| Nevada(State or other jurisdiction ofincorporation or organization) |   | 54-2153837(I.R.S. EmployerIdentification No.) |
|---------------------------------------------------------------------|--------|-----------------------------------------------|

| Large accelerated filer o |   | Accelerated filer o              |
|---------------------------|--------|----------------------------------|
| Non-accelerated filer o   |   | Smaller reporting company þ |

----

| Part       |   | Item and Description                                                                                |   | Page   |
|------------|--------|-----------------------------------------------------------------------------------------------------|--------|--------|
|       |   |                                                                                                |   |   |
| Part I     |   | Financial Information                                                                               |   |   |
|       |   | Forward-Looking Statements                                                                          |   | 2      |
|       |   | Item 1. Financial Statements                                                                        |   | 3      |
|       |   | Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |   | 31     |
|       |   | Item 3. Quantitative and Qualitative Disclosures about Market Risks                                 |   | 41     |
|       |   | Item 4. Controls and Procedures                                                                     |   | 41     |
|       |   |                                                                                                |   |   |
| Part II    |   | Other Information                                                                                   |   |   |
|       |   | Item 1. Legal Proceedings                                                                           |   | 42     |
|       |   | Item 1A. Risk Factors                                                                               |   | 43     |
|       |   | Item 2. Unregistered Sales of Equity Securities and Use of Proceeds                                 |   | 43     |
|       |   | Item 3. Defaults Upon Senior Securities                                                             |   | 43     |
|       |   | Item 4. Removed and Reserved                                                                        |   | 43     |
|       |   | Item 5. Other Information                                                                           |   | 44     |
|       |   | Item 6. Exhibit Index                                                                               |   | 44     |
|       |   |                                                                                                |   |   |
| Signatures |   |                                                                                                |   | 45     |

----

----

|                                                                                                          |   | June 30, |        |   | December 31, |   |
|---------------------------------------------------------------------------------------------------------------|--------|---------------|-------------|--------|-------------------|--------|
|                                                                                                          |   | 2011          |        |   | 2010              |   |
|                                                                                                          |   | (Unaudited)   |        |   |              |   |
| Assets                                                                                                        |   |          |        |   |              |   |
|                                                                                                          |   |          |        |   |              |   |
| Current assets:                                                                                               |   |          |        |   |              |   |
| Cash and cash equivalents                                                                                     |   | $             | 1,038,757   |   |              | $      | 1,746,510 |   |
| Accounts receivable, net of allowances for returns and bad debts of $166,530 and $216,413                     |   |          | 1,640,420   |   |              |   | 393,851 |   |
| Inventories, net                                                                                              |   |          | 1,941,689   |   |              |   | 2,067,226 |   |
| Prepaid expenses and other current assets                                                                     |   |          | 279,672     |   |              |   | 22,796 |   |
| Total current assets                                                                                          |   |          | 4,900,538   |   |              |   | 4,230,383 |   |
|                                                                                                          |   |          |        |   |              |   |   |   |
| Property and equipment, net                                                                                   |   |          | 2,891,275   |   |              |   | 2,418,357 |   |
| Other assets                                                                                                  |   |          | 529,893     |   |              |   | 125,516 |   |
| Total assets                                                                                                  |   | $             | 8,321,706   |   |              | $      | 6,774,256 |   |
|                                                                                                          |   |          |        |   |              |   |   |   |
| Liabilities, Redeemable Preferred Stock and Deficit                                                           |   |          |        |   |              |   |   |   |
|                                                                                                          |   |          |        |   |              |   |   |   |
| Current liabilities:                                                                                          |   |          |        |   |              |   |   |   |
| Accounts payable and accrued expenses                                                                         |   | $             | 2,664,742   |   |              | $      | 1,855,861 |   |
| Notes payable and current maturities of long-term debt                                                        |   |          | 326,115     |   |              |   | 286,262 |   |
| Total current liabilities                                                                                     |   |          | 2,990,857   |   |              |   | 2,142,123 |   |
| Advances                                                                                                      |   |          | 3,000,000   |   |              |   | — |   |
| Long-term debt                                                                                                |   |          | 2,113,829   |   |              |   | 1,891,542 |   |
| Security deposits on leases                                                                                   |   |          | 9,193       |   |              |   | 9,193 |   |
| Total liabilities                                                                                             |   |          | 8,113,879   |   |              |   | 4,042,858 |   |
|                                                                                                          |   |          |        |   |              |   |   |   |
| Commitments and contingencies (Note 13)                                                                       |   |          | —     |   |              |   | — |   |
|                                                                                                          |   |          |        |   |              |   |   |   |
| Redeemable preferred stock                                                                                    |   |          | 7,290,446   |   |              |   | 9,497,444 |   |
|                                                                                                          |   |          |        |   |              |   |   |   |
| Deficit:                                                                                                      |   |          |        |   |              |   |   |   |
| Infusion Brands shareholders’ deficit:                                                                  |   |          |        |   |              |   |   |   |
| Series C Preferred Stock, $0.00001 par, 10,620,000 shares authorized, 1,024,210 shares issued and outstanding |   |          | 4,946,910   |   |              |   | — |   |
| Series E Preferred Stock, $0.00001 par, 13,000,000 shares authorized and issued, 2,856,282 and outstanding    |   |          | 2,344,776   |   |              |   | 2,344,776 |   |
| Common Stock, $0.00001 par, 400,000,000 shares authorized; 181,457,508 and 158,795,060 shares outstanding     |   |          | 1,861       |   |              |   | 1,589 |   |
| Paid-in capital                                                                                               |   |          | 47,124,119  |   |              |   | 49,593,421 |   |
| Accumulated deficit                                                                                           |   |          | (61,928,431 | )      |              |   | (58,712,607 | ) |
| Accumulated other comprehensive income (loss)                                                                 |   |          | (22,872     | )      |              |   | — |   |
| Total Infusion Brands shareholders’ deficit                                                             |   |          | (7,533,602  | )      |              |   | (6,772,821 | ) |
| Non-controlling interests                                                                                     |   |          | 450,983     |   |              |   | 6,775 |   |
| Total deficit                                                                                                 |   |          | (7,082,619  | )      |              |   | (6,766,046 | ) |
| Total liabilities, redeemable preferred stock and deficit                                                     |   | $             | 8,321,706   |   |              | $      | 6,774,256 |   |

----

|                                                                     |   | Three Months Ended June 30, |       |
|--------------------------------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                                     |   | 2011                                            |       |   | 2010 |   |
|                                                                     |   | (Unaudited)                                     |       |   | (Unaudited) |   |
| Revenues and cost of product sales:                                      |   |                                            |       |   |   |   |
| Product sales                                                            |   | $                                               | 5,216,743  |   |   | $ | 570,208 |   |
| Cost of product sales                                                    |   |                                            | 2,744,280  |   |   |   | 812,298 |   |
| Gross profit (loss)                                                      |   |                                            | 2,472,463  |   |   |   | (242,090 | ) |
|                                                                     |   |                                            |       |   |   |   |   |   |
| Rental income                                                            |   |                                            | 61,081     |   |   |   | 72,835 |   |
| Services and other income                                                |   |                                            | —    |   |   |   | 742,167 |   |
|                                                                     |   |                                            | 61,081     |   |   |   | 815,002 |   |
|                                                                     |   |                                            |       |   |   |   |   |   |
| Other costs and operating expenses:                                      |   |                                            |       |   |   |   |   |   |
| Advertising and promotional                                              |   |                                            | 1,734,550  |   |   |   | 289,045 |   |
| Employment costs                                                         |   |                                            | 1,683,292  |   |   |   | 319,766 |   |
| Other general and administrative                                         |   |                                            | 606,750    |   |   |   | 522,926 |   |
| Accounting and professional                                              |   |                                            | 431,005    |   |   |   | 700,529 |   |
| Bargain purchase gain, net of expenses                                   |   |                                            | (155,780   | ) |   |   | — |   |
| Depreciation, excluding depreciation classified in cost of product sales |   |                                            | 67,265     |   |   |   | 397,101 |   |
| Impairments                                                              |   |                                            | —    |   |   |   | 3,881,462 |   |
|                                                                     |   |                                            | 4,367,082  |   |   |   | 6,110,829 |   |
| Loss from operations                                                     |   |                                            | (1,833,538 | ) |   |   | (5,537,917 | ) |
|                                                                     |   |                                            |       |   |   |   |   |   |
| Other income (expense):                                                  |   |                                            |       |   |   |   |   |   |
| Interest and other income                                                |   |                                            | 193,838    |   |   |   | 18,034 |   |
| Interest expense                                                         |   |                                            | (76,289    | ) |   |   | (28,946 | ) |
| Loss on asset sales                                                      |   |                                            | (75,000    | ) |   |   | — |   |
| Derivative income                                                        |   |                                            | —    |   |   |   | 3,849,673 |   |
| Total other income, net                                                  |   |                                            | 42,549     |   |   |   | 3,838,761 |   |
|                                                                     |   |                                            |       |   |   |   |   |   |
| Loss from continuing operations                                          |   |                                            | (1,790,989 | ) |   |   | (1,699,156 | ) |
| Loss from discontinued operations                                        |   |                                            | —    |   |   |   | (22,117,433 | ) |
|                                                                     |   |                                            |       |   |   |   |   |   |
| Loss attributable to Infusion Brands International                       |   |                                            | (1,790,989 | ) |   |   | (23,816,589 | ) |
| (Loss) income attributable to non-controlling interests                  |   |                                            | (105,483   | ) |   |   | 119,151 |   |
|                                                                     |   |                                            |       |   |   |   |   |   |
| Net loss                                                                 |   | $                                               | (1,896,472 | ) |   | $ | (23,697,438 | ) |

