~~change~~under promotion.

9f. Income Taxes

h.We ~~Recent~~account for income taxes under the Financial Accounting Standards Board’s, FASB, accounting ~~pronouncements~~guidance for income taxes. In accordance with FASB’s accounting guidance, we recorded a deferred tax asset for the net operating loss, NOL, carry forward resulting from losses. The asset is a result of our ability to utilize the NOL in future periods to offset future taxable income and therefore reduce our taxes payable in the future. At September 30, 2010 and December 31, 2009 we had an asset for the NOL of $958,418 and $390,687, respectively. However, given our current going concern issues we determined that this asset may not be realized as it is dependent on us generating sufficient future operating income and accordingly we created a valuation allowance of $910,497 and $371,153 at the respective dates based on our judgment and estimates. In the future, we may determine that we will be able to realize all or most of this asset and we will adjust our valuation allowance accordingly, which will result in a reduction in income tax expense reported in our financial statements in the period of change.

g. Recent accounting pronouncements

There have been no recent accounting pronouncements that will directly and materially impact us in the future.

~~5. Warrants~~10

At5. ~~December~~May 3126, ~~2009 $37,822 of warrants were accounted for as part of additional paid in capital. In May~~ 2010, ~~these warrants expired upon recapitalization of the company. There was no change in additional paid in capital for the expiration of the warrants, nor was there any gain recognized.~~Offering

6.On May ~~Fair~~26, ~~Value~~2010 we commenced an offering to certain “accredited investors” (as such term is defined in Regulation D promulgated under the Securities Act of ~~Financial~~1933, ~~Instruments~~as amended) for the right to purchase, at $2 per unit, units consisting of:

Weo ~~have adopted~~Two ~~the~~shares ~~applicable provisions~~ of ~~the~~our ~~new~~common accounting guidance on fair value measurements which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements related to financial instrumentsstock.

~~Current fair~~o ~~value~~A ~~accounting~~base ~~guidance~~warrant ~~includes~~(“Base aWarrant”) ~~hierarchy that is intended~~ to ~~increase consistency~~purchase ~~and~~one ~~comparability~~share inof ~~fair~~our ~~value~~common ~~measurements~~stock ~~and~~at ~~related disclosures.~~the ~~The fair~~ value ~~hierarchy~~per isshare ~~based~~of onour ~~inputs~~common tostock ~~valuation~~in ~~techniques that~~our ~~are~~next ~~used~~qualified tofinancing, ~~measure~~as ~~fair~~defined ~~value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use~~ in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The current guidance establishes a three-tiered fair value hierarchy which prioritizes the ~~inputs~~Base ~~used in measuring fair value as follows:~~Warrant.

A par value warrant (“Par Warrant”) to purchase additional shares of our common stock at its par value ($0.001 per share) in the event its value per share in the next qualified financing is less than $1.00.

During the quarter ended September 30, 2010 we raised $246,000 under this offering issuing 246,000 shares of our common stock and 123,000 base warrants. The units were sold to investors pursuant to the terms of a securities purchase agreement between the Company and the investors. We granted to purchasers of units “piggyback” registration rights with respect to their shares of common stock.

6. Notes Payable

On August 17, 2010, we completed a private placement of $1,100,000 principal amount of promissory notes (the “Notes”) and 1,000,000 shares of common stock to “accredited investors” (the “Private Placement”). The securities were sold to investors pursuant to the terms of a securities purchase agreement (the “Purchase Agreement”) between the Company and the investors. We received gross proceeds from the Private Placement of $1,100,000 which we used to pay down our existing senior debt (see below).

The principal amount of the Notes is due in 12 equal monthly payments of an aggregate of $91,667 each, commencing on January 1, 2012. The Notes bear interest at a rate of 10% per annum. Interest is payable quarterly in arrears commencing on September 30, 2010. Pursuant to the terms of the Notes, we have agreed, among other things, not to (i) pay dividends on our common stock, other than solely in the form of common stock, (ii) repurchase our common stock or other securities, (iii) sell or dispose of all or a substantial portion of our assets unless the proceeds of such sale are used to pay off the Notes, or (iv) make future loans or advances or guarantee debt other than in the ordinary course of business.

Our obligations under the Notes are guaranteed by RHG.

We granted to the purchasers in the Private Placement “piggyback” registration rights with respect to their shares of common stock substantially similar to the registration rights that we have granted to the purchasers in our previous private placements.

We discounted the notes by $47,461, which was allocated to the shares issued with the notes. This discount produces an effective interest rate of 12.67%.

7. Warrants and Fair Value of Financial Instruments

We have adopted the provisions of Accounting Standards Codification (“ASC”) 820-10’s guidance on fair value measurements, which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements related to financial instruments.

Fair value as defined by the guidance is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value estimates of financial instruments are not necessarily indicative of the amounts we might pay or receive in actual market transactions. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Current fair value accounting guidance includes a hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing based upon their own market assumptions. The current guidance establishes a three-tiered fair value hierarchy that prioritizes the inputs used in measuring fair value as follows:

Level 1. Observable inputs such as quoted prices in active markets;

Level 2. Inputs, other than quoted prices, that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and

Level 3. Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

~~The Financial~~To ~~Accounting Standards Board’s accounting guidance requires disclosure~~the ofextent ~~fair~~that ~~value~~multiple ~~information~~inputs ~~about~~are ~~financial~~used ~~instruments,~~to ~~whether~~determine ~~or not recognized in~~ the ~~accompanying~~fair ~~balance sheets. Fair~~ value asof ~~defined~~an byasset ~~the guidance is the~~or ~~price~~a liability, that ~~would be received to sell an~~ asset or ~~paid~~liability towill ~~transfer~~be aclassified ~~liability~~ in an ~~orderly~~its ~~transaction~~entirety ~~between~~based ~~market participants at~~ on the ~~measurement~~lowest ~~date.~~level ~~The fair value estimates~~ of ~~financial~~input ~~instruments~~that ~~are~~is ~~not~~significant ~~necessarily~~to ~~indicative of~~ the ~~amounts~~fair wevalue ~~might pay or receive in actual market transactions. The use of~~measurement, ~~different~~with ~~market~~level ~~assumptions~~3 ~~and/or~~being ~~estimation methodologies may have a material effect on~~ the ~~estimated fair value amounts~~lowest.

·The Financial ~~Receivables~~Accounting Standards Board’s accounting guidance requires disclosure of fair value information about financial instruments, ~~Accounts~~whether ~~Payable~~or ~~and~~not ~~Certain~~those instruments ~~Other~~are ~~Accrued~~recognized ~~Liabilities~~at fair value in the accompanying balance sheets.

oWe ~~Due~~have the tofollowing ~~their~~three ~~short-term~~types ~~nature,~~of ~~fair~~financial ~~value approximates carrying value.~~instruments:

·I. Base ~~Notes~~Warrants ~~payable.~~and Par Warrants

oWe ~~The~~issued the ~~following~~Base ~~table~~Warrants ~~reflects~~and Par Warrants in our May 26, 2010 offering, as discussed above. We have determined that these warrants qualify as derivative financial instruments under the ~~carrying~~provisions ~~value~~of ASC 815-40 “Derivatives and Hedging ~~fair~~– ~~value~~Contracts ofin an Entity’s Own Stock.” These warrant agreements include provisions designed to protect holders from a decline in our stock ~~notes~~price ~~payable~~(“down-round” provision) because: 1) Base Warrants — the exercise price of the Base Warrants will be reduced in the event that we issue equity shares at a price lower than the current $1 exercise price of the warrants, and 2) Par Warrants — the number of shares the Par Warrant converts into increases if we issue equity shares at a price lower than $1 per share. As a result of these provisions, these warrants are not considered “fixed-for-fixed” options as defined under ASC 815-40, and consequently these warrants must be treated as a liability and recorded at fair value at each reporting date with changes in fair value reflected in earnings.

