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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K/A
 Amendment # 2
 (Mark One)
 þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended January 2, 2011
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 333-136167
 UFOOD RESTAURANT GROUP, INC.
  Nevada
    
    20-4463582(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 
 
  Title of each class
    
    Name of each exchange on which registeredNone
    
    None
  
 o þ
 þ o
 þ o
 þ
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



PagePART IItem 1. Business
    
    
    4Item 1A. Risk Factors
    
    
    10Item 2. Properties
    
    
    24Item 3. Legal Proceedings
    
    
    24PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters And Issuer Purchases of Equity Securities
    
    
    25Item 6. Selected Financial Data
    
    
    26Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    26Item 7A. Quantitive and Qualitive Disclosures about Market Risk
    
    
    38Item 8. Financial Statements and Supplementary Data
    
    
    39Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    66Item 9A. Controls and Procedures
    
    
    66Item 9B Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    67Item 11. Executive Compensation
    
    
    72Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    76Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    78Item 14. Principal Accounting Fees and Services
    
    
    79PART IVItem 15 Exhibits
    
    
    81Signatures
    
    
    82Exhibit 21Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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Forward-Looking Statements
  
  
 Item 1.
    
    Business
     4




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
    
    Dallas-Fort Worth International Airport and Parkland Hospital in Dallas, Texas.
 
    
    Florida
 
    
    Cleveland, Ohio
 
    
    Washington, D.C.
    7




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
    
    Better Burger (New York City)
 
    
    Energy Kitchen (New York City)
 
    
    The Pump (New York City)
 
    
    The Muscle Maker (New Jersey)
 
    
    Topz (California)
 
    
    Evos (California, Florida, Nevada, North Carolina)
 
    
    b. good (Boston)
 
    
    Soma Grill (Arizona)
 
    
    Healthy Bites (Florida)
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Item 1A.
    
    Risk Factors
 Risks Related to Our Company and Our Business
 We have a limited operating history and are subject to all of the risks inherent in the expansion
of an early-stage business.
  We have not been profitable to date and expect our operating losses to continue for the foreseeable
future; we may never be profitable
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There are risks inherent in expansion of operations, including our ability to sell franchises,
generate profits from new restaurants, find suitable sites and develop and construct stores in a
timely and cost-effective way
    
    
    the availability of suitable sites for new stores;
    
    our and our franchisees ability to negotiate acceptable lease or purchase terms for
new locations, obtain adequate financing, on favorable terms, requires to construct,
build-out and operate new stores and meet construction schedules, and hire and train and
retain qualified store managers and personnel;
 
    
    managing construction and development costs of new stores at affordable levels;
 
    
    the establishment of brand awareness in new markets; and
 
    
    the ability of our Company and our area developers to manage this anticipated
expansion.
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
    
    labor disputes;
 
    
    shortages of materials or skilled labor;
 
    
    requirements to use union labor;
 
    
    energy prices;
 
    
    adverse weather;
 
    
    unforeseen engineering problems;
 
    
    environmental problems;
 
    
    construction or zoning problems;
 
    
    local government regulations;
 
    
    modifications in design; and
 
    
    other unanticipated increases in costs.
  Our business plan is dependent on the franchising model; therefore, our success will generally
depend on the success of our franchisees and the profitability of their stores
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Our past and future operating losses may make it more difficult for us to attract new franchisees
  We may be subject to general risk factors affecting the restaurant industry, including current
economic climate, costs of labor, food prices, gasoline prices and the unemployment levels
  
    
    adverse changes in national, regional or local economic or market conditions;
 
    
    increased costs of labor (including increases in the minimum wage);
 
    
    increased costs of food products;
 
    
    availability of, and ability to obtain, adequate supplies of ingredients that meet
our quality standards;
 
    
    increased energy costs;
    
    management problems;
 
    
    increases in the number and density of competitors;
 
    
    limited alternative uses for properties and equipment;
 
    
    changing consumer tastes, habits and spending priorities;
 
    
    changing demographics;
 
    
    the cost and availability of insurance coverage;
 
    
    uninsured losses;
 
    
    changes in government regulation;
 
    
    changing traffic patterns;
 
    
    weather conditions; and
 
    
    local, regional or national health and safety matters.
  13




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There is intensive competition in our industry, and we will be competing with national and regional
chains and independent restaurant operators.
  Our business has been adversely affected by declines in discretionary spending and may be affected
by changes in consumer preferences.
    14




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Increases in costs, including food, labor and energy prices, will adversely affect our results of
operations
  Our stores are concentrated in a small geographic area
  The growth of our Company is dependent on the skills and expertise of management and key personnel.
  Our food service business and the restaurant industry are subject to extensive government
regulation
   
    
    Establish general standards, specifications and requirements for the construction,
design and maintenance of the store premises;
 
    
    regulate matters affecting the health, safety and welfare of our customers, such as
general health and sanitation requirements for restaurants, employee practices concerning
the storage, handling, cooking and preparation of food, special health, food service and
licensing requirements, restrictions on smoking, exposure to tobacco smoke or other
carcinogens or reproductive toxicants and saccharin and availability of and requirements
for public accommodations, including restrooms;
 
    
    set standards pertaining to employee health and safety;
 
    
    set standards and requirements for fire safety emergency preparedness; regulate the
proper use, storage and disposal of waste, insecticides, and other hazardous materials;
 
    
    establish general requirements or restrictions on advertising containing false or
misleading claims, or health and nutrient claims on menus or otherwise, such as low
calorie or fat free, and
 
    
    establish requirements concerning withholdings and employee reporting of taxes on tips.
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We have not conducted a comprehensive review of all the potential environmental liabilities at our
properties.
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Our success and competitive position depends on our ability to protect our proprietary intellectual
property
  Our plan to rapidly increase the number of stores may make future results unpredictable, as our
success will depend on acceptance of our products in new markets
  New stores, once opened, may not be profitable, and the increases in average store sales and
Company store sales that we have experienced in the past may not be indicative of future results
  
    
    sales performance of new stores
 
    
    competition, either from competitors in the restaurant industry or our own stores;
 
    
    changes in consumer preferences and discretionary spending;
 
    
    consumer understanding and acceptance of UFood stores;
 
    
    road construction and other factors limiting access to new stores;
 
    
    general economic conditions, which can affect store traffic, local labor costs and
prices we pay for ingredients and other supplies; and
 
    
    changes in government regulation.
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Expansion into new markets may present increased risks due to our unfamiliarity with those areas
  We may not persuade customers of the benefits of paying higher prices for higher-quality food
  Additional instances of avian flu or mad cow disease or other food-borne illnesses could
adversely affect the price and availability of chicken, beef or other meat, cause the temporary
closure of some stores and result in negative publicity, thereby resulting in a decline in sales
  Our franchisees could take actions that harm our reputation and reduce our royalty revenues
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We could be party to litigation that could adversely affect us by distracting management,
increasing expenses or subjecting us to material money damages and other remedies
  Unfavorable publicity or consumer perception of our nutritional products and any similar products
distributed by other companies could cause fluctuations in our operating results and could have a
material adverse effect on our reputation, the demand for our products and our ability to generate
revenues
  We may incur material product liability claims, which could increase our costs and adversely affect
our reputation, revenues and operating income
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We will need to raise additional capital to meet our business requirements in the future, and such
capital raising may be costly or difficult to obtain and could dilute current stockholders
ownership interests
  
    
    pursuing growth opportunities, including more rapid expansion;
 
    
    opening additional Company-owned stores beyond the four we currently operate
 
    
    acquiring complementary businesses
 
    
    making capital improvements to improve our infrastructure;
 
    
    hiring qualified management and key employees;
 
    
    research and development of new products;
 
    
    increased advertising and marketing expenses;
 
    
    responding to competitive pressures;
 
    
    complying with regulatory requirements such as licensing and registration; and
 
    
    maintaining compliance with applicable laws.
    Compliance with the reporting requirements of federal securities laws can be expensive
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Applicable regulatory requirements, including those contained in and issued under the
Sarbanes-Oxley Act, may make it difficult for us to retain or attract qualified officers and
directors, which could adversely affect the management of our business and our ability to obtain or
retain listing of our common stock
   We are a holding company that depends on cash flow from our subsidiaries to meet our obligations
and pay dividends; our subsidiary is restricted from making distributions to us.
  We have reported a material weakness in our internal control over financial reporting as of January
2, 2011. If we fail to maintain an effective system of internal controls, including internal
controls over financial reporting, we may not be able to accurately report our financial results or
detect fraud. Consequently, investors could lose confidence in our financial reporting and this may
decrease the trading price of our stock.
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Risks Related to Our Securities
 There is not now, and there may not ever be, an active market for our common stock
  We cannot assure you that our common stock will become liquid or that it will be listed on a
securities exchange.
  Applicable SEC rules governing the trading of penny stocks limits the trading and liquidity of
our common stock, which may affect the trading price of the common stock.
  The price of our common stock may become volatile due to our operating results, products offered by
our competitors and stock market conditions, which could lead to losses by investors and costly
securities litigation.
  
    
    actual or anticipated variations in our operating results;
 
    
    announcements of developments by us or our competitors;
 
    
    announcements by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
 
    
    adoption of new accounting standards affecting our industry;
 
    
    additions or departures of key personnel;
 
    
    introduction of new products by us or our competitors;
 
    
    sales of our common stock or other securities in the open market; and
 
    
    other events or factors, many of which are beyond our control.
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We do not anticipate dividends to be paid on the common stock, and investors may lose the entire
amount of their investment.
  Securities analysts may not initiate coverage or continue to cover our common stock, and this may
have a negative impact on its market price.
  You may experience dilution of your ownership interests because of the future issuance of
additional shares of common stock.
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Item 2.
    