----

|                                                                                                           |   | Three Months Ended June 30, |        |
|----------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------|-------------|
|                                                                                                           |   | 2011                                            |        |   | 2010 |   |
|                                                                                                           |   | (Unaudited)                                     |        |   | (Unaudited) |   |
| Reconciliation of loss from continuing operations to loss attributable to Infusion Brands common shareholders: |   |                                            |        |   |   |   |   |   |
| Loss from continuing operations                                                                                |   | $                                               | (1,790,989  | ) |   | $ | (1,699,156 | ) |
| (Loss) income attributable to non-controlling interests                                                        |   |                                            | (105,483    | ) |   |   | 66,748 |   |
| Preferred dividends and accretion                                                                              |   |                                            | (1,584,861  | ) |   |   | — |   |
| Loss from continuing operations attributable to Infusion Brands common shareholders                            |   | $                                               | (3,481,333  | ) |   | $ | (1,632,408 | ) |
|                                                                                                           |   |                                            |        |   |   |   |   |   |
| Loss from discontinued operations attributable to Infusion Brands common shareholders:                         |   | $                                               | —     |   |   | $ | (22,117,433 | ) |
| Income attributable to non-controlling interests                                                               |   |                                            | —     |   |   |   | 52,403 |   |
| Loss from discontinued operations attributable to Infusion Brands common shareholders                          |   | $                                               | —     |   |   | $ | (22,065,030 | ) |
|                                                                                                           |   |                                            |        |   |   |   |   |   |
| Loss per common share:                                                                                         |   |                                            |        |   |   |   |   |   |
| Basic:                                                                                                         |   |                                            |        |   |   |   |   |   |
| Continuing operations                                                                                          |   | $                                               | (0.02       | ) |   | $ | (0.01 | ) |
| Discontinued operations                                                                                        |   | $                                               | (0.02       | ) |   | $ | (0.14 | ) |
| Diluted:                                                                                                       |   |                                            |        |   |   |   |   |   |
| Continuing operations                                                                                          |   | $                                               | —     |   |   | $ | (0.01 | ) |
| Discontinued operations                                                                                        |   | $                                               | —     |   |   | $ | (0.14 | ) |
|                                                                                                           |   |                                            |        |   |   |   |   |   |
| Weighted average common shares—basic                                                                     |   |                                            | 180,386,079 |   |   |   | 159,111,254 |   |
| Weighted average common shares—diluted                                                                   |   |                                            | 180,386,079 |   |   |   | 159,111,254 |   |

----

|                                                                     |   | Six Months Ended June 30, |       |
|--------------------------------------------------------------------------|--------|-----------------------------------------------|------------|
|                                                                     |   | 2011                                          |       |   | 2010 |   |
|                                                                     |   | (Unaudited)                                   |       |   | (Unaudited) |   |
| Revenues and cost of product sales:                                      |   |                                          |       |   |   |   |
| Product sales                                                            |   | $                                             | 9,373,459  |   |   | $ | 3,101,568 |   |
| Cost of product sales                                                    |   |                                          | 4,704,703  |   |   |   | 2,033,695 |   |
| Gross profit                                                             |   |                                          | 4,668,756  |   |   |   | 1,067,873 |   |
|                                                                     |   |                                          |       |   |   |   |   |   |
| Rental income                                                            |   |                                          | 124,308    |   |   |   | 168,573 |   |
| Services and other income                                                |   |                                          | —    |   |   |   | 742,167 |   |
|                                                                     |   |                                          | 124,308    |   |   |   | 910,740 |   |
|                                                                     |   |                                          |       |   |   |   |   |   |
| Other costs and operating expenses:                                      |   |                                          |       |   |   |   |   |   |
| Advertising and promotional                                              |   |                                          | 3,923,837  |   |   |   | 550,956 |   |
| Employment costs                                                         |   |                                          | 2,362,748  |   |   |   | 1,235,097 |   |
| Other general and administrative                                         |   |                                          | 1,017,562  |   |   |   | 1,221,289 |   |
| Accounting and professional                                              |   |                                          | 805,597    |   |   |   | 1,301,173 |   |
| Bargain purchase gain, net of expenses                                   |   |                                          | (155,780   | ) |   |   | — |   |
| Depreciation, excluding depreciation classified in cost of product sales |   |                                          | 120,593    |   |   |   | 787,050 |   |
| Impairments                                                              |   |                                          | —    |   |   |   | 3,881,462 |   |
|                                                                     |   |                                          | 8,074,557  |   |   |   | 8,977,027 |   |
| Loss from operations                                                     |   |                                          | (3,281,493 | ) |   |   | (6,998,414 | ) |
|                                                                     |   |                                          |       |   |   |   |   |   |
| Other income (expense):                                                  |   |                                          |       |   |   |   |   |   |
| Interest and other income                                                |   |                                          | 264,266    |   |   |   | 20,776 |   |
| Interest expense                                                         |   |                                          | (111,645   | ) |   |   | (64,817 | ) |
| Gain on asset sales                                                      |   |                                          | 11,756     |   |   |   | — |   |
| Derivative income                                                        |   |                                          | —    |   |   |   | 20,334,558 |   |
| Total other income, net                                                  |   |                                          | 164,377    |   |   |   | 20,290,517 |   |
|                                                                     |   |                                          |       |   |   |   |   |   |
| (Loss) income from continuing operations                                 |   |                                          | (3,117,116 | ) |   |   | 13,292,103 |   |
| Loss from discontinued operations                                        |   |                                          | —    |   |   |   | (23,489,579 | ) |
|                                                                     |   |                                          |       |   |   |   |   |   |
| Loss attributable to Infusion Brands International                       |   |                                          | (3,117,116 | ) |   |   | (10,197,476 | ) |
| (Loss) income attributable to non-controlling interests                  |   |                                          | (98,708    | ) |   |   | 132,351 |   |
|                                                                     |   |                                          |       |   |   |   |   |   |
| Net loss                                                                 |   | $                                             | (3,215,824 | ) |   | $ | (10,065,125 | ) |

----

|                                                                                                           |   | Six Months Ended June 30, |        |
|----------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|-------------|
|                                                                                                           |   | 2011                                          |        |   | 2010 |   |
|                                                                                                           |   | (Unaudited)                                   |        |   | (Unaudited) |   |
| Reconciliation of loss from continuing operations to loss attributable to Infusion Brands common shareholders: |   |                                          |        |   |   |   |
| (Loss) income from continuing operations attributable to Infusion Brands                                       |   | $                                             | (3,117,116  | ) |   | $ | 13,292,103 |   |
| Loss (income) attributable to non-controlling interests                                                        |   |                                          | (98,708     | ) |   |   | 79,948 |   |
| Preferred dividends and accretion                                                                              |   |                                          | (2,862,931  | ) |   |   | — |   |
| (Loss) income from continuing operations attributable to Infusion Brands common shareholders                   |   | $                                             | (6,078,755  | ) |   | $ | 13,372,051 |   |
|                                                                                                           |   |                                          |        |   |   |   |   |   |
| Loss from discontinued operations attributable to Infusion Brands common shareholders:                         |   | $                                             | —     |   |   | $ | (23,489,579 | ) |
| Income attributable to non-controlling interests                                                               |   |                                          | —     |   |   |   | 52,403 |   |
| Loss from discontinued operations attributable to Infusion Brands common shareholders                          |   | $                                             | —     |   |   | $ | (23,437,176 | ) |
|                                                                                                           |   |                                          |        |   |   |   |   |   |
| (Loss) income per common share:                                                                                |   |                                          |        |   |   |   |   |   |
| Basic:                                                                                                         |   |                                          |        |   |   |   |   |   |
| Continuing operations                                                                                          |   | $                                             | (0.03       | ) |   | $ | 0.08 |   |
| Discontinued operations                                                                                        |   | $                                             | —     |   |   | $ | (0.15 | ) |
| Diluted:                                                                                                       |   |                                          |        |   |   |   |   |   |
| Continuing operations                                                                                          |   | $                                             | (0.03       | ) |   | $ | 0.08 |   |
| Discontinued operations                                                                                        |   | $                                             | —     |   |   | $ | (0.15 | ) |
|                                                                                                           |   |                                          |        |   |   |   |   |   |
| Weighted average common shares—basic                                                                     |   |                                          | 174,217,398 |   |   |   | 159,043,408 |   |
| Weighted average common shares—diluted                                                                   |   |                                          | 174,217,398 |   |   |   | 159,043,408 |   |

