UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549







FORM
10-Q





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





For the
quarterly period ended September 30,
2009





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





For the
transition period from ________________________ to
________________________





Commission
File Number:333-124304




FORGEHOUSE,
INC.


(Exact
name of registrant as specified in its charter)





Nevada
              20-1904354(State
      or other jurisdiction of incorporation or organization)
              (I.R.S.
      Employer Identification No.)








4625 Alexander Dr., Suite 150, Alpharetta,
      Georgia
              30005(Address
      of principal executive offices)
              (Zip
      Code)





(404) 495-3910


(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 Exchange Act during the past
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 xNo
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.





(Check
one):





Large
      accelerated filer  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer  ̈
            Smaller
      reporting company x





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


Yes
 ̈  No
x





Indicate
the number of shares outstanding of each of the issuer’s classes of common
equity, as of the latest practicable date:


28,289,834
shares of common stock issued and outstanding at November 23,
2009.








FORGEHOUSE,
INC.


FORM
10-Q


QUARTERLY
PERIOD ENDED SEPTEMBER 30, 2009





INDEX





A
      Note About Forward Looking Statements
                                                      3PART
      I – FINANCIAL INFORMATIONItem
      1 – Unaudited Financial Statements of ForgeHouse, Inc. (a Nevada
      corporation)
                                                      4Balance
      Sheets - as of September 30, 2009 and December 31, 2008
      (Unaudited)
                                                      F-2Statements
      of Operations - for the Each of the Three- and Nine-Month Periods ended
      September 30, 2009 and 2008 (Unaudited)
                                                      F-3Statements
      of Cash Flows - For the Each of the Nine-Month Periods ended September 30,
      2009 and 2008 (Unaudited)
                                                      F-4Notes
      to the Unaudited Financial Statements
                                                      F-6Item
      2 – Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
                                                      5Item
      4T – Controls and Procedures
                                                      9PART
      II – OTHER INFORMATIONItem
      6 – Exhibits
                                                      10Signatures
                                                      12


2





A
Note About Forward-Looking Statements




This
Quarterly Report on Form 10-Q contains “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995 that are based
on management’s current expectations.  These statements may be
identified by their use of words like “plans,” “expect,” “aim,” “believe,”
“projects,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and
other expressions that indicate future events and trends.  All
statements that address expectations or projections about the future, including
statements about our business strategy, expenditures, and financial results, are
forward-looking statements.  We believe that the expectations
reflected in such forward-looking statements are accurate.  However,
we cannot assure you that such expectations will occur.




The
following discussion of the financial condition and results of operation of
ForgeHouse, Inc. (“ForgeHouse,” the “Company,” “we,” and “us”) should be read in
conjunction with the financial statements and the notes to those statements
included herein.  Actual results could differ materially from those in
the forward looking statements due to a number of uncertainties including, but
not limited to, those discussed in Management’s Discussion and Analysis of
Financial Condition and Results of Operations.  Factors that could
cause future results to differ from these expectations include general economic
conditions; further changes in our business direction or strategy; competitive
factors; market uncertainties; a continuing inability to obtain sufficient
financing to effectuate our business plan; and an inability to attract, develop,
or retain consulting or managerial agents or independent
contractors.  As a result, the identification and interpretation of
data and other information and their use in developing and selecting assumptions
from and among reasonable alternatives requires the exercise of
judgment.  To the extent that the assumed events do not occur, the
outcome may vary substantially from anticipated or projected results, and
accordingly, no opinion is expressed on the achievability of those
forward-looking statements.  No assurance can be given that any of the
assumptions relating to the forward-looking statements specified in the
following information are accurate, and we assume no obligation to update any
such forward-looking statements.  You should not unduly rely on these
forward-looking statements, which speak only as of the date of this Quarterly
Report.  Except as required by law, we are not obligated to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances occurring after the date of this report or to reflect the
occurrence of unanticipated events.


3


PART
I.  FINANCIAL INFORMATION





ITEM
1.  FINANCIAL STATEMENTS.




ForgeHouse,
Inc.
 (a
Nevada Corporation)
 (Unaudited)
 
 As
of September 30, 2009 and
 For
Each of the Three- and nine-month periods Ended September 30, 2009 and
2008
  4
  ForgeHouse,
Inc.
  Index
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  Unaudited
      Financial Statements of ForgeHouse, Inc. (a Nevada
      Corporation):Balance
      Sheets as of September 30, 2009 and December 31, 2008
      (unaudited)
                  F-2Statements
      of Operations for Each of the Three- and Nine-Month Periods Ended
      September 30, 2009 and 2008 (unaudited)
                  F-3Statements
      of Cash Flows for Each of the Nine-Month Periods Ended September 30, 2009
      and 2008 (unaudited)
                  F-4Notes
      to the Unaudited Financial Statements
                  F-6
  
  ForgeHouse,
Inc.
  Balance
Sheets
  (Unaudited)
 September
30, 2009 and December 31, 2008
  As
      of
                    
                    
                    As
      ofSeptember
      30,
                    
                    
                    December
      31,2009
                    
                    
                    2008ASSETSCurrent
      assets:Cash
                    
                    $
                    92
                    
                    
                    $
                    1,705Accounts
      receivable - trade
                    
                    
                    10,309
                    
                    
                    
                    80,168Inventory
                    
                    
                    14,154
                    
                    
                    
                    -Prepaid
      insurance
                    
                    
                    3,391
                    
                    
                    
                    8,178Tax
      asset
                    
                    
                    370,110
                    
                    
                    
                    -Total
      current assets
                    
                    
                    398,056
                    
                    
                    
                    90,051Equipment,
      net of accumulated depreciation of $45,355 and $28,142,
      respectively
                    
                    
                    17,816
                    
                    
                    
                    24,711Software
      development costs, net of accumulated amortization of $156,000 and
      $95,333
                    
                    
                    17,333
                    
                    
                    
                    43,333Deposit
                    
                    
                    3,623
                    
                    
                    
                    3,623Total
      assets
                    
                    $
                    436,828
                    
                    
                    $
                    161,718LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      liabilities:Notes
      payable in default
                    
                    
                    -
                    
                    
                    $
                    1,400,000Accounts
      payable - trade
                    
                    $
                    884,845
                    
                    
                    
                    908,121Related
      party payable
                    
                    
                    53,087
                    
                    
                    
                    29,067Dividend
      payable
                    
                    
                    133,260
                    
                    
                    
                    73,425Accrued
      payroll and related expenses
                    
                    
                    644,418
                    
                    
                    
                    255,611Accrued
      expenses
                    
                    
                    7,573
                    
                    
                    
                    6,005Accrued
      interest on notes payable
                    
                    
                    20,482
                    
                    
                    
                    22,635Current
      portion of obligations under capital leases
                    
                    
                    837
                    
                    
                    
                    4,398Deferred
      revenue
                    
                    
                    110,671
                    
                    
                    
                    49,621Notes
      payable - current
                    
                    
                    465,000
                    
                    
                    
                    50,000Tax
      liability
                    
                    
                    370,110
                    
                    
                    
                    -Total
      current liabilities
                    
                    
                    2,690,283
                    
                    
                    
                    2,798,883Total
      liabilities
                    
                    $
                    2,690,283
                    
                    
                    $
                    2,798,883Commitments
      and contingenciesStockholders'
      deficit:Preferred
      stock, par value $0.001 with 10,000,000 shares authorized and 2,000,000
      shares issued as Series A Convertible preferred stock
                    
                    
                    -
                    
                    
                    
                    -Series
      A Convertible Preferred stock, par value $0.001, 2,000,000 shares
      authorized, 2,000,000 shares issued and outstanding.  Senior as
      to all other equity instruments, voting and with a dividend rate of 4% of
      the stated liquidation preference amount of $2,000,000
                    
                    $
                    2,000
                    
                    
                    $
                    2,000Common
      stock, $.001 par value, 100,000,000 shares authorized, 28,289,834 shares
      issued and outstanding
                    
                    
                    28,290
                    
                    
                    
                    28,290Additional
      paid in capital
                    
                    
                    4,828,971
                    
                    
                    
                    4,573,722Accumulated
      deficit
                    
                    
                    (7,112,716
                    )
                    
                    
                    (7,241,177
                    )Total
      stockholders' deficit
                    
                    $
                    (2,253,455
                    )
                    
                    $
                    (2,637,165
                    )Total
      liabilities and stockholders' deficit
                    
                    $
                    436,828
                    
                    
                    $
                    161,718
 The
accompanying notes are an integral part of the financial
statements.
 F-2
  ForgeHouse,
Inc.
  Statements
of Operations
  (Unaudited)
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  For the Nine Month
                  
                  
                  For the Three MonthPeriodEndedSeptember30,
                  
                  
                  PeriodEndedSeptember30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Service
      contract revenue
                  
                  $
                  198,830
                  
                  
                  $
                  139,678
                  
                  
                  $
                  88,686
                  
                  
                  $
                  53,062Product
      revenue
                  
                  
                  114,206
                  
                  
                  
                  40,078
                  
                  
                  
                  27,758
                  
                  
                  
                  7,734Net
      revenues
                  
                  
                  313,036
                  
                  
                  
                  179,756
                  
                  
                  
                  116,444
                  
                  
                  
                  60,796Operating
      expenses:Costs
      of revenues
                  
                  
                  158,032
                  
                  
                  
                  65,801
                  
                  
                  
                  32,651
                  
                  
                  
                  20,616Software
      development costs
                  
                  
                  9,130
                  
                  
                  
                  127,146
                  
                  
                  
                  3,315
                  
                  
                  
                  34,682Payroll
      related expenses
                  
                  
                  494,660
                  
                  
                  
                  666,578
                  
                  
                  
                  150,206
                  
                  
                  
                  177,154Professional
      fees
                  
                  
                  30,884
                  
                  
                  
                  374,472
                  
                  
                  
                  13,553
                  
                  
                  
                  47,773Depreciation
      and amortization
                  
                  
                  33,616
                  
                  
                  
                  32,967
                  
                  
                  
                  11,241
                  
                  
                  
                  12,229Stock
      based charges
                  
                  
                  255,246
                  
                  
                  
                  1,120,937
                  
                  
                  
                  85,082
                  
                  
                  
                  106,826General
      and administrative
                  
                  
                  128,838
                  
                  
                  
                  231,003
                  
                  
                  
                  41,342
                  
                  
                  
                  58,401Total
      operating expenses
                  
                  
                  1,110,406
                  
                  
                  
                  2,618,904
                  
                  
                  
                  337,390
                  
                  
                  
                  457,681Loss
      from operations
                  
                  
                  (797,370
                  )
                  
                  
                  (2,439,148
                  )
                  
                  
                  (220,946
                  )
                  