    Properties
   2011
    
    $
    466,0002012
    
    
    470,0002013
    
    
    473,0002014
    
    
    440,0002015
    
    
    157,000Thereafter
    
    
    36,000$
    2,042,000
 
 Item 3.
    
    Legal Proceedings
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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities
  www.nasdaq.com
 The fiscal year ended
 January 2, 2011
    
    
    December 27, 2009High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    0.21
    
    
    $
    0.06
    
    
    $
    0.36
    
    
    $
    0.10Second Quarter
    
    $
    0.50
    
    
    $
    0.16
    
    
    $
    0.28
    
    
    $
    0.17Third Quarter
    
    $
    0.39
    
    
    $
    0.18
    
    
    $
    0.20
    
    
    $
    0.09Fourth Quarter
    
    $
    0.35
    
    
    $
    0.18
    
    
    $
    0.14
    
    
    $
    0.07
 Dividends
  Securities Authorized for Issuance under Equity Compensation Plans
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Number of
    
    
    
    
    
    
    Number of securitiessecurities to be
    
    
    
    
    
    
    remaining available forissued upon
    
    
    Weighted-average
    
    
    future issuance underexercise of
    
    
    exercise price of
    
    
    equity compensation plansoutstanding
    
    
    outstanding options,
    
    
    (excluding securitiesPlan Category
    
    options
    
    
    warrants and rights
    
    
    reflected in column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by security holders
    
    
    5,917,747
    (2)
    
    $
    0.19
    
    
    
    3,115,010
    (3)Equity compensation plans not approved by security
holders
    
    
    8,728,673
    (1)
    
    $
    0.19
    
    
    
    0Total
    
    
    14,646,420
    
    
    $
    0.19
    
    
    
    3,115,010
 (1)
    
    On June 30th, 2010 the Board of Directors approved the grant of options to
purchase 7,683,673 shares of common stock shown in the table. These options were not granted
pursuant to a compensation plan, but instead represent non-qualified stock options granted to
Directors, Officers, and employees. The options granted have various vesting schedules at an
exercise price of $0.19 per share.(2)
    
    On April 1, 2010, the Board of Directors approved the grant of 2,070,000 options to acquire
shares of the Companys common stock under the Companys 2007 Equity Incentive Plan to
officers and employees, fully vested at an exercise price of $0.16 per share.(3)
    
    On July 1st, 2010, the shareholders approved the increment of 3,000,000 stock
options available under our 2007 Stock Option Plan for a total of 9,000,000 stock options in
that Plan. 
 Item 6.
    
    Selected Financial Data
  
 Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
   26




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Critical Accounting Policies & Estimates
     Franchisors
  27




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Year EndedJanuary 2,
    
    
    December 27,2011
    
    
    2009Revenues:Store sales
    
    
    91.4
    %
    
    
    85.0
    %Franchise royalties and fees
    
    
    6.3
    
    
    
    7.9Other revenue
    
    
    2.3
    
    
    
    7.1100.0
    %
    
    
    100.0
    %Costs and expenses:Store operating expenses (1):Food and paper cost
    
    
    33.3
    %
    
    
    32.6
    %Cost of goods sold
    
    
    7.3
    
    
    
    7.4Labor
    
    
    28.4
    
    
    
    29.2Occupancy
    
    
    8.8
    
    
    
    12.0Other store operating expenses
    
    
    18.0
    
    
    
    16.8General and administrative expenses
    
    
    83.5
    
    
    
    67.8Advertising, marketing and promotion expenses
    
    
    4.7
    
    
    
    4.0Depreciation and amortization
    
    
    6.6
    
    
    
    7.5Loss on disposal of assets, Impairment of
Goodwill and Long-lived assets
    
    
    0.5
    
    
    
    4.1Total costs and expenses
    
    
    179.5
    
    
    
    163.6Operating loss
    
    
    (79.5
    )
    
    
    (63.6
    )Other income (expense):Interest income
    
    
    0.1
    
    
    
    0.4Interest expense
    
    
    (78.8
    )
    
    
    (17.5
    )Other expense, net
    
    
    (7.5
    )
    
    
    8.1Other income (expense), net
    
    
    (86.2
    )
    
    
    (9.0
    )Loss before income taxes
    
    
    (165.7
    )
    
    
    (72.6
    )Income taxes
    
    
    
    
    
    
    Net loss
    
    
    (165.7
    %)
    
    
    (72.6
    %)
 (1)
    
    Food and paper costs are shown as a percentage of food sales. The cost of nutritional
products, labor, occupancy and other store operating expenses are shown as a
percentage of total store sales.  29




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Year EndedJanuary 2,
    
    
    December 27,2011
    
    
    2009Company-owned locations:Locations at the beginning of the year
    
    
    4
    
    
    
    4Locations opened
    
    
    
    
    
    
    Locations closed
    
    
    
    
    
    
    Locations sold
    
    
    
    
    
    
    Locations transferred
    
    
    
    
    
    
    Locations at the end of the year
    
    
    4
    
    
    
    4Franchise-operated locations:Locations at the beginning of the year
    
    
    4
    
    
    
    6Locations opened
    
    
    2
    
    
    
    4Locations closed
    
    
    (2
    )
    
    
    (6
    )Locations sold
    
    
    
    
    
    
    Locations transferred
    
    
    
    
    
    
    Locations at the end of the year
    
    
    4
    
    
    
    4System-wide locationsLocations at the beginning of the year
    
    
    8
    
    
    
    10Locations opened
    
    
    2
    
    
    
    4Locations closed
    
    
    (2
    )
    
    
    (6
    )Locations sold
    
    
    
    
    
    
    Locations transferred
    
    
    
    
    
    
    Locations at the end of the year
    
    
    8
    
    
    
    8
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
    
    The personnel related costs increase was $399,894 and it is comprised of $172,050
reduction of payroll expenses due to the decline of corporate staff headcount, and offset
by $571,944 higher stock base compensation than the prior year primarily due to the
amendment of the employment agreements of the Companys Chief Executive Officer and Chief
Operating Officer, awarding 3,250,000 and 1,205,673 non-qualified stock options
respectively, for which half of their non-qualified stock options grants vested at the
execution of the agreement and half over a three year period. The fair value of the stock
options granted during 2010 was calculated with the Black-Scholes model. A key aspect of
the Black-Scholes model is volatility. The Company changed the expected volatility estimate
to an index of the Companys history combined with volatility of peer companies. The usage
of the Companys history of volatility had a significant impact.
 
    
    General and administrative expenses for the year ended January 2, 2011 include $572,434
of investor and public relations expenses compared to $82,819 for the year ended December
27, 2009. The increase of $489,615 was primarily due to the grant of 10,000 Series B
preferred shares pursuant to a service agreement for investor and public relations executed
on June 29th, 2010 with a term of 12 months from the date of the execution. Pursuant to
Section 3 of the Agreement, the Company terminated the agreement on December 8, 2010 which
such cancelation reduced the number of preferred shares to be issued by one-half to 5,000
shares.
 
    
    The year-over-year decrease of legal expenses of $163,833 was primarily due to the legal
cost associated with the mechanics liens in connection with the build-out of premises,
which the original contractor failed to pay the subcontractors during the year ended
December 27, 2009.
 
    
    The decrease in insurance expenses of $82,678 was primarily due to the cancelation of
the key man insurance on our Chief Executive Officer, George Naddaff during the first
quarter of 2010.
 