	At June 30,					At December 31,
	2010					2009
	Carrying Value		Fair Value			Carrying Value		Fair Value
Notes payable	$	1,055,182	$	(1,053,444	)	$	1,027,191	$	1,025,499

The Base Warrants and the Par Warrants are considered Level 3 financial liabilities because there is no current market for these securities and therefore the determination of fair value requires significant judgment and use of unobservable inputs. We have estimated the fair value of these warrants using the Black-Scholes option pricing model, and in the case of the Par Warrants an estimate of the number of shares that the Par Warrant would convert into given various possible future share prices.

~~We believe~~For the ~~carrying value of our fixed rate debt is not a reasonable estimate~~ ofBlack-Scholes ~~its~~model fair value due recent changes in the credit markets. We have estimated the fair value of our fixed rate debt using discounted cash flow techniques based on level 3 inputs, as discussed in the paragraph above. Specifically we ~~estimated~~used the ~~fair~~following ~~market discount rate for our debt considering the credit markets, our credit risk and the terms of our debt including call provisions and collateral.~~assumptions:

	Issuance			9/30/2010
Expected volatility (A)		116	%		115	%
Expected dividend yield		0.00	%		0.00	%
Risk-free rate (B)		1.01	%		0.64	%
Expected term, years		3			3

7(A) Because our company did not have its shares traded on a public stock exchange we had to use a proxy to calculate volatility. We used share price data for ~~Related~~three ~~Party~~historical ~~Indebtedness~~years for small publically traded beverage companies with market capitalization of less than $35 million.

(B) We used the rate on U.S. federal government bonds with a three-year term found at http://www.federalreserve.gov/releases/h15/data.htm.

We disclose these warrants on our balance sheet under “Derivative liabilities” and report change in fair value in income from operations under “Loss on derivative liabilities” summarize as follows:

	At September 30, 2010
			Fair Value Measurements Using
	Carrying Value		Level 1		Level 2		Level 3		Total
Derivative liabilities	$	126,680	$	-	$	-	$	126,680	$	126,680
Total derivative liabilities	$	126,680	$	-	$	-	$	126,680	$	126,680

	Fair Value Measurements Using Level 3 Inputs
	Derivative Liabilities		Totals
Beginning balance as of June 30, 2010	$	-	$	-
Issuance of derivative liabilities		122,727		122,727
Total loss on derivative liabilities		3,953		3,953
Ending balance as of September, 30, 2010	$	126,680	$	126,680

II. Notes payable

The following table reflects the carrying value and fair value of our notes payable:

	At September 30,				At December 31,
	2010				2009
	Carrying Value		Fair Value		Carrying Value		Fair Value

Notes payable	$	1,263,814	$	1,263,471	$	1,027,191	$	1,025,499

We believe the carrying value of our RHG Note is not euqual to its a reasonable estimate of its fair value due recent changes in the credit markets. We have estimated the fair value of our fixed rate debt using discounted cash flow techniques based on level 3 inputs, as discussed above. Specifically we estimated the fair market discount rate for our debt considering the credit markets, our credit risk and the terms of our debt including call provisions and collateral.

We believe the carrying value of our new Notes is a reasonable estimate of their fair value as those notes were issued during the quarter ended September, 30, 2010.

III. Receivables, Accounts Payable and Certain Other Accrued Liabilities

Due to their short-term nature, fair value approximates carrying value

8. Related Party Indebtedness

We have transactions with related parties as follows:

Rose Hill Gardens, LLC

We had a secured note payable with a balance of $~~955~~208,~~182~~360 and $927,191 at ~~June~~September 30, ~~2010~~ 2010 and December 31, 2009, respectively, to Rose Hill Gardens, LLC. Rose Hill Gardens, LLC owned 8372.522% and 97.4% at ~~June~~September 30, 2010 and December 31, 2009, respectively. At ~~June~~September 30, 2010 Victoria Briggs, was a member of our board of directors. At December 31, 2009 Victoria Briggs, was our acting president at the time and member of our board of directors, and is the sole owner of Rose Hill Gardens, LLC.

In addition starting January 1, 2009 we began paying Rose Hill Gardens, LLC a consulting fee of $8,500 per month for services in respect of, sales and marketing, fulfillment, production management, customer service, strategic planning, acquisition targeting and advice concerning structure and negotiations of acquisitions and financing transactions. Either party may terminate this agreement at any time.

· Michael D. Bagdasarian, Trustee

At June 30, 2010, we had a secured note payable of $100,000 to Michael D. Bagdasarian, Trustee. Michael Bagdasarian is the father of Chris Bagdasarian who is Victoria Briggs’ husband.

· AFH Holding and Advisory, LLC

The consideration given to AFH Holding and Advisory, LLC for the Exchange consisted of 800,000 shares of our common stock and $250,000, $75,000 of which was paid by Tony Roth. As of June 30, 2010 we have accrued the remaining $175,000 as a liability along with an additional $70,000 for expenses associated with the Exchange reimbursable to AFH Holding and Advisory, LLC. At June 30, 2010 AFH owns approximately 10% of our common stock.

8. Intangibles

We have the following amortizable intangible asset:

	At June 30,							At December 31,
	2010							2009
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Exclusive right to use bottle production mold	$	66,000	$	(14,930	)	$	51,071	$	66,000	$	(10,214	)	$	55,786

While we have the exclusive right to use the bottle production mold in perpetuity, we estimate its economic life to be seven years and amortize it on a straight-line basis over this period. We incurred amortization expense related to this asset of $2,357 and $4,714 for the three and six months ended June 30, 2010 and 2009, respectively.

As of June 30, 2010, we expect amortization expense for this asset for the next six years to be as follows:

2010	$	4,714
2011		9,429
2012		9,429
2013		9,429
2014		9,429
2015		8,641
	$	51,071

9. Calculation of Earnings per Share

Basic earnings per share is calculated by dividing net income by the weighted-average number of shares outstanding during the period. Diluted earnings per share is calculated by dividing net income by the weighted-average number of common shares outstanding after giving effect to all potentially dilutive common shares outstanding during the period. Basic and diluted earnings per share were calculated as follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Net loss	$	(761,669	)	$	(212,097	)	$	(803,593	)	$	(418,418	)
Weighted average common shares outstanding:
Basic		7,562,500			8,976,563			7,343,750			8,976,563
Effect of dilutive potential common stock:
Stock options		-			-			-			-
Non-vested shares		-			-			-			-
Diluted		7,562,500			8,976,563			7,343,750			8,976,563
Basic loss per share	$	(0.10	)	$	(0.02	)	$	(0.11	)	$	(0.05	)
Diluted loss per share	$	(0.10	)	$	(0.02	)	$	(0.11	)	$	(0.05	)

Because their inclusion would have had an anti-dilutive effect, we excluded from share count, and our weighted-average share count calculations, potential common shares of 987,500 for the six months ended June 30, 2010 and 2009 and the three months ended June 30, 2009, consisting of shares issuable upon exercise of warrants.

