UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.  20549
 ______________________
 
 FORM
10-Q
 
 [
X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
 
 For the
quarterly period ended September 30, 2009
 
 OR
 
 [   ]   Transition
Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 
 For the
transition period from ________ to ___________
 
 Commission
file number: 333-109990
 
 MELT
INC.
 (Name of
Small Business Issuer in Its Charter)
 
 Nevada
              
              47-0925451(State
      or Other Jurisdiction
                of
      Incorporation or Organization)
              
              (IRS
      Employer
                Identification
      No.)31556
      Loma Linda RoadTemecula,
      California
              
              92592(Address
      of Principal Executive Offices)
              
              (Zip
      Code)
 
 (310) 601-7907(Issuer’s
      Telephone Number)N/A(Former
      Name, Former Address and Former Fiscal Year, if Changed Since Last
      Report)
 
 
 
 Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
      during the past 12 months (or for such shorter period that the registrant
      was required to file such reports), and (2) has been subject to such
      filing requirements for the past 90 days.  Yes [X] No [ ]Indicate
      by check mark whether the registrant has submitted electronically and
      posted on its corporate Website, if any, every Interactive Data File
      required to be submitted and posted pursuant to Rule 405 of Regulation S-K
      (§229.405 of this chapter) during the preceding 12 months (or for such
      shorter period that the registrant was required to submit and post such
      files).Yes   No Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, non-accelerated filer, or a smaller reporting
      company.  See definition of  “large accelerated
      filer,”   “accelerated filer,” and “smaller reporting
      company in Rule 12b-2 of the Exchange Act.  (Check
      one):Large
      accelerated filer
              Accelerated
      filer  [  ]Non-accelerated
      filer  [  ] (Do not check if a smaller reporting
      company
              Smaller
      reporting company  [X]Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act [X] YES  [  ]
      NO
 
  
  
 
 
 APPLICABLE
ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
 PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
 
 Check
whether the registrant has filed all documents and reports required to be filed
by Sections 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution
of securities under a plan confirmed by a court. Yes
[   ]   No
[   ]
  APPLICABLE
ONLY TO CORPORATE ISSUERS
 
 Indicate the number of shares outstanding of each of
the issuer’s classes of common stock, as of the latest practicable
date.  21,290,000 common shares issued and outstanding as of October
23, 2009
  2
  
 
 PART
I - FINANCIAL INFORMATION
 Item1.  Financial
Statements.
 It
is the opinion of management that the interim consolidated financial statements
as of and for the period ended September 30, 2009 include all adjustments
necessary in order to ensure that the interim consolidated financial statements
are not misleading.
  3
  
 
 
 
 
 
   
 
 
 
 
 MELT
INC. AND SUBSIDIARIES
 
 CONSOLIDATED
FINANCIAL STATEMENTS
 
 September 30, 2009 and
December 31, 2008
                     
  4
  MELT
INC. AND SUBSIDIARIES
 Consolidated
Balance Sheets
 
 ASSETSSeptember
      30
              
              
              December
      31,2009
              
              
              2008(Unaudited)CURRENT
      ASSETSCash
              
              $
              -
              
              
              $
              59,925Receivables,
      net of allowance of $0 and $1,005, respectively
              
              
              30,658
              
              
              
              12,874Debt
      issuance costs
              
              
              15,867
              
              
              
              -Total Current
      Assets
              
              
              46,525
              
              
              
              72,799LONG-TERM
      ASSETSDebt
      issuance costs
              
              
              -
              
              
              
              20,067Total
      Long-Term Assets
              
              
              -
              
              
              
              20,067TOTAL
      ASSETS
              
              $
              46,525
              
              
              $
              92,866
 
 
 LIABILITIES AND STOCKHOLDERS’ EQUITY
      (DEFICIT)September
      30,
              
              
              December
      31,2009
              
              
              2008(Unaudited)CURRENT
      LIABILITIESCash overdraft
              
              $
              6,948
              
              
              $
              -Accounts payable
              
              
              74,183
              
              
              
              130,505Accrued expenses
              
              
              -
              
              
              
              15,000Accrued management fees –
      related party (Note 5)
              
              
              88,000
              
              
              
              88,000Notes
      payable- related party (Note 5)
              
              
              100,000
              
              
              
              100,000Accrued
      interest - related party (Note 5)
              
              
              90,920
              
              
              
              81,263Notes
      payable (Note 6)
              
              
              600,000
              
              
              
              182,630Accrued
      interest
              
              
              68,971
              
              
              
              45,606Deferred
      revenue
              
              
              25,000
              
              
              
              100,000Total
      Current Liabilities
              
              
              1,054,022
              
              
              
              743,004LONG-TERM
      LIABILITIESNotes
      payable
              
              
              -
              
              
              
              400,000Total
      Long-Term Liabilities
              
              
              -
              
              
              
              400,000LIABILITES
      OF DISCONTINUED OPERATIONS (Note 3)
              
              
              679,722
              
              
              
              679,722TOTAL
      LIABILITIES
              
              
              1,733,744
              
              
              
              1,822,726STOCKHOLDERS’
      EQUITY (DEFICIT)Common
      stock: $0.001 par value 100,000,000 sharesauthorized;
      21,290,000 and 21,290,000 shares issued andoutstanding,
      respectively
              
              
              21,290
              
              
              
              21,290Additional
      paid-in capital
              
              
              1,837,173
              
              
              
              1,877,113Deferred
      equity compensation
              
              
              -
              
              
              
              (39,940
              )Accumulated
      deficit
              
              
              (3,545,682
              )
              
              
              (3,588,323
              )Total
      Stockholders’ Equity (Deficit)
              
              
              (1,687,219
              )
              
              
              (1,729,860
              )TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
              
              $
              46,525
              
              
              $
              92,866
 
  5
  MELT
INC. AND SUBSIDIARIES
 Consolidated
Statements of Operations
 (Unaudited)
 
 For
      the Three Months Ended
                September
      30,
              
              
              For
      the Nine Months Ended
                September
      30,2009
              
              
              2008
              
              
              2009
              
              
              2008REVENUESFood and beverage
      sales
              
              $
              11,836
              
              
              $
              54,511
              
              
              $
              46,737
              
              
              $
              958,092Royalty and marketing
      fees
              
              
              137,893
              
              
              
              159,324
              
              
              
              406,925
              
              
              
              470,682Franchise fees
              
              
              25,000
              
              
              
              40,000
              
              
              
              92,500
              
              
              
              80,000Equipment sales
              
              
              -
              
              
              
              18,680
              
              
              
              -
              
              
              
              112,776Miscellaneous finders and
      professional fees
              
              
              23,548
              
              
              
              2,364
              
              
              
              52,185
              
              
              
              46,319Total Revenues
              
              
              198,277
              
              
              
              274,879
              
              
              
              598,347
              
              
              
              1,667,869COST
      OF SALESCost of food and
      beverage
              
              
              -
              
              
              
              6,314
              
              
              
              6,278
              
              
              
              799,099Materials and
    supplies
              
              
              -
              
              
              
              8,864
              
              
              
              -
              
              
              
              35,945Total Cost of
    Sales
              
              
              -
              
              
              
              15,178
              
              
              
              6,278
              
              
              
              835,044GROSS
      PROFIT
              
              
              198,277
              
              
              
              259,701
              
              
              
              592,069
              
              
              
              832,825EXPENSESDepreciation and
      amortization
              
              
              -
              
              
              
              1,259
              
              
              
              -
              
              
              
              7,251Marketing
              
              
              6,290
              
              
              
              3,205
              
              
              
              13,615
              
              
              
              62,572Professional fees
              
              
              83,860
              
              
              
              82,534
              
              
              
              144,829
              
              
              
              232,891Rent
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              12,304Management fees
              
              
              55,500
              
              
              
              95,500
              
              
              
              220,500
              
              
              
              319,500Bad debt expense
              
              
              -
              
              
              
              70,200
              
              
              
              924
              
              
              
              93,802General and
      administrative
              
              
              25,142
              
              
              
              48,843
              
              
              
              114,967
              
              
              