    
    The rent expense reduction of $164,939 during the year ended January 2, 2011 was as a
result of moving the Corporate Offices to a smaller suite in the same building for about
the one-third of the cost of the previous lease. An adjustment of $110,912 to the straight
line rent accrual was booked.
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Year EndedJanuary 2,
    
    
    December 27,2011
    
    
    2009Beneficial conversion feature (98.2% of the remaining balance)
    
    $
    2,774,619
    
    
    $
    310,201Deferred Financing
    
    
    750,154
    
    
    
    266,176Interest expense (net)
    
    
    370,102
    
    
    
    378,639Net interest expense
    
    $
    3,894,875
    
    
    $
    955,016
  2010
    
    
    2009
    
    
    VarianceChange in fair value of 2008 Warrants- Income(expense)
    
    $
    (1,447,919
    )(1)
    
    $
    349,498
    
    
    $
    (1,797,417
    )Change in fair value of 2009 Warrants- Income(expense)
    
    
    (4,616,401
    )(2)
    
    
    
    
    
    
    (4,616,401
    )Extinguishment of debt
    
    
    5,692,500
    (3)
    
    
    74,967
    
    
    
    5,617,533Other Income
    
    
    
    
    
    
    17,668
    
    
    
    (17,668
    )Total Other Income(expense)
    
    $
    (371,820
    )
    
    $
    442,133
    
    
    $
    (813,953
    )
 (1)
    
    The Company is subject to a derivative warrant liability instrument due to the fact
that the related contract is not indexed to its own stock, as specified by ASC No. 815-40,
Derivatives and Hedging-Contracts in entitys Own Equity. At January 2, 2011, the aggregate
fair value of the derivative was $1,451,669. The increase in the fair value of the
derivative was in the aggregate amount of $1,447,919 during the year ended January 2, 2011.(2)
    
    In conjunction with the extinguishment of debt, the Company modified the exercise price
of the 2009 Warrants. The exercise price was reduced from $0.14 to $0.09 per share of
Common Stock. As such, we have calculated the fair value of the warrants on the date of the
modification to be approximately $6,181,501 and recorded the increase in fair value of
$4,616,401 as an addition to additional paid-in capital. The fair value of the warrants was
computed using the Black-Scholes option pricing model. The Company assumed a risk-free
interest rate of 1.17%, no dividends, expected volatility of approximately 118.45%, which
was calculated based on a combination of historical volatility and the history of
comparable peer companies, and an expected warrant life of approximately 5 years.(3)
    
    In conjunction with the extinguishment of debt and in accordance to ASC 470-20-30, if
the intrinsic value of the beneficial conversion feature is greater than the proceeds
allocated to the convertible instrument, the amount of the discount assigned to the
beneficial conversion feature shall be limited to the amount of the proceeds allocated to
the convertible instrument. As such, the beneficial conversion feature of the preferred
shares is equal to $5,692,500.
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October 4, 2010
    
    
    October 29, 2010Expected term (years)
    
    
    5 Years
    
    
    
    5 YearsExpected volatility
    
    
    118.45
    %
    
    
    118.45
    %Risk-free interest rate
    
    
    1.26
    %
    
    
    1.17
    %Expected annual dividend
    
    0.00
    %
    
    0.00
    %
        36




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
    
    Eliminating the debt provides us with more operational flexibility in terms of
allocating financial resources.
 
    
    We believe adding to our equity and reducing debt provides us with a stronger financial
position and will allow us to more readily attract new capital to execute the operating
plan and provide the time needed to reach profitability.
 
    
    Reducing debt in return for equity provides some assurance to potential franchisees of a
longer term commitment from investors for us to reach profitability.
    37




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Less Than
    
    
    1 Year to
    
    
    4 Years to
    
    
    More thanTotal
    
    
    1 Year
    
    
    3 Years
    
    
    5 Years
    
    
    5 YearsLong-term debt
    
    $
    512,120
    
    
    $
    512,120
    (1)
    
    $
    
    
    
    $
    
    
    
    $
    Capital leases
    
    
    45,340
    
    
    
    27,496
    
    
    
    17,844
    
    
    
    
    
    
    
    Operating leases
    
    
    2,041,000
    
    
    
    466,000
    
    
    
    943,000
    
    
    
    596,000
    
    
    
    36,000Scheduled interest payments(2)
    
    
    17,300
    
    
    
    15,100
    
    
    
    2,200
    
    
    
    
    
    
    
    
 (1)
    
    Long-term debt due in less than 1 year includes $450,000 that becomes
due upon the sale of our Landmark Center restaurant and store. We
currently have no plans to sell our Landmark Center unit.
    
 Item 7A.
    
    Quantitive and Qualitive Disclosures About Market Risk
   38




---



##### Table of Contents



Item 8.
    
    Financial Statements and Supplementary Data
 Index to Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm
    
    
    40Consolidated Balance Sheets as of January 2, 2011 and
December 27, 2009
    
    
    41  42Consolidated Statements of Operations for the Fiscal Years
Ended January 2, 2011 and December 27, 2009
    
    
    43Consolidated Statements of Stockholders Equity (Deficit) for the
Fiscal Years Ended January 2, 2011 and December 27, 2009
    
    
    44Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 2, 2011 and December 27, 2009
    
    
    45Notes to Consolidated Financial Statements
    
    
    46  66
  39




---



##### Table of Contents



40




---



##### Table of Contents



2010Restated
    
    
    2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,797,452
    
    
    $
    2,278,427Restricted cash
    
    
    40,041
    
    
    
    60,425Accounts receivable, net
    
    
    8,334
    
    
    
    180,134Inventories
    
    
    118,324
    
    
    
    123,648Prepaid expenses and other current assets
    
    
    78,310
    
    
    
    68,6053,042,461
    
    
    
    2,711,239Property and equipment:Equipment
    
    
    1,006,238
    
    
    
    937,857Furniture and fixtures
    
    
    210,251
    
    
    
    202,205Leasehold improvements
    
    
    1,722,654
    
    
    
    1,744,594Website development costs
    
    
    27,050
    
    
    
    37,0502,966,193
    
    
    
    2,921,706Accumulated depreciation and amortization
    
    
    1,863,148
    
    
    
    1,560,4021,103,045
    
    
    
    1,361,304Other assets:Deferred financing costs, net
    
    
    7,717
    
    
    
    757,873Goodwill
    
    
    75,363
    
    
    
    75,363Other
    
    
    84,382
    
    
    
    86,560167,462
    
    
    
    919,796Total assets
    
    $
    4,312,968
    
    
    $
    4,992,339
   41




---



##### Table of Contents



2010Restated
    
    
    2009LIABILITIESCurrent liabilities:Current portion of long-term debt
    
    $
    450,000
    
    
    $
    857,882Current portion of capital lease obligations
    
    
    27,496
    
    
    
    58,820Accounts payable
    
    
    279,102
    
    
    
    285,150Franchisee deposits
    
    
    80,000
    
    
    
    157,500Accrued dividends
    
    
    225,779
    
    
    
    Accrued expenses and other current liabilities
    
    
    165,632
    
    
    
    157,8701,228,009
    
    
    
    1,517,222Long-term liabilities:Long-term debt
    
    
    62,120
    
    
    
    3,044,001Warrant liability
    
    
    1,451,669
    
    
    
    3,750Capital lease obligations
    
    
    17,844
    
    
    
    39,071Other noncurrent liabilities
    
    
    83,716
    
    
    
    276,9201,615,349
    
    
    
    3,363,742Total liabilities
    
    
    2,843,358
    
    
    
    4,880,964EQUITYStockholders equity:Preferred stock, $0.001 par value, 10,000,000 shares
authorized,Series A 56,925 shares issued and
outstanding
    
    
    57
    
    
    
    Series B 39,400 shares issued and outstanding
    
    
    39
    
    
    
    Common stock, $0.001 par value, 300,000,000 shares
authorized, 40,487,294 and 37,934,907 shares issued and
outstanding, respectively
    
    
    40,487
    
    
    
    37,935Additional paid-in capital
    
    
    42,845,625
    
    
    
    25,589,311Accumulated deficit
    
    
    (41,416,598
    )
    
    
    (25,515,871
    )Total stockholders equity
    
    
    1,469,610
    
    
    
    111,375Total liabilities and stockholders equity
    
    $
    4,312,968
    
    
    $
    4,992,339
   42




---



##### Table of Contents



2010
    
    
    2009Revenues:Store sales
    
    $
    4,518,308
    
    
    $
    4,632,651Franchise royalties and fees
    
    
    312,589
    
    
    
    429,537Other revenue
    
    
    112,042
    
    
    
    388,6484,942,939
    
    
    
    5,450,836Costs and expenses:Store operating expenses:Food and paper costs
    
    
    1,332,303
    
    
    
    1,336,240Cost of Goods sold
    
    
    328,550
    
    
    
    344,219Labor
    
    
    1,284,751
    
    
    
    1,354,101Occupancy
    
    
    397,944
    
    
    
    554,923Other store operating expenses
    
    
    814,333
    
    
    
    778,155General and administrative expenses
    
    
    4,129,282
    
    
    
    3,696,425Advertising, marketing and promotion expenses
    
    
    233,457
    
    
    
    219,360Depreciation and amortization
    
    
    325,952
    
    
    
    407,593Impairment of goodwill
    
    
    
    
    
    
    136,000Loss on disposal of assets
    
    
    25,782
    
    
    
    88,997Total costs and expenses
    
    
    8,872,354
    
    
    
    8,916,013Operating loss
    
    
    (3,929,415
    )
    
    
    (3,465,177
    )Other income (expense):Interest income
    
    
    7,088
    
    
    