10. Going Concern

We began operations in January 2007 and have incurred costs in formulating our products and establishing a market for them. We incurred net losses of $761,669 and $212,097 for the three months ended June 30, 2010 and 2009, respectively and net losses of $803,593 and $418,418 for the six months ended June 30, 2010 and 2009, respectively. In addition, at June 30, 2010 our current liabilities of $2,208,318 are considerably in excess of our current assets of $237,543. As a result of these factors, there is substantial doubt about our ability to continue as a going concern and our ability to pay off our current liabilities. We are attempting to obtain additional capital through either debt or equity financing sources, or a combination of the two, however, if we are unable to obtain additional capital we may need to declare bankruptcy, discontinue operations or both. We have incurred significant costs in these efforts during July and August. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

11. Concentrations

We had concentrations in gross revenue and accounts receivable as follows:

	% of Gross Revenue
	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2010			2009			2010			2009
Safeway		56	%		57	%		95	%		60	%
UNFI		-			26	%		2	%		16	%
New Age		-			-			-			5	%
City Super		56	%		-			3	%		-

	% of Accunts Receivable
	At			At
	June 30,			December 31,
	2010			2009
Safeway		-			76	%
UNFI		100	%		-
New Age		-			24	%

Our payment terms generally require payment within 30 days, however, as of June 30, 2010, we had approximately $24,000 in accounts receivable for UNFI the majority of which was greater than 90 days old. We have an allowance of approximately $21,000 for the balances over 90 days old.

We do not require collateral for receivables from our customers, however, we do evaluate new customers for credit worthiness.

12. Subsequent Events

May 26, 2010 Offering

On May 26, 2010 we commenced an offering to certain “accredited investors” (as such term is defined in Regulation D promulgated under the Securities Act of 1933, as amended for the right to purchase, at $2 per unit, units consisting of:

o Two shares of our common stock.

o A base warrant (“Base Warrant”) to purchase one share of our common stock at the value per share of our common stock in our next qualified financing, as defined in the Base Warrant.

o A par value warrant (“Par Warrant”) to purchase additional shares of our common stock at its par value ($0.001 per share) in the event its value per share in the next qualified financing is less than $1.00.

Our first closing on this offering occurred on July 1, 2010 and our second and third closings on July 9, 2010 and July 13, 2010. As of August 18, 2010, we raised $246,000 under this offering issuing 246,000 shares of our common stock and 123,000 base warrants The units were sold to investors pursuant to the terms of a securities purchase agreement between the Company and the investors. We granted to purchasers of units “piggyback” registration rights with respect to their shares of common stock.

RHG Consulting Agreement

On July 1, 2010 we increased the monthly consulting fee paid to RHG to $20,000 per month, however, on August 16, 2010, we modified the contract again changing the fee to $10,000 per month, extending it for one year defining and defining its scope to provide support in the following areas:

On July 1, 2010 we increased the monthly consulting fee paid to RHG to $20,000 per month, however, on August 16, 2010, we modified the contract again changing the fee to $10,000 per month, extending it for one year and defining its scope to provide support in the following areas:

Sales and marketing support

Fulfillment

Production management

Customer Service

Strategic Planning

Acquisition targeting

Advice concerning structure and negotiations of acquisitions and financing transactions

At any time, we may reduce the scope of any service or terminate all of the services under the agreement and accordingly renegotiate the fee paid.

~~CEO Termination~~· Michael D. Bagdasarian, Trustee

~~On August~~At 13December 31, ~~2010~~2009, ~~our~~we ~~CEO~~had ~~and~~a ~~Chairman~~secured ofnote ~~the~~payable ~~board,~~of ~~Tony Roth~~$100,000 ~~terminated~~to ~~his~~Michael D. ~~employment~~Bagdasarian, ~~with~~Trustee. Michael usBagdasarian ~~and~~is ~~stepped~~the ~~down~~father ~~from our board~~ of ~~directors. He~~Chris ~~owns~~Bagdasarian ~~75,000~~who ~~shares~~is ofVictoria ~~our~~Briggs’ ~~common stock~~husband.

~~Barrett Carrere,~~· ~~our~~AFH ~~Chief~~Holding ~~Financial~~and ~~Officer~~Advisory, ~~will~~ ~~assume the responsibilities of our principal executive officer until we hire a new CEO.~~LLC

~~August~~The 17consideration given to AFH Holding and Advisory, LLC for the Exchange consisted of 800,000 shares of our common stock and $250,000, $75,000 of which was paid by Tony Roth. As of September 30, 2010 ~~Debt~~we ~~Refinancing~~have accrued the remaining $175,000 as a liability along with an additional $70,000 for expenses associated with the Exchange reimbursable to AFH Holding and Advisory, LLC. At September 30, 2010 AFH Holding and Advisory, LLC owns approximately 8.7% of our common stock.

On· ~~August 17,~~Barrett ~~2010~~Carrere, weCFO ~~completed a private placement of $1,100,000 principal amount of promissory notes (the “Notes”)~~ and ~~1,000,000~~Principal ~~shares~~Executive of common stock to “accredited investors” (the “Private Placement”). The securities were sold to investors pursuant to the terms of a securities purchase agreement (the “Purchase Agreement”) between the Company and the investors. We received gross proceeds from the Private Placement of $1,100,000 which we used to pay down our existing senior debt (see below).Officer

~~The principal~~As ~~amount~~ of ~~the Notes is due in 12 equal monthly payments of an~~ ~~aggregate~~September ~~of $91~~30,~~667~~ ~~each,~~2010 ~~commencing~~we onowe ~~January~~Barrett 1Carrere, ~~2012.~~our ~~The~~CFO ~~Notes~~and ~~bear interest~~Principal ~~at a rate of 10% per annum. Interest is payable quarterly in arrears~~Executive ~~commencing on September 30~~Officer, ~~2010. Pursuant~~an toaggregate ~~the~~total ~~terms~~ of ~~the Notes~~$106, we701 ~~have~~consisting ~~agreed,~~of: ~~among other things~~$92,882 ~~not~~for ~~to (i) pay dividends on our common~~accrued ~~stock~~compensation expenses, ~~other~~reported ~~than solely~~ in ~~the~~other ~~form~~accrued ofliabilities ~~common~~on ~~stock,~~balance ~~(ii) repurchase~~ our ~~common~~ ~~stock~~sheet, orand ~~other securities~~$13,819 ~~(iii)~~for ~~sell~~expenses orincurred ~~dispose~~on ofbehalf ~~all or a substantial portion~~ of ~~our assets unless~~ the ~~proceeds of such sale are used to pay off the Notes~~Company, ~~or (iv)~~recorded ~~make future loans or advances or guarantee debt other than~~ in accounts ~~the~~payable ~~ordinary course~~on ofour ~~business~~balance sheet.