              149,724Total Expenses
              
              
              170,792
              
              
              
              301,541
              
              
              
              494,835
              
              
              
              878,044INCOME
      (LOSS) FROM OPERATIONS
              
              
              27,485
              
              
              
              (41,840
              )
              
              
              97,234
              
              
              
              (45,219
              )OTHER
      INCOME (EXPENSES)Gain on litigation
      settlement
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              85,927Interest expense
              
              
              (21,010
              )
              
              
              (20,166
              )
              
              
              (54,593
              )
              
              
              (60,351
              )Total Other Income
      (Expense)
              
              
              (21,010
              )
              
              
              (20,166
              )
              
              
              (54,593
              )
              
              
              25,576INCOME
      (LOSS) BEFORE DISCOUNTINUED
                OPERATIONS AND INCOME
      TAXES
              
              $
              6,475
              
              
              $
              (62,006
              )
              
              $
              42,641
              
              
              $
              (19,643
              )
 
  6
  
 MELT
INC. AND SUBSIDIARIES
 Consolidated
Statements of Operations (Continued)
 (Unaudited)
 
  For
      the Three Months ended
                Sept
      30,
              
              
              For
      the Nine Months Ended
                Sept
      30,2009
              
              
              2008
              
              
              2009
              
              
              2008INCOME
      (LOSS) BEFORE DISCONTINUED
                OPERATIONS
      AND INCOME TAXES
              
              $
              6,475
              
              
              $
              (62,006
              )
              
              $
              42,641
              
              
              $
              (19,643
              )INCOME
      (LOSS) FROM DISCONTINUED
                OPERATIONS
              
              
              -
              
              
              
              19,109
              
              
              
              -
              
              
              
              (47,239
              )INCOME
      (LOSS) BEFORE INCOME TAXES
              
              
              6,475
              
              
              
              (42,897
              )
              
              
              42,641
              
              
              
              (66,882
              )INCOME
      TAX EXPENSE
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -NET
      INCOME (LOSS)
              
              $
              6,475
              
              
              $
              (42,897
              )
              
              $
              42,641
              
              
              $
              (66,882
              )BASIC
      NET INCOME (LOSS) PER SHARE:Income (loss) per share on
      continuing
                operations
              
              $
              0.00
              
              
              $
              (0.00
              )
              
              $
              0.00
              
              
              $
              (0.00
              )Income (loss) per share on
      discontinued
                Operations
              
              
              -
              
              
              
              (0.00
              )
              
              
              -
              
              
              
              (0.00
              )Net income (loss) per
      share
              
              $
              0.00
              
              
              $
              (0.00
              )
              
              $
              0.00
              
              
              $
              (0.00
              )WEIGHTED
      AVERAGE NUMBER OF SHARES
                OUTSTANDING –
BASIC
              
              
              21,290,000
              
              
              
              21,290,000
              
              
              
              21,290,000
              
              
              
              21,290,000
 
   7
  MELT
INC. AND SUBSIDIARIES
 Consolidated
Statement of Stockholders’ Equity (Deficit)
 
 Common
      StockShares
              
              
              Amount
              
              
              Additional
                Paid-in
                Capital
              
              
              Deferred
                Compensation
              
              
              Accumulated
                DeficitBalance,
      December 31, 2008
              
              
              21,290,000
              
              
              $
              21,290
              
              
              $
              1,877,113
              
              
              $
              (39,940
              )
              
              $
              (3,588,323
              )Cumulative
      effect of stock option
                forfeitures
      (unaudited)
              
              
              -
              
              
              
              -
              
              
              
              (39,940
              )
              
              
              39,940
              
              
              
              -Net
      income for the nine months
                Ended September 30, 2009
      (unaudited)
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              42,641Balance
      September 30, 2009 (unaudited)
              
              
              21,290,000
              
              
              $
              21,290
              
              
              $
              1,837,173
              
              
              $
              -
              
              
              $
              (3,545,682
              )
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  8
  MELT
INC. AND SUBSIDIARIES
 Consolidated
Statements of Cash Flows
 (Unaudited)
 For
      the Nine Months Ended
                Sept
      30,2009
              
              
              2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      income (loss) after discontinued operations
              
              $
              42,641
              
              
              $
              (66,882
              )Less:  loss
      from discontinued operations
              
              
              -
              
              
              
              (47,239
              )Net
      income (loss) before discontinued operations
              
              
              42,641
              
              
              
              (19,643
              )Items
      to reconcile net loss to net cash provided (used) by
                operating
      activities:Depreciation and
      amortization
              
              
              -
              
              
              
              7,251Bad debt
expense
              
              
              924
              
              
              
              93,802Amortization of deferred equity
      compensation
              
              
              -
              
              
              
              8,872Amortization of deferred debt
      issuance costs
              
              
              4,200
              
              
              
              4,200Changes in operating assets
      and liabilities:(Increase) in
      receivables
              
              
              (18,708
              )
              
              
              (16,586
              )Decrease in other
      assets
              
              
              -
              
              
              
              28,523(Decrease) in accounts payable
      and accrued expenses
              
              
              (71,322
              )
              
              
              (106,760
              )Increase in interest payable –
      related party
              
              
              9,656
              
              
              
              7,249Increase in interest
      payable
              
              
              40,736
              
              
              
              3,902Increase (Decrease) in deferred
      revenue
              
              
              (75,000
              )
              
              
              10,000Net Cash Provided (Used) in
      Operating Activities
              
              
              (66,873
              )
              
              
              20,810Net Cash Provided (Used) by
      Discontinued Activities
              
              
              -
              
              
              
              24,726Total Net Cash Provided (Used)
      by Operating and
                Discontinued
      Activities
              
              
              (66,873
              )
              
              
              45,536CASH
      FLOWS FROM INVESTING ACTIVITIES
              
              
              -
              
              
              
              -CASH
      FLOWS FROM FINANCING ACTIVITIESBank
      overdraft
              
              
              6,948
              
              
              
              -Payments
      on notes payable
              
              
              -
              
              
              
              (1,153
              )Payment
      on notes payable – related party
              
              
              -
              
              
              
              (49,465
              )Net Cash Provided (Used) by
      Financing Activities-
                Continuing
      Operations
              
              
              6,948
              
              
              
              (50,618
              )DECREASE
      IN CASH
              
              
              (59,925
              )
              
              
              (5,082
              )CASH
      AT BEGINNING OF PERIOD
              
              
              59,925
              
              
              
              67,853CASH
      AT END OF PERIOD
              
              $
              -
              
              
              $
              62,771CASH
      PAID FOR:Interest
              
              $
              -
              
              
              $
              44,625Income taxes
              
              $
              -
              
              
              $
              -
 -
  9
  
 MELT
INC. AND SUBSIDIARIES
 Notes
to the Consolidated Financial Statements
 September
30, 2009 and December 31, 2008
 