----

|                                                                    |   | Six Months Ended June 30, |       |
|-------------------------------------------------------------------------|--------|---------------------------|------------|
|                                                                    |   | 2011                      |       |   | 2010 |   |
|                                                                    |   | (Unaudited)               |       |   | (Unaudited) |   |
| Cash flows from operating activities:                                   |   |                      |       |   |   |   |
| Net (loss) income                                                       |   | $                         | (3,117,116 | ) |   | $ | (10,197,476 | ) |
| Adjustments to reconcile loss to net cash used in operating activities: |   |                      |       |   |   |   |   |   |
| Share-based payment                                                     |   |                      | 393,936    |   |   |   | 518,886 |   |
| Bargain purchase gain related to HSE                                    |   |                      | (200,416   | ) |   |   | — |   |
| Depreciation expense                                                    |   |                      | 119,682    |   |   |   | 111,474 |   |
| Bad debts expense and returns and allowances                            |   |                      | 10,076     |   |   |   | 397,176 |   |
| Impairments                                                             |   |                      | —    |   |   |   | 22,972,854 |   |
| Derivative income                                                       |   |                      | —    |   |   |   | (20,334,558 | ) |
| Impairment of investments                                               |   |                      | —    |   |   |   | 1,998,492 |   |
| Amortization of intangible assets                                       |   |                      | —    |   |   |   | 1,150,958 |   |
| Amortization of deferred revenue                                        |   |                      | —    |   |   |   | (349,197 | ) |
| Equity in losses of investees                                           |   |                      | —    |   |   |   | 341,604 |   |
| Non-cash severance                                                      |   |                      | —    |   |   |   | 76,077 |   |
| Amortization of deferred costs                                          |   |                      | —    |   |   |   | 20,983 |   |
| Changes in operating assets and liabilities:                            |   |                      |       |   |   |   |   |   |
| Accounts receivable                                                     |   |                      | (559,250   | ) |   |   | 1,180,963 |   |
| Inventories                                                             |   |                      | 1,165,524  |   |   |   | (199,289 | ) |
| Prepaid expenses and other assets                                       |   |                      | (413,921   | ) |   |   | 54,666 |   |
| Accounts payable and accrued expenses                                   |   |                      | (932,216   | ) |   |   | (802,009 | ) |
| Net cash (used) in operating activities                                 |   |                      | (3,533,701 | ) |   |   | (3,058,396 | ) |
|                                                                    |   |                      |       |   |   |   |   |   |
| Cash flows from investing activities:                                   |   |                      |       |   |   |   |   |   |
| Purchases of HSE, net of $17,856 cash received                          |   |                      | (57,298    | ) |   |   | — |   |
| Purchases of property and equipment                                     |   |                      | (56,629    | ) |   |   | (47,640 | ) |
| Purchase of other investments                                           |   |                      | —    |   |   |   | (83,791 | ) |
| Other investing activities                                              |   |                      | —    |   |   |   | 5,261 |   |
| Net cash flow (used) in investing activities                            |   |                      | (113,927   | ) |   |   | (126,170 | ) |
|                                                                    |   |                      |       |   |   |   |   |   |
| Cash flows from financing activities:                                   |   |                      |       |   |   |   |   |   |
| Proceeds from advances                                                  |   |                      | 3,000,000  |   |   |   | 5,000,000 |   |
| Principal payments on long-term debt                                    |   |                      | (37,253    | ) |   |   | (15,849 | ) |
| Redemption of common stock                                              |   |                      | —    |   |   |   | (100,000 | ) |
| Net cash flow provided by in financing activities                       |   |                      | 2,962,747  |   |   |   | 4,884,151 |   |
|                                                                    |   |                      |       |   |   |   |   |   |
| Foreign currency translation adjustments                                |   |                      | (22,872    | ) |   |   | — |   |
|                                                                    |   |                      |       |   |   |   |   |   |
| Net change in cash and cash equivalents                                 |   |                      | (684,881   | ) |   |   | 1,699,585 |   |
| Cash and cash equivalents at beginning of period                        |   |                      | 1,746,510  |   |   |   | 3,991,837 |   |
| Cash and cash equivalents at end of period                              |   | $                         | 1,038,757  |   |   | $ | 5,691,422 |   |

| Supplemental Cash Flow Information |   |
|------------------------------------|--------|
|                               |   |   |   |   |   |   |
| Cash paid for interest             |   | $ | 112,743 |   |   | $ | 58,293 |   |
| Cash paid for income taxes         |   | $ | — |   |   | $ | — |   |

----

|                            |   |           |      |   |         |   |        |         |   |   |           |   |   |               |       |   | AccumulatedOther    |   |        |           |   |   |                     |   |   |                   |       |
|--------------------------------------|--------|----------------|-----------|--------|--------------|--------|-------------|--------------|--------|--------|----------------|--------|--------|--------------------|------------|--------|---------------------|--------|-------------|----------------|--------|--------|--------------------------|--------|--------|------------------------|------------|
|                                 |   | PreferredStock |      |   | CommonShares |   |        | CommonAmount |   |   | Paid-inCapital |   |   | AccumulatedDeficit |       |   | ComprehensiveIncome |   |        | Total(Deficit) |   |   | Non-ControllingInterests |   |   | Infusion BrandsDeficit |       |
|                                 |   |           |      |   |         |   |        |         |   |   |           |   |   |               |       |   |                |   |        |           |   |   |                     |   |   |                   |       |
| Balances, January 1, 2011            |   | $              | 2,344,776 |   |         |   | 158,795,060 |         |   | $      | 1,589          |   |   | $                  | 49,593,421 |   |                | $      | (58,712,607 | )              |   | $      | —                  |   |   | $                      | (6,772,821 | ) |   | $ | 6,775 |   |   | $ | (6,766,046 | ) |
| Reclassification of Series C         |   |           | 4,946,910 |   |         |   | —     |         |   |   | —        |   |   |               | —    |   |                |   | —     |           |   |   | —                  |   |   |                   | 4,946,910  |   |   |   | — |   |   |   | 4,946,910 |   |
| Share-based payment—employees  |   |           | —   |   |         |   | 2,500,000   |         |   |   | 25             |   |   |               | 190,020    |   |                |   | —     |           |   |   | —                  |   |   |                   | 190,045    |   |   |   | — |   |   |   | 190,045 |   |
| Share-based payment—consultant |   |           | —   |   |         |   | 20,162,448  |         |   |   | 202            |   |   |               | 203,689    |   |                |   | —     |           |   |   | —                  |   |   |                   | 203,891    |   |   |   | — |   |   |   | 203,891 |   |
| Acquisition of HSE                   |   |           | —   |   |         |   | —     |         |   |   | —        |   |   |               | —    |   |                |   | —     |           |   |   | —                  |   |   |                   | —    |   |   |   | 345,500 |   |   |   | 345,500 |   |
| Accretion of Series G Preferred      |   |           | —   |   |         |   | —     |         |   |   | —        |   |   |               | (2,664,575 | )      |                |   | —     |           |   |   | —                  |   |   |                   | (2,664,575 | ) |   |   | — |   |   |   | (2,664,575 | ) |
| Dividends on Series G Preferred      |   |           | —   |   |         |   | —     |         |   |   | —        |   |   |               | (198,356   | )      |                |   | —     |           |   |   | —                  |   |   |                   | (198,356   | ) |   |   | — |   |   |   | (198,356 | ) |
| Foreign currency translation         |   |           | —   |   |         |   | —     |         |   |   | —        |   |   |               | —    |   |                |   | —     |           |   |   | (22,872                  | )      |   |                   | (22,872    | ) |   |   | — |   |   |   | (22,872 | ) |
| Net loss                             |   |           | —   |   |         |   | —     |         |   |   | —        |   |   |               | —    |   |                |   | (3,215,824  | )              |   |   | —                  |   |   |                   | (3,215,824 | ) |   |   | 98,708 |   |   |   | (3,117,116 | ) |
|                                 |   |           |      |   |         |   |        |         |   |   |           |   |   |               |       |   |                |   |        |           |   |   |                     |   |   |                   |       |   |   |   |   |   |   |   |   |   |
| Balances, June 30, 2011              |   | $              | 7,291,686 |   |         |   | 181,457,508 |         |   | $      | 1,816          |   |   | $                  | 47,124,199 |   |                | $      | (61,928,431 | )              |   | $      | (22,872                  | )      |   | $                      | (7,533,602 | ) |   | $ | 450,983 |   |   | $ | (7,082,619 | ) |