~~Our obligations under the Notes are guaranteed by RHG pursuant to a Guarantee~~9. Intangibles

We ~~granted~~ ~~to the purchasers in the Private Placement “piggyback” registration~~have ~~rights with respect to their shares of common stock substantially similar to~~ the ~~registration~~ ~~rights~~following ~~that~~amortizable weintangible ~~have granted to the purchasers in our previous private placements.~~asset:

We used the proceeds of the Private Placement to repay (i) all amounts outstanding under our $100,000 Senior Secured Promissory Note, dated June 26, 2009, due to Michael D. Bagdasarian (the “MDB Note”), and (ii) $1,000,000 of the outstanding principal and accrued interest under our Senior Secured Credit Facility from RHG (the “RHG Note”). Following this repayment, the MDB Note has been paid in full and terminated and the outstanding balance of the RHG Note is $192,876. We may make additional borrowings under the RHG Note in the future.

	At December 31,
	2009
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Exclusive right to use bottle production mold	$	66,000	$	(10,214	)	$	55,786

We wrote this asset off on July 1, 2010 as we are no longer using this mold and do not anticipate use of it in the future. The write-off resulted in a charge to income of $51,071.

During the quarter ended September 30, 2010 we purchased the domain name “First Blush” for $1,400. This is an indefinite lived intangible asset.

10. Calculation of Earnings per Share

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Net loss	$	(554,738	)	$	(213,666	)	$	(1,358,331	)	$	(632,084	)
Weighted average common shares outstanding:
Basic		8,707,278			8,976,563			7,506,593			8,976,563
Effect of dilutive potential common stock:
Stock options		-			-			-			-
Non-vested shares		-			-			-			-
Warrants		-			-			-			-
Diluted		8,707,278			8,976,563			7,506,593			8,976,563

Basic loss per share	$	(0.06	)	$	(0.02	)	$	(0.18	)	$	(0.07	)

Diluted loss per share	$	(0.06	)	$	(0.02	)	$	(0.18	)	$	(0.07	)

Because their inclusion would have had an anti-dilutive effect, we excluded from share count, and our weighted-average share count calculations, potential common shares of 641,954 and 114,750 for the nine and three months ended September 30, 2010, respectively and potential common shares of for the nine and three months ended September 30, 2009, consisting of shares issuable upon exercise of warrants.

11. CEO Termination

On August 13, 2010, our CEO and Chairman of the board, Tony Roth, terminated his employment with us and stepped down from our board of directors. He owns 75,000 shares of our common stock.

In addition to his responsibilities as CFO, Barrett Carrere has assumed the responsibilities of our principal executive officer until we hire a new CEO.

12. Concentrations

We had concentrations in gross revenue and accounts receivable as follows:

	% of Gross Revenue
	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2010			2009			2010			2009
Safeway		96	%		84	%		95	%		70	%
UNFI		-			-			1	%		10	%
Palmentere		-			-			-			8	%
New Age		-			-			-			3	%
City Super		4	%		7	%		3	%		3	%

	% of Accounts Receivable
	At			At
	September 30,			December 31,
	2010			2009
Safeway		72	%		76	%
UNFI		28	%		-
New Age		-			24	%

Our payment terms generally require payment within 30 days, however, as of September 30, 2010, we had approximately $24,000 in accounts receivable for UNFI the majority of which was greater than 90 days old. We have an allowance of approximately $21,000 for the balances over 90 days old.

We do not require collateral for receivables from our customers; however, we do evaluate new customers for credit worthiness.

13. Going Concern

We began operations in January 2007 and have incurred costs in formulating our products and establishing a market for them. We incurred net losses of $554,738 and $213,666 for the three months ended September 30, 2010 and 2009, respectively and net losses of $1,358,331 and $632,084 for the nine months ended September 30, 2010 and 2009, respectively. In addition, at September 30, 2010 our current liabilities of $1,579,044 are considerably in excess of our current assets of $308,624. As a result of these factors, there is substantial doubt about our ability to continue as a going concern and our ability to pay off our current liabilities. We are attempting to obtain additional capital through either debt or equity financing sources, or a combination of the two, however, we have had difficulties doing so and if we are unable to obtain additional capital we may need to declare bankruptcy, discontinue operations or both. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

14. Subsequent Events

On October 5, 2010 one of our vendors, Zuckerman-Honickman, Inc. (“Zuckerman”) filed an action against First Blush, Inc. and First Blush Brands Inc. in Los Angeles Superior Court, case name Zuckerman-Honickman, Inc. v. First Blush, Inc., case number BC446875. Zuckerman is seeking recovery of $122,678 for past due invoices and 10% interest and legal costs. The $122,678 is part of our accounts payable balance at September 30, 2010 and December 31, 2009. We have reached a settlement calling for monthly payments of $10,000, the first of which has already been made.

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

Forward-looking Information

The following discussion should be read in conjunction with our Consolidated Financial Statements and Notes thereto, included elsewhere within this report. This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, including statements using terminology such as “can,” “may,” “believe,” “designed to,” “expect,” “intend to,” “plan,” “anticipate,” “estimate,” “potential,” or “continue,” or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. You should read statements that contain these words carefully because they:

•· discuss our future expectations;

•· contain projections of our future results of operations or of our financial condition; and

•· state other “forward-looking” information.

We believe it is important to communicate our expectations. However, forward-looking statements involve risks and uncertainties and our actual results and the timing of certain events could differ materially from those discussed in or implied by forward-looking statements as a result of certain factors, including those set forth in our Current Report on Form 8-K filed on May 13, 2010., as amended. All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to us as of the date thereof, and we assume no obligations to update any forward-looking statement or risk factor, unless we are required to do so by law.

Introduction

We produce and market two product lines:

An all natural, premium grape juice crafted from 100% pure, fine wine grapes. We currently offer four juices: Cabernet, Merlot, Syrah and Chardonnay juice under the name “First Blush.”

We sell our products in over 1,500 retail outlets in the United States, primarily through grocery stores.

Executive Overview

We, First Blush Brands, Inc., formerly known as AFH Holding II, Inc., were incorporated as a Delaware corporation on April 16, 2007 as a development stage company with no assets and no business operations. We were organized to provide a method for a foreign or domestic private company to become a reporting (“public”) company. We registered its shares of common stock under Section 12(g) of the Exchange Act. We were what is commonly known as a “shell” company. At the time of the exchange, AFH Holding and Advisory, LLC was our sole shareholder.

On May 12, 2010, we entered into a share exchange agreement with First Blush, Inc. and its security holders whereby each outstanding share of common stock and Series A Preferred Stock of First Blush, Inc. was transferred to us in exchange for shares of our common stock. Upon consummation of the exchange agreement, First Blush, Inc. became a wholly owned subsidiary of ours, and the security holders of First Blush became our shareholders, owning approximately 89.06% of our outstanding common stock. On June 8, 2010, we changed our name to First Blush Brands, Inc.