 NOTE
1 -       ORGANIZATION AND SIGNIFICANT
ACCOUNTING POLICIES
  This
summary of significant accounting policies of Melt Inc. and its Subsidiaries
(herein referred to as The Company) is presented to assist in understanding the
Company’s consolidated financial statements.  The consolidated
financial statements and notes are representations of the Company’s management,
which is responsible for their integrity and objectivity.  These
accounting policies conform to accounting principles generally accepted in the
United States of America and have been consistently applied in the preparation
of the consolidated financial statements.
  a.
              Organization
      and Business Activities
  Melt
Inc. was organized on July 18, 2003, under the laws of the State of
Nevada.  Melt Inc. operates as a holding company for its operating
subsidiaries.
  Melt
(California), Inc. a wholly owned subsidiary (hereinafter referred to as Melt
(CA)) was organized on August 6, 2003, under the laws of the State of
California.  Melt (CA) was in the business of owning and operating
corporate owned stores, of which none were in existence during the year ended
December 31, 2008 and the period ended September 30, 2009, managing the
construction process for both corporate and franchisee owned stores, securing
retail space for either corporate or franchise stores to operate from. Melt (CA)
ceased managing the construction of stores during September 2007.  All
assets, liabilities and operating results related to store construction and
retail leases are therefore included in discontinued operations as of September
30, 2009 (see note 3).  All operations of Melt (CA)  have
been terminated since September 30, 2007.
  Melt
Franchising LLC (hereinafter referred to as Melt (FA)) a wholly owned subsidiary
was organized on February 2, 2005 under the laws of the State of
Nevada.  Melt (FA) is responsible for selling franchises to allow
franchisee’s to own and operate stores trading under the name of Melt – gelato
italiano, Melt – café & gelato bar and Melt – gelato & crepe café as
well as, marketing and the collection of royalties.  To date, Melt
(FA) has sold fifty  franchises of which twenty are operating,
seventeen agreements have been terminated by the Company as a result of the
franchisee’s not securing retail space or other reasons, one is in the process
of finding suitable locations to operate their stores, and twelve have closed
their operations.
  b.     Depreciation
  The
cost of the equipment and property is depreciated over the estimated useful life
of 5 years.  Depreciation is computed using the straight-line method
beginning when the assets are placed in service.  Depreciation expense
on assets used in continuing operations for the nine months ended September 30,
2009 and 2008 was $0 and $7,251, respectively.
  c.     Accounting
Method
  The
Company’s consolidated financial statements are prepared using the accrual
method of accounting.  The Company has elected a December 31 year-end.
  10
  MELT
INC. AND SUBSIDIARIES
 Notes
to the Consolidated Financial Statements
 September
30, 2009 and December 31, 2008
  NOTE
1 -        ORGANIZATION AND SUMMARY OF
ACCOUNTING POLICIES (Continued)
  d.     Cash
and Cash Equivalents
  For
the purpose of the statement of cash flows, the Company considers all highly
liquid investments purchased with a maturity of six months or less to be cash
equivalents.
  e.     Estimates
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period.  Actual results could differ from those
estimates.
  f.     Revenue
Recognition
  The
Company’s revenues are derived primarily from franchising activities, including
sales of franchise licenses, food and beverage products, equipment, marketing
services and royalties from franchisee sales.
  Food
and Beverage
  Revenue
from the sale of food and beverages at corporate owned stores and to franchisees
is recognized as products are sold and when all rights and obligations of the
Company have been met.
  Franchise
Fee Revenue
  The
Company’s franchise agreements require an initial franchise fee of $25,000 and
have a ten year term with two five year options.  The agreements also
call for weekly royalty payments of six percent and a one percent marketing
fee.
  Revenue
from initial franchise fees are recognized when the Company has completed its
obligation to the franchisee, the franchise store has opened and there is (a) no
remaining obligation or intent to refund amounts paid, (b) substantially all of
the initial services required by the Uniform Franchise Offering Circular have
been performed, and (c) there are no other material conditions or obligations
related to substantial performance.  Franchise fees collected for
franchise agreements that are ultimately terminated are recognized as revenue
only when the Company has met its obligations under the Uniform Franchise
Offering Circular and there are no material conditions or obligations
remaining.  During the nine months ended September 30, 2009 and 2008,
the Company recognized $92,500 and $80,000 in franchise fee revenue,
respectively.
  Revenue
from continuing royalties and marketing fees, which are based on a percentage of
net sales made at franchised owned restaurants, are recognized as income is
earned and when they becomes receivable from the franchisee.
  
   11
   MELT
INC. AND SUBSIDIARIES
 Notes
to the Consolidated Financial Statements
 September
30, 2009 and December 31, 2008
  NOTE
1 -        ORGANIZATION AND SUMMARY OF
ACCOUNTING POLICIES (Continued)
  f.     Revenue
Recognition (Continued)
  Deferred
Revenue
  As
of September 30, 2009 and December 31, 2008 the company maintained deferred
revenue of $25,000 and $100,000, respectively.  This represents
franchise fees received, which have not been recognized as revenue.
  Miscellaneous
Finder and Professional Fees
  Miscellaneous
finder and professional fees revenue consists of services performed by the
Company for franchise store design, lease review and site finders
fees.  The revenue from these professional fees is recognized as
services are performed and when all rights and obligations of the Company have
been met.
  g.     Accounts
Receivable and Allowance for Doubtful Accounts
  Accounts
receivable consists primarily of amounts due from the sale of products and
services to franchisees for store construction. Accounts receivable also
includes amounts related to franchise royalties, rents and other miscellaneous
items.
  The
Company recognizes allowances for doubtful accounts to ensure receivables are
not overstated due to uncollectibility. Bad debt reserves are maintained for
customers in the aggregate based on a variety of factors, including the length
of time receivables are past due, significant one-time events and historical
experience. An additional reserve for individual accounts is recorded when the
Company becomes aware of potential uncollectibility.  The allowance
for doubtful accounts on continuing operations was $0 and $1,005 at September
30, 2009 and December 31, 2008, respectively, while bad debt expense on
continuing operations totaled $924 and $93,802 for the nine months ended
September 30, 2009 and 2008, respectively.
  h.     Advertising
and Marketing
  The
Company follows the policy of charging the costs of marketing and advertising to
expense as incurred.  Marketing and Advertising expense for the Nine
months ended September 30, 2009 and 2008 was $13,615 and $62,572,
respectively.
  i.
              Principles
      of Consolidation
  The
consolidated financial statements include the amounts of Melt Inc. and its
wholly owned subsidiaries, Melt (CA) and Melt (FA).  All material
inter-company accounts and transactions have been eliminated.
  j.     Long
Lived Assets
  The
Company accounts for long-lived assets that are to be disposed of by sale at the
lower of book value or fair value less cost to sell. Discontinued operations
include all components of
  12
   the
Company with operations that (1) can be distinguished from the rest of the
entity and(2)
will be eliminated from the ongoing operations of the entity in a disposal
transaction.
  13
  MELT
INC. AND SUBSIDIARIES
 Notes
to the Consolidated Financial Statements
 September
30, 2009 and December 31, 2008
  NOTE
1 -        ORGANIZATION AND SUMMARY OF
ACCOUNTING POLICIES (Continued)
  k.     Fair
Value of Financial Instruments
  The
carrying amounts of the Company’s financial instruments, including cash,
accounts payable, and accrued liabilities, approximate fair value due to their
short maturities.
  l.     Reclassification
of Prior Period Balances
  Certain
amounts in prior periods have been reclassified to conform with the report
classifications of the period ended September 30, 2009, with no effect on
previously reported net income or stockholder’s equity (deficit).
 
 NOTE
      2 -
              LITIGATION
  Melt
Franchising, LLC and Melt (California), Inc. (Melt) v. Steven A. Field, M.D.,
MMS Coconut Point, LLC, and MMS King of Prussia Court, LLC
(Respondents).
  On
March 18, 2007, Melt (FA) and Melt (CA) filed a demand for arbitration against
Steven A. Field, MD., MMS Coconut Point, LLC and MMS King of Prussia Court, LLC
(collectively, “Field”) seeking a finding and/or declaration of entitlement to
terminate Field’s four franchise agreements.  Melt (FA) & Melt
(CA) is also seeking unpaid royalties and advertising contributions; rent and
other charges due under a sublease; an amount equal to all unpaid construction
invoices; an amount equal to all unpaid invoices for products purchased by
Field; and costs and expenses of arbitration and attorneys’ fees.  As
of September 30, 2009 the demand is still pending.
  David
Gold, Elena Gold, EAOA, Inc., Steven Field, MMS Management, LLC, MMS Coconut
Point, LLC, Jong Han, Yon Ho Kim, Young Suk Kim, Kang Won Lee, Yoo & Lee
Enterprises, Inc., Charindra Liyanage, Liyange Investments, LLC, PMI
Enterprises, Inc. and John Flannery (Plaintiffs)  v. Melt, Inc., Melt
(California), Inc., Melt Franchising, LLC, Clive V. Barwin, Brandon Barwin,
Michael Zorehkey, Rick Zorehkey, Eddie Ollman, Scott Miller, and Alin
Cruz.
  On
September 19, 2007, six of our franchisees and their affiliates filed a putative
class action lawsuit against us, our affiliates, our officers and some of our
employees in which the franchisees allege that we fraudulently induced the
franchisees to enter into franchise agreements by misrepresenting facts about
the franchise opportunity.  The lawsuit sought injunctive relief and
damages, in an unspecified amount, under several state franchise acts,
restitution and injunctive relief under various provisions of the California
Unfair Business Practices Act, damages and injunctive relief under the
“Cartwright” Act, and damages for fraud, interference with prospective economic
advantage, and unjust enrichment and declaratory relief. On or about Sept 30,
2008, the Court dismissed the plaintiffs’ lawsuit. On or about August 26, 2008,
the Plaintiffs filed a Notice of Appeal. Two of the six franchisees and their
affiliates Kang Won Lee, You & Lee Enterprises Inc, Yon Ho Kim and Young Suk
Kim have withdrawn their appeals.
 