                  
                  (396,885
                  )Other
      income (expense):Interest
      expense
                  
                  
                  (103,703
                  )
                  
                  
                  (157,135
                  )
                  
                  
                  (35,186
                  )
                  
                  
                  (55,349
                  )Other
      income (expense)
                  
                  
                  813
                  
                  
                  
                  (161
                  )
                  
                  
                  -
                  
                  
                  
                  (84
                  )Total
      other expense
                  
                  
                  (102,890
                  )
                  
                  
                  (157,296
                  )
                  
                  
                  (35,186
                  )
                  
                  
                  (55,433
                  )Net
      loss before income taxes and extraordinary item
                  
                  
                  (900,260
                  )
                  
                  
                  (2,596,444
                  )
                  
                  
                  (256,132
                  )
                  
                  
                  (452,318
                  )Income
      tax (benefit)
                  
                  
                  (370,110
                  )
                  
                  
                  800
                  
                  
                  
                  (370,110
                  )
                  
                  
                  800Loss
      before extraordinary item
                  
                  
                  (530,150
                  )
                  
                  
                  (2,597,244
                  )
                  
                  
                  113,978
                  
                  
                  
                  (453,118
                  )Gain
      on restructuring of debt, net of income taxes
                  
                  
                  718,449
                  
                  
                  
                  365,834
                  
                  
                  
                  718,449
                  
                  
                  
                  -Net
      income (loss)
                  
                  $
                  188,299
                  
                  
                  $
                  (2,231,410
                  )
                  
                  $
                  832,427
                  
                  
                  $
                  (453,118
                  )Income
      (loss) per share:Loss
      per share, before extraordinary item, basic and diluted
                  
                  $
                  (0.02
                  )
                  
                  $
                  (0.10
                  )
                  
                  $
                  0.00
                  
                  
                  $
                  (0.02
                  )Net
      income (loss) per share:Basic
                  
                  $
                  0.01
                  
                  
                  $
                  (0.08
                  )
                  
                  $
                  0.03
                  
                  
                  $
                  (0.02
                  )Diluted
                  
                  $
                  0.01
                  
                  
                  $
                  (0.08
                  )
                  
                  $
                  0.02
                  
                  
                  $
                  (0.02
                  )Weighted
      average shares outstanding:Basic
                  
                  
                  28,289,834
                  
                  
                  
                  26,645,788
                  
                  
                  
                  28,289,834
                  
                  
                  
                  28,289,384Diluted
                  
                  
                  33,941,834
                  
                  
                  
                  26,645,788
                  
                  
                  
                  33,941,834
                  
                  
                  
                  28,289,384
 The
accompanying notes are an integral part of the financial
statements.
 F-3
  ForgeHouse,
Inc.
  Statements
of Cash Flows
  (Unaudited)
 For
Each of the Nine-Month Periods Ended September 30, 2009 and 2008
  Nine Month Period Ended September 30,2009
                  
                  
                  2008Cash
      flows used in operating activities:Net
      loss
                  
                  $
                  188,299
                  
                  
                  $
                  (2,231,410
                  )Adjustments
      to reconcile net loss to net cash  (used in) operating
      activities:Depreciation
                  
                  
                  7,616
                  
                  
                  
                  6,967Amortization
      of software development costs
                  
                  
                  26,000
                  
                  
                  
                  26,000Gain
      on restructure of debt
                  
                  
                  (1,088,559
                  )
                  
                  
                  (365,834
                  )Amortization
      of stock based charges
                  
                  
                  255,246
                  
                  
                  
                  1,120,937Decrease
      (increase) in assets:Escrowed
      funds
                  
                  
                  -
                  
                  
                  
                  7,114Accounts
      receivable - trade
                  
                  
                  69,859
                  
                  
                  
                  (82,825
                  )Prepaid
      expenses and other current assets
                  
                  
                  4,787
                  
                  
                  
                  (302
                  )Inventory
                  
                  
                  (14,154
                  )
                  
                  
                  (7,701
                  )Deposit
                  
                  
                  -
                  
                  
                  
                  (3,623
                  )Tax
      asset
                  
                  
                  (370,110
                  )
                  
                  
                  -Increase
      (decrease) in liabilities:Accounts
      payable - trade
                  
                  
                  (23,277
                  )
                  
                  
                  249,336Accrued
      interest on debt
                  
                  
                  101,406
                  
                  
                  
                  (238,550
                  )Accrued
      expenses
                  
                  
                  1,570
                  
                  
                  
                  (178,151
                  )Accrued
      payroll
                  
                  
                  388,807
                  
                  
                  
                  118,645Deferred
      revenue
                  
                  
                  61,050
                  
                  
                  
                  96,975Related
      party payable
                  
                  
                  24,019
                  
                  
                  
                  (91,792
                  )Tax
      liability
                  
                  
                  370,110
                  
                  
                  
                  -Cash
      used in operating activities
                  
                  
                  2,669
                  
                  
                  
                  (1,574,214
                  )Cash
      flows used in investing activities:30%
      purchase of ForgeHouse LLC
                  
                  
                  -
                  
                  
                  
                  (171,430
                  )Recapitalization
      of Milk Bottle Cards Inc. - reverse merger
                  
                  
                  -
                  
                  
                  
                  (8,860
                  )Acquisition
      of equipment
                  
                  
                  (721
                  )
                  
                  
                  (18,911
                  )Cash
      used in investing activities
                  
                  
                  (721
                  )
                  
                  
                  (199,201
                  )Cash
      flows provided by financing activities:Payments
      of notes payable
                  
                  
                  -
                  
                  
                  
                  (264,653
                  )Payments
      on related party debt
                  
                  
                  -
                  
                  
                  
                  (300,000
                  )Proceeds
      from the sale of preferred A stock
                  
                  
                  -
                  
                  
                  
                  2,100,000Issuance
      of common shares for cash
                  
                  
                  -
                  
                  
                  
                  290,388Purchase
      and retirement of stock
                  
                  
                  -
                  
                  
                  
                  (50,000
                  )Payment
      on capital lease
                  
                  
                  (3,561
                  )
                  
                  
                  (3,147
                  )Dissolution
      of variable interest entity
                  
                  
                  -
                  
                  
                  
                  (3,944
                  )Net
      increase (decrease) in bank overdrafts
                  
                  
                  -
                  
                  
                  
                  4,771Cash
      provided by financing activities
                  
                  
                  (3,561
                  )
                  
                  
                  1,773,415Net
      increase (decrease) in cash
                  
                  
                  (1,613
                  )
                  
                  
                  -Cash
      at beginning of period
                  
                  
                  1,705
                  
                  
                  
                  -Cash
      at end of period
                  
                  $
                  92
                  
                  
                  $
                  -
  The
accompanying notes are an integral part of the financial
statements.
  F-4
  ForgeHouse,
Inc.
  Statements
of Cash Flows
  (Unaudited)
 For
Each of the Nine-Month Periods Ended September 30, 2009 and 2008
  Nine Month Period Ended September 30,2009
                  
                  
                  2008Supplemental
      Disclosure of Cash Flow InformationCash
      paid during the fiscal years for:Interest
                  
                  $
                  -
                  
                  
                  $
                  383,462Income
      taxes
                  
                  $
                  -
                  
                  
                  $
                  800Non-Cash
      TransactionsIssuance
      of shares in satisfaction of accounts payable:Accounts
      payable
                  