During the first quarter of 2010 we made a strategic decision to delay production of additional finished goods in anticipation of the share exchange and the related reorganization of our ~~company~~Company. As a result of this decision we ~~depleted~~ depleted our finished goods inventory by March 31, 2010. ~~With~~ During ~~our recapitalization completed, we have started~~ the ~~initial~~three ~~stages of our next~~months ~~production~~ended asSeptember ~~part~~30, of2010 ~~our~~we ~~restocking~~reinitiated ~~of Safeway stores. We expect this~~ production ~~to be completed in September 2010. Because our racks at Safeway hold 12 cases~~ of our product and ~~the~~made ~~Safeway warehouses hold~~the ~~additional~~first ~~back-stock~~initial ofrestocking ~~our~~sales ~~product, most~~to Safeway. We ~~stores~~expect ~~have maintained our product on~~ the ~~floor, however, many stores are either running low~~restocking orprocess ~~our~~with ~~out~~Safeway ofto ~~certain~~continue ~~SKU’s,~~through ~~especially Chardonnay. As a result of our strategic decision, revenue for~~ the ~~second~~fourth quarter is2010 ~~$1,789,~~and ~~which is considerably less than~~ the ~~comparable~~ first quarter ~~last~~of ~~year~~2011. ~~We expect~~ Our arelationship ~~spike~~with inSafeway ~~revenue~~has ~~for~~not Q3been ~~and/or~~impaired ~~Q4 as we restock Safeway~~even ~~stores. We~~though ~~expect~~there ~~our~~was ~~revenues~~a todelay ~~normalize~~ in ~~2011~~restocking asits ~~typical reorder~~store ~~patterns are established~~shelves.

15As a result of our strategic decision, revenue for the nine months ended September 30, 2010 was $151,682, and revenue for the three months ended September 30, 2010 was $11,855, both of which were considerably less than the comparable periods last year. We expect a spike in revenue for fourth quarter 2010 as we restock Safeway stores; however we expect that revenue for the year ending December 31, 2010 will be less than revenue for the year ending December 31, 2009. We have started a very aggressive promotional campaign for the fourth quarter alternating between buy-one-get-one-free promotions and buy-10-get-10 free promotions resulting in a promotional allowance approximating 50%. The initial results of these programs have been favorable, and we expect they will contribute to the spike in fourth quarter revenue as Safeway purchases additional product to keep up with demand.

~~In addition, we incurred significant legal and accounting costs in the second quarter 2010 as part of our share exchange and financing efforts.~~17

In 2011 we expect our revenues fluctuation to be more consistent with 2009 as typical reorder patterns at Safeway are established. We also expect that our gross revenue from Safeway, and therefore our total gross revenue, will increase due to the following: 1) we expect to continue with our aggressive promotional campaign resulting in promotional allowances approximating 40-50%, 2) we expect to manage our brand more effectively by taking steps to ensure that stores are adequately stocked, 3) we expect to replace racks in stores where they have been damaged and therefore removed from the floor and ensure that in the future racks are reordered on a timely basis if damaged, and 4) we expect to work closer with Safeway management to ensure that product is reordered on a timely basis and that we are optimizing our promotional programs.

We have obtained approval from The Kroger Co. to launch our products in certain Kroger locations; however, we will not proceed with the launch unless we are adequately capitalized to support its success. As of right now, due to difficulties obtaining additional capital, we do not anticipate the launch to occur in the near future. We are not considering launching in any other stores right now.

During the quarter we completed a private placement of $1,100,000 principal amount of promissory notes and 1,000,000 shares of common stock. We received gross proceeds from the placement of $1,100,000, which we used to pay down our existing senior debt.

During the quarter we also completed an offering consisting of equity and warrants for which we received $246,000. We used these proceeds for production and for other working capital requirements; however, efforts to raise additional capital necessary to meet our obligations have not been successful. We are considering various strategies to raise the cash necessary to pay our obligations and continue the growth of our brand, including sales of equity, borrowing additional debt, entering into strategic partnerships and merging or selling the Company.

Critical Accounting Policies and Use of Estimates

We believe that the application of the following accounting policies, which are important to our financial position and results of operations, require us to make significant judgments and estimates. For a summary of all our accounting policies, including the accounting policies discussed below, see Note 4, Summary of Significant Accounting Policies in our financial statements included this filing.

Promotional allowance

Many of our promotional programs are based on discounts given to the ultimate consumer at the point of purchase. For these programs we generally reduce our ~~cost~~ cost to the retailer for all product sold under promotion so there is no, or limited, impact on the retailer’s gross profit. Because we do not know the ultimate amount of product that will be sold under promotional programs and because retailers pay us 100% of the purchase price upon purchase of our product, we accrue an estimated liability for the amount we expect we will have to refund to the retailers due to these programs. As a result we have an accrual for promotional programs of $2789,~~329~~172 and $27,194 at ~~June~~September 30, 2010 and ~~December~~ December 31, 2009, respectively.

We treat promotional allowance as contra revenue and recorded promotional allowance of $~~963~~47,236 and $26126,~~548~~891for ~~for~~ the three months ended ~~June~~September, 30 2010 and 2009, ~~respectively~~ respectively and $74121,~~171~~407and ~~and~~ $35162,~~531~~422 for the ~~six~~nine months ended ~~June~~September, 30 2010 and 2009, respectively. For the quarter ended September 30, 2010 expect a promotional allowance of 50% or $29,546 for our new promotional program. The additional promotional allowance of $17,690 is an adjustment to our promotional liability for first and second quarters of 2010 promotional activity at Safeway where our product was still be sold under promotion.

Income Taxes

We account for income taxes under the Financial Accounting Standards Board’s, FASB, accounting guidance for income taxes. In accordance with FASB’s accounting guidance, we recorded a deferred tax asset for the net operating loss, NOL, carry forward resulting from losses in our year ended December 31, 2009. The asset is a result of our ability to utilize the NOL in future periods to offset future taxable income and therefore reduce our taxes payable in the future. At ~~June~~September 30, 2010 and December 31, 2009 we had an asset for the NOL of $~~718~~958,~~395~~418 and $390,687, respectively. However, given our current going concern issues we determined that this asset may not be realized as it is dependent on us generating sufficient future operating income and accordingly we created a valuation allowance of $~~682~~910,~~475~~497 and $371,153 at the respective dates based on our judgment and estimates. In the future, we may determine that we will be able to realize all or most of this asset and we will adjust our valuation allowance accordingly, which will result in a reduction in income tax expense reported in our financial statements in the period of change.