 
  14
  MELT
INC. AND SUBSIDIARIES
 Notes
to the Consolidated Financial Statements
 September
30, 2009 and December 31, 2008
 
 NOTE
2 -        LITIGATION
(Continued)
  Melt
Franchising, LLC v. PMI Enterprises, Inc. and John Flannery.
  On
June 24, 2008, Melt (FA) filed an ex parte application for a temporary
restraining order and preliminary injunction against PMI Enterprises, Inc. and
John Flannery for significant violations of the franchise
agreement.  On August 18, 2008, the Court granted our motion for a
preliminary injunction and ordered the parties to allow us to assume management
of the store, cease using our marks, assign the parties’ lease for the store to
us, and required the parties to sell all or any portions of the
assets.  On September 4, 2008, the parties filed counterclaims for
injunctive relief, restitution, fraud, unjust enrichment, and declaratory
relief.  Melt (FA) filed a Motion to dismiss the parties’
counterclaims and on January 9, 2009, the Court dismissed all of the parties’
California claims and asked the parties to amend their complaint. As of
September 30, 2009, this case is on hold as the defendants have declared
bankruptcy.
  Jong Han
v. Melt, Inc., Melt (California), Inc., Melt Franchising, LLC, Clive V. Barwin,
Brandon Barwin, Michael Zorehkey, Rick Zorehkey, Eddie Ollman, and Alin
Cruz.
  On
August 22, 2008, Jong Han filed a Complaint against us similar to the purported
class action suit that was dismissed by the Court.  On or about
December 8, 2008, the Court granted our motion to compel arbitration. As of
September 30, 2009 no arbitration has been filed.
  Mayflower Emerald Square LLC
v. Melt Inc and Melt (California), Inc.
  In
October 2008, Mayflower Emerald Square LLC filed a complaint against both Melt
(CA) and Melt Inc for early termination of a lease in North Attleboro, MA. The
lease was signed by Melt (CA) only, however, the plaintiff claims Melt (CA) was
acting as an agent of Melt Inc and thus has named Melt Inc. as a defendant. Melt
Inc has filed a motion to dismiss, which was not granted by the court, and the
discovery phase has commenced.
  Braintree Property
Associates LP v. Melt Inc, Melt Franchising LLC, Clive Barwin
(Melt)
 
 On
April 2, 2009, plaintiff (landlord) filed suit against defendants which alleges
that Melt made a verbal representation to landlord that Melt would be assuming
obligations of a lease made between landlord and a former Melt (FA) franchisee.
Melt will be vigorously defending these allegations. Melt Inc has filed a motion
to dismiss, which was not granted by the court, and the discovery phase has
commenced.
 
 
 
  15
  MELT
INC. AND SUBSIDIARIES
 Notes
to the Consolidated Financial Statements
 September
30, 2009 and December 31, 2008
  NOTE
3 -        DISCONTINUED
OPERATIONS
  During
the period ended September 2007, Melt (CA) elected to discontinue all its
operations due to continuing losses.  All assets, liabilities and
operating results related to store construction are therefore included in
discontinued operations as of September 30, 2009 and 2008.  No tax
benefit has been attributed to discontinued operations.  The following
is an unaudited summary of the assets and liabilities related to discontinued
operations of construction activities:
 
 September
      30,
                2009
              
              
              December
      31,
                2008LIABILITIESAccounts payable and accrued
      expenses
              
              $
              679,722
              
              
              $
              679,722The
      following is an unaudited summary of the loss from discontinued operations
      resulting
                From
      the discontinuation of construction activities:For
      the Nine Months Ended
                September
      30,2009
              
              
              
              2008COST
      OF SALESFranchise
      stores construction costs
              
              $
              -
              
              
              $
              3,632EXPENSESBad
      debt
              
              
              -
              
              
              
              850Rent
              
              
              -
              
              
              
              124,238Total Expenses
              
              
              -
              
              
              
              125,088LOSS
      FROM OPERATIONS
              
              
              -
              
              
              
              (128,720
              )OTHER
      INCOME (EXPENSE)Loss
      on disposal of assets
              
              
              -
              
              
              
              (15,690
              )Gain
      on settlement of liabilities
              
              
              -
              
              
              
              97,171Total Other Income
      (Expense)
              
              
              -
              
              
              
              81,481LOSS
      FROM DISCONTINUED OPERATIONS
              
              $
              -
              
              
              $
              (47,239
              )
 
 
  16
   MELT
INC. AND SUBSIDIARIES
 Notes
to the Consolidated Financial Statements
 September
30, 2009 and December 31, 2008
  NOTE
4 -       OUTSTANDING STOCK PURCHASE WARRANTS
AND OPTIONS
  Employee
Stock Options
  During
March 2009, Josiah Puder, resigned as Vice President and General Counsel of the
Company, forfeiting options to purchase 500,000 shares of common
stock.  As a result, $20,591 in previously deferred compensation
expense was reversed against additional paid in capital.
  During
March 2009, Brandon Barwin, Vice President and Director, agreed to cancel his
remaining 200,000 options to purchase common stock.  As a result,
$19,349 in previously deferred compensation expense was reversed against
additional paid in capital.
  A
summary of the status of the Company’s outstanding stock options as of December
31, 2008 and September 30, 2009 and changes during the periods is presented
below:
  Options
              
              
              Weighted
                Average
                Exercise
      Price
              
              
              Weighted
                Average
                Fair
      ValueOutstanding,
      December 31, 2008
              
              
              700,000
              
              
              $
              0.34
              
              
              $
              0.17Issued
              
              
              -
              
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited
              
              
              (700,000
              )
              
              
              0.34
              
              
              
              0.17Expired
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding,
      September 30, 2009
              
              
              -
              
              
              
              -
              
              
              
              -
  NOTE
5 -       RELATED PARTY
TRANSACTIONS
  Management
Fees
  During
the nine months ended September 30, 2009 and 2008, the Company paid Chill, Inc.,
a related party company, a management fee of $220,500 and $319,500,
respectively, representing the salaries, wages, benefits, rent and overhead
expenses related to the operation of the Company during the
periods.
  Notes
Payable
  During
the nine months ended September 30, 2009 and 2008, the Company repaid $0 and
$49,465 of its note payable to its President, respectively.  The note
balance at September 30, 2009 and December 31, 2008 was $100,000 and $100,000,
respectively.
  NOTE
      6 -
              NOTES
      PAYABLE
  During
      the period ended September 30, 2009, the Company failed to make the
      required quarterly interest payment on its outstanding long-term
      convertible note payable in the amount of $400,000.  As such, the
      convertible note and accrued interest are now due upon demand and the
      principal amount has been reclassified to a current liability as of
      September 30, 2009.
 