    20,709Interest expense
    
    
    (3,894,875
    )
    
    
    (955,016
    )Other (expense) income
    
    
    (371,820
    )
    
    
    442,133Other income (expense), net
    
    
    (4,259,607
    )
    
    
    (492,174
    )Loss before income taxes
    
    
    (8,189,022
    )
    
    
    (3,957,351
    )Income taxes
    
    
    
    
    
    
    Net loss
    
    $
    (8,189,022
    )
    
    $
    (3,957,351
    )Dividends on preferred stock
    
    
    (225,779
    )
    
    
    Net loss attributable to common stockholders
    
    $
    (8,414,801
    )
    
    $
    (3,957,351
    )Basic and diluted earnings (loss) per share
    
    $
    (0.21
    )
    
    $
    (0.11
    )Weighted average number of shares outstanding 
basic and diluted
    
    
    39,184,919
    
    
    
    35,320,547
   43




---



##### Table of Contents



UFOOD RESTAURANT GROUP, INC.
and SUBSIDIARY
 
   Preferred Stock
    
    
    Common Stock
    
    
    Additional Paid-in
    
    
    AccumulatedShares
    
    
    Value
    
    
    Shares
    
    
    Value
    
    
    Capital
    
    
    Deficit
    
    
    TotalBalances, December 28, 2008 as filed
    
    
    
    
    
    
    
    
    
    
    34,818,490
    
    
    
    34,818
    
    
    
    24,998,924
    
    
    
    (24,717,544
    )
    
    
    316,198Cumulative effect of reclassification of warrants to warrants liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,512,272
    )
    
    
    3,159,024
    
    
    
    (353,248
    )Common stock issued for marketing and promotional services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,920
    
    
    
    
    
    
    
    150,920Common stock issued for interest payment
    
    
    
    
    
    
    
    
    
    
    2,982,671
    
    
    
    2,983
    
    
    
    312,995
    
    
    
    
    
    
    
    315,978Exercise of stock options into common stock
    
    
    
    
    
    
    
    
    
    
    7,618
    
    
    
    8
    
    
    
    45
    
    
    
    
    
    
    
    53Common stock issued for franchise sales commission
    
    
    
    
    
    
    
    
    
    
    82,895
    
    
    
    83
    
    
    
    14,917
    
    
    
    
    
    
    
    15,000Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    483,625
    
    
    
    
    
    
    
    483,625Issuance of warrants and beneficial conversion feature in connection
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,130,200
    
    
    
    
    
    
    
    3,130,200Forfeitures of common stock
    
    
    
    
    
    
    
    
    
    
    (33,690
    )
    
    
    (34
    )
    
    
    34
    
    
    
    
    
    
    
    Exercised debentures into common stock
    
    
    
    
    
    
    
    
    
    
    76,923
    
    
    
    77
    
    
    
    9,923
    
    
    
    
    
    
    
    10,000Net loss for year ended December 27, 2009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,957,351
    )
    
    
    (3,957,351
    )Balances, December 27, 2009
    
    
    
    
    
    
    
    
    
    
    37,934,907
    
    
    $
    37,935
    
    
    $
    25,589,311
    
    
    $
    (25,515,871
    )
    
    $
    111,375Preferred stock series A issued
    
    
    56,925
    
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    5,692,443
    
    
    
    
    
    
    
    5,692,500Preferred stock series B issued
    
    
    34,400
    
    
    
    34
    
    
    
    
    
    
    
    
    
    
    
    2,953,703
    
    
    
    
    
    
    
    2,953,737Preferred stock series B issued for promotional services
    
    
    5,000
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    499,995
    
    
    
    
    
    
    
    500,000Common stock issued for consulting, marketing, & promotional services
    
    
    
    
    
    
    
    
    
    
    380,000
    
    
    
    380
    
    
    
    216,218
    
    
    
    
    
    
    
    216,598Common stock issued for interest payment
    
    
    
    
    
    
    
    
    
    
    1,297,236
    
    
    
    1,297
    
    
    
    311,587
    
    
    
    
    
    
    
    312,884Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,055,569
    
    
    
    
    
    
    
    1,055,569Forfeitures of common stock
    
    
    
    
    
    
    
    
    
    
    (1,773
    )
    
    
    (2
    )
    
    
    2
    
    
    
    
    
    
    
    Exercised debentures & warrants into common stock
    
    
    
    
    
    
    
    
    
    
    876,924
    
    
    
    877
    
    
    
    116,969
    
    
    
    
    
    
    
    117,846Change in the warrants fair value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,616,401
    
    
    
    
    
    
    
    4,616,401Beneficial conversion feature- deemed dividend
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,793,428
    
    
    
    (1,793,428
    )
    
    
    Dividends on preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (225,779
    )
    
    
    (225,779
    )Extinguishment of Debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,692,500
    )
    
    
    (5,692,500
    )Net loss for the year ended January 2, 2011
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,189,022
    )
    
    
    (8,189,022
    )Balances, January 2, 2011 (Restated)
    
    
    96,325
    
    
    $
    96
    
    
    
    40,487,294
    
    
    $
    40,487
    
    
    $
    42,845,625
    
    
    $
    (41,416,598
    )
    
    $
    1,469,610
  44




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##### Table of Contents



2010
    
    
    2009Cash flows from operating activities:Net loss
    
    $
    (8,189,022
    )
    
    $
    (3,957,351
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    325,952
    
    
    
    407,593Adjustment to straight-line rent
    
    
    (149,912
    )
    
    
    Amortization of beneficial conversion feature
    
    
    2,673,952
    
    
    
    310,201Amortization of deferred financing costs
    
    
    750,155
    
    
    
    266,176Provision for doubtful accounts
    
    
    (10,254
    )
    
    
    161,424Impairment of goodwill
    
    
    
    
    
    
    136,000Loss on disposal of assets
    
    
    25,782
    
    
    
    88,997Change in value of warrant liability
    
    
    1,447,919
    
    
    
    (349,498
    )Stock-based compensation
    
    
    1,055,569
    
    
    
    483,625Non-cash promotion expenses
    
    
    716,598
    
    
    
    158,302Non-cash interest payments
    
    
    312,884
    
    
    
    315,976Gain on extinguishment of debt
    
    
    (5,692,500
    )
    
    
    (74,967
    )Change in fair value of warrants (debenture exchange)
    
    
    4,616,401
    
    
    
    Increase (decrease) in cash from changes in assets and liabilities:Accounts receivable
    
    
    182,054
    
    
    
    (189,185
    )Inventories
    
    
    5,323
    
    
    
    18,159Prepaid expenses and other current assets
    
    
    295
    
    
    
    11,052Other assets and noncurrent liabilities
    
    
    2,179
    
    
    
    2,640Accounts payable
    
    
    (6,048
    )
    
    
    (248,269
    )Franchisee deposits
    
    
    (77,500
    )
    
    
    (542,500
    )Accrued expenses and other current liabilities
    
    
    (35,530
    )
    
    
    (187,766
    )Net cash used in operating activities
    
    
    (2,045,702
    )
    
    
    (3,189,391
    )Cash flows from investing activities:Proceeds from sale of assets
    
    
    
    
    
    
    5,600Acquisition of property and equipment
    
    
    (95,311
    )
    
    
    (116,910
    )Net cash used in investing activities
    
    
    (95,311
    )
    
    
    (111,310
    )Cash flows from financing activities:Proceeds from exercise of options
    
    
    
    
    
    
    53Proceeds from issuance of common stock
    
    
    53,846
    
    
    
    Proceeds from issuance of preferred stock, net of issuance costs
    
    
    3,054,405
    
    
    
    Proceeds from issuance of convertible debt
    
    
    
    
    
    
    5,874,000Payments for financing costs
    
    
    
    
    
    
    (1,001,220
    )Payments on long-term debt
    
    
    (407,882
    )
    
    
    (375,511
    )Payments on capital lease obligations
    
    
    (60,715
    )
    
    
    (62,810
    )Decrease in restricted cash
    
    
    20,384
    
    
    
    357,065Net cash provided by financing activities
    
    
    2,660,038
    
    
    
    4,791,577Increase in cash and cash equivalents
    
    
    519,025
    
    
    
    1,490,876Cash and cash equivalents  beginning of year
    
    
    2,278,427
    
    
    
    787,551Cash and cash equivalents  end of year
    
    $
    2,797,452
    
    
    $
    2,278,427
   45




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##### Table of Contents



1. Nature of Operations and Basis of Presentation
    2. Summary of Significant Accounting Policies
      46




---



##### Table of Contents



Leasehold improvements
    
    5 years, or over life of lease, whichever is shorterEquipment
    
    5 yearsFurniture and fixtures
    
    5 yearsWebsite development costs
    
    3 years
   47




---



##### Table of Contents



Business Combinations
        48




---



##### Table of Contents



49




---



##### Table of Contents



3. Disposal of Assets
   4. Goodwill
   50




---



##### Table of Contents



FranchiseStore Operations
    
    
    OperationsSegment
    
    
    Segment
    
    
    TotalBalance as of December 28, 2008
    
    
    75,363
    
    
    