1619

Results of Operations

The following table sets forth our statement of results of operation data as a percentage of net sales from continuing operations for the periods indicated:

	For the Three Months Ended June 30,															For the Six Months Ended June 30,
	For the Three Months Ended September 30,															For the Nine Months Ended September 30,
	2010						2009									2010						2009
	$			% of Gross			$			% of Gross			% Change			$			% of Gross			$			% of Gross			% Change
Revenue:
Gross revenue	$	259,~~752~~091					$	~~232~~252,~~719~~411						9876.86	%	$	~~213~~273,~~998~~089					$	~~369~~622,~~744~~155						4256.1	%
Promotion allowance		(~~963~~47,236	)		-3580	%		(26126,~~548~~891	)		-1150	%		9662.48	%		(74121,~~171~~407	)		-3544	%		(35162,~~531~~422	)		-1026	%		~~-108~~25.83	%
Net revenue	$	111,~~789~~855					$	~~206~~125,~~171~~520						9990.16	%	$	~~139~~151,~~827~~682					$	~~334~~459,~~213~~733						5867.20	%

	For the Three Months Ended June 30,															For the Six Months Ended June 30,
	For the Three Months Ended September 30,															For the Nine Months Ended September 30,
	2010						2009									2010						2009
	$			% of Net Rev			$			% of Net Rev			% Change			$			% of Net Rev			$			% of Net Rev			% Change
Gross Profit:
Net revenue	$	111,~~789~~855					$	~~206~~125,~~171~~520						9990.16	%	$	~~139~~151,~~827~~682					$	~~334~~459,~~213~~733						5867.20	%
Cost of goods sold		1324,~~506~~845			~~755~~210	%		~~120~~99,~~664~~804			5879.5	%		8875.81	%		97122,~~768~~613			7081	%		~~199~~299,~~282~~086			5965.61	%		5059.90	%
Gross profit (loss)	$	(1112,~~717~~990	)		-~~655~~110	%	$	8525,~~507~~716			4120.5	%		~~113~~150.75	%	$	4229,~~059~~069			3019	%	$	~~134~~160,~~931~~647			4034.49	%		6881.89	%
Selling, general and administrative expense		~~696~~439,~~829~~252			~~38951~~3705	%		~~268~~77,~~019~~278			~~130~~62	%		-~~160~~468.04	%		~~757~~1,~~961~~197,213			~~542~~789	%		~~472~~549,~~651~~929			~~141~~119.46	%		-60117.47	%
Abnormal producition losses		-						-									-						28,415
Loss on derivative liabilities		3,953						-									3,953						-
Write-off of inventory		28,613						-									28,613						-
Abnormal production costs		21,213						-									21,213						28,415
Operating loss	$	(737,159	)		-41205	%	$	(182,512	)		-89	%		-303.9	%	$	(744,515	)		-532	%	$	(366,135	)		-109.6	%		-103.3	%
Write-off of intangible asset		51,071						-									51,071						-
Write-off of inventory		-						131,213									28,613						131,213
Operating loss	$	(528,479	)		-4458	%	$	(182,775	)		-146	%		-189.1	%	$	(1,272,994	)		-839	%	$	(548,910	)		-119.4	%		-131.9	%

The results of operations for three and ~~six~~nine months ended ~~June~~September 30, 2010 are significantly less than the comparable periods in 2009 because of our strategic decision to delay production of additional finished goods in anticipation of the share exchange and the related reorganization of our company. As During the three months ended September 30, 2010 we reinitiated production of our product and made the first initial restocking sales to Safeway. For the quarter ended September 30, 2010, we expect a promotional allowance of approximately 50% ~~result~~or $29,546 for our new promotional program. The additional promotional allowance of ~~this~~ ~~decision~~$17,690, resulting in an aggregate promotional allowance of $47,236, is an adjustment to our promotional liability for promotional activity occurring during the first and second quarters of 2010 at Safeway where our product was still sold under our promotional programs. Had we ~~depleted~~not had this additional promotional adjustment, our ~~finished~~gross ~~goods~~profit ~~inventory~~margin bywould ~~March~~have been 16% 31for the three months ended September 30, 2010 and 28% for the nine months ended September 30, 2010. Given a promotional allowance of 50% we expect gross profit margin to be approximately 20%, however, to the extent that we are not generating significant revenue small unexpected expenses can have a large impact on the gross profit margin.

~~Gross~~We expect ~~profit~~a spike in revenue for ~~the~~fourth ~~three~~quarter ~~months~~2010 ~~ended~~as ~~June~~we 30restock Safeway stores; however we expect that revenue for the year ending December 31, 2010 ~~was~~to ~~negative~~be asless athan revenue ~~result~~for ~~of uncapitalized~~the ~~storage~~year ~~costs~~ending ~~for~~December ~~raw~~31, ~~materials~~2009. ~~These~~ We ~~costs~~have ~~also~~started a very ~~caused~~aggressive ~~gross~~promotional ~~profit~~campaign for the ~~six~~fourth ~~months~~quarter ~~ended~~alternating ~~June~~between buy-one-get-one-free 30promotions and buy-10-get-10-free promotions resulting in a promotional allowance approximating 50%. The initial results of these programs have been favorable, ~~2010~~and towe beexpect ~~lower~~they ~~than~~will contribute to the ~~comparable~~ ~~period~~spike in fourth ~~2009~~quarter revenue as Safeway purchases additional product to keep up with demand.

Selling, general and administrative costs increased significantly for the three and ~~six~~nine months ended ~~June~~September 30, 2010 relative to the comparable periods 2009 due to costs ~~legal~~incurred as part of our share exchange and financing efforts. For the nine months ended September 30, 2010 we had the following specific increases in selling, general and ~~accounting~~administrative costs ~~incurred~~relative to the comparable period in 2009: 1) expenses related to consulting bankers and their advisors $330,000, 2) expenses related to legal services, $435,000, and 3) expenses related to accounting services $67,000. The expenses related to the ~~second~~consulting ~~quarter~~banker and ~~2010~~their advisors as ~~part~~well as most of ~~our~~the ~~share~~legal services were incurred as part of the share exchange and our subsequent financing efforts. On an ongoing basis we expect to incur some level of legal and accounting expenses, and may incur significant legal and accounting expenses depending on transactions that we enter into. The increases for the nine months ended September 30, 2010 were offset by the following decreases relative to the comparable period in 2009: 1) expenses related to compensation $287,000 2) general selling costs and commissions $109,000, and 3) research and development $51,000. We expect expenses related to compensation and consulting for the year ending December 31, 2010 to be less than the same expenses for the year ended December 31, 2009 due to the reductions in head count. We also expect that selling costs will be less for the year ended December 31, 2010 relative to the year ended December 31, 2009 as it is our expectation that revenue will be less for the year ended December 31, 2010.

With our recapitalization completed, we have started the initial stages of our next production as part of our restocking of Safeway stores. We expect this production to be completed in September 2010. Because our racks at Safeway hold 12 cases of our product and the Safeway warehouses hold additional back-stock of our product, most Safeway stores have maintained our product on the floor, however, many stores are either running low or our out of certain SKU’s, especially Chardonnay. We expect a spike in revenue for Q3 and/or Q4 as we restock Safeway stores. We expect our revenues to normalize in 2011 as typical reorder patterns are established.20

In addition, we incurred significant legal and accounting costs in the second quarter 2010 as part of our share exchange and financing efforts. We continued to incur significant legal costs in July and August as a result of our financing efforts and expect to continue incurring these costs through the rest of 2010.:

17· During the nine months ended September 30, 2010:

We wrote off $28,613 of raw materials (labels and trays) that were unsuitable for future production because of our switch to boxes instead of trays and our change to new UPC codes that specifically identifying First Blush Brands.

We incurred $21,213 of abnormal production costs related to shipping raw materials from our old bottler to our new bottler, abnormal air freight costs and performing additional and non-routine testing on our bottlers’ equipment in preparation for our initial production.

We wrote off our exclusive right to use a bottle production mold as we are no longer using this mold and do not anticipate to use it in the future. This write-off resulted in a charge to income of $51,071.