  17
   MELT
INC. AND SUBSIDIARIES
 Notes
to the Consolidated Financial Statements
 September
30, 2009 and December 31, 2008
  NOTE
7 -        GOING CONCERN
  The
Company's consolidated financial statements are prepared using Generally
Accepted Accounting Principals applicable to a going concern that contemplates
the realization of assets and liquidation of liabilities in the normal course of
business.  However, the Company has accumulated significant losses,
has negative working capital and a deficit in stockholders'
equity.  All of these items raise substantial doubt about its ability
to continue as a going concern.  Management's plans with respect to
alleviating the adverse financial conditions that
 caused
management to express substantial doubt about the Company's ability to continue
as a going concern are as follows:
  Management
believes that, based upon the current operating plan of divesting itself of
operations failing to produce cash flows from operations should help alleviate
the adverse financial condition of the Company.  If the Company is not
successful in identifying positive cash flow revenue streams from its
franchising
activities,  the  Company  may  be  forced  to  raise  additional
equity or debt
financing  to  fund  its  ongoing
obligations,  seek  protection under existing bankruptcy
laws or cease doing business.  If additional funds are raised through
the issuance of equity securities, the percentage ownership of the Company's
then current stockholders would be diluted.  If additional funds are
raised through the issuance of debt securities, the Company will incur interest
charges until the related debt is paid off.
  There
can be no assurance that the Company will be able to achieve its business plans,
raise any required capital or secure the financing necessary to achieve its
current operating plan.  The ability of the Company to continue as a
going concern is dependent upon its ability to successfully accomplish the plan
described in the preceding paragraph and eventually attain profitable
operations. The accompanying consolidated financial statements do not include
any adjustments that might be necessary if the Company is unable to continue as
a going concern.
 
 NOTE
8 -        SUBSEQUENT
EVENTS
  Management
evaluated subsequent events for possible disclosure as of October 23, 2009, the
date the financial statements were available to be issued, noting no events that
would require adjustment to, or disclosure in, the consolidated financial
statements as of and for the period ended September 30, 2009.
 
 
 
 
 
 
 
 
  18
  
 Item2.  Management's Discussion and Analysis
of Financial Condition and Results of Operations.
 FORWARD-LOOKING
STATEMENTS
 This
quarterly report contains forward-looking statements. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may", "should",
"expects", "plans", "anticipates", "believes", "estimates", "predicts",
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, that may cause our or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements. Although
we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities
laws of the United States, we do not intend to update any of the forward-looking
statements to conform these statements to actual results.
  Our
unaudited financial statements are stated in United States Dollars (US$) and are
prepared in accordance with United States Generally Accepted Accounting
Principles. The following discussion should be read in conjunction with our
financial statements and the related notes that appear elsewhere in this
quarterly report. The following discussion contains forward-looking statements
that reflect our plans, estimates and beliefs. Our actual results could differ
materially from those discussed in the forward looking statements. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and elsewhere in this quarterly report.
  In
this quarterly report, unless otherwise specified, all dollar amounts are
expressed in United States dollars. All references to "US$" refer to United
States dollars and all references to "common shares" refer to the common shares
in our capital stock.
  As used in this quarterly report, the terms "we",
"us", "our", "our company" and “Melt” mean Melt Inc. and our wholly owned
subsidiaries Melt (California) Inc. and Melt Franchising LLC.  The
term “Melt (CA)” refers to Melt (California) Inc. and the term “Melt
(FA) refers to Melt Franchising LLC, unless
otherwise indicated.
  Results
of Operations
  Revenue
  Our
revenue for the nine month periods ended September 30, 2009 and 2008 are
outlined in the table below:
 
 Nine Months Ended September
    30,2009
              
              
              2008Food
      and beverage sales
              
              $
              46,737
              
              
              $
              958,092Royalty
      and marketing fees
              
              $
              406,925
              
              
              $
              470,682Franchise
      fees
              
              $
              92,500
              
              
              $
              80,000Equipment
      sales
              
              $
              -
              
              
              $
              112,776Miscellaneous
      finders and professional fees
              
              $
              52,185
              
              
              $
              46,319
  Revenue
for the nine month period ended September 30, 2009, decreased by 64% as compared
to the comparative period in 2008 primarily as a result of a 95% decrease in
food and beverage sales, 14% decrease in royalty and marketing fees and 100%
decrease in equipment sales. During the third quarter of 2008 Melt Franchising
LLC decided to phase out selling food and beverages and equipment to its
franchisees, this phase out was primarily completed by Dec 31, 2008. The
franchisees now purchase directly from the distributors.
  Our
revenue for the three month periods ended September 30, 2009 and 2008 are
outlined in the table below:
 
 Three
      Months Ended September 30,2009
              
              
              2008Food
      and beverage sales
              
              $
              11,836
              
              
              $
              54,511Royalty
      and marketing fees
              
              $
              137,893
              
              
              $
              159,324
  19
   Three
      Months Ended September 30,2009
              
              
              2008
 Franchise
      fees
                
                $
                25,000
                
                
                $
                40,000Equipment
      sales
                
                $
                -
                
                
                $
                18,680Miscellaneous
      finders and professional fees
                
                $
                23,548
                
                
                $
                2,364
  Revenue
for the three month period ended September 30, 2009, decreased by 28% as
compared to the comparative period in 2008 primarily as a result of a 78%
decrease in food and beverage sales, 13% decrease in royalty and marketing fees,
38% decrease in franchise fees, 100% decrease in equipment sales, partially
offset by a 896% increase in finders and professional fees. During the third
quarter of 2008 Melt Franchising LLC decided to phase out selling food and
beverages and equipment to its franchisees, this phase out was primarily
completed by December 31, 2008. The franchisees now purchase directly from the
distributors.
  Expenses
  Our
operating expenses for the nine month periods ended September 30, 2009 and 2008
are outlined in the table below:
 
 Nine
      Months Ended September 30,2009
              
              
              2008Depreciation
      and Amortization
              
              $
              -
              
              
              $
              7,251Marketing
              
              $
              13,615
              
              
              $
              62,572Professional
      Fees
              
              $
              144,829
              
              
              $
              232,891Rent
              
              $
              -
              
              
              $
              12,304Management
      fees
              
              $
              220,500
              
              
              $
              319,500Bad
      debt expense
              
              $
              924
              
              
              $
              93,802General
      and administrative
              
              $
              114,967
              
              
              $
              149,724
  Operating
expenses for the nine months ended September 30, 2009, decreased by 44% as
compared to the comparative period in 2008 primarily as a result of a 31%
reduction in management fees as a result of the management arrangement with
Chill, Inc, a 99% decrease in bad debt expense, a 38% reduction in professional
fees, a 78% reduction in marketing expenses, a 23% reduction in general and
administrative expenses and a 100% reduction in rent expense.
  Our
operating expenses for the three month periods ended September 30, 2009 and 2008
are outlined in the table below:
 Three Months Ended September
      30,2009
              
              
              2008Depreciation
      and Amortization
              
              $
              -
              
              
              $
              1,259Marketing
              
              $
              6,290
              
              
              $
              3,205Professional
      Fees
              
              $
              83,860
              
              
              $
              82,534Management
      fees
              
              $
              55,500
              
              
              $
              95,500Bad
      debt expense
              
              $
              -
              
              
              $
              70,200General
      and administrative
              
              $
              25,142
              
              
              $
              48,843
  Operating
expenses for the three months ended September 30, 2009, decreased by 43% as
compared to the comparative period in 2008 primarily as a result of a 100%
decrease in bad debt expense, a 42% reduction in management fees as a result of
the management arrangement with Chill, Inc. and a 49% reduction in general and
administrative expenses.
  Equity
Compensation
  We
have no formal plan for compensating our directors for their service in their
capacity as directors, although such directors are expected in the future to
receive stock options to purchase common shares as awarded by our board of
directors or (as to future stock options) a compensation committee which may be
established. Directors are entitled to reimbursement for reasonable travel and
other out-of-pocket expenses incurred in connection with attendance
at
  20
   meetings
of our board of directors. Our board of directors may award special remuneration
to any director undertaking any special services on our behalf other than
services ordinarily required of a director. No director received and/or accrued
any compensation for their services as a director, including committee
participation and/or special assignments.
  Liquidity
and Financial Condition
 
 Working CapitalAt
      September 30, 2009
              
              
              At
                December
      31, 2008
              
              
              Percentage
      Increase/DecreaseCurrent
      Assets
              
              $
              46,525
              
              
              $
              72,799
              
              
              
              (36
              )
      %Current
      Liabilities
              
              $
              1,054,022
              
              
              $
              743,004
              
              
              
              (41
              )
      %Working
      Capital (Deficit)
              
              $
              (1,007,497
              )
              