                  $
                  -
                  
                  
                  $
                  45,800Common
      stock
                  
                  $
                  -
                  
                  
                  $
                  (46
                  )Additional
      paid in capital
                  
                  $
                  -
                  
                  
                  $
                  (45,754
                  )
 The
accompanying notes are an integral part of the financial
statements.
 F-5
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  1.
              Description of the
      Company's Business
  Nature
of Operations
  ForgeHouse,
Inc. (the Company) (formerly Milk Bottle Cards, Inc) is currently engaged in the
sale of and development of ongoing enhancement to OneVision®, its proprietary
software system.  The Company’s OneVision® system is a web based
application that offers a virtual command and control system for certain
compliance, physical security and maintenance applications.
  Basis
of Presentation
  The
Company was incorporated under the laws of the state of Nevada in November 2004
for the purpose of producing, distributing and marketing a collection of
greeting cards. ForgeHouse, LLC (ForgeHouse) (a Georgia LLC) was formed in the
state of Georgia in June 2002 for the purpose of developing and selling physical
security industry applications and software.  ForgeHouse operated
through April 2007 as a company in the development stage. The Company is
currently engaged in the development and sale of OneVision®,
its  proprietary software product.
  In July
2007, the members (the "Members") of ForgeHouse, LLC, a Georgia limited
liability company (the "Operating Company"), entered into a Nonbinding Letter of
Intent with Milk Bottle Cards, Inc. ("Milk Bottle") (a non-operating public
shell corporation), whereby the Members were to exchange their membership
interests for Milk Bottle common stock and cash.  On January 31, 2008,
Milk Bottle and the Members entered certain agreements (the "Exchange
Agreement") that resulted in, among other items, the exchange of all of their
membership interests in the Operating Company for 10,500,000 shares of common
stock of Milk Bottle (approximately 37.5% of all outstanding common stock of the
Company as of the closing of the exchange transaction).  As a result
of the exchange, the Operating Company became a wholly-owned subsidiary of Milk
Bottle, which changed its name to ForgeHouse, Inc. (sometimes referred to as the
"Resulting Company").  For accounting purposes, the transaction is
considered a “reverse merger” under which ForgeHouse is considered the acquirer
of the Company. Accordingly, the purchase price was allocated among the fair
values of the assets and liabilities of the Company while the historical results
are those of ForgeHouse, but they were retroactively restated (a
recapitalization) for the equivalent number of shares received by the Company in
the exchange transaction. Earnings per share for the periods prior to the
exchange transaction have been restated to reflect the number of equivalent
shares received by the ForgeHouse members. The ForgeHouse members as a result of
the merger transaction own approximately 35% of the Company.
  F-6
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  These
condensed financial statements are presented in United States dollars and have
been  prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and with the
instructions to Securities and Exchange Commission (“SEC”) Form 10-Q and Article
8 of SEC Regulation S-X. The principles for interim financial information do not
require the inclusion of all the information and footnotes required by generally
accepted accounting principles for complete financial statements. Therefore,
these financial statements should be read in conjunction with the Company’s
Annual Report on Form 10-K for the year ended December 31, 2008. The condensed
financial statements included herein are unaudited; however, in the opinion of
management, they contain all normal recurring adjustments necessary for a fair
statement of the condensed results for the interim periods. Operating results
for the three month and nine month periods ended September 30, 2009 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2009.
  Reclassification
of Accounts
  Certain
reclassifications have been made to prior-year comparative financial statements
to conform to the current year presentation. These reclassifications had no
effect on previously reported results of operations or financial
position.
  2.
              Summary of Significant
      Accounting Policies
  Recent
Accounting Pronouncements
  In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles - a replacement of
FASB Statement No. 162,” and also issued Accounting Standards No. 2009-01,
“Generally Accepted Accounting Principles” (ASC Topic 105-10), which establishes
the FASB Accounting Standards Codification (the “Codification” or “ASC”) as the
official single source of authoritative U.S. generally accepted accounting
principles (“GAAP”). All guidance contained in the Codification carries an equal
level of authority.  All existing accounting standards are
superseded.  All other accounting guidance not included in the
Codification will be considered non-authoritative.  The Codification
also includes all relevant SEC guidance organized using the same topical
structure in separate sections within the Codification.  The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented.  The Codification is effective for financial
statements issued for interim and annual periods ending after September 15,
2009.  Except for the disclosure requirements, the adoption of this
statement did not have an impact on the determination or reporting of the
Company’s financial statements.  The Company is providing the
Codification cross-reference alongside the references to the standards issued
and adopted prior to the adoption of the
Codification.    The Codification does not change current US
GAAP, but is intended to simplify user access to all authoritative US GAAP by
providing all the authoritative literature related to a particular topic in one
place. All existing accounting standard documents will be superseded and all
other accounting literature not included in the Codification will be considered
non-authoritative. As it relates to the Company, the Codification is effective
July 1, 2009 and will require future references to authoritative US GAAP to
coincide with the appropriate section of the Codification. Accordingly, this
standard will not have an impact on the Company’s results of operations or
financial condition.
  F-7
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141(R), Business
Combinations, (ASC 805) and No. 160, Noncontrolling Interests in
Consolidated Financial Statements, an amendment of ARB No. 51 (ASC
810-10-65).  ASC 805 will change how business acquisitions are
accounted for and ASC 810-10-65 will change the accounting and reporting for
minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity.  The Company adopted both as
of January 1, 2009 and neither pronouncement has a material impact on the
Company’s financial statements.
  In May
2009, the FASB issued SFAS No. 165, Subsequent Events (ASC 855-10). This
statement establishes general standards of accounting for and disclosures of
events that occur after the balance sheet date but before financial statements
are issued or are available to be issued. In particular, this statement sets
forth (1) the period after the balance sheet date during which management of a
reporting entity should evaluate events or transactions that may occur for
potential recognition or disclosure in the financial statements; (2) the
circumstances under which an entity should recognize events or transactions
occurring after the balance sheet date in its financial statements; and (3) the
disclosures that an entity should make about events or transactions that
occurred after the balance sheet date. This statement is effective for interim
or annual periods ending after June 15, 2009 and we adopted it on April 1, 2009.
This statement is not expected to have any impact on our financial position or
results of operations.
  In June
2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets
an amendment of FASB Statement No. 140, which amends the derecognition guidance
in SFAS No. 140 and eliminates the exemption from consolidation for qualifying
special-purpose entities. This statement has not yet been codified and is
effective for financial asset transfers occurring after the beginning of an
entity’s first fiscal year that begins after November 15, 2009. This statement
is not expected to have any impact on our financial position or results of
operations.
  F-8
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
 
 In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R),
which amends the consolidation guidance applicable to variable interest
entities. The amendments will significantly affect the overall consolidation
analysis under FASB Interpretation No. 46(R). This statement has not yet been
codified and is effective as of the beginning of the first fiscal year that
begins after November 15, 2009. This statement is not expected to have any
impact on our financial position or results of operations.
  Revenue
Recognition
  The
Company recognizes revenue only when all of the following criteria have been
met:
  ·
              Persuasive
      evidence of an arrangement exists;
 ·
              Delivery
      has occurred or services have been
rendered;
 ·
              The
      fee for the arrangement is fixed or determinable;
  and
 ·
              Collectability
      is reasonably assured.
  The
Company recognizes revenue from monthly access fees charged to customers for
access to the Company's OneVision® software as well as certain related licensee
hardware sales, technical support fees, applications programming and training
services.
  Service
Contract Revenue
  The
Company recognizes revenue on service contracts ratably over applicable contract
periods or as services are performed.  Amounts billed and collected
before the services are performed are included in deferred
revenues.
  The
agreement with the Licensee provides for payments to the Company at a base
service fee of $10,000 per month along with an annual per user service fee
payable at the beginning of each service year that Licensee utilizes the
OneVision® service.  The annual user service fees are a minimum of
$1,140 per year, with additional optional services and hardware
available.  The Company's per user service fee rates are subject to an
upward rate adjustment if the Licensee does not meet certain agreed upon user
participation levels. Further, in order for the Licensee to maintain the
exclusivity rights in the United States, the Licensee must meet minimum user
participation levels and have paid all fees due under the
agreement.
  Product
Revenue
  Sales are
recorded when products are shipped to customers. Provisions for discounts and
rebates to customers, estimated returns and allowances, and other adjustments
are provided for in the same period the related sales are recorded. In instances
where products are configured to customer requirements, revenue is recorded upon
the successful completion of the Company’s final test procedures and the
customer’s acceptance.
  F-9
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  Use
of Estimates
  The
preparation of 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, liabilities, revenues
and expenses and disclosure of contingent obligations in the financial
statements and accompanying notes. Our most significant assumptions relate to
recording net revenue, collectability of accounts receivable, useful lives and
impairment of tangible and intangible assets, accruals, income taxes,
stock-based compensation expense and other factors. The estimation process
requires assumptions to be made about future events and conditions, and as such,
is inherently subjective and uncertain. Actual results could differ materially
from our estimates.
  Concentration
of Credit Risk
  At
September 30, 2009, the Company had $0 on deposit that exceeded United States
(FDIC) federally insurance limit of $250,000 per bank.
  Software
Development Costs
  The
Company accounts for development costs related to software products to be sold,
leased, or otherwise marketed in accordance with FASB SFAS No. 86, Accounting
for the Costs of Computer Software to Be Sold, Leased, or Otherwise
Marketed (ASC 985-20). Software development costs are expensed as
incurred until technological feasibility has been established, at which time
such costs are capitalized until the product is available for general release to
customers. The Company's software was available July 1, 2003, for general
release approximately seven months after the establishment of technological
feasibility and, accordingly, the Company capitalized certain software
development costs incurred during that period. SFAS No. 2, Accounting
for Research and Development Costs (ASC 730-10), establishes accounting
and reporting standards for research and development. During the three- and
nine-month periods ended September 30, 2009 and 2008, the Company did not
capitalize any software development costs.  The Company has
capitalized $173,333 in software development costs as of September 30,
2009.  The Company expensed $3,315, $9,130, $34,682 and $127,146 as
research and development expense during the three- and nine-month periods ended
September 30, 2009 and 2008, respectively.
  In
accordance with ASC 730-10, the costs the Company incurs to enhance its existing
products are expensed in the period they are incurred and included in software
development costs in the statements of operations.
  F-10
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  Amortization
of capitalized software development costs begins when the product is available
for general release. Amortization is provided on a product-by-product basis on
the straight-line method over the software product's economic useful life.
Unamortized capitalized software development costs determined to be in excess of
net realizable values of the product are expensed immediately. During the three-
and nine-month periods ended September 30, 2009 and 2008, amortization of
software development costs totaled $8,666, $26,000, $8,666 and $26,000,
respectively.
  Management
has concluded that the software development costs have no residual value and a
five-year period of amortization, with the amortization period starting with the
first general sale of the product after the beta site.  This occurred
in April 2005.
  The
Company includes in software development expense those costs related to the
following software development activities:
  ·
              Conceptual
      formulation and design of possible product or process
      alternatives;
 ·
              Testing
      in search for, or evaluation of, product or process
      alternatives;
 ·
              Modification
      of the formulation or design of a product or process;
  and
 ·
              Engineering
      activity required to advance the design of a product to the point that it
      meets specific functional and economic requirements and is ready for
      production.
  Future
amortization of the software development costs is as follows for the years
ended:
  2009
      (remainder of year)
                    
                    $
                    8,6672010
                    
                    
                    8,666$
                    17,333
  Fair
Value of Financial Instruments
  As of
January 1, 2008, the Company adopted Statement of Financial Accounting Standards
No. 157, “Fair Value Measurements,” (ASC 820-10).  ASC 820-10 defines
fair value, establishes a framework for measuring fair value under GAAP and
enhances disclosures about fair value measurements. Fair value is defined under
ASC 820-10 as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date. Valuation techniques used to measure fair
value under ASC 820-10 must maximize the use of observable inputs and minimize
the use of unobservable inputs.
  F-11
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
 
 We
utilize the market approach to measure fair value for our financial assets and
liabilities. The market approach uses prices and other relevant information
generated by market transactions involving identical or comparable assets or
liabilities. The standard describes a fair value hierarchy based on three levels
of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value which are the
following:
  Level
1:  Quoted prices (unadjusted) in active markets that are accessible
at the measurement date for assets or liabilities. The fair value hierarchy
gives the highest priority to Level 1 inputs.
  Level
2:  Observable prices that are based on inputs not quoted on active
markets, but corroborated by market data.
  Level
3:  Unobservable inputs are used when little or no market data is
available. The fair value hierarchy gives the lowest priority to Level 3
inputs.
  In
determining fair value, we utilize valuation techniques that maximize the use of
observable inputs and minimize the use of unobservable inputs to the extent
possible as well as the consideration of counterparty credit risk in its
assessment of fair value.
  The
adoption of this statement did not have a material impact on our results of
operations and financial condition. The carrying values of our cash, cash
equivalents and marketable securities, carried at fair value as of September 30,
2009, are classified in the table below in one of the three categories described
above:
  Fair
Value Measurements at September 30, 2009
 Level 1
                    
                    
                    Level 2
                    
                    
                    Level 3
                    
                    
                    TotalCash
      & Equivalents
                    
                    $
                    92
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    $
                    92Escrowed
      Funds
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Cash,
      Cash Equivalents and Escrowed Funds
                    