|                         |   | Series E  |      |   | Common Stock |   |        | Paid-in |   |   | Comprehensive |   |   | Accumulated  |       |   | Total   |   |     | Non-Controlling  |   |   | Infusion Brands |   |
|-----------------------------------|--------|-----------|-----------|--------|--------------|--------|-------------|---------|--------|--------|---------------|--------|--------|--------------|------------|--------|---------|--------|----------|------------------|--------|--------|-----------------|--------|
|                              |   | Preferred |      |   | Shares       |   |        | Amount  |   |   | Capital       |   |   | Income Items |       |   | Deficit |   |     | Equity (Deficit) |   |   | Interests       |   |   | Equity (deficit) |   |
|                              |   |      |      |   |         |   |        |    |   |   |          |   |   |         |       |   |    |   |     |             |   |   |            |   |   |   |   |
| Balances, January 1, 2010         |   | $         | 3,177,317 |   |         |   | 159,122,243 |    |   | $      | 1,591         |   |   | $            | 46,370,212 |   |    | $      | 425,000  |             |   | $      | (42,642,655     | )      |   | $ | 7,331,465 |   |   | $ | 155,659 |   |   | $ | 7,487,124 |   |
| Conversions of preferred          |   |      | (240,313  | )      |         |   | 251,080     |    |   |   | 3             |   |   |         | 240,310    |   |    |   | —  |             |   |   | —         |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Redemption                        |   |      | —   |   |         |   | (1,300,000  | )       |   |   | (13           | )      |   |         | (99,987    | )      |    |   | —  |             |   |   | —         |   |   |   | (100,000 | ) |   |   | — |   |   |   | (100,000 | ) |
| Share-based payment               |   |      | —   |   |         |   | —     |    |   |   | —       |   |   |         | 518,886    |   |    |   | —  |             |   |   | —         |   |   |   | 518,886 |   |   |   | — |   |   |   | 518,886 |   |
| Unrealized gains (losses)         |   |      | —   |   |         |   | —     |    |   |   | —       |   |   |         | —    |   |    |   | (395,000 | )                |   |   | —         |   |   |   | (395,000 | )  |   |   | — |   |   |   | (395,000 | ) |
| Consolidation of Wineharvest      |   |      | —   |   |         |   | —     |    |   |   | —       |   |   |         | —    |   |    |   | —  |             |   |   | —         |   |   |   | — |   |   |   | 93,066 |   |   |   | 93,066 |   |
| Income from continuing operations |   |      | —   |   |         |   | —     |    |   |   | —       |   |   |         | —    |   |    |   | —  |             |   |   | 13,372,051      |   |   |   | 13,372,051 |   |   |   | (79,948 | ) |   |   | 13,292,103 |   |
| Loss from discontinued operations |   |      | —   |   |         |   | —     |    |   |   | —       |   |   |         | —    |   |    |   | —  |             |   |   | (23,437,176     | )      |   |   | (23,437,176 | ) |   |   | (52,403 | ) |   |   | (23,489,579 | ) |
|                              |   |      |      |   |         |   |        |    |   |   |          |   |   |         |       |   |    |   |     |             |   |   |            |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances, June 30, 2010           |   | $         | 2,937,004 |   |         |   | 158,073,323 |    |   | $      | 1,581         |   |   | $            | 47,029,421 |   |    | $      | 30,000   |             |   | $      | (52,707,780     | )      |   | $ | (2,709,774 | ) |   | $ | 116,374 |   |   | $ | (2,593,400 | ) |

----

----

| Assets acquired:                                          |   |   |       |
|-----------------------------------------------------------|--------|--------|------------|
| Cash                                                      |   | $      | 17,856     |   |
| Accounts receivable                                       |   |   | 697,395    |   |
| Inventories                                               |   |   | 1,039,987  |   |
| Land, buildings and operating equipment                   |   |   | 535,971    |   |
| Other assets with future benefits                         |   |   | 171,995    |   |
| Liabilities assumed:                                      |   |   |       |   |
| Accounts payable and accrued liabilities                  |   |   | (1,472,811 | ) |
| Notes payable                                             |   |   | (299,393   | ) |
| Non-controlling interest                                  |   |   | (345,500   | ) |
| Purchase consideration:                                   |   |   |       |   |
| Cash consideration disbursed                              |   |   | (75,154    | ) |
| Contingent consideration, recorded in liabilities         |   |   | (69,930    | ) |
| Bargain purchase gain                                     |   |   | 200,416    |   |
| Less, acquisition costs that were expensed                |   |   | (44,636    | ) |
| Bargain purchase, net of expenses reflected in operations |   | $      | 155,780    |   |

----

|                                                |   | Three months ended June 30, |       |
|-----------------------------------------------------|--------|-------------------------------------------------|------------|
|                                                |   | 2011                                            |       |   | 2010 |   |
| Pro forma results:                                  |   |                                            |       |   |   |   |   |   |
| Revenue                                             |   | $                                               | 5,284,654  |   |   | $ | 2,010,716 |   |
| Loss from continuing operations                     |   |                                            | (2,049,132 | ) |   |   | (1,737,260 | ) |
| Loss  per common share, basic and diluted |   |                                            | (0.01      | ) |   |   | (0.01 | ) |

|                                                |   | Six months ended June 30, |       |
|-----------------------------------------------------|--------|-----------------------------------------------|------------|
|                                                |   | 2011                                          |       |   | 2010 |   |
| Pro forma results:                                  |   |                                          |       |   |   |   |   |   |
| Revenue                                             |   | $                                             | 10,815,021 |   |   | $ | 5,712,681 |   |
| (Loss) income from continuing operations            |   |                                          | (3,271,049 | ) |   |   | 13,261,898 |   |
| (Loss) earnings per common share, basic and diluted |   |                                          | (0.02      | ) |   |   | 0.08 |   |

|                                                                      |   | Three monthsendedJune 30, 2010 |        |   | Six monthsendedJune 30, 2010 |   |
|---------------------------------------------------------------------------|--------|--------------------------------|-------------|--------|------------------------------|--------|
| Revenues of discontinued segments                                         |   | $                              | 1,981,767   |   |                         | $      | 4,305,318 |   |
| Cost of revenues                                                          |   |                           | 2,806,668   |   |                         |   | 4,991,246 |   |
| Gross loss                                                                |   |                           | (824,901    | )      |                         |   | (685,928 | ) |
| Costs and operating expenses:                                             |   |                           |        |   |                         |   |   |   |
| Impairments of assets                                                     |   |                           | 19,091,392  |   |                         |   | 19,091,392 |   |
| General and administrative                                                |   |                           | 427,431     |   |                         |   | 883,910 |   |
| Depreciation and amortization                                             |   |                           | 244,147     |   |                         |   | 482,378 |   |
| Total costs and expenses                                                  |   |                           | 19,762,970  |   |                         |   | 20,457,680 |   |
| Loss from operations                                                      |   |                           | (20,587,871 | )      |                         |   | (21,143,608 | ) |
| Other expenses:                                                           |   |                           |        |   |                         |   |   |   |
| Impairments of investments                                                |   |                           | (1,627,129  | )      |                         |   | (1,998,491 | ) |
| Equity in losses of investees accounted for by applying the equity method |   |                           | 103,443     |   |                         |   | (341,604 | ) |
| Interest expense                                                          |   |                           | (5,876      | )      |                         |   | (5,876 | ) |
| Loss from discontinued operations                                         |   | $                              | (22,117,433 | )      |                         | $      | (23,489,579 | ) |