              $
              (670,205
              )
              
              
              (50
              )
      %
 
 Cash FlowsAt
      September 30, 2009
              
              
              At
      September 30, 2008Net
      Cash Provided (Used) by Operating Activities
              
              $
              (66,873
              )
              
              $
              45,536Net
      Cash Provided (Used) by Investing Activities
              
              $
              -
              
              
              $
              -Net
      Cash Provided (Used) by Financing Activities
              
              $
              -
              
              
              $
              (50,618
              )(Decrease)
      In Cash
              
              $
              (66,873
              )
              
              $
              (5,082
              )
  As
of September 30, 2009, our company had a working capital deficit of $1,007,497.
We estimate our operating expenses and working capital requirements for the next
twelve month period to be as follows:
  Estimated
      Expenses for the Next Twelve Month PeriodOperating
      ExpensesMarketing
              
              $
              80,000Professional
      Fees
              
              $
              120,000Management
      fees
              
              $
              360,000Interest
              
              $
              80,000General
      and administrative
              
              $
              100,000Total
              
              $
              740,000
  We
plan to raise additional capital required to meet immediate short-term needs and
to meet the balance of our estimated funding requirements for the twelve months,
primarily through the private placement of our securities.
   During
the period ended September 30, 2009, our company failed to make the required
quarterly interest payment on its outstanding long-term convertible note payable
in the amount of $400,000.  As such, the convertible note and accrued
interest are now due upon demand and the principal amount has been reclassified
to a current liability as of September 30, 2009.
  We
are not aware of any other known trends, demands, commitments, events or
uncertainties that will result in or that are reasonably likely to result in our
liquidity increasing or decreasing in any material way.
  Future
Financings
  We
will require additional financing in order to enable us to proceed with our plan
of operations, as discussed above, of approximately $1,000,000 over the next 12
months to pay for our ongoing expenses and expansion plans. These expenses
include, marketing, professional fees, management fees, and general and
administrative. Accordingly, we will require additional financing in order to
continue operations. There is no assurance that any party will advance
additional funds to us in order to enable us to sustain our plan of
operations.
  21
   We
anticipate continuing to rely on equity sales of our common stock in order to
continue to fund our business operations. Issuances of additional shares will
result in dilution to our existing stockholders. There is no assurance that we
will achieve any additional sales of our equity securities or arrange for debt
or other financing to fund our planned business activities.
  We
presently do not have any arrangements for additional financing for the
expansion of our operations, and no potential lines of credit or sources of
financing are currently available.
  Contractual
Obligations
  As
a “smaller reporting company”, we are not required to provide tabular disclosure
obligations.
  Going
Concern
  We anticipate that additional funding will be
required in the form of equity financing from the sale of our common
stock.  At this time, we cannot provide investors with any assurance
that we will be able to raise sufficient funding from the sale of our common
stock or through a loan from our directors to meet our obligations over the next
twelve months. We do not have any arrangements in place for any future debt or
equity financing.
  Off-Balance
Sheet Arrangements
  We
have no off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital
expenditures or capital resources that is material to stockholders.
  Critical
Accounting Policies
  Our
consolidated financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles used in the United
States.  Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies.  We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our consolidated financial statements is critical
to an understanding of our financials.
  Item
3.  Quantitative Disclosures About Market Risks
  As
a “smaller reporting company”, we are not required to provide the information
required by this Item.
  Item4T.  Controls and
Procedures.
  We
maintain disclosure controls and procedures that are designed to ensure that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Securities and Exchange
Commission's rules and forms, and that such information is accumulated and
communicated to our management, including our president (also our principal
executive officer, principal financial officer and principal accounting officer)
to allow for timely decisions regarding required disclosure.
  As
of September 30, 2009, the end of our first quarter covered by this report, we
carried out an evaluation, under the supervision and with the participation of
our president (also our principal executive officer, principal financial and
accounting officer), of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our president (also
our principal executive officer, principal financial and accounting officer)
concluded that our disclosure controls and procedures were not effective in
providing reasonable assurance in the reliability of our financial reports as of
the end of the period covered by this quarterly report.
  There
have been no changes in our internal controls over financial reporting that
occurred during the quarter ended September 30, 2009 that have materially or are
reasonably likely to materially affect, our internal controls over financial
reporting.
  22
   PART
II - OTHER INFORMATION
  Item1.  Legal
Proceedings.
  Melt
Franchising, LLC and Melt (California), Inc. (Melt) v. Steven A. Field, M.D.,
MMS Coconut Point, LLC, and MMS King of Prussia Court, LLC
(Respondents).
  On
March 18, 2007, Melt (FA) and Melt (CA) filed a demand for arbitration against
Steven A. Field, MD., MMS Coconut Point, LLC and MMS King of Prussia Court, LLC
(collectively, “Field”) seeking a finding and/or declaration of entitlement to
terminate Field’s four franchise agreements.  Melt (FA) & Melt
(CA) is also seeking unpaid royalties and advertising contributions; rent and
other charges due under a sublease; an amount equal to all unpaid construction
invoices; an amount equal to all unpaid invoices for products purchased by
Field; and costs and expenses of arbitration and attorneys’ fees.  As
of September 30, 2009, the demand is still pending.
  David
Gold, Elena Gold, EAOA, Inc., Steven Field, MMS Management, LLC, MMS Coconut
Point, LLC, Jong Han, Yon Ho Kim, Young Suk Kim, Kang Won Lee, Yoo & Lee
Enterprises, Inc., Charindra Liyanage, Liyange Investments, LLC, PMI
Enterprises, Inc. and John Flannery (Plaintiffs)  v. Melt, Inc., Melt
(California), Inc., Melt Franchising, LLC, Clive V. Barwin, Brandon Barwin,
Michael Zorehkey, Rick Zorehkey, Eddie Ollman, Scott Miller, and Alin
Cruz.
  On
September 19, 2007, six of our franchisees and their affiliates filed a putative
class action lawsuit against us, our affiliates, our officers and some of our
employees in which the franchisees allege that we fraudulently induced the
franchisees to enter into franchise agreements by misrepresenting facts about
the franchise opportunity.  The lawsuit sought injunctive relief and
damages, in an unspecified amount, under several state franchise acts,
restitution and injunctive relief under various provisions of the California
Unfair Business Practices Act, damages and injunctive relief under the
“Cartwright” Act, and damages for fraud, interference with prospective economic
advantage, and unjust enrichment and declaratory relief. On or about Sept 30,
2008, the Court dismissed the plaintiffs’ lawsuit. On or about August 26, 2008,
the Plaintiffs filed a Notice of Appeal. Two of the six franchisees and their
affiliates Kang Won Lee, You & Lee Enterprises Inc, Yon Ho Kim and Young Suk
Kim have withdrawn their appeals.
  Melt
Franchising, LLC v. PMI Enterprises, Inc. and John Flannery.
  On
June 24, 2008, Melt (FA) filed an ex parte application for a temporary
restraining order and preliminary injunction against PMI Enterprises, Inc. and
John Flannery for significant violations of the franchise
agreement.  On August 18, 2008, the Court granted our motion for a
preliminary injunction and ordered the parties to allow us to assume management
of the store, cease using our marks, assign the parties’ lease for the store to
us, and required the parties to sell all or any portions of the
assets.  On September 4, 2008, the parties filed counterclaims for
injunctive relief, restitution, fraud, unjust enrichment, and declaratory
relief.  Melt (FA) filed a Motion to dismiss the parties’
counterclaims and on January 9, 2009, the Court dismissed all of the parties’
California claims and asked the parties to amend their complaint. As of
September 30, 2009, this case is   on hold as the defendants have
declared bankruptcy.
  Jong Han
v. Melt, Inc., Melt (California), Inc., Melt Franchising, LLC, Clive V. Barwin,
Brandon Barwin, Michael Zorehkey, Rick Zorehkey, Eddie Ollman, and Alin
Cruz.
  On
August 22, 2008, Jong Han filed a Complaint against us similar to the purported
class action suit that was dismissed by the Court.  On or about
December 8, 2008, the Court granted our motion to compel arbitration. As of
September 30, 2009 no arbitration has been filed.
  Mayflower Emerald Square LLC
v. Melt Inc and Melt (California), Inc.
  In
October 2008, Mayflower Emerald Square LLC filed a complaint against both Melt
(CA) and Melt Inc for early termination of a lease in North Attleboro, MA. The
lease was signed by Melt (CA) only, however, the plaintiff claims Melt (CA) was
acting as an agent of Melt Inc and thus has named Melt Inc. as a defendant. Melt
Inc has filed a motion to dismiss, which was not granted by the court, and the
discovery phase has commenced.
  23
   Braintree Property
Associates LP v. Melt Inc, Melt Franchising LLC, Clive Barwin
(Melt)
  On
April 2, 2009 plaintiff (landlord) filed suit against defendants which alleges
that Melt  made a verbal representation to landlord that Melt would be
assuming obligations of a lease made between landlord and  a former
Melt (FA) franchisee. Melt will be vigorously defending these allegations. Melt
Inc has filed a motion to dismiss, which was not granted by the court, and the
discovery phase has commenced.
  Item
1A.  Risk Factors
  Much
of the information included in this annual report includes or is based upon
estimates, projections or other "forward looking statements".  Such
forward looking statements include any projections or estimates made by us and
our management in connection with our business operations.  While
these forward-looking statements, and any assumptions upon which they are based,
are made in good faith and reflect our current judgment regarding the direction
of our business, actual results will almost always vary, sometimes materially,
from any estimates, predictions, projections, assumptions or other future
performance suggested herein.
  Such
estimates, projections or other "forward looking statements" involve various
risks and uncertainties as outlined below.  We caution the reader that
important factors in some cases have affected and, in the future, could
materially affect actual results and cause actual results to differ materially
from the results expressed in any such estimates, projections or other "forward
looking statements".
  Our
common shares are considered speculative as our business is still in an early
growth stage of its development.  Prospective investors should
consider carefully the risk factors set out below.
  Risks
Related to our Business
  We
commenced our business operations in July, 2003 and opened our first retail
store in November, 2003 and thus have a limited operating history.  If
we cannot successfully manage the risks normally faced by early stage companies,
our business may fail.
  We
have a limited operating history.  Our future is subject to the risks
and expenses encountered by early stage companies, such as uncertainty regarding
level of future revenue and inability to budget expenses and manage growth
accordingly, uncertainty regarding acceptance of our products and retail
operations and inability to access sources of financing when required and at
rates favourable to us.  Our limited operating history and the highly
competitive nature of the retail food industry make it difficult to predict
future results of our operations.  We may not establish a customer
following that will make us profitable, which might result in the loss of some
or all of your investment in our common stock.
  If
we are unable to protect our trade name, our efforts to increase public
recognition of our ”Melt” brand may be impaired and we may be required to incur
substantial costs to protect our trade name.
  Our
service/trademarks “M Melt®” "Melt-gelato italiano®", “Melt – café & gelato
bar®”, and “Melt – gelato and crepe café®” have been registered with the US
Patent & Trade Mark Office.  However, these measures may not be
adequate to prevent the unauthorized use of our trade names.  We may
be unable to prevent third parties from acquiring and using names that are