                    $
                    92
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    $
                    92
  Basic
and Diluted Earnings (Loss) Per Share
  Basic net
earnings (loss) per common share is computed by dividing net income (loss)
applicable to common shareholders by the weighted-average number of common
shares outstanding during the period.  Diluted net earnings (loss) per
common share is determined using the weighted-average number of common shares
outstanding during the period, adjusted for the dilutive effect of common stock
equivalents, consisting of shares that might be issued upon exercise of warrants
to purchase common shares.  In periods where losses are reported, the
weighted-average number of common shares outstanding excludes common stock
equivalents, because their inclusion would be anti-dilutive.
  F-12
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  As of
September 30, 2009, the Company had issued and outstanding common stock
equivalents comprised of common stock options, warrants and convertible
preferred stock that can be converted into 5,652,000 shares of common
stock.
  Cash
and Cash Equivalents
  The
Company considers deposits that can be redeemed on demand and investments that
have original maturities of less than three months, when purchased, to be cash
equivalents. As of September 30, 2009, the Company had cash of $92.
  Accounts
Receivable - Trade and Allowance for Doubtful Accounts
  Trade
accounts receivable are stated at the amount the Company expects to collect. The
Company provides an allowance for doubtful accounts equal to the estimated
uncollectible amounts. The Company’s estimate is based on its historical
collection experience and a review of the current status of trade accounts
receivable. It is reasonably possible that the Company’s estimate of the
allowance for doubtful accounts will change. Based on the Company's status as a
development stage company until 2007 and past level of sales, the Company has
not experienced any accounts receivable that could not be collected, and as
such, the allowance for doubtful accounts is zero at September 30, 2009. As the
Company expands, it fully expects the allowance for doubtful accounts to
increase from zero.
  Inventory
  Inventories
are stated at the lower of cost or market. Cost is determined on a standard cost
basis that approximates the first-in, first-out (FIFO) method. Market is
determined based on net realizable value. Appropriate consideration is given to
obsolescence, excessive levels, deterioration, and other factors in evaluating
net realizable value. The Company buys and resells hardware as necessary, but
does not perpetually carry inventory on-hand.  At September 30, 2009,
there was PDA's for resale on-hand of $14,154.
  Prepaid
Expenses
  The
Company's prepaid expenses consist mainly of amounts paid for annual insurance
contracts. The amounts are expensed ratably over the term of the
contract.
  Equipment
  Equipment
is recorded at cost. Depreciation is provided over the estimated useful lives of
the related assets using the straight-line method for financial statement
purposes. The Company uses other depreciation methods (generally, accelerated
depreciation methods) for tax purposes where appropriate. Repairs and
maintenance are expensed as incurred. When equipment is retired, sold, or
otherwise disposed of, the asset’s carrying amount and related accumulated
depreciation are removed from the accounts and any gain or loss is included in
operations. During the three- and nine-month periods ended September 30, 2009
and 2008, the Company did not dispose of any equipment. The estimated useful
lives of computer and office equipment are as follows:
  F-13
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
 
 EstimatedUsefulLivesComputer
      equipment
                        3
      yearsOffice
      equipment
                        5
      yearsOffice
      furniture
                        7
      years
  Leases
  The
Company reviews all leases for capital or operating classification at their
inception under the guidance of the Financial Accounting Standards Board's
(FASB) Statement of Financial Accounting Standards (SFAS) No. 13, Accounting
for Leases (ASC 840) as amended. The Company uses its incremental
borrowing rate in the assessment of lease classification and defines the initial
lease term to exclude lease extension periods.
  The
Company has entered into an operating lease agreement for its corporate office
which contains provisions for future rent increases or periods in which rent
payments are reduced (abated). In accordance with generally accepted accounting
principles, the Company records monthly rent expense equal to the total of the
payments due over the lease term, divided by the number of months of the lease
term. The difference between rent expense recorded and the amount paid is
credited or charged to “Deferred rent.” Deferred rent was not material at
September 30, 2009.
  Impairment
of Long-Lived Assets
  In
accordance with SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets (ASC 360-10),
long-lived assets, such as property and equipment, and intangible assets subject
to amortization are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to estimated undiscounted future
cash flows expected to be generated by the asset. If the carrying amount of an
asset exceeds its estimated undiscounted future cash flows, an impairment charge
is recognized for the amount by which the carrying amount of the asset exceeds
the fair value of the asset. Fair value is determined based on the estimated
discounted future cash flows expected to be generated by the asset. The factors
considered by management in performing this assessment include current operating
results and trends and prospects, as well as the effects of obsolescence and
economic factors.
  F-14
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  Deferred
Revenue - Amounts Billed in Advance
  The
Company recognizes revenue as earned. Amounts billed in advance of the period in
which service is rendered will be recorded as a liability under “Deferred
revenue.” The Company had $110,671 of deferred revenue at September 30,
2009.
  General
and Administrative Expense
  General
and administrative expense includes the cost of maintaining the infrastructure
of the Company that is not directly related to delivery services. Also included
in this category would be the provision for doubtful accounts
receivable.
  Income
Taxes
  Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets, including tax loss and credit carryforwards, and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Deferred income tax expense represents the change during the period in the
deferred tax assets and deferred tax liabilities. The components of the deferred
tax assets and liabilities are individually classified as current and
non-current based on their characteristics. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be
realized.
  3.
              Accounts Receivable -
      Trade
   Accounts
      receivable - trade
                      
                      $
                      10,309Allowance
      for doubtful accounts receivable
                      
                      
                      -Accounts
      receivable - trade, net
                      
                      $
                      10,309
  The
Company did not provide for an allowance for doubtful accounts as of September
30, 2009 as all open account balances were determined to be
collectible.  The accounts receivable - trade account as of September
30, 2009 (and also those that arise from future operations) are pledged as
security as part of the Company's loans with the private and commercial lenders
(Note 6 - Debt).
  F-15
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  4.
              Equipment
  Equipment,
net is comprised of the following at September 30, 2009:
  Computer
      equipment
                    
                    $
                    43,022Office
      furniture
                    
                    
                    2,397Office
      equipment
                    
                    
                    8,667Equipment
      under capital lease
                    
                    
                    9,085Total
      equipment
                    
                    
                    63,171Less:
      accumulated depreciation
                    
                    
                    (45,355
                    )Equipment,
      net
                    
                    $
                    17,816
  Depreciation
expense amounted to $2,575, $7,616, $3,562 and $6,967 for the three month and
nine month periods ended September 30, 2009 and 2008, respectively. All of the
equipment, with a net book value of $17,816, was pledged as security for the
Company's loans two loans with the private lender (Note 6 - Debt).
  5.
              Obligations under
      Capital Lease
  The
Company leases certain equipment under a capital lease. The equipment under such
capital lease is recorded at the lower of the present value of the minimum lease
payments or the fair value of the equipment.  Equipment held under
capital leases is included in the Balance Sheet as equipment, net was $9,085 at
September 30, 2009. Accumulated depreciation of the leased equipment at
September 30, 2009 was $5,482. Depreciation of assets under such capital lease
is included in depreciation expense.
  The
future minimum lease payments required under the capital leases and the present
value of the net minimum lease payments as of September 30, 2009, are as
follows:
  Amount2009
                
                $
                850Total
      minimum lease payments
                
                
                850Less:
      amount representing interest
                
                
                (13
                )Present
      value of net minimum lease payments
                
                
                837Less:
      current maturities of capital lease obligations
                
                
                (837
                )Long-term
      capital lease obligations
                
                $
                -
  F-16
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  6.
              Debt
  Debt is
comprised of the following:
  Notes
Payable - Current
  September
      30,
                          
                          
                          December
      31,2009
                          
                          
                          2008Two
      $25,000 unsecured demand notes, interest is payable upon demand of payment
      of the principal, bear interest at a rate of 10% per
annum.
                          
                          $
                          50,000
                          
                          
                          $
                          -$415,000
      note payable as a result of the Debt Forgiveness Agreement (described
      below), interest free, with a due date of either September 30, 2010 or
      March 31, 2011, contingent on the execution of a commercial bank loan by
      December 31, 2009
                          
                          
                          415,000
                          
                          
                          
                          -Notes
      payable - current
                          
                          $
                          465,000
                          
                          
                          $
                          -
  Extraordinary
Item - Debt Restructuring
  On
September 30, 2009, the Company entered into a Debt Forgiveness Agreement with
Insurance Medical Group Limited (f/k/a After All Limited), Bryan Irving, and Ian
Morl, pursuant to which $785,000 (plus accrued and unpaid interest and any
penalties of $80,141) of our outstanding obligations in favor of Arngrove Group
Holdings were forgiven and all $200,000 (plus accrued and unpaid interest and
any penalties of $23,418) of our outstanding obligations in favor of After All
Limited were forgiven.  Total gain on debt restructuring is $1,088,559
for the three- and nine-months ended September 30, 2009.  The basic
per share effect for the three- and nine-months ended September 30, 2009 was
$0.03. The diluted per share effect for the three- and nine-months ended
September 30, 2009 was $0.02.
  In
connection with the Debt Forgiveness Agreement, on September 30, 2009, the
Company also entered into a new Promissory Note, in favor of Bryan Irving and
Ian Morl, in the initial principal amount of $415,000.  The payment
terms of the new note are tied to certain terms of the forgiveness
agreement.  Specifically, if the Company successfully obtains a loan
from a commercial bank, it is then obligated to tender $75,000 to the holders of
the new note and, within 10 business days of the closing of such loan, an
additional $140,000 to such holders.
  F-17
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  The
Company would then be obligated to pay remaining balance of $200,000 to such
holders in ten equal, monthly installments, without interest, commencing 90 days
after the closing of such loan.  If the Company is unable to obtain
such a loan from a commercial bank by December 31, 2009, as to which loan
closing there can be no assurance, then the Company is obligated to tender
$100,000 to the holders of the new note.  The Compnay would then be
obligated to pay the remaining balance of $315,000, without interest, to such
holders as follows: $25,000 would be paid in 11 monthly installments of $2,083
and one installment of $2,087 commencing on January 30, 2010 and the remaining
$290,000 would be paid in three monthly installments of $30,000 commencing on
March 31, 2010, and, thereafter, ten monthly installments of
$20,000.  John Britchford-Steel, the Company's chief executive
officer, agreed to guarantee up to $125,000 of our obligations under the new
note.  Further, Mr. Britchford-Steel placed $100,000 in escrow to
guarantee either of the initial payments under the new note to its
holders.
  Short Term Bridge
Financing
  In the
October 2008, the Company obtained short term financing from an investor group
in the form of two $25,000 demand notes.  The loans were necessary to
sustain the ongoing operations of the Company.  The loans are
unsecured and interest is payable upon demand of payment of the
principal.  The loans are still outstanding at September 30, 2009 and
bear interest at a rate of 10% per annum.
  Debt
in Default
  September
      30,
                          
                          
                          December
      31,2009
                          
                          
                          2008After
      All Group debt (forgiven September 30, 2009, no longer in
      default)
                          
                          $
                          -
                          
                          
                          $
                          200,000Arngrove
      Group Holdings, Ltd. debt (partially forgiven September 30, 2009, no
      longer in default)
                          
                          
                          -
                          
                          
                          