----

|                                            |   | 2011   |      |   | 2010   |   |
|-------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                            |   |   |      |   |   |   |
| Finished goods                                  |   | $      | 2,311,233 |   |   | $      | 2,335,800 |   |
| Reserves for obsolescence and excess quantities |   |   | (369,534  | )      |   |   | (268,574 | ) |
|                                            |   | $      | 1,941,689 |   |   | $      | 2,067,226 |   |

|                                      |   | 2011   |      |   | 2010   |   |
|-------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Land                                      |   | $      | 643,212   |   |   | $      | 500,000 |   |
| Buildings and improvements                |   |   | 1,814,397 |   |   |   | 1,554,333 |   |
| Office equipment                          |   |   | 1,032,718 |   |   |   | 834,972 |   |
| Computer software and minor intangibles   |   |   | 39,335    |   |   |   | — |   |
| Leasehold improvements                    |   |   | 16,093    |   |   |   | 16,093 |   |
|                                      |   |   | 3,545,755 |   |   |   | 2,905,398 |   |
| Accumulated depreciation and amortization |   |   | (654,480  | )      |   |   | (487,041 | ) |
|                                      |   | $      | 2,891,275 |   |   | $      | 2,418,357 |   |

----

|                                  |   | 2011   |      |   | 2010   |   |
|---------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                  |   |   |      |   |   |   |
| Accounts payable – trade        |   | $      | 1,613,603 |   |   | $      | 1,060,914 |   |
| Accrued expenses:                     |   |   |      |   |   |   |   |   |
| Dividends on Series G Preferred Stock |   |   | 410,836   |   |   |   | 205,904 |   |
| Media Funding (1)                     |   |   | 150,532   |   |   |   | — |   |
| Sales tax                             |   |   | 111,143   |   |   |   | — |   |
| Contingent purchase price for HSE     |   |   | 69,930    |   |   |   | — |   |
| Employment                            |   |   | 44,828    |   |   |   | 31,550 |   |
| Warranty                              |   |   | 42,672    |   |   |   | 85,343 |   |
| Deposits and refunds                  |   |   | 28,307    |   |   |   | 187,302 |   |
| Interest                              |   |   | 6,276     |   |   |   | 2,521 |   |
| Other                                 |   |   | 181,246   |   |   |   | 282,327 |   |
|                                  |   | $      | 2,664,742 |   |   | $      | 1,855,861 |   |

----

| Three months ended June 30, 2010Financing—Financial Instrument |   | EmbeddedDerivatives |    |   | WarrantDerivatives |   |       | Total  |   |
|----------------------------------------------------------------------|--------|---------------------|---------|--------|--------------------|--------|------------|--------|--------|
| New Vicis Warrant                                                    |   | $                   | — |   |               | $      | (3,430,000 | )      |   | $ | (3,430,000 | ) |
| Series B Warrants                                                    |   |                | — |   |               |   | (19,585    | )      |   |   | (19,585 | ) |
| Series C Put Derivative and Warrants                                 |   |                | 172     |   |               |   | (122,905   | )      |   |   | (122,733 | ) |
| Series G Warrants (issued on June 30, 2010)                          |   |                | — |   |               |   | —    |   |   |   | — |   |
| Placement Agent Warrants                                             |   |                | — |   |               |   | (277,355   | )      |   |   | (277,355 | ) |
| Derivative (income) expense                                          |   | $                   | 172     |   |               | $      | (3,849,845 | )      |   | $ | (3,849,673 | ) |

| Six months ended June 30, 2010Financing—Financial Instrument |   | EmbeddedDerivatives |    |   | WarrantDerivatives |   |        | Total  |   |
|--------------------------------------------------------------------|--------|---------------------|---------|--------|--------------------|--------|-------------|--------|--------|
| Vicis Warrant                                                      |   | $                   | — |   |               | $      | (18,095,000 | )      |   | $ | (18,095,000 | ) |
| Series B Warrants                                                  |   |                | — |   |               |   | (196,176    | )      |   |   | (196,176 | ) |
| Series C Put Derivative and Warrants                               |   |                | 1,174   |   |               |   | (645,389    | )      |   |   | (644,215 | ) |
| Series G Warrants (issued on June 30, 2010)                        |   |                | — |   |               |   | —     |   |   |   | — |   |
| Placement Agent Warrants                                           |   |                | — |   |               |   | (1,399,165  | )      |   |   | (1,399,165 | ) |
| Derivative (income) expense                                        |   | $                   | 1,174   |   |               | $      | (20,335,732 | )      |   | $ | (20,334,558 | ) |

| Financing—Financial Instrument                 |   | June 30, 2010 |        |
|------------------------------------------------------|--------|---------------|-------------|
| Vicis Warrant                                        |   |          | 70,000,000  |   |
| Series B Preferred Financing—Investor warrants |   |          | 480,000     |   |
| Series C Preferred Financing—Investor warrants |   |          | 2,731,228   |   |
| Series G Preferred Financing—Investor warrants |   |          | 50,000,000  |   |
| Placement agent warrants                             |   |          | 5,546,980   |   |
|                                                 |   |          | 128,758,208 |   |

----

|                     |   | Number |       |   | Strike |   | Term |   | Volatility      |   | Rate               |
|--------------------------|--------|--------|------------|--------|--------|--------|------|--------|-----------------|--------|--------------------|
| Vicis Warrant            |   |   | 70,000,000 |   |   | $      | 0.10 |   | 9.05            |   | 70.8%              |   | 2.97% |
| Series B Warrants        |   |   | 480,000    |   |   | $      | 0.10 |   | 1.90            |   | 186.2%             |   | 0.61% |
| Series C Warrants        |   |   | 2,731,228  |   |   | $      | 0.10 |   | 2.30—7.31 |   | 77.8%—173.2% |   | 0.61%—2.42% |
| Series G Warrants        |   |   | 50,000,000 |   |   | $      | 0.10 |   | 10.00           |   | 68.0%              |   | 2.97% |
| Placement Agent Warrants |   |   | 5,546,980  |   |   | $      | 0.10 |   | 8.63—9.26 |   | 70.0%—71.4%  |   | 2.97% |

|                                                      |   | Three months endedJune 30, 2010 |       |   | Six months endedJune 30, 2010 |   |
|-----------------------------------------------------------|--------|-----------------------------------------------------|------------|--------|---------------------------------------------------|--------|
| Beginning balances                                        |   | $                                                   | (5,905,630 | )      |                                              | $      | (22,390,515 | ) |
| Issuances:                                                |   |                                                |       |   |                                              |   |   |   |
| Series G Preferred Stock and Warrant Financing (Note 10): |   |                                                |       |   |                                              |   |   |   |
| Warrants                                                  |   |                                                | (1,330,000 | )      |                                              |   | (1,330,000 | ) |
| Derivative conversion feature                             |   |                                                | (800,000   | )      |                                              |   | (800,000 | ) |
| Unrealized gains and losses                               |   |                                                | 3,849,673  |   |                                              |   | 20,334,558 |   |
| Balances at June 30, 2010                                 |   | $                                                   | (4,185,957 | )      |                                              | $      | (4,185,957 | ) |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | 2011   |                                               |   | 2010   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|----------------------------------------------------|--------|--------|--------|
| Initial $2,000,000 six-year, variable rate mortgage note, with interest at the Wall Street Prime Rate, plus 1.5%, with a floor of 6.5% and a cap 7.75% during the first three years and a floor of 6.75% and a cap of 8.75% during the second three years; principal and interest payments of $13,507 are payable over the six year term based upon a twenty-five year amortization schedule, with $1,775,557 payable at maturity; secured by real estate; guaranteed by related parties. |   | $      |            1,911,700 |   |   | $      |            1,928,199 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |                                               |   |   |   |   |   |
| Bank lending rate (3.5% at June 30, 2011 and December 31, 2010) demand bank note.                                                                                                                                                                                                                                                                                                                                                                                                         |   |   | 249,605                                            |   |   |   | 249,605 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |                                               |   |   |   |   |   |
| 4.6% to 6.2% bank term, due at various dates through September 2013 (debt of HSE; see Notes 3 and 12).                                                                                                                                                                                                                                                                                                                                                                                    |   |   | 169,912                                            |   |   |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   |                                               |   |   |   |   |   |
| 11.7% mortgage note, with monthly payments of $1,545 through May 2016; secured by real estate located in Europe (debt of HSE; see Notes 3 and 12).                                                                                                                                                                                                                                                                                                                                        |   |   | 108,727                                            |   |   |   | — |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |   | 2,439,944                                          |   |   |   | 2,177,804 |   |
| Less current maturities                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |   | (326,115                                           | )      |   |   | (286,262 | ) |
| Long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | $      | 2,113,829                                          |   |   | $      | 1,891,542 |   |