similar to, infringe upon or otherwise decrease the value of our trademarks and
other proprietary rights.  We may need to bring legal claims to
enforce or protect such intellectual property rights.  Any litigation,
whether successful or unsuccessful, could result in substantial costs and
diversion of resources.  Any claims, by or against us, could be time
consuming and costly to defend or litigate, divert our attention and resources
and result in the loss of goodwill associated with our trade
names.  An adverse outcome in litigation or similar proceedings could
subject us to significant liabilities to third parties; require expenditure of
significant resources to develop non-infringing trade name and trademarks, any
of which could have a material adverse effect on our business, operating results
and financial condition.
  The franchising
industry is a highly litigious industry and almost all franchisors have one or
many lawsuits filed against it.  If we have many lawsuits filed
against us, we may be required to incur substantial costs to defend them, which
might result in the loss of some or all of your investment in our common
stock.
  Although
we engage in ethical business practices at all times and adhere to all the rules
and regulations governed by the franchise act, due to the litigious nature of
our industry we could have more lawsuits filed against us.Any
litigation, by or against us, could be time consuming and costly to instuite or
defend, and divert our attention and
  24
   resources.
An adverse outcome in litigation could have a material adverse effect on our
business, operating results and financial condition.
  The
establishment and maintenance of the brand identity “Melt” is critical to our
future success.  If we are unable to promote and maintain our “Melt”
brand, our business could fail.
  Since
we expect that substantially all of our revenues will be generated from
purchases by the consumer of our gelato and related products at franchise owned
and operated retail outlets, market acceptance of our products is critical to
our future success.  Factors such as market positioning, retail
locations, the availability and price of competing products (in particular,
frozen desserts), and the introductions of new products will affect the market
acceptance of our business.
  We
believe that establishing and maintaining the brand identity of our products
will increase the appeal of our products to prospective
customers.  Consumer recognition and a preference of our "Melt" brand
products over similar products offered by our competition will be critical to
our future success.  Promotion and enhancement of our gelato and
related products will depend largely on our success in continuing to provide
high quality products and service.  In order to attract and retain
customers and to promote and maintain our "Melt" brand in response to
competitive pressures, we may increase our financial commitment to creating and
maintaining a distinct brand loyalty among our customers.  Currently,
given the large number of factors and variables in achieving and maintaining
consumer recognition and brand loyalty, we cannot anticipate or estimate how
much we may be required to spend to establish such loyalty.  If we are
unable to provide high quality products, or otherwise fail to promote and
maintain our "Melt" brand, incur excessive expenses in an attempt to improve, or
promote and maintain our brand, we may not be able to successfully implement our
business plan and achieve a profitable level of operations.
  Due
to the nature of our products, we will be subject to specific risks unique to
the retail frozen desert industry.
  Specialty
retail food businesses such as ours are often affected by changes in consumer
and competitive conditions, including changes in consumer tastes; national,
regional, and local economic conditions and demographic trends; and the type,
number, and location of competing businesses.  Adverse publicity
resulting from food quality, illness, injury, or other health concerns or
operating issues stemming from one of our products may adversely affect our
retail operations.  We, as well as our competitors, are subject to the
foregoing risks, the occurrence of any of which would impair or prevent our
efforts to establish and expand our frozen dessert operations.  The
occurrence of such risks may result in an investor losing some or all of their
investment in our common stock.
  Because
we face intense competition, an investment in our company is highly
speculative.
  The
retail frozen dessert industry is characterized by intense and substantial
competition.  We believe that our business competes with large and
established ice cream retailers such as Ben & Jerry's, Haagen-Dazs,
Dreyer’s, Baskin-Robbins, Dairy Queen and Cold Stone Creamery Company, as well
as other small to medium sized ice cream and gelato business entities that
provide similar products, including stores that sell frozen yogurt.
  A
number of our competitors are well established, substantially larger, and have
substantially greater market recognition, greater resources and broader
distribution capabilities than we have.  These existing and future
competitors may be able to respond more quickly than us to new or changing
opportunities,  product and customer requirements, and may be able to
undertake more extensive promotional activities, offer more retail locations to
customers and adopt more aggressive pricing policies than we
do.  Increased competition by these existing and future competitors
could materially and adversely affect our ability to commence, maintain, or
expand our operations.
  Our
operations are subject to governmental regulation associated with the food
service industry, the operation and enforcement of which may restrict our
ability to carry on our business.
  We
are in the perishable food industry.  The development, manufacture and
marketing of products sold by us will be subject to extensive regulation by
various government agencies, including the U.S. Food and Drug Administration and
the U.S. Federal Trade Commission, as well as various state and local
agencies.  These agencies regulate production processes, product
attributes, packaging, labelling, advertising, storage and
distribution.  These agencies establish and enforce standards for
safety, purity and labelling.  In addition, other governmental
agencies (including the U.S. Occupational Safety and Health Administration),
establish and enforce health and safety standards and regulations in the
workplace, including those in our retail locations.  Our retail
locations will be subject to inspection
  25
   by
federal, state, and local authorities.  We will seek to comply at all
times with all such laws and regulations.  We will obtain and maintain
all necessary permits and licenses relating to our operations, and will ensure
that our facilities and practices comply with applicable governmental laws and
regulations.  Nevertheless, there is no guarantee that we will be able
to comply with any future laws and regulations.  Our failure to comply
with applicable laws and regulations could subject us to civil remedies
including fines, injunctions, recalls or seizures as well as potential criminal
sanctions.
  As
a result of such regulations we may encounter a variety of difficulties or
extensive costs, which could delay or preclude us from marketing our products or
continuing or expanding our operations.  We cannot predict if all
necessary approvals will be granted or that if granted, any approval will be
received on a timely basis.  If approvals are not obtained or are
delayed, this may also preclude us from marketing our products or continuing or
expanding our operations.
  Because
our officers, directors and principal shareholders control a substantial portion
of our common stock, investors will have little or no control over our
management or other matters requiring shareholder approval.
  Our
officers and directors, in the aggregate, beneficially own29.93%of the issued and
outstanding shares of our common stock.  In addition, Glynis Sive, the
spouse of Clive Barwin, beneficially owns 9.34% of the issued and outstanding
shares of our common stock.  As a result, these individuals have the
ability to exert significant influence over matters affecting minority
shareholders, including the election of our directors, the acquisition or
disposition of our assets, and the future issuance of our shares. Because our
officers, directors and Glynis Sive can exercise such influence over our
company, investors may not be able to replace our management if they disagree
with the way our business is being run.  Because control by these
insiders could result in management making decisions that are in the best
interest of those insiders and not in the best interest of the investors, you
may lose some or all of the value of your investment in our common
stock.
  Because
we might not have sufficient insurance to cover any losses that may arise, we
might have uninsured losses, increasing the possibility that you would lose your
investment.
  We
may incur uninsured liabilities and losses as a result of the conduct of our
business.  At the moment, we do not carry directors and officers
insurance nor do we cover insurance for lawsuits brought against our company or
our directors.  Should uninsured losses occur, purchasers of our
common stock could lose their entire investment.
  Because
we can issue additional common shares, purchasers of our common stock may incur
immediate dilution and may experience further dilution.
  We
are authorized to issue up to 100,000,000 common shares, of which 21,290,000 are
issued and outstanding.  Our board of directors has the authority to
cause our company to issue additional shares of common stock or issue warrants
or options to purchase shares of common stock without the consent of any of our
shareholders.  Consequently, our shareholders may experience more
dilution in their ownership of our company in the future.
  Risks
Associated with our common stock
  Trading
on the OTC Bulletin Board may be volatile and sporadic, which could depress the
market price of our common stock and make it difficult for our stockholders to
resell their shares.
  Our
common stock is quoted on the OTC Bulletin Board service of the Financial
Industry Regulatory Authority.  Trading in stock quoted on the OTC
Bulletin Board is often thin and characterized by wide fluctuations in trading
prices, due to many factors that may have little to do with our company’s
operations or business prospects.  This volatility could depress the
market price of our common stock for reasons unrelated to operating
performance.  Moreover, the OTC Bulletin Board is not a stock
exchange, and trading of securities on the OTC Bulletin Board is often more
sporadic than the trading of securities listed on a quotation system like NASDAQ
or a stock exchange like Amex.  Accordingly, shareholders may have
difficulty reselling any of the shares.
  Our
stock is a penny stock.  Trading of our stock may be restricted by the
SEC’s penny stock regulations and the FINRA’s sales practice requirements, which
may limit a stockholder’s ability to buy and sell our stock.
  Our
stock is a penny stock.  The Securities and Exchange Commission has
adopted Rule 15g-9 which generally defines “penny stock” to be any equity
security that has a market price (as defined) less than $5.00 per share or an
exercise price of less than $5.00 per share, subject to certain
exceptions.  Our securities are covered by the penny
  26
   stock
rules, which impose additional sales practice requirements on broker-dealers who
sell to persons other than established customers and “accredited
investors”.  The term “accredited investor” refers generally to
institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse.  The penny stock rules require a broker-dealer,
prior to a transaction in a penny stock not otherwise exempt from the rules, to
deliver a standardized risk disclosure document in a form prepared by the SEC
which provides information about penny stocks and the nature and level of risks
in the penny stock market.  The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer’s account.  The bid and offer quotations, and the
broker-dealer and salesperson compensation information, must be given to the
customer orally or in writing prior to effecting the transaction and must be
given to the customer in writing before or with the customer’s
confirmation.  In addition, the penny stock rules require that prior
to a transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction.  These disclosure requirements may have
the effect of reducing the level of trading activity in the secondary market for
the stock that is subject to these penny stock rules.  Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities.  We believe that the penny stock rules discourage investor
interest in and limit the marketability of our common stock.
  In
addition to the “penny stock” rules promulgated by the Securities and Exchange
Commission, FINRA has adopted rules that require that in recommending an
investment to a customer, a broker-dealer must have reasonable grounds for
believing that the investment is suitable for that customer.  Prior to
recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customer’s financial status, tax status, investment objectives and
other information.  Under interpretations of these rules, FINRA
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers.  FINRA requirements
make it more difficult for broker-dealers to recommend that their customers buy
our common stock, which may limit your ability to buy and sell our
stock.
  Item
2. Unregistered Sales of Equity Securities and Use of Proceeds
  None.
  Item
3.  Defaults Upon Senior Securities.
 