                          1,200,000Debt
      in default
                          
                          $
                          -
                          
                          
                          $
                          1,400,000
  F-18
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  After All Group
Debt
  In August
2006, ForgeHouse borrowed $200,000 from a group ("After All") that consisted of
some of the same owners of Arngrove Group Holdings, Ltd (who were, at the time,
members of ForgeHouse). The loan was unsecured and interest accrues at a rate of
20% per annum, which is calculated monthly and rolled into the principal balance
of the loan. The loan term was six months from the issuance date and has been
extended on a month-to-month basis at the discretion of After
All.  This note payable was restructured on January 31, 2008 and all
accrued interest was forgiven, which is included in the gain on the
restructuring of debt in the statement of operations.  The
restructured note was at an interest rate of 6% per annum, with scheduled
principal payments of $40,000 to be made starting December 31, 2008, and every
six months thereafter, up to and including December 31, 2010.  The
payment due December 31, 2008 was not made and a notice of default was received
in February 2009. The default interest rate was 8%.  The Company
incurred interest expense during the three- and nine-month periods ended
September 30, 2009 and 2008 of $4,033, $12,404, $3,004, and $8,010, all of which
was charged to operations.   Accrued interest on this note
payable was $23,418 immediately preceding the restructuring of the note on
September 30, 2009 by the aforementioned Debt Forgiveness
Agreement.  As a result of the Debt Forgiveness Agreement, a gain on
debt restructuring of $223,418 was recognized at September 30,
2009.
  Arngrove Group Holdings Ltd.
Debt
  In May
2005, ForgeHouse entered into a combination debt, sale of Members' equity and
services agreement transaction (the "Agreement") with Arngrove Group Holdings
Ltd (a United Kingdom entity) ("Arngrove"). The Agreement provided ForgeHouse
with a line-of-credit facility (the "Loan Agreement") that called for Arngrove
to advance ForgeHouse as requested up to $100,000 per month, with a maximum
aggregate principal amount not to exceed $1,200,000 over the twelve month period
ending May 2006. The Loan Agreement was evidenced by a note payable with a
not-to-exceed face amount of $1,200,000 with a fixed interest rate of 10.0% per
annum.  The Loan Agreement for financial reporting purposes was
discounted at inception to reflect an effective interest rate yield of 29.7% (as
of the date the Loan Agreement promissory note was created); its initial
discount recognized was $114,622. The discount was being accreted ratably over
the initial life of the Loan Agreement promissory note. The required annual
interest only payments were to commence as of June 1, 2006, but were not
made.  As such, in 2006, the Loan Agreement's restrictive covenants
went into default and all of the unaccreted discount was expensed.
  F-19
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  The
Agreement also included a services contract that provided for Arngrove to
provide certain consulting services and to receive a fee (the "Fee") of
approximately $120,000 each year, payable monthly within 7 days of each
month-end. The Fee was a required portion of the Agreement. It is being treated
by ForgeHouse as additional interest. ForgeHouse determined that the nature of
the consultancy services called for in the Agreement were investor's due
diligence procedures or were not provided to ForgeHouse at
all.  ForgeHouse did not make any Fee payments to Arngrove as provided
for in the service contract until the agreement was restructured at January 31,
2008, at which time payments totaling $368,571 were made to satisfy all accrued
interest and management fees on the Arngrove and After All
notes.  This resulted in a 2008 first quarter gain on the
restructuring of debt of $365,834.
  The
Agreement included the sale of Members equity to four individuals related to
Arngrove for $300,000 and a 30% interest in ForgeHouse (Note 9). This was a
necessary provision to obtain the loan, which was why ForgeHouse accepted the
investment at a discounted price. ForgeHouse, based on prior equity investments,
estimated the fair value of the 30% equity interest at $600,000. ForgeHouse
trifurcated the values of the loan, equity interest, and service contract based
on the net cash received from the agreement, resulting in the recording of the
equity investment at a value of $414,622 and a discount on the underlying loan
of $114,622, to be amortized over the life of the loan.  However, as
mentioned above, the loan discount was accelerated when the note became in
default in 2006.  This 30% interest was purchased by the Company at
January 31, 2008 for $171,430.
  ForgeHouse
restructured the debt in January 2008 as part of the exchange transaction (Note
9 - Equity), and, as such, the debt is classified as a long term Note Payable on
the face of the balance sheet.  This note payable was restructured on
January 31, 2008 at an interest rate of 6% per annum, with scheduled principal
payments of $240,000 to be made starting December 31, 2008 and every six months
thereafter, up to and including December 31, 2010.  Interest accrues
at 8% beyond maturity and in default.
  The
payment due December 31, 2008 was not made and a notice of default was received
in February 2009.  The Company incurred interest expense during the
three- and nine-month periods ended September 30, 2009 and 2008 of $24,197,
$72,121, $18,022, and $48,060, all of which was charged to
operations.  Accrued interest on this note payable was $80,141
immediately preceding the restructuring of the note on September 30, 2009 by the
aforementioned Debt Forgiveness Agreement.  As a result of the Debt
Forgiveness Agreement, a gain on debt restructuring of $865,141 was recognized
at September 30, 2009.
  F-20
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  7.
              Commitments and
      Contingencies
  Financial
Results, Liquidity and Management's Plan
  The
Company’s success will depend in part on its ability to obtain patents (one is
now pending in 36 countries) and to expand its OneVision® product license
holders and related revenue, to maintain its trade secrets, and to operate
without infringing on the proprietary rights of others, both in the United
States and other countries. There can be no assurance that patents issued to or
licensed by the Company will not be challenged, invalidated, or circumvented, or
that the rights granted there under will provide proprietary protection or
competitive advantages to the Company.
  The
accompanying financial statements as of September 30, 2009 have been prepared
assuming the Company will continue as a going concern. The Company, over time,
has experienced recurring losses and negative cash flows from operations, and as
of September 30, 2009, the Company’s current liabilities exceeded its current
assets by $2,292,227 and its total liabilities exceeded its total assets by
$2,253,455. The Company also has substantial debt that was restructured on
September 30, 2009 (Note 6 - Debt).  These factors raise substantial
doubt about the Company's ability to continue as a going concern. Management
intends to raise additional debt and/or equity financing to fund future
operations, ongoing software development costs and debt retirement needs. The
Company’s marketing plan is to assist its licensees and to promote the expand
acceptance and use of its OneVision® product, and to develop additional
applications in industries where there is significant anticipated demand
requirements. Management believes that its plans will contribute towards
achieving profitability but there is no assurance that they can be implemented;
or that the results will be of a sufficient level necessary to meet the
Company’s ongoing cash needs.  No assurances can be given that the
Company can obtain sufficient working capital through borrowings from a related
party or lending institutions or that the continued implementation of its
business plan will generate sufficient revenues in the future to sustain ongoing
operations.
  The
accompanying financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets or
the amounts and classifications of liabilities that may result from the possible
inability of the Company to continue as a going concern.  As discussed
in Note 9 - Equity Transactions, the Company was able to obtain additional
working capital in connection with the reverse acquisition in January
2008.
  F-21
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  Legal
Actions
  Certain
conditions may exist as of the date the financial statements are issued, which
may result in a loss to the Company, but which will only be resolved when one or
more future events occur or fail to occur. The Company’s management and its
legal counsel assess such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against the Company or unasserted claims that
may result in such proceedings, the Company’s legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought
therein.
  If the
assessment of a contingency indicates that it is probable that a material loss
has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s financial statements. If
the assessment indicates that a potentially material loss contingency is not
probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, would be
disclosed.
  Loss
contingencies considered remote are generally not disclosed unless they involve
guarantees, in which case the guarantees would be disclosed.
  Operating
Leases
  The
Company recognized rental expense of $11,586, $35,661, $3,623 and $21,192 for
the three- and nine-month periods ended September 30, 2009 and 2008,
respectively. The Company occupied its Norcross, Georgia facility under a rental
agreement that had a lease term that expired in March 2007. The Company began
subleasing space from a third party for $1,500 per month in October 2007 on a
month-to-month basis until they entered their current lease agreement starting
on June 1, 2008.  The 39 month lease calls for initial monthly
payments of $3,623 and does not have any renewal options.
  8.
              Related Party
      Transactions
  Personal
Guarantees
  Note Payable Resulting From
Debt Forgiveness Agreement
  John
Britchford-Steel, the Company's chief executive officer, guaranteed up to
$125,000 of the $415,000 note payable that resulted from the Debt Forgiveness
Agreement (Note 6 - Debt).  $100,000 of the maximum guarantee of
$125,000 has been placed in escrow, which will be used to satisfy the agreement
if the Company is unable to meet the payment terms.
  F-22
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  9.
              Equity
      Transactions
  Sale
of Units
  On
January 31, 2008, the Company sold 2,000,000 units, each unit consisted of one
share of the Company's Series A Convertible Preferred stock and one warrant to
purchase a share of the Company's common stock.  The total proceeds
from this transaction were $2,100,000.  Each of the Series A Preferred
shares is convertible into the Company's common stock on a one-to-one
basis.  The Series A Preferred Shares are senior as to all other
equity instruments, voting, and have a dividend rate of 4% of the stated
liquidation preference amount of $2,000,000.  The warrants have an
exercise price of $1.00 and expire 2 years from the grant date.
  Dividend
Payable
  The
Company declared a dividend on the Series A Preferred Shares of $20,164 for the
three month period ended September 30, 2009.  Dividends of $19,945 and
$19,726 were declared for the three month periods ended June 30, 2009 and March
31, 2009, respectively.  The dividend can not be satisfied while the
Company has an accumulated deficit.  Dividend payable at September 30,
2009 is $133,260.
  Shares
Issued for Cash
  In June
2008, the Company issued 244,022 shares of the Company’s common stock to eight
individuals for cash proceeds of $290,388, which is $1.19 per
share.  The share price represented a 30% discount to the
10-trading-day volume weighted average closing price of the common stock, with
May 29, 2008, as the 10th trading day.  As stipulated in the
restructured Arngrove note payable agreement that was then in effect, the
Company was required to remit 20% of all funds raised to Arngrove to be applied
first to the then outstanding principal balance of the note payable and second
to any interest accrued thereon.
  F-23
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  Shares
Issued in Satisfaction of Accounts Payable – Trade
  In June
2008, the Company issued 45,812 shares of the Company’s common stock to two
individuals for satisfaction of $45,800 of accounts payable – trade at $1.00 per
share.
  Options
Activity
  A summary
of the option activity as of September 30, 2009, and changes during the period
then ended is presented below:
  WeightedAverageWeighted
                    
                    
                    Remaining
                    
                    
                    AggregateNumber of
                    
                    
                    Average
                    
                    
                    Contractual
                    
                    
                    IntrinsicOptions
                    
                    
                    ExercisePrice
                    
                    
                    Term(Years)
                    