    136,000
    
    
    
    211,363Goodwill written off in
connection with impairment
test
    
    
    
    
    
    
    (136,000
    )
    
    
    (136,000
    )Balance as of December 27, 2009
    
    
    75,363
    
    
    
    
    
    
    
    75,363Goodwill written off in
connection with impairment
test
    
    
    
    
    
    
    
    
    
    
    Balance as of January 2, 2011
    
    
    75,363
    
    
    
    
    
    
    
    75,363
 5. Long-Term Debt
 2008 Investor Warrants
       51




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##### Table of Contents



As of January 2, 2011Liability DerivativesBalance SheetLocation
    
    
    Fair ValueDerivatives designated as hedging
instruments under ASC No. 815:NoneDerivatives not designated as
hedging instruments under ASC No.
815:Derivative warrant liability
    
    Long-term liabilities
    
    $
    1,451,669Total derivatives
    
    
    
    
    
    $
    1,451,669
  Amount of Gain (Loss)Recognized in Income onDerivativeLocation of Gain (Loss)Recognized in Income on
    
    
    Twelve Months EndedDerivative
    
    
    January 2, 2011Derivatives not designated as
hedging instruments under ASC No.
815:Derivative warrant liability
    
    Other Income (Expense)
    
    $
    (1,447,919
    )Total
    
    
    
    
    
    $
    (1,447,919
    )
  52




---



##### Table of Contents



At Issuance
    
    
    December 27, 2009
    
    
    January 2, 2011Expected term (years)
    
    5  7 Years
    
    
    5  7 Years
    
    
    2  4 YearsExpected volatility
    
    
    32.34
    %
    
    
    37.20
    %
    
    
    156.3
    %Risk-free interest rate
    
    
    2.46
    %
    
    
    1.56
    %
    
    
    0.61
    %Expected annual dividend
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
  Balance as of December 29, 2008
    
    $
    Fair value of warrant liability at issuance
    
    
    3,512,272Decrease in fair value at December 29, 2008
    
    
    (3,159,024
    )Decrease in fair value during the twelve months ended December 27,
2009
    
    
    (349,498
    )Increase in fair value during the twelve months ended January 2, 2011
    
    
    1,447,919Balance as of January 2, 2011
    
    $
    1,451,669
 2009 Warrants
    Debentures Debenture Exchange Series A Preferred Stock
  53




---



##### Table of Contents



Series A Conversion Price
   2010
    
    
    2009Senior Secured Convertible Debentures $5,874,000
at 8% interest and are due three years from the
date they are issued. The Debentures are
convertible into shares of Common Stock at $0.13
per share. In conjunction with the Debentures and
the 2009 Warrants, the Company recorded debt
discount of $3,130,200 associated with a
beneficial conversion feature on the debt, which
is being accreted using the effective interest
method over the three year term of the
debentures. On October 1, 2010, an aggregate
principal amount of $5,692,500 of outstanding
Debentures was extinguished in exchange for
56,925 shares of Series A Preferred Stock.
    
    
    62,120
    
    
    
    3,044,001Landmark Center acquisition promissory note with
no stated interest rate. Due upon the occurrence
of a sales event, as defined in the agreement.
The note agreement includes a restrictive
covenant requiring the Companys wholly-owned
subsidiary, KnowFat of Landmark Center, Inc., to
maintain net equity of not less than $450,000.
    
    
    450,000
    
    
    
    450,000Term note payable to bank in monthly principal
installments of $29,167 commencing January 2007
through December 2010. Interest is payable
monthly at the banks prime rate (3.25% at May
31, 2010). The note has been fully paid.
    
    
    
    
    
    
    342,072Unsecured, non-interest bearing note payable.
This note payable is due on demand. Interest
imputed on the note using a discount rate of 5%
totaled $59,597, which is being amortized over
the term of the note. The note has been fully
paid.
    
    
    
    
    
    
    56,033
  54




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##### Table of Contents



2010
    
    
    2009Indebtedness incurred in connection with the
acquisition of the two franchisee locations. No
stated interest rate; this note payable is due on
demand. The note has been fully paid.
    
    
    
    
    
    
    2,137Note payable to the Watertown landlord in
connection with the acquisition of the training
center in 2004. The note is payable in monthly
installments of $2,566 including interest at 5%
through April 2010. This note has been fully
paid.
    
    
    
    
    
    
    7,640512,120
    
    
    
    3,901,883Less current portion
    
    
    450,000
    
    
    
    857,882Long-term debt
    
    $
    62,120
    
    
    $
    3,044,001
  2011
    
    
    450,0002012
    
    
    62,120$
    512,120
 6. Capital Lease Obligations
   2011
    
    $
    31,9862012
    
    
    14,014Thereafter
    
    
    5,86151,861Less imputed interest
    
    
    6,52145,340Less current portion
    
    
    27,496Long-term portion of capital lease obligations
    
    $
    17,844
   55




---



##### Table of Contents



7. Capital Stock
  Share Transactions Prior to the Merger
  th
   2010 Private Placement
 Series B Preferred Stock
 the
Series B Preferred Stock
 Common Stock Investor Warrants
  56




---



##### Table of Contents



Placement Agent Placement Agent Warrants
   Warrants
 Common
Stock Investor Warrants
    October 4, 2010
    
    
    October 29, 2010Expected term (years)
    
    5  Years
    
    
    5 YearsExpected volatility
    
    
    118.45
    %
    
    
    118.45
    %Risk-free interest rate
    
    
    1.26
    %
    
    
    1.17
    %Expected annual dividend
    
    
    0.00
    %
    
    
    0.00
    %
  57




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##### Table of Contents



Number ofDescription
    
    Warrants
    
    
    Exercise PriceNew Warrants
    
    
    607,226
    
    
    $
    1.00Vendor Warrants
    
    
    2,916,666
    
    
    $
    1.252008 Placement Agent Warrants
    
    
    2,988,200
    
    
    $
    0.49
    (2)2008 Investor Warrants
    
    
    7,510,588
    
    
    $
    0.59
    (2)2009 Investor Warrants
    
    
    22,207,692
    
    
    $
    0.09
    (1)2009 Placement Agent Warrants
    
    
    9,036,923
    
    
    $
    0.142010 Investor Warrants
    
    
    3,440,000
    
    
    $
    0.292010 Placement Agent Warrants
    
    
    2,243,478
    
    
    $
    0.29Total
    
    
    50,950,773
 (1)
    
    In conjunction with the extinguishment of debt, the Company modified the exercise price
of the 2009 Investor Warrants. The exercise price was reduced from $0.14 to $0.09 per share
of Common Stock. As such, we have calculated the fair value of the warrants on the date of
the modification to be approximately $6,181,501 and recorded the increase in fair value of
$4,616,401 as an addition to additional paid-in capital. The fair value of the warrants was
computed using the Black-Scholes option pricing model. The Company assumed a risk-free
interest rate of 1.17%, no dividends, expected volatility of approximately 118.45%, which
was calculated based on a combination of historical volatility and the history of
comparable peer companies, and an expected warrant life of approximately 5 years.(2)
    
    As a result of the Offering in 2010 and pursuant to the terms of the 2008 Investor
warrants the exercise price was reduced from $0.59 to $0.54 and the 2008 Placement agent
warrants from $0.49 to $0.45 per share.
 8. Stock-Based Compensation
    2010
    
    
    2009Expected term (years)
    
    
    5
    
    
    
    6Expected volatility
    
    
    45
    %
    
    
    36.53
    %Risk-free interest rate
    
    
    2.59
    %
    
    
    0.89
    %Expected annual dividend
    
    None
    
    
    None
  58




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WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Shares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at December 28, 2008
    
    
    304,702
    
    
    $
    0.61
    
    
    
    7.8
    
    
    $
    Canceled
    
    
    (181,980
    )
    
    
    
    
    
    
    Exercised
    
    
    (7,618
    )
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    (82,347
    )Outstanding at December 27, 2009
    
    
    32,757
    
    
    $
    0.01
    
    
    
    5.0
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Outstanding at January 2, 2011
    
    
    32,757
    
    
    $
    0.01
    
    
    
    4.0
    
    
    $
    6,879Exercisable at January 2, 2011
    
    
    32,757
    
    
    $
    0.01
    
    
    
    4.0
    
    
    $
    6,879
     59




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##### Table of Contents



WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Shares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at December 28, 2008
    
    
    2,845,920
    
    
    $
    1.22
    
    
    
    8.8
    
    
    
    -0-Granted
    
    
    3,979,990
    
    
    $
    0.20
    
    
    
    8.2Canceled
    
    
    (2,360,920
    )
    
    $
    1.22Forfeited
    
    
    (545,000
    )
    