 During
the period ended September 30, 2009, the Company failed to make the required
quarterly interest payment on its outstanding long-term convertible note payable
in the amount of $400,000.  As such, the convertible note and accrued
interest are now due upon demand and the principal amount has been reclassified
to a current liability as of September 30, 2009.
  Item
4.  Submission of Matters to a Vote of Security Holders.
  None.
  Item 5.  Other Information
  None.
  Item 6.  Exhibits.
  Exhibits
required by Item 601 of Regulation S-K
  Exhibit
      Number
                Description(3)
                (i)
      Articles of Incorporation; and (ii) Bylaws3.1
                Articles
      of Incorporation (incorporated by reference from our Form SB-2
      Registration Statement, filed on October 2,
  2003).
 27
  Exhibit
      Number
                Description3.2
                Bylaws
      (incorporated by reference from our Form SB-2 Registration Statement,
      filed on October 2, 2003).(10)
                Material
      Contracts10.1
                Operating
      Agreement between Melt Inc. and Dolce Dolci, LLC dated July 21, 2004
      (incorporated by reference from our Form 10-KSB, filed on Sept 30,
      2005).10.2
                Operating
      Agreement between Melt Inc. and Melt Franchising LLC dated February 25,
      2005 (incorporated by reference from our Form 10-KSB, filed on Sept 30,
      2005).10.3
                Form
      of loan agreement entered into with each of:
                  Clive
      Barwin
                  Errol
      Brome
                  Lance
      Rosenberg
                  Cecil
      Hofman
                  (incorporated
      by reference from our Form 8-K, filed on June 12,
2005).10.4
                Franchise
      Offering Circular (incorporated by reference from our Form 10-QSB, filed
      on November 14, 2005).(14)
                Code
      of Ethics14.1
                Code
      of Business Conduct and Ethics. (incorporated by reference from our Form
      10-KSB, filed on March 30, 2004).(21)
                Subsidiaries
      of the small business issuerMelt
      (California) Inc.
                  Melt
      Franchising LLC(31)
                Rule
      13a-14(a)/15d-14(a) Certifications31.1*
                Certification
      under Sarbanes-Oxley Act of 2002(32)
                Section
      1350 Certifications32.1*
                Certification
      under Sarbanes-Oxley Act of
2002
  *
Filed herewith
   28
   SIGNATURES
   Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
   
  MELT
      INC.(Registrant)Dated:  October
      28, 2009
              
              /s/
      Clive BarwinClive
      BarwinPresident,
      CEO, Chief Financial Officer, Secretary and Director(Principal
      Executive Officer, Principal Financial Officer and Principal Accounting
      Officer)
 
 
 
  29