                    
                    ValueOutstanding
      at December 31, 2008
                    
                    
                    1,652,000
                    
                    
                    $
                    1.00
                    
                    
                    
                    -
                    
                    
                    
                    -Granted
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Forfeited
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Expired
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Outstanding
      at September 30, 2009
                    
                    
                    1,652,000
                    
                    
                    $
                    1.00
                    
                    
                    
                    4.5
                    
                    
                    $
                    -Exercisable
      at September 30, 2009
                    
                    
                    1,110,333
                    
                    
                    $
                    1.00
                    
                    
                    
                    4.3
                    
                    
                    $
                    -
  On
January 31, 2008, the Company granted options to purchase 251,000 shares of its
common stock to the Company's Chief Executive Officer immediately following the
Exchange Agreement as a condition for entering his employment
agreement.  The options have an exercise price of $1.00, vest
immediately and expire 10 years from the grant date.   The
Company also granted options to purchase 90,000 shares of its common stock to
the Company's Chief Operating Officer immediately following the Exchange
Agreement as a condition for entering his employment agreement.  The
options have an exercise price of $1.10, vest immediately and expire 5 years
from the grant date.
  On
January 31, 2008, the Company granted options to purchase 186,000 shares of its
common stock to the Company's Chief Operating Officer immediately following the
Exchange Agreement as a condition for entering his employment
agreement.  The options have an exercise price of $1.00, vest
immediately and expire 10 years from the grant date.
  F-24
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
  On
January 31, 2008, the Company granted options to purchase 75,000 shares of its
common stock to both the Company's Chief Strategy Officer and the Chief
Technology Officer immediately following the Exchange Agreement for entering
their employment agreements.  The options have an exercise price of
$1.00, vest immediately and expire in 5 years from the grant date.
  On
January 31, 2008, the Company granted options to purchase 225,000 shares of its
common stock to each of two employees for past services immediately following
Exchange Agreement.  The options have an exercise price of $1.00, vest
evenly on each of the first three anniversaries of the grant date and expire 5
years from the grant date.
  On
February 15, 2008, the Company granted options to purchase 350,000 shares of its
common stock to the Company's Chief Financial Officer for entering his
employment agreement.  The options have an exercise price of $1.00,
50,000 vest immediately, and the remaining 300,000 vest evenly on each of the
first three anniversaries of the grant date and expire 5 years from the grant
date.  The Company also granted options to purchase 400,000 shares of
its common stock to the Company's Chief Financial Officer for entering his
employment agreement.  The options have an exercise price of $1.00 and
vest evenly on each of the first three anniversaries of the grant date and
expire 10 years from the grant date.
  The
assumptions used in the Black-Scholes option pricing model for the stock options
granted during the year ended December 31, 2008 were as follows:
  Risk-free
      interest rate
                    2.78
      to 3.83%Expected
      volatility of common stock
                    92%Dividend
      yield
                    $0.00Expected
      life of options
                    5-10
      yearsWeighted
      average fair market value of options granted
                    $1.13
  Warrant
Activity
  A summary
of the warrant activity as of September 30, 2009, and changes during the period
then ended is presented below:
  F-25
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
 
 WeightedAverageNumber of
                    
                    
                    ExerciseWarrants
                    
                    
                    PriceOutstanding, December 31, 2008
                    
                    
                    2,000,000
                    
                    
                    $
                    1.00Issued
                    
                    
                    -
                    
                    
                    
                    -Exercised
                    
                    
                    -
                    
                    
                    
                    -Outstanding,
      September 30, 2009
                    
                    
                    2,000,000
                    
                    
                    $
                    1.00Exercisable,
      September 30, 2009
                    
                    
                    2,000,000
                    
                    
                    $
                    1.00
  On
January 31, 2008, the Company sold 2,000,000 units, with each unit consisting of
one share of the Company's Series A Convertible Preferred stock and one warrant
to purchase a share of the Company's common stock.  The warrants have
an exercise price of $1.00 and expire 2 years from the grant date.
  Shares
Reserved for Future Issuance
  The
Company has reserved shares for future issuance upon exercise of outstanding
options and warrants as follows:
  Options
                    
                    
                    1,652,000Warrants
                    
                    
                    2,000,000Reserved
      shares at September 30, 2009
                    
                    
                    3,652,000
  10.
              Earnings (Loss) Per
      Share
  Basic and
diluted loss before extraordinary item is computed using the weighted-average
number of common shares outstanding.  Since there was a loss before
extraordinary item in each period presented, the effect of potentially dilutive
common shares is not considered as their effect would be
anti-dilutive.  Basic net earnings per share is computed using the
weighted-average number of common shares outstanding. The dilutive effect of
potential common shares outstanding is included in diluted net earnings per
share. The computations of basic and diluted loss before extraordinary item and
basic net earnings (loss) per share and diluted net earnings (loss) per share
for the three- and nine-month periods ended September 30, 2009 and 2008 are as
follows:
  F-26
  ForgeHouse,
Inc.
  Notes
to the Financial Statements
  (Unaudited)
 As
of September 30, 2009 and December 31, 2008 and
 For
Each of the Three- and Nine-Month Periods Ended September 30, 2009 and 2008
 
 For the Nine Month
                    
                    
                    For the Three MonthPeriodEndedSeptember30,
                    
                    
                    PeriodEndedSeptember30,Numerator:Loss
      before extraordinary item
                    
                    $
                    (530,150
                    )
                    
                    $
                    (2,597,244
                    )
                    
                    $
                    113,978
                    
                    
                    $
                    (453,118
                    )Net
      income (loss)
                    
                    $
                    188,299
                    
                    
                    $
                    (2,231,410
                    )
                    
                    $
                    832,427
                    
                    
                    $
                    (453,118
                    )Denominator:Basic
      weighted-average shares
                    
                    
                    28,289,834
                    
                    
                    
                    26,645,788
                    
                    
                    
                    28,289,834
                    
                    
                    
                    28,289,384Effect
      of dilutive securities:Common
      stock options and warrants
                    
                    
                    3,652,000
                    
                    
                    
                    -
                    
                    
                    
                    3,652,000
                    
                    
                    
                    -Convertible
      preferred stock
                    
                    
                    2,000,000
                    
                    
                    
                    -
                    
                    
                    
                    2,000,000
                    
                    
                    
                    -Dilutive
      potential common shares
                    
                    
                    33,941,834
                    
                    
                    
                    26,645,788
                    
                    
                    
                    33,941,834
                    
                    
                    
                    28,289,384Loss
      per share before extraordinary item:Basic
      and diluted
                    
                    $
                    (0.02
                    )
                    
                    $
                    (0.10
                    )
                    
                    $
                    0.00
                    
                    
                    $
                    (0.02
                    )Net
      earnings (loss) per shareBasic
                    
                    $
                    0.01
                    
                    
                    $
                    (0.08
                    )
                    
                    $
                    0.03
                    
                    
                    $
                    (0.02
                    )Diluted
                    
                    $
                    0.01
                    
                    
                    $
                    (0.08
                    )
                    
                    $
                    0.02
                    
                    
                    $
                    (0.02
                    )
  The
following table sets forth potential shares of common stock that are not
included in the diluted loss per share because to do so would be antidilutive
since the Company reported losses in certain reporting periods:
  As
      of September 30,2009
                    
                    
                    2008Options
      to purchase shares of common stock
                    
                    
                    1,652,000
                    
                    
                    
                    1,877,000Warrants
      to purchase shares of common stock
                    
                    
                    2,000,000
                    
                    
                    
                    2,000,000Convertible
      preferred stock
                    
                    
                    2,000,000
                    
                    
                    
                    2,000,000Total
                    
                    
                    5,652,000
                    
                    
                    
                    5,877,000
  F-27




ITEM
2.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.





The
following discussion of the financial condition and results of operation of
ForgeHouse, Inc. (“ForgeHouse,” the “Company,” “we,” and “us”) should be read in
conjunction with the financial statements and the notes to those statements
included herein.  Actual results could differ materially from those in
the forward looking statements due to a number of uncertainties including, but
not limited to, those discussed in Management’s Discussion and Analysis of
Financial Condition and Results of Operations.





Overview





ForgeHouse
is in the business-to-business arena and is focused on providing scalable,
Enterprise-class web-based solutions that increase productivity and
accountability by workflow optimization.  Our markets range from
Fortune 1000 companies to Government to Small and Medium Enterprises and
Businesses (SMEs and SMBs).  During the quarter ended September 30,
2009, we continued to market our software solution to targeted
prospects.





We will
need to obtain additional operating capital to fund continuing software
development and to increase our sales team to penetrate and gain traction in the
markets identified as critical to our business success.  Although we
are considering various debt or equity financings, there can be no assurance
that any financing will be available to us on terms acceptable to us or at the
time that we that we would require such financing, or at all.  Failure
to obtain any such financing will result in our inability to effectuate our
business plan.  As of the date of this Quarterly Report, we have not
entered into any agreements and have not received any commitments to obtain any
such financing.





For
the Quarter and Nine Months Ended September 30, 2009 in Comparison to the
Quarter and Nine Months Ended September 30, 2008.





Net
Revenues





Net
revenues for the quarter ended September 30, 2009, increased to $116,000 from
$61,000 in the prior year, an increase of approximately 92%.  Revenues
from the ASP service increased by approximately 67%, while sales of hardware
increased by approximately 259%.  One customer accounted for 85% of
total net revenues for the quarter ended September 30, 2009.





Net
revenues for the nine months ended September 30, 2009, increased to $313,000
from $180,000 in the prior year, an increase of approximately
74%.  Revenues from the ASP service increased by approximately 42%,
while sales of hardware increased by approximately 185%.  One customer
accounted for 79% of total net revenues for the nine months ended September 30,
2009.





Cost
of Revenues





Cost of
revenue primarily consists of Server Hosting Cost and Cost of Hardware purchased
for resale.  Cost of revenues for the quarter ended September 30,
2009, increased to $33,000 from $21,000 in the prior year, primarily due to the
increased sales of hardware.  Cost of sales as a percentage of sales
is 28% for the period ending September 30, 2009, and 34% for the prior
period.





Cost of
revenue for the nine months ended September 30, 2009, increased to $158,000 from
$66,000 in the prior year, primarily due to the increased sales of
hardware.  Cost of sales as a percentage of sales is 51% for the
period ending September 30, 2009, and 37% for the prior period.