----

| Six months ending December 31, 2011 |   | $      | 306,919   |   |
|-------------------------------------|--------|--------|-----------|--------|
| Years ending December 31:           |   |   |      |   |
| 2012                                |   |   | 71,088    |   |
| 2013                                |   |   | 140,783   |   |
| 2014                                |   |   | 1,812,425 |   |
| 2015                                |   |   | —   |   |
| 2016                                |   |   | 108,729   |   |
|                                |   | $      | 2,439,944 |   |

|                                                                                                                                                                                                                          |   | 2011   |      |   | 2010   |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Series C Convertible Preferred Stock, 1,024,210 shares issued and outstanding at December 31, 2010 (liquidation value $1,024,210); on March 31, 2011 this Series was reclassed to stockholders’ equity. See note below. |   | $      | —   |   |   | $      | 4,946,910 |   |
|                                                                                                                                                                                                                          |   |   |      |   |   |   |   |   |
| Series G Convertible Preferred Stock, 5,000,000 shares issued and outstanding at June 30, 2011 and December 31, 2010 respectively; liquidation value $5,000,000, respectively.                                                |   |   | 7,290,446 |   |   |   | 4,550,534 |   |
|                                                                                                                                                                                                                          |   | $      | 7,290,446 |   |   | $      | 9,497,444 |   |

----

|  Series |   | Date ofDesignation |   | Number ofShares |      |   | ParValue |   |    | StatedValue |   |   | LiquidationValue |   |   | DividendRate |   |   | InitialConversion |   |   | CurrentConversion |   |
|--------------|--------|--------------------|--------|-----------------|-----------|--------|----------|--------|---------|-------------|--------|--------|------------------|--------|--------|--------------|--------|--------|-------------------|--------|--------|-------------------|--------|
| G            |   | 6/30/2010          |   |            | 8,000,000 |   |     | $      | 0.00001 |        |   | $      | 1.00             |   |   | $            | 1.00   |   |              |   | 8.0    | %                 |   | $ | 0.10 |   |   | $ | 0.10 |   |

----

|   | · | The stated value of $5,000,000 is payable on June 30, 2013. |
|--------|--------|-------------------------------------------------------------|

|   | · | An additional dividend equal to $1.00 per share of Series G Preferred is payable on June 30, 2011 if the special preferred distribution discussed in the next bullet point has not been paid before that date (aggregate redemption value $5,000,000). |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A special preferred distribution equal to $8.12 per share of Series G Preferred is payable on June 30, 2013 or earlier at our option (aggregate redemption value of $40,600,000). This special preferred distribution is reduced by the amount of the additional dividend discussed in the preceding bullet point if the additional dividend is paid on the June 30, 2011. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                      |   | AccretionTable |       |
|-----------------------------------------------------------|--------|----------------|------------|
| Carrying value on June 30, 2011                           |   | $              | 7,290,446  |   |
| Future accretion (charges to stockholders’ equity): |   |           |       |   |
| Six months ending December 31, 2011                       |   |           | 4,224,821  |   |
| Year ending December 31, 2012                             |   |           | 17,319,770 |   |
| Year ending December 31, 2013                             |   |           | 16,764,963 |   |
| Redemption value                                          |   | $              | 45,600,000 |   |

----

|                                                         |   | Allocation |      |
|--------------------------------------------------------------|--------|------------|-----------|
| Financial Instrument:                                        |   |       |      |   |
| Series G Preferred, classified in redeemable preferred stock |   | $          | 2,870,000 |   |
| Embedded Conversion Feature                                  |   |       | 800,000   |   |
| Series G Warrants                                            |   |       | 1,330,000 |   |
|                                                         |   | $          | 5,000,000 |   |

----

|  Series |   | Date ofDesignation |   | Number ofShares |       |   | ParValue |   |    | StatedValue |   |   | LiquidationValue |   |   | DividendRate |   |   | InitialConversion |   |    | CurrentConversion |   |
|--------------|--------|--------------------|--------|-----------------|------------|--------|----------|--------|---------|-------------|--------|--------|------------------|--------|--------|--------------|--------|--------|-------------------|--------|---------|-------------------|--------|
| C            |   | 10/18/2007         |   |            | 10,620,000 |   |     | $      | 0.00001 |        |   | $      | 1.00             |   |   | $            | 1.00   |   |              |   | — |              |   | $ | 0.75 |   |   | $ | 0.25 |   |

|   | · | The Corporation shall fail to have available a sufficient number of authorized and unreserved shares of Common Stock to issue to such Holder upon a conversion hereunder; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Unless specifically addressed elsewhere in the Certificate of Designation as a Triggering Event, the Corporation shall fail to observe or perform any other covenant, agreement or warranty contained in the Certificate of Designation, and such failure or breach shall not, if subject to the possibility of a cure by the Corporation, have been cured within 20 calendar days after the date on which written notice of such failure or breach shall have been delivered; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | There shall have occurred a Bankruptcy Event or Material Monetary Judgment; |
|--------|--------|-----------------------------------------------------------------------------|

----

|                                                      |   | Shares |        |   | Amount |   |
|-----------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Shares issued to acquire Abazias, Inc. on August 27, 2009 |   |   | 13,000,000  |   |   | $      | 15,841,323 |   |
| Beneficial conversion feature                             |   |   | —     |   |   |   | (2,605,158 | ) |
| Conversion into 12,012,239 shares of common stock         |   |   | (10,115,399 | )      |   |   | (10,299,161 | ) |
| Balances at June 30, 2010                                 |   |   | 2,884,601   |   |   |   | 2,937,004 |   |
| Conversion into 721,737 shares of common stock            |   |   | (357,825    | )      |   |   | (592,228 | ) |
| Balances at December 31, 2010 and June 30, 2011           |   |   | 2,526,776   |   |   | $      | 2,344,776 |   |