    $
    1.11Outstanding at December 27, 2009
    
    
    3,919,990
    
    
    $
    0.20
    
    
    
    8.2
    
    
    
    -0-Granted
    
    
    2,070,000
    
    
    $
    0.16
    
    
    
    9.3Canceled
    
    
    
    
    
    $
    Forfeited
    
    
    (105,000
    )
    
    $
    0.20Outstanding at January 2, 2011
    
    
    5,884,990
    
    
    $
    0.19
    
    
    
    7.9
    
    
    $
    200,500
  Options Outstanding
    
    
    Options ExercisableWeightedAverageRemainingNumber of
    
    Exercise
    
    
    Contractual
    
    
    Number ofOptions
    
    Price
    
    
    Term
    
    
    Options
    
    
    Exercise Price3,814,990
    
    $
    0.20
    
    
    
    7.2
    
    
    
    3,800,439
    
    
    $
    0.202,070,000
    
    $
    0.16
    
    
    
    9.3
    
    
    
    2,070,000
    
    
    $
    0.16
  st
 Other Equity Awards
 st
   60




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##### Table of Contents



th
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at December 27, 2009
    
    
    175,000
    
    
    $
    0.15
    
    
    
    7.2
    
    
    $
    -0-Granted
    
    
    8,553,673
    
    
    
    0.19
    
    
    
    9.5Forfeited
    
    
    
    
    
    
    
    
    
    
    Canceled
    
    
    
    
    
    
    
    
    
    
    Outstanding at January 2, 2011
    
    
    8,728,673
    
    
    $
    0.19
    
    
    
    9.2
    
    
    $
    245,993
 9. Income Taxes
 Income Taxes
   61




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##### Table of Contents



2010
    
    
    2009Deferred Taxes
    
    Federal
    
    
    FederalNet Fixed Assets
    
    
    555,000
    
    
    
    543,000Net Intangible Assets
    
    
    228,000
    
    
    
    255,000Deferred Revenues
    
    
    28,000
    
    
    
    54,000Bad Debt Reserve
    
    
    2,000
    
    
    
    29,000Deferred Rent
    
    
    28,000
    
    
    
    94,000Option Expenses on NQs
    
    
    516,000
    
    
    
    279,000Net Operating Loss Carryforwards
    
    
    9,604,000
    
    
    
    7,939,000Other
    
    
    9,000
    
    
    
    8,000Total
    
    
    10,970,000
    
    
    
    9,201,000
 Deferred Taxes
    
    State
    
    
    StateNet Fixed Assets
    
    
    86,000
    
    
    
    100,000Net Intangible Assets
    
    
    36,000
    
    
    
    47,000Deferred Revenues
    
    
    4,000
    
    
    
    10,000Bad Debt Reserve
    
    
    
    
    
    
    5,000Deferred Rent
    
    
    4,000
    
    
    
    17,000Option Expenses on NQs
    
    
    80,000
    
    
    
    51,000Net Operating Loss Carryforwards
    
    
    1,462,000
    
    
    
    1,437,000Other
    
    
    1,000
    
    
    
    1,000Total
    
    
    1,673,000
    
    
    
    1,668,000Total Deferred Taxes
    
    
    12,643,000
    
    
    
    10,869,000Valuation Allowance
    
    
    (12,643,000
    )
    
    
    (10,869,000
    )Total Deferred Taxes
    
    
    
    
    
    
    
  2010
    
    
    2009FederalDeferredNet operating loss carryforward
    
    $
    1,665,000
    
    
    $
    1,183,000Other
    
    
    104,000
    
    
    
    (175,000
    )1,769,000
    
    
    
    1,008,000StateDeferredNet operating loss carryforward
    
    
    252,000
    
    
    
    207,000Change in state tax rate
    
    
    (264,000
    )
    
    
    Other
    
    
    17,000
    
    
    
    (31,000
    )5,000
    
    
    
    176,000Tax benefit before adjustment to valuation allowance
    
    
    1,774,000
    
    
    
    1,184,000Adjustment to valuation allowance
    
    
    (1,774,000
    )
    
    
    (1,184,000
    )Net tax benefit
    
    $
    
    
    
    $
    
  2010
    
    
    2009Federal tax provision rate
    
    
    34
    %
    
    
    34
    %State tax provision, net of federal provision
    
    
    5.3
    %
    
    
    6
    %Change in valuation allowance
    
    
    (39.3
    %)
    
    
    (40
    %)
    
    
    
    
  62




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10. Concentration of Credit Risk
  11. Commitments and Contingencies
    2011
    
    $
    466,0002012
    
    
    470,0002013
    
    
    473,0002014
    
    
    440,0002015
    
    
    157,000Thereafter
    
    
    36,000$
    2,042,000
  63




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##### Table of Contents



12. Supplemental Disclosures of Cash Flow Information
 2010
    
    
    2009Cash paid during the year for interest
    
    $
    70,880
    
    
    $
    78,532Accrued dividends on preferred stock
    
    $
    225,779
    
    
    $
    -0-Property and equipment acquired with capital lease
    
    $
    8,163
    
    
    $
    12,357
 13. Loss per share
  2010
    
    
    2009Net loss
    
    $
    (8,189,022
    )
    
    $
    (3,957,351
    )Dividends on preferred stock
    
    
    225,779
    
    
    
    -0-Net loss allocable to common stockholders
    
    $
    (8,414,801
    )
    
    $
    (3,957,351
    )Weighted average number of shares
outstanding  basic and diluted
    
    
    39,184,919
    
    
    
    35,320,547Basic and diluted loss per common share
    
    $
    (0.21
    )
    
    $
    (0.11
    )
  64




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##### Table of Contents



14. Segment Data
     2010
    
    
    2009Revenues:Store operations
    
    $
    4,518,308
    
    
    $
    4,632,651Franchise operations
    
    
    424,631
    
    
    
    818,225Total revenue
    
    $
    4,942,939
    
    
    $
    5,450,836Segment profit (loss):Store operations
    
    $
    142,762
    
    
    $
    (13,056
    )Franchise operations
    
    
    (923,471
    )
    
    
    (842,440
    )Total segment loss
    
    $
    (780,709
    )
    
    $
    (855,496
    )Advertising, marketing and promotion
    
    $
    233,457
    
    
    $
    219,360Depreciation and amortization
    
    
    325,952
    
    
    
    407,593Unallocated general and administrative expenses
    
    
    2,589,296
    
    
    
    1,982,728Interest (income) expense
    
    
    3,887,769
    
    
    
    934,307Other (income) expenses, net
    
    
    371,820
    
    
    
    (442,133
    )Net loss
    
    $
    (8,189,022
    )
    
    $
    (3,957,351
    )Depreciation and amortization:Store operations
    
    $
    302,288
    
    
    $
    364,757Franchise operations
    
    
    23,664
    
    
    
    42,836Total depreciation and amortization
    
    $
    325,952
    
    
    $
    407,593
  65




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##### Table of Contents



2010
    
    
    2009Capital expenditures:Store operations
    
    $
    77,805
    
    
    $
    108,102Franchise operations
    
    
    17,506
    
    
    
    8,808Total capital expenditures
    
    $
    95,311
    
    
    $
    116,910Segment assets:Store operations
    
    $
    1,468,858
    
    
    $
    1,682,070Franchise operations
    
    
    2,844,110
    
    
    
    3,310,269Total segment assets
    
    $
    4,312,968
    
    
    $
    4,992,339
 15. Restatement
  16. Subsequent Events
   
 Item 9.
    
    Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A
    
    Controls and Procedures.
    66




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##### Table of Contents



Managements Report on Internal Control Over Financial Reporting
  
    
    pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the
assets of the Company;
    
    provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and
expenditures of the Company are being made in accordance with
authorizations of management and directors of the Company; and
    
    provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use or disposition of the Companys
assets that could have a material effect on the financial statements.
   Remediation Plans
    67




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##### Table of Contents



Item 9B
    
    Other Information
   68




---



##### Table of Contents



PART III
 
 DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
  Name
    
    
    Age
    
    
    PositionGeorge Naddaff
    
    
    81
    
    
    Chief Executive Officer and Chairman of the
Board of DirectorsCharles Cocotas
    
    
    75
    
    
    President and Chief Operating Officer, DirectorIrma Norton
    
    
    43
    
    
    Chief Financial OfficerRobert C. Grayson
    
    
    65
    
    
    DirectorMark Giresi
    
    
    52
    
    
    DirectorRichard Golden
    
    
    57
    
    
    DirectorKeith Mueller
    
    
    51
    
    
    Director
 Background of Officers and Directors
 George Naddaff
 Charles A. Cocotas
  69




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##### Table of Contents



Irma Norton
 Robert C. Grayson
 Mark Giresi
 Richard Golden
 Keith Mueller
  70




---



##### Table of Contents



(a)
    
    had any petition under the federal bankruptcy laws or any state insolvency law
filed by or against, or a receiver, fiscal agent or similar officer appointed by a
court for the business or property of, such person, or any partnership in which he
was a general partner at or within two years before the time of such filing, or any
corporation or business association of which he was an executive officer at or
within two years before the time of such filing;(b)
    
    been convicted in a criminal proceeding or subject to a pending criminal proceeding;(c)
    
    been subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction or any federal or
state authority, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities, futures,
commodities or banking activities; or(d)
    
    been found by a court of competent jurisdiction (in a civil action), the SEC or the
Commodities Future Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed, suspended or
vacated.
 Section 16(a) Beneficial Ownership Reporting Compliance
  Nominations to the Board of Directors
  Code of Ethics
  Board of Directors
  Audit Committee Financial Expert
   71




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##### Table of Contents



Item 11.
    