Operating
Expenses





Total
operating expenses for the quarter ended September 30, 2009, decreased to
$301,000 from $402,000 in the prior year. For the nine months ended September
30, 2009, operating expenses decreased to $943,000 from
$2,427,000.  The expense breakdown is as follows:




Three Months Ending September 30
                                    
                                    
                                    Nine Months Ending Sepember 302009
                                    
                                    
                                    2008
                                    
                                    
                                    Var B(W)
                                    
                                    
                                    Var B(W)
                                    
                                    
                                    2009
                                    
                                    
                                    2008
                                    
                                    
                                    Var B(W)
                                    
                                    
                                    Var B(W)Operating Expenses
                                    
                                    $ 000
                                    
                                    
                                    $000
                                    
                                    
                                    $000
                                    
                                    
                                    %
                                    
                                    
                                    $000
                                    
                                    
                                    $000
                                    
                                    
                                    $000
                                    
                                    
                                    %Payroll
      related expenses
                                    
                                    
                                    150
                                    
                                    
                                    
                                    177
                                    
                                    
                                    
                                    27
                                    
                                    
                                    
                                    15
                                    %
                                    
                                    
                                    495
                                    
                                    
                                    
                                    667
                                    
                                    
                                    
                                    172
                                    
                                    
                                    
                                    26
                                    %Professional
      fees
                                    
                                    
                                    14
                                    
                                    
                                    
                                    48
                                    
                                    
                                    
                                    34
                                    
                                    
                                    
                                    72
                                    %
                                    
                                    
                                    31
                                    
                                    
                                    
                                    374
                                    
                                    
                                    
                                    344
                                    
                                    
                                    
                                    92
                                    %Depreciation
      and Amortization
                                    
                                    
                                    11
                                    
                                    
                                    
                                    12
                                    
                                    
                                    
                                    1
                                    
                                    
                                    
                                    8
                                    %
                                    
                                    
                                    34
                                    
                                    
                                    
                                    33
                                    
                                    
                                    
                                    (1
                                    )
                                    
                                    
                                    (2
                                    )%Stock-based
      charges
                                    
                                    
                                    85
                                    
                                    
                                    
                                    107
                                    
                                    
                                    
                                    22
                                    
                                    
                                    
                                    20
                                    %
                                    
                                    
                                    255
                                    
                                    
                                    
                                    1,121
                                    
                                    
                                    
                                    866
                                    
                                    
                                    
                                    77
                                    %General
      and Administrative
                                    
                                    
                                    41
                                    
                                    
                                    
                                    58
                                    
                                    
                                    
                                    17
                                    
                                    
                                    
                                    29
                                    %
                                    
                                    
                                    129
                                    
                                    
                                    
                                    232
                                    
                                    
                                    
                                    103
                                    
                                    
                                    
                                    44
                                    %Total
                                    
                                    
                                    301
                                    
                                    
                                    
                                    402
                                    
                                    
                                    
                                    101
                                    
                                    
                                    
                                    25
                                    %
                                    
                                    
                                    943
                                    
                                    
                                    
                                    2,427
                                    
                                    
                                    
                                    1,484
                                    
                                    
                                    
                                    61
                                    %


5





*
            Payroll
      expenseswere attributable to salaries, benefits, related taxes,
      and group health insurance to our officers and employees.  We
      anticipate that payroll expenses will increase during the remainder of our
      current fiscal year.  Our plan is to expand the sales and
      support staff in order to meet our growth targets, subject to our receipt
      of sufficient additional financing, for which we currently have no
      commitments.




*
            Professional
      feesrepresent both accounting and legal fees.  We
      anticipate that our professional fees will remain flat for the balance of
      the fiscal year.  A material amount of professional service fees
      in 2008 were incurred during the quarter ended March 31, 2008, in
      connection with the exchange transaction pursuant to which our business
      became affiliated with the public company and the related SEC
      filings.




*
            Depreciation
      and Amortization expensesrepresent depreciation of fixed assets
      over three years and amortization of software development over five
      years.  We expect depreciation expenses to increase for the
      balance of this fiscal year as we acquire additional fixed assets for the
      use of an expected increasing number of employees, subject to our receipt
      of sufficient additional financing, for which we currently have no
      commitments.




*
            Stock Based
      Chargesrepresent the amortization of stock options issued to
      management and certain of our other employees.  We anticipate
      that stock based charges will be flat for the balance of this fiscal
      year.




*
            General and
      Administrative expensesare primarily comprised of Occupancy &
      Equipment, Travel & Entertainment, Printing & Stationary, Postage
      & Delivery, Office Supplies, and
Fees.





Other
Expense





For the
three months ended September 30, 2009, interest expense amounted to
$34,000.  For the nine months ended September 30, 2009, interest
expense amounted to $102,000 and was attributable to two notes
payable.





Net
Income





For the
three months ended September 30, 2009, we reported a loss from operations of
$256,000 offset by a one-time extraordinary gain on restructuring of debt of
$1,089,000 for a net income of $832,000 (or a gain per share of $0.03), compared
to a net loss of $419,000 (or a loss per share of $0.01) for the equivalent
period in the prior year.





For the
nine months ended September 30, 2009, we reported a loss from operations of
$900,000 offset by a one-time extraordinary gain on restructuring of debt of
$1,089,000 for a net income of $188,000 (or a gain per share of $0.01), compared
to a net loss of $2,231,000 (or a loss per share of $0.08) for the equivalent
period in the prior year.  The overall increase in net income in
comparison with last year is primarily due to the $1,089,000 gain on
restructuring of debt and a decrease in Operating Expenses described
above.





Liquidity
and Capital Resources





Liquidity
is the ability of a company to generate funds to support its current and future
operations, satisfy its obligations, and otherwise operate on an ongoing
basis.  At September 30, 2009, we had a cash balance of $92 and a
working capital deficit of $2,242,000.





Net cash
flows from operating activities for the nine months ended September 30, 2009
amounted to $3,000.  Net cash flows used in investing activities for
the nine months ended September 30, 2009 amounted to $4,300 and were used
primarily for capital lease payments.  There was no financing activity
for the nine months ended September 30, 2009.





At
September 30, 2009, we had cash of $92, which was essentially equivalent to our
cash position at the beginning of the quarter.  We have no currently
planned material commitments for capital expenditures; however, other than our
current cash and accounts receivable, we presently have no other alternative
source of operating capital, without which we may be unable to continue software
development, to increase our sales team to penetrate and gain traction in the
markets identified as critical to our business success, or to have the capital
necessary to fund our ongoing operations and obligations.  Although we
are considering various debt or equity financings, there can be no assurance
that any financing will be available to us on terms acceptable to us or at the
time that we that we would require such financing.  Failure to obtain
any such financing will result in our inability to effectuate our business
plan.  As of the date of this Quarterly Report, we have not entered
into any agreements and have not received any commitments to obtain any such
financing.


6


On
September 30, 2009, we entered into a Debt Forgiveness Agreement with Insurance
Medical Group Limited (f/k/a After All Limited), Bryan Irving, and Ian Morl,
pursuant to which $785,000 (plus accrued and unpaid interest and any penalties)
of our outstanding obligations in favor of Arngrove Group Holdings were forgiven
and all $200,000 (plus accrued and unpaid interest and any penalties) of our
outstanding obligations in favor of After All Limited were
forgiven.  In connection with the Debt Forgiveness Agreement, on
September 30, 2009, we also entered into a new Promissory Note, in favor of
Bryan Irving and Ian Morl, in the initial principal amount of
$415,000.  The payment terms of the new note are tied to certain terms
of the forgiveness agreement.  Specifically, if we successfully obtain
a loan from a commercial bank, we are then obligated to tender $75,000 to the
holders of the new note and, within 10 business days of the closing of such
loan, an additional $140,000 to such holders.  We would then be
obligated to pay remaining balance of $200,000 to such holders in ten equal,
monthly installments, without interest, commencing 90 days after the closing of
such loan.  If we are unable to obtain such a loan from a commercial
bank by December 31, 2009, as to which loan closing there can be no assurance,
then we are obligated to tender $100,000 to the holders of the new
note.  We would then be obligated to pay the remaining balance of
$315,000 to such holders, without interest, as follows:  (i) an
aggregate of $25,000 in 11 monthly installments of $2,083 and one installment of
$2,087 commencing on January 30, 2010, (ii) an aggregate of $90,000 in three
monthly installments of $30,000 commencing on March 31, 2010, and (iii) an
aggregate of $200,000 in ten monthly installments of $20,000 commencing June 30,
2010.  John Britchford-Steel, our chief executive officer, agreed to
guaranty up to $125,000 of our obligations under the new
note.  Further, Mr. Britchford-Steel placed $100,000 in escrow to
guarantee either of the initial payments under the new note to its
holders.





Off-Balance
Sheet Arrangements





We have
no off-balance sheet arrangements at September 30, 2009.





Critical
Accounting Policies and Estimates





Our
discussion and analysis of our financial condition and results of operations are
based on our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States of
America.  The preparation of these financial statements requires us to
make estimates and judgments that affect the reported amounts of assets,
liabilities, and expenses.  On an ongoing basis, we evaluate our
estimates and judgments, including those related to accrued expenses, fair
valuation of stock related to stock-based compensation and income
taxes.  We based our estimates on historical experience and on various
other assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other
sources.  Actual results may differ from these estimates under
different assumptions or conditions.





Use of
Estimates





In
preparing the financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the statements of financial condition, revenues, and expenses for the
period then ended.  Actual results may differ significantly from those
estimates.  Significant estimates made by management include, but are
not limited to, stock-based compensation, valuation of debt discounts, and
useful life of property and equipment.





Accounts
Receivable





We have a
policy of reserving for uncollectible accounts based on its best estimate of the
amount of probable credit losses in its existing accounts
receivable.  We periodically review our accounts receivable to
determine whether an allowance is necessary based on an analysis of past due
accounts and other factors that may indicate that the realization of an account
may be in doubt.  Account balances deemed to be uncollectible are
charged to the allowance after all means of collection have been exhausted and
the potential for recovery is considered remote.





Inventories





Inventories
are stated at the lower of cost or market utilizing the first-in, first-out
method and consist of raw materials related to our products.  We
intend to write down inventory for estimated obsolescence or unmarketable
inventory based upon assumptions and estimates about future demand and market
conditions.  If actual market conditions become less favorable than
those projected by us, additional inventory write-downs might be
required.





Property and
Equipment





Property
and equipment are carried at cost.  Depreciation and amortization are
provided using the straight-line method over the estimated economic lives of the
assets.  The cost of repairs and maintenance is expensed as incurred;
major replacements and improvements are capitalized.  When assets are
retired or disposed of, the cost and accumulated depreciation are removed from
the accounts, and any resulting gains or losses are included in income in the
year of disposition.





Revenue
Recognition





We follow
the guidance of the SEC’s Staff Accounting Bulletin No. 104, “Revenue
Recognition in Financial Statements.”  In general, we record revenue
when persuasive evidence of an arrangement exists, services have been rendered
or product delivery has occurred, the sales price to the customer is fixed or
determinable, and collectability is reasonably assured.