----

|                                                                               |   | Linked CommonShares |        |   | Exercise PricesPer Share |   |            | Weighted AverageExercise Prices Per Share |   |
|-----------------------------------------------------------------------------------------|--------|---------------------|-------------|--------|--------------------------|--------|-----------------|-------------------------------------------|--------|
|                                                                                    |   | Warrants            |        |   | Stock Options       |   |            | Warrants                                  |   |   | Stock Options |   |   | Warrants |   |   | Stock Options |   |
| Outstanding at January 1, 2011                                                          |   |                | 128,758,209 |   |                     |   | 32,960,337      |                                      |   | $ | 0.10 |   |   | $ | 0.01—1.00 |   |   | $ | 0.10 |   |   | $ | 0.05 |   |
| Granted                                                                                 |   |                | —     |   |                     |   | —         |                                      |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Exercised                                                                               |   |                | —     |   |                     |   | —         |                                      |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Cancelled or expired                                                                    |   |                | —     |   |                     |   | (2,271,666      | )                                         |   |   | — |   |   |   | 0.19—1.00 |   |   |   | — |   |   |   | 0.97 |   |
| Outstanding at June 30, 2011                                                            |   |                | 128,758,209 |   |                     |   | 30,688,671      |                                      |   | $ | 0.10 |   |   | $ | 0.01—0.35 |   |   | $ | 0.10 |   |   | $ | 0.01 |   |
|                                                                                    |   |                |        |   |                     |   |            |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at January 1, 2010                                                          |   |                | 80,238,208  |   |                     |   | 4,536,666       |                                      |   | $ | 0.20—1.00 |   |   | $ | 0.35—1.00 |   |   | $ | 0.20 |   |   | $ | 0.53 |   |
| Granted                                                                                 |   |                | —     |   |                     |   | 4,825,000       |                                      |   |   | — |   |   |   | 0.19 |   |   |   | — |   |   |   | 0.19 |   |
| Exercised                                                                               |   |                | —     |   |                     |   | —         |                                      |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |
| Cancelled or expired                                                                    |   |                | —     |   |                     |   | (1,825,000      | )                                         |   |   | — |   |   |   | 0.05—1.00 |   |   |   | 0.20 |   |   |   | 0.58 |   |
| Outstanding at June 30, 2010                                                            |   |                | 80,238,208  |   |                     |   | 7,536,666       |                                      |   | $ | 0.20—1.00 |   |   | $ | 0.19—1.00 |   |   | $ | 0.20 |   |   | $ | 0.38 |   |
|                                                                                    |   |                |        |   |                     |   |            |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Exerciseable at June 30, 2011                                                           |   |                | 80,238,208  |   |                     |   | —         |                                      |   | $ | 0.10 |   |   |   | — |   |   | $ | 0.10 |   |   |   | — |   |
|                                                                                    |   |                |        |   |                     |   |            |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation expense:                                                                   |   |                |        |   |                     |   |            |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Grant date fair values:                                                                 |   |                |        |   |                     |   |            |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding, June 30, 2011                                                              |   |                |        |   |                     | $      | 1,825,840       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation expense recorded:                                                          |   |                |        |   |                     |   |            |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Six months June 30, 2011                                                                |   |                |        |   |                     | $      | 165,045         |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Six months June 30, 2010                                                                |   |                |        |   |                     | $      | 518,886         |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation subject to amortization in future periods as options vest at June 30, 2011 |   |                |        |   |                     | $      |  1,489,651 |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|   | · | On May 6, 2011, as part of our acquisition of HSE, we awarded the subsidiary’s president (i) 2,500,000 shares of common stock that had a fair value of $25,000 and (ii) an option to receive between 1,250,000 and 2,500,000 shares of common stock that are contingent upon achieving certain revenues and profitability levels. The bonus shares were expensed upon issuance. The fair value of the contingent option was calculated at $25,000 and is being amortized into compensation expense over the contingency period that is one year. During the three and six months ended June 30, 2011, $3,904 in compensation expense was recorded under this arrangement. The number of shares issuable under this arrangement is not determinable; therefore, no shares have been reflected in the previous table. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On December 31, 2009, we awarded employees 2,400,000 stock options with exercise prices of $0.35, pro rata vesting of four years and terms of four years. The grant date fair value amounted to $689,450. Volatility assumptions ranged from 139.35% to 282.51%; Risk-free rate assumptions ranged from 0.06% to 1.70%. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On March 31, 2010, we awarded employees 4,825,000 stock options with exercise prices of $0.19, pro rata vesting of five years and terms of five years. The grant date fair value amounted to $435,025. Volatility assumptions ranged from 138.40% to 211.91%; Risk-free rate assumptions ranged from 0.16% to 1.60%. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | On June 30, 2010, we awarded 30,243,671 stock options to employees and consultants (12,097,468 shares) (of which 4,800,000 replaced previously issued stock options) with exercise prices of $0.01, pro rata vesting of three years and terms of ten years. The grant date fair value amounted to $1,723,890. Volatility assumptions ranged from 156.05% to 217.79%; Risk-free rate assumptions ranged from 0.18% to 1.00%. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| Three months ended June 30                     |   | 2011   |        |   | 2010   |   |
|------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| Loss from continuing operations                |   | $      | (1,896,472  | )      |   | $      | (1,632,408 | ) |
| Preferred stock dividends and accretion        |   |   | (1,584,861  | )      |   |   | — |   |
| Numerator for basic                            |   | $      | (3,481,333  | )      |   | $      | (1,632,408 | ) |
|                                           |   |   |        |   |   |   |   |   |
| Loss from discontinued operations              |   | $      | —     |   |   | $      | (22,065,030 | ) |
|                                           |   |   |        |   |   |   |   |   |
| Denominator:                                   |   |   |        |   |   |   |   |   |
| Weighted averages shares                       |   |   | 180,386,079 |   |   |   | 159,111,254 |   |
| Potentially dilutive equity-linked contracts:  |   |   |        |   |   |   |   |   |
| Warrants and options                           |   |   | —     |   |   |   | — |   |
| Convertible preferred stock                    |   |   | —     |   |   |   | — |   |
|                                           |   |   | 180,386,079 |   |   |   | 159,111,254 |   |
| Loss per common share, continuing operations   |   |   |        |   |   |   |   |   |
| Basic                                          |   | $      | (0.02       | )      |   | $      | (0.01 | ) |
| Diluted                                        |   | $      | (0.02       | )      |   | $      | (0.01 | ) |
| Loss per common share, discontinued operations |   |   |        |   |   |   |   |   |
| Basic                                          |   | $      | —     |   |   | $      | (0.14 | ) |
| Diluted                                        |   | $      | —     |   |   | $      | (0.14 | ) |

| Six months ended June 30                              |   | 2011   |        |   | 2010   |   |
|-------------------------------------------------------|--------|--------|-------------|--------|--------|--------|
| (Loss) income from continuing operations              |   | $      | (3,215,824  | )      |   | $      | 13,372,051 |   |
| Preferred stock dividends and accretion               |   |   | (2,862,931  | )      |   |   | — |   |
| Numerator for basic                                   |   | $      | (6,078,755  | )      |   | $      | 13,372,081 |   |
|                                                  |   |   |        |   |   |   |   |   |
| Loss from discontinued operations                     |   | $      | —     |   |   | $      | (23,437,176 | ) |
|                                                  |   |   |        |   |   |   |   |   |
| Denominator:                                          |   |   |        |   |   |   |   |   |
| Weighted averages shares                              |   |   | 174,217,398 |   |   |   | 159,043,408 |   |
| Potentially dilutive equity-linked contracts:         |   |   |        |   |   |   |   |   |
| Warrants and options                                  |   |   | —     |   |   |   | — |   |
| Convertible preferred stock                           |   |   | —     |   |   |   | — |   |
|                                                  |   |   | 174,217,398 |   |   |   | 159,043,408 |   |
| (Loss) income per common share, continuing operations |   |   |        |   |   |   |   |   |
| Basic                                                 |   | $      | (0.03       | )      |   | $      | 0.08 |   |
| Diluted                                               |   | $      | (0.03       | )      |   | $      | 0.08 |   |
| Loss per common share, discontinued operations        |   |   |        |   |   |   |   |   |
| Basic                                                 |   | $      | —     |   |   | $      | (0.15 | ) |
| Diluted                                               |   | $      | —     |   |   | $      | (0.15 | ) |

----

|                                     |   | Three months ended June 30, 2011 |       |
|------------------------------------------|--------|-----------------------------------------------------------|------------|
|                                     |   | United States                                             |       |   | Europe |   |   | Consolidated |   |
| Revenues                                 |   | $                                                         | 4,504,973  |   |   | $ | 711,770 |   |   | $ | 5,216,743 |   |
| (Loss) income from continuing operations |   |                                                      | (2,107,438 | ) |   |   | 210,966 |   |   |   | (1,896,472 | ) |

|                                     |   | Six months ended June 30, 2011 |       |
|------------------------------------------|--------|---------------------------------------------------------|------------|
|                                     |   | United States                                      |       |   | Europe |   |   | Consolidated |   |
| Revenues                                 |   | $                                                       | 8,661,689  |   |   |   | 711,770 |   |   | $ | 9,373,459 |   |
| (Loss) income from continuing operations |   |                                                    | (3,426,790 | ) |   |   | 210,966 |   |   |   | (3,215,824 | ) |

|                                                |   | June 30, 2011 |       |
|-----------------------------------------------------|--------|-------------------------|------------|
|                                                |   | United States      |       |   | Europe |   |   | Consolidated |   |
| Assets:                                             |   |                    |       |   |   |   |   |   |   |
| Current assets                                      |   | $                       | 3,176,639  |   |   | $ | 1,723,899 |   |   | $ | 4,900,538 |   |
| Long-lived assets                                   |   |                    | 2,886,772  |   |   |   | 534,396 |   |   |   | 3,421,168 |   |
|                                                |   | $                       | 6,063,411  |   |   | $ | 2,258,295 |   |   | $ | 8,321,706 |   |
| Liabilities, redeemable preferred stock and equity: |   |                    |       |   |   |   |   |   |   |   |   |   |
| Current liabilities                                 |   | $                       | 1,851,558  |   |   | $ | 1,139,299 |   |   | $ | 2,990,857 |   |
| Non-current liabilities                             |   |                    | 4,883,120  |   |   |   | 239,902 |   |   |   | 5,123,022 |   |
| Redeemable preferred stock                          |   |                    | 7,290,446  |   |   |   | — |   |   |   | 7,290,446 |   |
| (Deficit) equity                                    |   |                    | (7,961,713 | ) |   |   | 879,094 |   |   |   | (7,082,619 | ) |
|                                                |   | $                       | 6,063,411  |   |   | $ | 2,258,295 |   |   | $ | 8,321,706 |   |

----

----

----

----

|                                     |   | Three months ended June 30, 2011 |       |
|------------------------------------------|--------|----------------------------------|------------|
|                                     |   | United States                    |       |   | Europe |   |   | Consolidated |   |
| Revenues                                 |   | $                                | 4,504,973  |   |   | $ | 711,770 |   |   | $ | 5,216,743 |   |
| (Loss) income from continuing operations |   |                             | (2,107,438 | ) |   |   | 210,966 |   |   |   | (1,896,472 | ) |

|                                     |   | Six months ended June 30, 2011 |       |
|------------------------------------------|--------|--------------------------------|------------|
|                                     |   | United States                  |       |   | Europe |   |   | Consolidated |   |
| Revenues                                 |   | $                              | 8,661,689  |   |   |   | 711,770 |   |   | $ | 9,373,459 |   |
| (Loss) income from continuing operations |   |                           | (3,426,790 | ) |   |   | 210,966 |   |   |   | (3,215,824 | ) |