    Executive Compensation
 EXECUTIVE COMPENSATION
 Summary Compensation Table
  Non-Equity
    
    
    NonqualifiedName and
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Incentive
    
    
    Deferred
    
    
    All OtherPrincipal
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock
    
    
    Option
    
    
    Plan
    
    
    Compensation
    
    
    AnnualPosition(s)
    
    Year
    
    
    Salary
    
    
    Bonus
    
    
    Awards
    
    
    Awards
    
    
    Compensation
    
    
    Earnings
    
    
    Compensation
    
    
    Total(a)
    
    (b)
    
    
    (c)
    
    
    (d)
    
    
    (e)
    
    
    (f)(1)
    
    
    (g)
    
    
    (h)
    
    
    (i)(2)
    
    
    (j)George Naddaff,
    
    
    2010
    
    
    $
    301,620
    
    
    $
    -0-
    
    
    $
    0
    
    
    $
    691,961
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    30,000
    
    
    $
    1,023,581Chairman and CEO
    
    
    2009
    
    
    $
    301,485
    
    
    $
    -0-
    
    
    $
    7,500
    
    
    $
    212,000
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    7,500
    
    
    $
    528,485Charles A. Cocotas
    
    
    2010
    
    
    $
    201,620
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    271,788
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    473,408President and COO
    
    
    2009
    
    
    $
    201,485
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    43,200
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    244,685Irma Norton
    
    
    2010
    
    
    $
    136,215
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    56,278
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    192,493CFO
    
    
    2009
    
    
    $
    133,409
    
    
    $
    10,000
    
    
    $
    -0-
    
    
    $
    4,465
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    147,874Thomas Mackey
    
    
    2010
    
    
    $
    150,000
    
    
    
    -0-
    
    
    $
    -0-
    
    
    $
    52,870
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    10,950
    
    
    $
    213,820SVP of Operations
    
    
    2009
    
    
    $
    150,000
    
    
    
    -0-
    
    
    $
    -0-
    
    
    $
    7,170
    
    
    $
    -0-
    
    
    $
    -0-
    
    
    $
    10,950
    
    
    $
    168,120
 (1)
    
    These amounts represent the aggregate grant date fair value of
awards for fiscal years 2010, and 2009. The fair value of the
stock option award(s) was determined using a Black Scholes option
pricing model and the assumptions for expected option term,
volatility of our Common Stock, risk-free interest rate and
expected annual dividend yield disclosed in Note 8, Stock-Based
Compensation,of the Notes to our 2010 Consolidated Financial
Statements included in the Companys annual report.(2)
    
    Mr. Naddaff was paid in 2010 the amount of $30,000 for
commissions with respect to franchises sold pursuant to his
employment agreement. Mr. Mackey received an auto-allowance for
the use of his personal car while doing business.  Agreements with Executive Officers
   72




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Summary Compensation Table
 Outstanding Equity Awards at Fiscal Year End
January 2, 2011
  EquityIncentivePlanAwards:No. of
    
    
    No. of
    
    
    Number ofSecurities
    
    
    Securities
    
    
    SecuritiesUnderlying
    
    
    Underlying
    
    
    UnderlyingUnexercised
    
    
    Unexercised
    
    
    Unexercised
    
    
    Option
    
    
    OptionOptions (#)
    
    
    Options (#)
    
    
    Unearned
    
    
    Exercise
    
    
    ExpirationName
    
    Exercisable
    
    
    Unexercisable
    
    
    Options
    
    
    Price
    
    
    DateGeorge Naddaff
    
    
    5,100,694
    
    
    
    1,399,306
    (1)
    
    
    -0-
    
    
    $
    0.19
    
    
    April 30, 2018Charles A. Cocotas
    
    
    1,892,238
    
    
    
    519,110
    
    
    
    -0-
    
    
    
    0.19
    
    
    April 30, 2018Irma Norton
    
    
    302,580
    
    
    
    168,750
    
    
    
    -0-
    
    
    
    0.19
    
    
    February 11, 2018Thomas Mackey
    
    
    290,000
    
    
    
    168,750
    
    
    
    -0-
    
    
    
    0.19
    
    
    February 11, 2018
 (1)
    
    The vesting schedule for the unexercised shares is
outlined in the section entitled Agreements with
Executive Officers and Consultants above.  73




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2004 Stock Option Plan
  2007 Equity Incentive Plan
   WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Shares
    
    
    Price
    
    
    Term
    
    
    ValueOutstanding at December 28, 2008
    
    
    2,845,920
    
    
    $
    1.22
    
    
    
    8.8
    
    
    
    -0-Granted
    
    
    3,979,990
    
    
    $
    0.20
    
    
    
    8.2Canceled
    
    
    (2,360,920
    )
    
    $
    1.22Forfeited
    
    
    (545,000
    )
    
    $
    1.11Outstanding at December 27, 2009
    
    
    3,919,990
    
    
    $
    0.20
    
    
    
    8.2
    
    
    
    -0-Granted
    
    
    2,070,000
    
    
    $
    0.16
    
    
    
    9.3Canceled
    
    
    
    
    
    $
    Forfeited
    
    
    (105,000
    )
    
    $
    0.20Outstanding at January 2, 2011
    
    
    5,884,990
    
    
    $
    0.19
    
    
    
    7.9
    
    
    $
    200,500
  Options Outstanding
    
    
    Options ExercisableWeightedAverageRemainingNumber of
    
    Exercise
    
    
    Contractual
    
    
    Number ofOptions
    
    Price
    
    
    Term
    
    
    Options
    
    
    Exercise Price3,814,990
    
    $
    0.20
    
    
    
    7.2
    
    
    
    3,800,439
    
    
    $
    0.202,070,000
    
    $
    0.16
    
    
    
    9.3
    
    
    
    2,070,000
    
    
    $
    0.16
  74




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##### Table of Contents



Administration
  Grants
  
    
    Options granted under the 2007 Plan entitle the grantee, upon
exercise, to purchase a specified number of shares from us at a
specified exercise price per share. The exercise price for shares of
common stock covered by an option cannot be less than the fair market
value of the common stock on the date of grant unless agreed to
otherwise at the time of the grant.
    
    Restricted stock awards and restricted stock units may be awarded on
terms and conditions established by the compensation committee, which
may include performance conditions for restricted stock awards and the
lapse of restrictions on the achievement of one or more performance
goals for restricted stock units.
    
    The compensation committee may make performance grants, each of which
will contain performance goals for the award, including the
performance criteria, the target and maximum amounts payable and other
terms and conditions.
    
    The 2007 Plan authorizes the granting of stock awards. The
compensation committee will establish the number of shares of common
stock to be awarded and the terms applicable to each award, including
performance restrictions.
    
    Stock appreciation rights (SARs) entitle the participant to receive a
distribution in an amount not to exceed the number of shares of common
stock subject to the portion of the SAR exercised multiplied by the
difference between the market price of a share of common stock on the
date of exercise of the SAR and the market price of a share of common
stock on the date of grant of the SAR.
 Duration, Amendment and Termination
  Other Equity Awards
 th
  75




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##### Table of Contents



Director Compensation
    th
 Stock Awards
    
    
    Stock Awards2009
    
    
    2010Robert Grayson
    
    $
    9,377
    
    
    $
    98,606Mark Giresi
    
    $
    9,377
    
    
    $
    98,606Keith Mueller
    
    $
    -0-
    
    
    $
    98,606Richard Golden
    
    $
    -0-
    
    
    $
    98,606
  
 Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
 Securities Authorized for Issuance under Equity Compensation Plans
 Stock-Based Compensation
  Number of securitiesNumber of
    
    
    
    
    
    
    remaining available forsecurities to be
    
    
    
    
    
    
    future issuance underissued upon
    
    
    Weighted-average
    
    
    equity compensationexercise of
    
    
    exercise price of
    
    
    plans (excludingoutstanding
    
    
    outstanding options,
    
    
    securities reflected inPlan Category
    
    options
    
    
    warrants and rights
    
    
    column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by security holders
    
    
    5,917,747
    (2)
    
    $
    0.19
    
    
    
    3,115,010
    (3)Equity compensation plans not approved by security holders
    
    
    8,728,673
    (1)
    