7


The
following policies reflect our specific criteria for our revenue stream: We
generate revenue from the sale of our software products.  Revenues
from the sale of these items are recognized upon invoicing of the product to the
customer.





Stock Based
Compensation





We
adopted Statement of Financial Accounting Standards No. 123 (revised 2004),
Share Based Payment(“ASC-718”).  ASC-718 establishes the financial accounting and
reporting standards for stock-based compensation plans.  As required
by ASC-718, we recognized the cost resulting from all stock-based payment
transactions including shares issued under our stock option plans in the
financial statements.





Non-Employee Stock-Based
Compensation





The cost
of stock based compensation awards issued to non-employees for services are
recorded at either the fair value of the services rendered or the instruments
issued in exchange for such services, whichever is more readily determinable,
using the measurement date guidelines enumerated in Emerging Issues Task Force
Issue (“EITF”) 96-18, “Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services” (“ASC 505-50 ”).





Recent Accounting
Pronouncements




In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles - a replacement of
FASB Statement No. 162,” and also issued Accounting Standards No. 2009-01,
“Generally Accepted Accounting Principles” (ASC Topic 105-10), which establishes
the FASB Accounting Standards Codification (the “Codification” or “ASC”) as the
official single source of authoritative U.S. generally accepted accounting
principles (“GAAP”).  All guidance contained in the Codification
carries an equal level of authority.  All existing accounting
standards are superseded.  All other accounting guidance not included
in the Codification will be considered non-authoritative.  The
Codification also includes all relevant SEC guidance organized using the same
topical structure in separate sections within the Codification.  The
Codification is not intended to change GAAP, but it will change the way GAAP is
organized and presented.  The Codification is effective for financial
statements issued for interim and annual periods ending after September 15,
2009.  Except for the disclosure requirements, the adoption of this
statement did not have an impact on the determination or reporting of the
Company’s financial statements.  The Company is providing the
Codification cross-reference alongside the references to the standards issued
and adopted prior to the adoption of the Codification.  The
Codification does not change current US GAAP, but is intended to simplify user
access to all authoritative US GAAP by providing all the authoritative
literature related to a particular topic in one place.  All existing
accounting standard documents will be superseded and all other accounting
literature not included in the Codification will be considered
non-authoritative.  As it relates to the Company, the Codification is
effective July 1, 2009 and will require future references to authoritative US
GAAP to coincide with the appropriate section of the
Codification.  Accordingly, this standard will not have an impact on
the Company’s results of operations or financial condition.
 
 In
December 2007, the FASB issued Statement of Financial Accounting Standards No.
141(R), Business Combinations, (ASC 805) and No. 160, Noncontrolling Interests
in Consolidated Financial Statements, an amendment of ARB No. 51 (ASC
810-10-65).  ASC 805 will change how business acquisitions are
accounted for and ASC 810-10-65 will change the accounting and reporting for
minority interests, which will be recharacterized as noncontrolling interests
and classified as a component of equity.  The Company adopted both as
of January 1, 2009 and neither pronouncement has a material impact on the
Company’s financial statements.
 
 In May
2009, the FASB issued SFAS No. 165, Subsequent Events (ASC
855-10).  This statement establishes general standards of accounting
for and disclosures of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued.  In
particular, this statement sets forth (1) the period after the balance sheet
date during which management of a reporting entity should evaluate events or
transactions that may occur for potential recognition or disclosure in the
financial statements; (2) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements; and (3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet
date.  This statement is effective for interim or annual periods
ending after June 15, 2009 and we adopted it on April 1, 2009.  This
statement is not expected to have any impact on our financial position or
results of operations.
 
 
  8




In June
2009, the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets
an amendment of FASB Statement No. 140, which amends the derecognition guidance
in SFAS No. 140 and eliminates the exemption from consolidation for qualifying
special-purpose entities.  This statement has not yet been codified
and is effective for financial asset transfers occurring after the beginning of
an entity’s first fiscal year that begins after November 15,
2009.  This statement is not expected to have any impact on our
financial position or results of operations.
 
 In June
2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R),
which amends the consolidation guidance applicable to variable interest
entities.  The amendments will significantly affect the overall
consolidation analysis under FASB Interpretation No. 46(R).  This
statement has not yet been codified and is effective as of the beginning of the
first fiscal year that begins after November 15, 2009. This statement is not
expected to have any impact on our financial position or results of
operations.





Other
accounting standards that have been issued or proposed by the FASB or other
standards-setting bodies that do not require adoption until a future date and
are not expected to have a material impact on the financial statements upon
adoption.





ITEM 4T.  CONTROLS
AND PROCEDURES.




The
Company, under the supervision and with the participation of its management,
including the Chief Executive Officer and the Chief Financial Officer, evaluated
the effectiveness of the design and operation of the Company’s “disclosure
controls and procedures” (as defined in Rule 13a-15(e) under the Securities
Exchange Act of 1934, as amended, as of the end of the period covered by this
report.  Based on that evaluation, the Chief Executive Officer and the
Chief Financial Officer concluded that the Company’s disclosure controls and
procedures were effective as of September 30, 2009.  There has been no
change in the Company’s internal control over financial reporting during the
quarter ended September 30, 2009, that has materially affected, or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting.





9




PART
II – OTHER INFORMATION




ITEM
6.  EXHIBITS




2.1
              Agreement
      and Plan of Exchange by and among Milk Bottle Cards, Inc., and certain
      members of ForgeHouse, LLC, dated January 31, 2008 (incorporated by
      reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K,
      filed February 7, 2008).2.2
              Capital
      Interest Purchase Agreement, by and among the Company and Paul
      Grootendorst, Bryan Irving, Brooks Mileson, and Ian Morl, dated January
      31, 2008 (incorporated by reference to Exhibit 2.2 of the Company’s
      Current Report on Form 8-K, filed February 7, 2008).2.3
              Repurchase
      Agreement, by and between the Company and Nicole Milkovich, dated January
      31, 2008 (incorporated by reference to Exhibit 2.3 of the Company’s
      Current Report on Form 8-K, filed February 7, 2008).3.1
              Amended
      and Restated Articles of Incorporation, as filed with the Secretary of
      State of the State of Nevada, effective January 31, 2008 (incorporated by
      reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K,
      filed February 7, 2008).3.2
              Bylaws
      (incorporated by reference to Exhibit 3(ii) of the Company’s Registration
      Statement on Form SB-2, filed on April 15, 2005).3.3
              Certificate
      of Designation of Series A Convertible Preferred Stock, as filed with the
      Secretary of State of the State of Nevada, effective January 31, 2008
      (incorporated by reference to Exhibit 3.3 of the Company’s Current Report
      on Form 8-K, filed February 7, 2008).3.4
              Articles
      of Exchange, as filed with the Secretary of State of the State of Nevada,
      effective January 31, 2008 (incorporated by reference to Exhibit 3.4 of
      the Company’s Current Report on Form 8-K, filed February 7,
      2008).10.1
              2008
      Incentive Plan (incorporated by reference to Exhibit B of the Company’s
      definitive Information Statement on Schedule 14-C, filed January 2,
      2008).10.2
              Form
      on Incentive Stock Option Award Agreement under the 2008 Incentive Plan
      (incorporated by reference to Exhibit 10.2 of the Company’s Current Report
      on Form 8-K, filed February 7, 2008).10.3
              Form
      of Nonqualified Stock Option Award Agreement under the 2008 Incentive Plan
      (incorporated by reference to Exhibit 10.3 of the Company’s Current Report
      on Form 8-K, filed February 7, 2008).10.4
              Employment
      Agreement with John Britchford-Steel, dated as of January 31, 2008
      (incorporated by reference to Exhibit 10.4 of the Company’s Current Report
      on Form 8-K, filed February 7, 2008).10.5
              Employment
      Agreement with Jose Alonso, dated as of January 31, 2008 (incorporated by
      reference to Exhibit 10.5 of the Company’s Current Report on Form 8-K,
      filed February 7, 2008).10.6
              Mutual
      Release, by and among the Company, ForgeHouse, and Paul Grootendorst,
      Bryan Irving, Brooks Mileson, and Ian Morl, dated as of January 31, 2008
      (incorporated by reference to Exhibit 10.6 of the Company’s Current Report
      on Form 8-K, filed February 7, 2008).10.7
              Form
      of Lock-Up Agreement, dated as of December 12, 2007, by and between the
      Company and each of certain beneficial stockholders (incorporated by
      reference to Exhibit 10.7 of the Company’s Current Report on Form 8-K,
      filed February 7, 2008).10.8
              Form
      of Subscription Agreement, dated as of January 31, 2008, by and between
      the Company and each of certain preferred stockholders (incorporated by
      reference to Exhibit 10.8 of the Company’s Current Report on Form 8-K,
      filed February 7, 2008).10.9
              Form
      of Common Stock Purchase Warrant, dated as of January 31, 2008, by and
      between the Company and each of certain preferred stockholders
      (incorporated by reference to Exhibit 10.9 of the Company’s Current Report
      on Form 8-K, filed February 7, 2008).10.10*
              Debt
      Forgiveness Agreement, dated September 30, 2009, among the Registrant,
      Insurance Medical Group Limited, f/k/a After All Limited, Bryan Irving,
      Ian Morl, and John
Britchford-Steel.


10




10.11*
              Promissory
      Note, in favor of Bryan Irving and Ian Morl, dated September 30,
      2009.10.12
              Reserved.10.13
              Employment
      Agreement with Jorge Vargas, dated as of February 15, 2008 (incorporated
      by reference to Exhibit 10.13 of the Company’s Quarterly Report on Form
      10-QSB, filed May 20, 2008).10.14
              Service
      and Software License Agreement, dated April 15, 2007, by and between the
      Company and Securitas Security Services USA, Inc. (incorporated by
      reference to Exhibit 10.14 of the Company’s Quarterly Report on Form
      10-QSB, filed May 20, 2008).10.15
              Office
      Lease Agreement, by and between the Company and Wolff Atlanta Portfolio,
      LLC (incorporated by reference to Exhibit 10.15 of the Company’s Quarterly
      Report on Form 10-QSB, filed May 20, 2008).21.1*
              Subsidiaries
      of the Registrant.31.1*
              Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.31.2*
              Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.32.1*
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. § 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2*
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. § 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.







*      Filed
herewith.




11


SIGNATURES




In
accordance with the requirements of the Exchange Act, the registrant has caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.





FORGEHOUSE,
      INC.By:
      /s/ John
      Britchford-SteelNovember
      23, 2009
              John
      Britchford-SteelChief
      Executive Officer


12