During the nine months ended September 30, 2009:

We had abnormal production losses in excess of the 5% industry norm equating to $28,415 due to issues with our bottler.

We switched from using glass bottles to PET (Polyethylene terephthalate) bottles as part of a strategic marketing decision. As a result of this decision, we wrote off $131,213 of glass bottle finished goods.

Liquidity and Capital Resources

	For the Six Months Ended
	For the Nine Months Ended
	June 30,
	September 30,
	2010			2009
Cash flow used by operating activities:
Cash collected from customers	$	~~162~~165,~~362~~113		$	~~108~~324,~~800~~020
Cash paid to suppliers		(70206,~~717~~852	)		(~~111~~126,~~370~~280	)
Cash paid for employees & management services		-(22,583	)		(~~348~~374,~~003~~914	)
Cash paid for other selling, general & administrative costs		(~~193~~237,~~811~~147	)		(~~231~~256,~~322~~208	)
Net cash used by operating activities	$	(102,166	)	$	(581,895	)
Cash paid for interest		(288,951	)		-
Net cash used by operating activities	$	(590,420	)	$	(433,382	)

Activity for the ~~six~~nine months ended ~~June~~September 30, 2010 relative to the ~~six~~nine months ended September ~~June~~ 30, 2009 is as follows:

· Cash collected from customers – We collected more cash from customers in ~~2010~~2009 because ofnet revenue was greater for the ~~increase~~nine inmonths ~~sales~~ended toSeptember ~~one~~30, of2009 ~~our~~than ~~key~~the ~~accounts~~comparable period 2010.

· Cash paid to suppliers – We paid less to suppliers in 2010 as we ~~used~~had ~~inventory~~less onrevenue ~~hand~~and ~~for~~therefore ~~sales~~less production.

· Cash paid for management services – We paid noless cash for management services in 2010 as we terminated consultants in 2009 in response to the economic crisis and paid for other management and administrative services by increasing our notes payable. In addition, we have only paid our CFO for one month of his employment and have accrued compensation expense owing to him of $92,882 at September 30, 2010.

· Cash paid for ~~other~~interest ~~selling, general & administrative costs~~ – We paid ~~less~~accrued ininterest ~~2010~~on asour wenotes ~~pared~~payable ~~down~~as ~~operations~~a inresult ~~response~~of toour ~~the~~debt ~~economic~~refinancing ~~crisis~~discussed below.

As of ~~June~~September 30, 2010, we had approximately $~~238~~309,000 of current assets, approximately $0 3,600 of which was cash and the rest of which was receivables, inventory and ~~inventory~~pre-paid assets. On average, our receivables are collected in approximately 30 days. Total current liabilities at ~~June~~September 30, 2010 totaled approximately $21,~~208~~579,000 of which approximately $~~566~~755,000 are trade ~~and operating payables~~accounts. At September ~~June~~ 30, 2010, we had a net working capital deficiency of approximately $1,~~884~~270,000. Our ~~need~~operating ~~for~~ cash needs during the ~~six~~nine months ended ~~June~~ September 30, 2010 ~~was~~were primarily funded through operations, borrowings and ~~borrowings~~the raising of $246,000 in an offering, discussed below.

AsOn ofMay ~~June 30~~26, 2010 we ~~had~~commenced ~~outstanding~~an ~~borrowings~~offering ~~on our note payable~~ to ~~RHG~~certain ~~of approximately~~“accredited ~~$955,000~~investors” ~~and~~(as ~~under that note have unused availability of~~such ~~$45,000. The~~term ~~note~~is ~~and~~defined ~~all~~in ~~unpaid~~Regulation ~~and~~D ~~accrued~~promulgated ~~interest~~under isthe ~~due~~Securities onAct ~~the sooner~~ of ~~30 days demand notice or December 31~~1933, ~~2010. In addition we~~as ~~have~~amended ~~$100,000~~for ~~note~~the ~~payable~~right to apurchase, ~~related~~at ~~party~~$2 ~~that~~per isunit, ~~due~~units onconsisting ~~demand. Both notes are secured by substantially all~~ of ~~our assets.~~:

~~Subsequent to~~o ~~June~~Two ~~30,~~shares ~~2010~~of ~~we have incurred significant legal and consulting fees in~~ our ~~attempts~~ tocommon ~~raise additional capital~~stock.

Ono ~~August 17,~~A ~~2010,~~base wewarrant ~~completed a private placement of $1,100,000 principal amount of promissory notes~~ (~~the~~ “~~Notes~~Base Warrant”) ~~and 1,000,000 shares of common stock~~ to ~~“accredited~~ ~~investors”~~purchase ~~(as~~one ~~such~~share ~~term is defined in Regulation D promulgated under the Securities Act~~ of ~~1933,~~our ascommon ~~amended~~stock ~~(the~~at ~~“1933 Act”)) (~~the ~~“Private Placement”).~~value ~~The~~per ~~securities~~share ~~were sold to investors pursuant to the terms~~ of ~~a securities~~our ~~purchase~~common ~~agreement~~stock ~~(the~~in ~~“Purchase~~our ~~Agreement”)~~next ~~between~~qualified ~~the~~financing, ~~Company~~as ~~and the~~defined ~~investors. We~~in ~~received gross proceeds from~~ the ~~Private~~Base ~~Placement of $1,100,000 which we used to pay down our existing senior debt (see below)~~Warrant.

~~The principal~~o ~~amount~~A ofpar ~~the~~value ~~Notes~~warrant is(“Par ~~due~~Warrant”) into 12purchase ~~equal~~additional ~~monthly~~shares ~~payments~~ of ~~an aggregate~~our ofcommon ~~$91,667~~stock ~~each,~~at ~~commencing~~its onpar ~~January~~value ~~1, 2012~~($0.001 ~~The Notes bear interest at a rate of 10%~~ per ~~annum.~~share) ~~Interest is payable quarterly~~ in ~~arrears commencing on September 30, 2010. Pursuant to~~ the ~~terms~~event ofits ~~the~~value ~~Notes, we~~per ~~have~~share ~~agreed, among other things, not to (i) pay dividends on our common stock, other than solely~~ in the ~~form~~next ofqualified ~~common~~financing ~~stock,~~is ~~(ii)~~less repurchase our common stock or other securities, (iii) sell or dispose of all or a substantial portion of our assets unless the proceeds of such sale are used to pay off the Notes, or (iv) make future loans or advances or guarantee debt other than ~~in the ordinary course of business~~$1.00.

~~Our~~During ~~obligations~~the quarter ended September 30, 2010, we raised $246,000 under ~~the~~this ~~Notes~~offering issuing ~~are~~246,000 ~~guaranteed~~shares byof ~~RHG~~our common stock and 123,000 base warrants. The units were sold to investors pursuant to the terms of a securities purchase ~~Guarantee~~agreement between the Company and the investors. We granted to purchasers of units “piggyback” registration rights with respect to their shares of common stock.