    $
    0.19
    
    
    
    0Total
    
    
    14,646,420
    
    
    $
    0.19
    
    
    
    3,115,010
 (1)
    
    On June 30th, 2010 the Board of Directors approved the
grant of options to purchase 7,683,673 shares of common stock
shown in the table. These options were not granted pursuant to a
compensation plan, but instead represent non-qualified stock
options granted to Directors, Officers, and employees. The
options granted have various vesting schedules at an exercise
price of $0.19 per share.  76




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##### Table of Contents



(2)
    
    On April 1, 2010, the Board of Directors approved the grant of
2,070,000 options to acquire shares of the Companys common stock
under the Companys 2007 Equity Incentive Plan to officers and
employees, fully vested at an exercise price of $0.16 per share.(3)
    
    On July 1st, 2010, the shareholders approved the
addition of 3,000,000 stock options available under our 2007
Stock Option Plan for a total of 9,000,000 stock options in that
Plan. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  Amount andNature of
    
    
    PercentBeneficial
    
    
    ofName and Address of Beneficial Owner
    
    Ownership
    
    
    Class+George A. Naddaff(1)
    
    
    7,238,968
    
    
    
    15.14
    %Charles A. Cocotas(2)
    
    
    1,992,710
    
    
    
    4.68
    %Irma Norton(7)
    
    
    315,080
    
    
    
    *Robert C. Grayson(3)
    
    
    705,483
    
    
    
    1.71
    %Mark Giresi(4)
    
    
    605,000
    
    
    
    1.47
    %Keith Mueller(5)
    
    
    3,594,771
    
    
    
    8.1
    %Richard Golden(6)
    
    
    2,975,816
    
    
    
    6.8
    %Directors and Executive Officers as a group(1)-(6)
    
    
    17,427,829
    
    
    
    30.0
    %Kevin Kimberlin(8)
    
    
    4,483,712
    
    
    
    9.95
    %535 Madison AvenueNew York, NY 10022
 
 *
    
    Less than one percent+
    
    Based on 40,581,557 shares of common stock issued and outstanding as of April 7, 2011.(1)
    
    Includes 1,682,907 shares of Common Stock beneficially owned by Mr.
Naddaff. Also includes 184,533 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60
days of April 7, 2011 and 5,371,528 shares of Common Stock issuable
upon exercise of options currently exercisable or exercisable within
60 days of April 7, 2011. Does not include 1,128,472 shares of Common
Stock issuable upon exercise of options granted to Mr. Naddaff which
will not be exercisable within 60 days of April 7, 2011.  77




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##### Table of Contents



(2)
    
    Consists of 1,992,710 shares of Common Stock issuable upon exercise of
options currently exercisable or exercisable within 60 days of April
7, 2011. Does not include 418,638 shares of Common Stock issuable upon
exercise of options granted to Mr. Cocotas which will not be
exercisable within 60 days of April 7, 2011.(3)
    
    Includes 74,815 shares of Common Stock beneficially owned by Mr.
Grayson. Also includes 25,668 shares of Common Stock issuable upon
exercise of warrants currently exercisable or exercisable within 60
days of April 7, 2011 and 605,000 shares of Common Stock issuable upon
exercise of options currently exercisable or exercisable within 60
days of April 7, 2011.(4)
    
    Includes 605,000 shares of Common Stock issuable upon exercise of
options currently exercisable or exercisable within 60 days of April
7, 2011.(5)
    
    Includes 210,156 shares of Common Stock beneficially
owned by Mr. Mueller. Also, includes 1,923,077 shares
of Common Stock issuable upon conversion of Preferred
Stock and 961,538 shares of Common Stock issuable upon
exercise of warrants beneficially owned by Mr.
Mueller. Includes 500,000 shares of Common Stock
issuable upon exercise of options currently
exercisable or exercisable within 60 days of April 7,
2011.(6)
    
    Includes 168,124 shares of Common Stock beneficially
owned by Mr. Golden. Also, includes 1,538,462 shares
of Common Stock issuable upon conversion of Preferred
Stock and 769,231 shares of Common Stock issuable upon
exercise of warrants beneficially owned by Mr. Golden.
Includes 500,000 shares of Common Stock issuable upon
exercise of options currently exercisable or
exercisable within 60 days of April 7, 2011.(7)
    
    Includes 315,080 shares of Common Stock issuable upon
exercise of options currently exercisable or
exercisable within 60 days of April 7, 2011. Does not
include an additional 156,250 shares of Common Stock
issuable upon exercise of options granted to Mrs.
Norton which will not be exercisable within 60 days of
April 7, 2011.(8)
    
    Includes 102,125 shares of Common Stock beneficially
owned by Spencer Trask Breakthrough Partners, LLC
(STBP) and 3,240,000 shares of Common Stock
beneficially owned by Spencer Trask Investment
Partners, LLC (STIP). Mr. Kimberlin is the
non-member manager of both STBP and STIP. Also
includes (i) 51,063 shares of Common Stock issuable
upon exercise of a warrant held by STBP, (ii) 372,500
shares of Common Stock issuable upon exercise of a
warrant held by Concord Equities Group, Inc., (iii)
358,584 shares of Common Stock issuable upon exercise
of a warrant held by Spencer Trask & Co., a
corporation of which Mr. Kimberlin is the sole
stockholder, and (iv) 359,440 shares of Common Stock
issuable upon exercise of a warrant held by Washington
Associates, LLC. The information set forth in this
footnote 8 was obtained from a Form 4 filed by Mr.
Kimberlin with the SEC on July 16, 2008. 
 Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
 Directors and Officers of UFood
   78




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##### Table of Contents



Transactions with the Placement Agent and Its Related Parties
   Board Independence
  
 Item 14.
    
    Principal Accounting Fees and Services
  Year EndedJanuary 2, 2011
    
    
    December 27, 2009Audit fees (1)
    
    $
    55,000
    
    
    $
    60,000Audit-related fees
    
    
    33,000
    
    
    
    33,000Tax fees (2)
    
    
    17,100
    
    
    
    17,100All other fees (3)
    
    
    7,205
    
    
    
    -0-Total fees
    
    $
    112,305
    
    
    $
    110,100
 (1)
    
    Audit fees for the year ended January 2, 2011 represent payments made by KnowFat to CCR
for professional services in connection with the audit of its annual financial statements.
The payments were approved by the Audit Committee.  79




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##### Table of Contents



(2)
    
    Tax fees for the year ended January 2, 2011 represent payments made by KnowFat to CCR
for their preparation of Knowfats federal and state income tax returns. The payments were
approved by the Audit Committee.(3)
    
    All other fees for the year ended January 2, 2011 are comprised of (i) $2,073 paid to
CCR for professional services in connection with their assistance on the review of the S-8
document, (ii) $3,852 for audit of the 401K Plan, and (iii) $1,280 for review of comment
letter with the SEC. These amounts were approved by the Audit Committee. Audit Committee Pre-Approval Policies and Procedures
     80




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##### Table of Contents



Item 15.
    
    Exhibits, Financial Statement Schedules.
 (a)
    
    The following documents are filed as part of this report:
 (1)
    
    Consolidated financial statements (included in Part II, Item 8):
 Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets as of January 2, 2011 and December 27, 2009Consolidated Statements of Operations for the Fiscal Years Ended
January 2, 2011 and December 27, 2009Consolidated Statements of Stockholders Equity (Deficit) for the
Fiscal Years Ended January 2, 2011 and December 27, 2009Consolidated Statements of Cash Flows for the Fiscal Years Ended
January 2, 2011 and December 27, 2009Notes to Consolidated Financial Statements
 (2)
    
    Consolidated financial statement schedules
  (3)
    
    Exhibits included herein:
   81




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##### Table of Contents



UFOOD RESTAURANT GROUP, INC.Date: May 18, 2011
    By:
    /s/ George NaddaffChairman and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ George Naddaff
    
    Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
    
    May 18, 2011/s/ Charles A. Cocotas
    
    President and Chief
Operating Officer,
Director
    
    May 18, 2011/s/ Irma Norton
    
    Chief Financial Officer
(Principal Financial Officer)
    
    May 18, 2011/s/ Mark Giresi
    
    Director
    
    May 18, 2011/s/ Robert Grayson
    
    Director
    
    May 18, 2011Keith Mueller
    
    Director
    
    May 18, 2011/s/ Rick Golden
    
    Director
    
    May 18, 2011
  82




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##### Table of Contents



21
    
    
    Subsidiaries of the Registrant*31.1
    
    
    Certification of CEO required by Section 302 of the Sarbanes-Oxley Act of 2002*31.2
    
    
    Certification of CFO required by Section 302 of the Sarbanes-Oxley Act of 2002*32.1
    
    
    Certification of CEO required by Section 906 of the Sarbanes-Oxley Act of 2002*32.2
    
    
    Certification of CFO required by Section 906 of the Sarbanes-Oxley Act of 2002*
  83