----

|                                                           |   | June 30, 2011 |       |
|----------------------------------------------------------------|--------|---------------|------------|
|                                                           |   | United States |       |   | Europe |   |   | Consolidated |   |
| Assets:                                                        |   |          |       |   |   |   |   |   |   |
|    Current assets                               |   | $             | 3,176,639  |   |   | $ | 1,723,899 |   |   | $ | 4,900,538 |   |
|    Long-lived assets                            |   |          | 2,886,772  |   |   |   | 534,396 |   |   |   | 3,421,168 |   |
|                                                           |   | $             | 6,063,411  |   |   | $ | 2,258,295 |   |   | $ | 8,321,706 |   |
| Liabilities, redeemable preferred stock and equity:            |   |          |       |   |   |   |   |   |   |   |   |   |
|       Current liabilities        |   | $             | 1,851,558  |   |   | $ | 1,139,299 |   |   | $ | 2,990,857 |   |
|       Non-current liabilities    |   |          | 4,883,120  |   |   |   | 239,902 |   |   |   | 5,123,022 |   |
|       Redeemable preferred stock |   |          | 7,290,446  |   |   |   | — |   |   |   | 7,290,446 |   |
|       (Deficit) equity           |   |          | (7,961,713 | ) |   |   | 879,094 |   |   |   | (7,082,619 | )  |
|                                                           |   | $             | 6,063,411  |   |   | $ | 2,258,295 |   |   | $ | 8,321,706 |   |

----

----

----

|                                                                      |   | Three monthsendedJune 30, 2010 |        |   | Six monthsendedJune 30, 2010 |   |
|---------------------------------------------------------------------------|--------|-----------------------------------------------|-------------|--------|---------------------------------------------|--------|
| Revenues of discontinued segments                          |   | $                                             | 1,981,767   |   |                                        | $      | 4,305,318 |   |
| Cost of revenues                                                |   |                                          | 2,806,668   |   |                                        |   | 4,991,246 |   |
| Gross loss                                                                |   |                                          | (824,901    | )      |                                        |   | (685,928 | ) |
| Costs and operating expenses:                                             |   |                                          |        |   |                                        |   |   |   |
| Impairments of assets                                                     |   |                                          | 19,091,392  |   |                                        |   | 19,091,392 |   |
| General and administrative                                                |   |                                          | 427,431     |   |                                        |   | 883,910 |   |
| Depreciation and amortization                                             |   |                                          | 244,147     |   |                                        |   | 482,378 |   |
| Total costs and expenses                                                  |   |                                          | 19,762,970  |   |                                        |   | 20,457,680 |   |
| Loss from operations                                                      |   |                                          | (20,587,871 | )      |                                        |   | (21,143,608 | ) |
| Other expenses:                                                           |   |                                          |        |   |                                        |   |   |   |
| Impairments of investments                                                |   |                                          | (1,627,129  | )      |                                        |   | (1,998,491 | ) |
| Equity in losses of investees accounted for by applying the equity method |   |                                          | 103,443     |   |                                        |   | (341,604 | ) |
| Interest expense                                                          |   |                                          | (5,876      | )      |                                        |   | (5,876 | ) |
| Loss from discontinued operations                                         |   | $                                             | (22,117,433 | )      |                                        | $      | (23,489,579 | ) |

----

----

----

|                                                                      |   | Three months       |        |   | Six months         |   |
|---------------------------------------------------------------------------|--------|-------------------------|-------------|--------|-------------------------|--------|
|                                                                      |   | ended                   |        |   | ended                   |   |
|                                                                      |   | June 30, 2010 |        |   | June 30, 2010 |   |
| Revenues of discontinued segments                                         |   | $                       | 1,981,767   |   |                    | $      | 4,305,318 |   |
| Cost of revenues                                                          |   |                    | 2,806,668   |   |                    |   | 4,991,246 |   |
| Gross profit                                                              |   |                    | (824,901    | )      |                    |   | (685,928 | ) |
| Costs and operating expenses:                                             |   |                    |        |   |                    |   |   |   |
| Impairments of assets                                                     |   |                    | 19,091,392  |   |                    |   | 19,091,392 |   |
| General and administrative                                                |   |                    | 427,431     |   |                    |   | 883,910 |   |
| Depreciation and amortization                                             |   |                    | 244,147     |   |                    |   | 482,378 |   |
| Total costs and expenses                                                  |   |                    | 19,762,970  |   |                    |   | 20,457,680 |   |
| Loss from operations                                                      |   |                    | (20,587,871 | )      |                    |   | (21,143,608 | ) |
| Other expenses:                                                           |   |                    |        |   |                    |   |   |   |
| Impairments of investments                                                |   |                    | (1,627,129  | )      |                    |   | (1,998,491 | ) |
| Equity in losses of investees accounted for by applying the equity method |   |                    | 103,443     |   |                    |   | (341,604 | ) |
| Interest expense                                                          |   |                    | (5,876      | )      |                    |   | (5,876 | ) |
| Loss from discontinued operations                                         |   | $                       | (22,117,433 | )      |                    | $      | (23,489,579 | ) |

----

|   | · | The stated value of $5,000,000 is payable on June 30, 2013. |
|--------|--------|-------------------------------------------------------------|

|   | · | An additional dividend equal to $1.00 per share of Series G Preferred is payable on June 30, 2011 if the special preferred distribution discussed in the next bullet point has not been paid before that date (aggregate redemption value $5,000,000). |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | A special preferred distribution equal to $8.12 per share of Series G Preferred is payable on June 30, 2013 or earlier at our option (aggregate redemption value of $40,600,000). This special preferred distribution is reduced by the amount of the additional dividend discussed in the preceding bullet point if the additional dividend is paid on the June 30, 2011. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

----

----

----

| 10.1   | Stock Purchase Agreement (Incorporated by reference to the Current Report on Form 8-K, filed with the SEC on May 13, 2011)                                                                                                                                                                                                                                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2   | Employment Agreement (Incorporated by reference to the Current Report on Form 8-K, filed with the SEC on May 13, 2011)                                                                                                                                                                                                                                                                                                    |
| 10.3   | Securities Purchase Agreement (Incorporated by reference to the Current Report on Form 8-K, filed with the SEC on July 14, 2011)                                                                                                                                                                                                                                                                                          |
| 10.4   | Amendment to Series G Convertible Preferred Stock Certificate of Designation (Incorporated by reference to the Current Report on Form 8-K, filed with the SEC on July 14, 2011)                                                                                                                                                                                                                                           |
| 10.5   | Form of Series G Warrant (Incorporated by reference to the Current Report on Form 8-K, filed with the SEC on July 14, 2011)                                                                                                                                                                                                                                                                                               |
| 10.6   | Registration Rights Agreement (Incorporated by reference to the Current Report on Form 8-K, filed with the SEC on July 14, 2011)                                                                                                                                                                                                                                                                                          |
| 10.7   | Amended and Restated Security Agreement (Incorporated by reference to the Current Report on Form 8-K, filed with the SEC on July 14, 2011)                                                                                                                                                                                                                                                                                |
| 10.8   | Amended and Restated Subsidiary Guarantee(Incorporated by reference to the Current Report on Form 8-K, filed with the SEC on July 14, 2011)                                                                                                                                                                                                                                                                               |
| 10.9   | Amended and Restated Guarantor Security Agreement (Incorporated by reference to the Current Report on Form 8-K, filed with the SEC on July 14, 2011)                                                                                                                                                                                                                                                                      |
| 31.1   | Certification of Periodic Financial Reports by Robert John DeCecco III in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                   |
| 31.2   | Certification of Periodic Financial Reports by Mary Mather in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                               |
| 32.1   | Certification of Periodic Financial Reports by Robert John DeCecco III in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350                                                                                                                                                                                                                                                        |
| 32.2   | Certification of Periodic Financial Reports by Mary Mather in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350                                                                                                                                                                                                                                                                    |
| 101 ** | The following materials from Infusion Brands International, Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Income, (ii) the Consolidated Statements of Cash Flow, (iii) the Consolidated Balance Sheets, and (iv) Notes to Consolidated Financial Statements tagged as blocks of text. |

----

|                  | Infusion Brands International, Inc. |
|-----------------------|-------------------------------------|
|                  |                                |   |
| Date: August 15, 2011 | By:                                 | /s/ Robert DeCecco III |
|                  |                                | Robert DeCecco III |
|                  |                                | President and Chief Executive Officer (Principal Executive Officer) |
|                  |                                |   |

| Date: August 15, 2011 | By:    | /s/ Mary B. Mather                                                   |
|-----------------------|--------|----------------------------------------------------------------------|
|                  |   | Mary B. Mather                                                       |
|                  |   | Chief Financial Officer (Principal Financial and Accounting Officer) |
|                  |   |                                                                 |

----