WeOn ~~used~~August ~~the~~17, ~~proceeds~~2010, ofwe ~~the~~completed ~~Private~~a ~~Placement~~private toplacement ~~repay~~of ~~(i) all amounts outstanding under our~~ $1,100,000 ~~Senior~~principal ~~Secured~~amount ~~Promissory Note, dated June 26, 2009, due to Michael~~of D.promissory ~~Bagdasarian~~notes (the “~~MDB Note~~Notes”), and ~~(ii) $~~1,000,000 shares of ~~the~~common ~~outstanding~~stock to ~~principal~~“accredited ~~and~~investors” ~~accrued~~(as ~~interest~~such term is defined in Regulation D promulgated under ~~our~~the ~~Senior~~Securities ~~Secured~~Act ~~Credit~~of ~~Facility~~1933, ~~from~~as ~~RHG~~ amended (the “~~RHG~~1933 ~~Note~~Act”)) (the “Private Placement”). ~~Following~~The ~~this~~securities ~~repayment,~~were ~~the~~sold ~~MDB~~to ~~Note~~investors ~~has~~pursuant ~~been~~to ~~paid~~the interms ~~full~~of a ~~and~~securities ~~terminated~~purchase ~~and~~agreement (the ~~outstanding~~“Purchase ~~balance~~Agreement”) ofbetween the ~~RHG~~Company ~~Note~~and the isinvestors. We received gross proceeds from the Private Placement of $~~192~~1,~~876. We~~100,000 ~~may~~which ~~make~~we ~~additional~~used ~~borrowings~~to ~~under~~pay ~~the~~down ~~RHG~~our ~~Note~~existing insenior ~~the~~debt, discussed ~~future~~below.

WeThe principal ~~are~~amount of the Notes is due in 12 equal monthly payments of an ~~continuing~~aggregate ~~our~~of ~~efforts~~$91,667 toeach ~~raise~~month, ~~capital~~commencing toon ~~pay~~January ~~our~~1, ~~remaining~~2012. ~~current~~The ~~liabilities~~Notes bear ~~and~~interest ~~provide~~at ~~capital~~a ~~for~~rate ~~future~~of ~~expansion~~10% per annum. Interest is payable quarterly in arrears commencing on September 30, 2010.

1822

Our obligations under the Notes are guaranteed by RHG.

We used the proceeds of the Private Placement to repay (i) all amounts outstanding under our $100,000 Senior Secured Promissory Note, dated September 26, 2009, due to Michael D. Bagdasarian (the “MDB Note”), and (ii) $1,000,000 of the outstanding principal and accrued interest under our Senior Secured Credit Facility from RHG (the “RHG Note”). Following this repayment, the MDB Note has been paid in full and terminated and the outstanding balance of the RHG Note was $192,876 after the repayment increasing to approximately $208,000 at September 30, 2010. The note payable to RHG and all unpaid and accrued interest is due on the sooner of 30 days demand notice or December 31, 2010. RHG intends to extend the December 31, 2010 due date on the RHG Note keeping their right to call the note and accrued interest with 30 days notice. RHG may continue to provide additional funds under the RHG Note as needed to fund on-going operating needs. If RHG does not extend the due date of the RHG Note past December 31, 2010 or calls the note in the future, we intend to seek additional financing to pay the RHG Note. We may not be successful in obtaining this financing. If we are not successful, we would be in default on the RHG Debt. Our new Notes have a cross-default provision that makes us in default on the Notes if we are in default any indebtedness or obligation exceeding $250,000. An event of default under the Notes would increase our interest rate to 12%, however, it would not make the Notes immediately due nor would it accelerate required payments.

We are continuing our efforts to raise capital to fund operations, pay our remaining current liabilities and provide capital for future expansion. We are considering a variety of possibilities including the sale of equity, borrowing additional debt, entering into strategic partnerships, and merging or selling the Company. The ultimate strategy that we choose will determine our cash source and needs for the next 12-24 months.

If we were to support our expected sales to Safeway and increase our customer base to other Key Accounts, we estimate that we will need between $3.6 million and $6.6 million of additional funds over the next two years. The primary use of these funds will be for marketing expenses associated with attracting new business as well as the build-up of inventory to meet customer demands. With these additional funds, we expect that we can support and obtain sales ranging from $2.5 million to $3.2 million over the next year and $8.0 million and $12.2 million the year after. Without additional funds we may not even be able to support the needs of our existing Key Account, Safeway. We have funded working capital needs through product sales, management of working capital components of our business, sales of preferred stock. We anticipate that, in order to grow sales ranging from $2.5 million to $3.2 million over the next year and $8.0 million and $12.2 million the year after, given an average operating margin of 8% on those sales, we will need between $3.6 million and $6.6 million for manufacturing, research and development, marketing, sales channel development, general and administrative expenses, short and long-term debt repayments and interest expense, and approximately $2.5 million to establish a level of inventory and working capital necessary to increase our growth in the years thereafter. We can offer no assurance that we will be able to generate cash or obtain financing sufficient to meet these needs. This cash need assumes the incurrence and repayment within such two-year period of $3.0 million of debt at an average interest rate of 10% and up to $3.0 million in capital contributions as well as the continued payment of our accounts payable and collections on our accounts receivable in accordance with our past experience.

Due to the economic crisis sources of financing for companies like ours has become more difficult to find. In the event that we are unable to obtain additional financing we will not be able to expand our company as planned and become profitable.

If we do not continue with our current strategy and only focus on Safeway, we will require approximately $2.6 million to payoff current debt and payables in addition to on-going operating cash flow needs.

Off-Balance-Sheet Arrangements

As of ~~June~~September 30, 2010, we did not have any off-balance-sheet arrangements, as defined in Item 303(a)(4) of Regulation S-K.

Recent Accounting Pronouncements

See Note 4 to the financial statements included in Part I, Item 1 of this report.

Item 3. ~~Quantitative~~Legal ~~and Qualitative Disclosures About Market Risk.~~Proceedings

Item 4. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 45. Controls and Procedures.

Disclosure Controls and Procedures

As of ~~June~~September 30, 2010, Barrett Carrere, our Chief Financial Officer and Secretary ~~and~~ and principal executive officer evaluated the effectiveness of our "disclosure controls and procedures" as defined in Rules 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 ("Disclosure Controls"). Based upon this evaluation, Mr. Carrere concluded that the Disclosure Controls were effective, as of the date of their evaluation, in reaching a reasonable level of assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms and that any information relating to us that is required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive/financial officer, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the fiscal quarter ended ~~June~~September 30, 2010, there were no changes in our "internal control over financial reporting" as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934 (“Internal Control”), ~~that~~ that have materially affected or are reasonably likely to ~~materially~~ materially affect our Internal Control.

1924

PART II- OTHER INFORMATION

Item 6. Exhibits.

Exhibit		Description

31		Certification of principal executive officer and Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934.

32		Certification of principal executive officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

2025

SIGNATURES

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

Date: August 23, 2010	FIRST BLUSH BRANDS, INC.
Date: November 22, 2010	FIRST BLUSH BRANDS, INC.
	/s/ Barrett Carrere
	Barrett Carrere, Chief Financial Officer and Secretary (principal executive and financial officer)

2126

EXHIBIT INDEX

Exhibit		Description

31		Certification of principal executive officer and Chief Financial Officer pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934.

32		Certification of pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

2227

Filing Compare · FIRST BLUSH BRANDS, INC.