UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q/A

AMENDMENT No. 2





|                                                               |                                                                             
|-------------------------------------------------------------- | ----------------------------------------------------------------------------
|þ                                                              | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE 
|                                                               | ACT OF 1934                                                                 
|For the quarterly period ended: December 31, 2010             
|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: 000-53539



H&H Imports, Inc.

(Exact name of registrant as specified in its charter)





|                                  |                    
|--------------------------------- | -------------------
|Florida                           | 80-149096          
|(State or other jurisdiction      | (I.R.S. Employer   
|of incorporation or organization) | Identification No.)

14044 Icot Boulevard, Clearwater, Florida 33760

(Address of Principal Executive Office) (Zip Code)

(727) 288-2738

(Registrants telephone number, including area code)



|                                                                                                                                                                                                                                                                                                                                                                                        |   |                                            |   |                           |   |  |  |  |  | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | ------------------------------------------ | - | ------------------------- | - |  |  |  |  | 
|Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was                                                                                                                                          
|required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                                                                                                                                                                                                                                                                              | þ | Yes                                        |  ̈ | No                       
|                                                                                                                                                                                                                                                                                                                                                                                       
|Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
|                                                                                                                                                                                                                                                                                                                                                                                        |  ̈ | Yes                                        |  ̈ | No                       
|                                                                                                                                                                                                                                                                                                                                                                                       
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.                                                                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                        |  
|Large accelerated filer                                                                                                                                                                                                                                                                                                                                                                 |  ̈ |                                            |   | Accelerated filer         |  ̈ | 
|Non-accelerated filer                                                                                                                                                                                                                                                                                                                                                                   |  ̈ | (Do not check if a smaller                 |   | Smaller reporting company | þ | 
|                                                                                                                                                                                                                                                                                                                                                                                        |   | reporting company)                         |   |                           |   | 
|                                                                                                                                                                                                                                                                                                                                                                                        |  
|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                                                        |  ̈ | Yes                                        | þ | No                       
|                                                                                                                                                                                                                                                                                                                                                                                        |  
|Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.                                                                                                                                                                                                                                                          
|Class                                                                                                                                                                                                                                                                                                                                                                                   |   | Shares Outstanding as of February 14, 2011
|Common Stock, $0.0001 Par Value Per Share                                                                                                                                                                                                                                                                                                                                               |   | 217,667,481                               













---

EXPLANATORY PARAGRAPH



H&H Imports, Inc. (we, us, our or the Company) is filing this Amendment No. 2 to our Quarterly Report on Form 10-Q/A for the quarter ended December 31, 2010, as originally filed on February 14, 2010 and as amended on May 5, 2011, to correct the accounting treatment previously accorded certain transactions and to restate our condensed consolidated balance sheet at December 31, 2010, our condensed consolidated statements of operations for the three and nine month periods ending December 31, 2010 and the period from inception (October 16, 2009) to December 31, 2010, our condensed consolidated statement of stockholders equity (deficit) from inception (October 16, 2009) to December 31, 2010 and our condensed consolidated statements of cash flows for the nine month period ending December 31, 2010 and the period from inception (October 16, 2009) to December 31, 2010.



Our Form 10-Q/A filed on May 5, 2011 contained errors and is restated to correct the previous accounting treatment to:



·

To reclassify Deferred revenue recognized with a corresponding adjustment to Accounts receivable;

·

To reclassify a component of Prepaid expenses and other current assets to Investments and report Accrued registration penalty separately from Accrued expenses and other current liabilities;

·

Correctly recognize the beneficial conversion feature on a related party loan to the Company and the accretion to related interest expense;

·

Correct accounting treatment for certain professional fees initially recognized as cost of capital; and

·

To recognize the fair value of warrants issued to the placement agent that are treated as a liability and related change in fair value.

·

As part of the restatement process, the Company recorded adjustments for items that were previously considered insignificant and were either not recorded or were reclassified.

In addition, certain balance sheet accounts have been reclassified to conform with the restated March 31, 2010 presentation.

Additional information on the effect of the correction in our financial statements as a result of this restatement are contained in Note 3- Restatement, appearing elsewhere in the report.



As a result of these corrections to our financial statements for the three months and nine months ended December 31, 2010, we are filing this Amendment No. 2 to our Form 10-Q for the periods ending December 31, 2010 to reflect the changes to our financial statements necessitated by these restatements.



The items in this Form 10-Q/A (Amendment No. 2) which are amended and restated as a result of the foregoing are:

Part I. Financial Information

·

Item 1. Financial Statements, including condensed consolidated balance sheets, condensed consolidated statements of operations, condensed consolidated statement of stockholders equity, condensed consolidated statements of cash flows and notes to condensed consolidated financial statements.

·

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

·

Item 4. Controls and Procedures

This form 10-Q/A also contains currently dated certifications as Exhibits 31.1, 31.2, 32.1 and 32.2. The remaining Items in this Form 10-Q/A (Amendment No. 2) consist of all other Items originally contained in our Form 10-Q for the period ended December 31, 2010. This filing supersedes in its entirety our original Form 10-Q for the period ended December 31, 2010 filed on February 14, 2010 and Amendment No. 1 filed on May 5, 2011.









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H&H IMPORTS, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Page
Number                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|PART I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|Item 1.
Financial Statements
1

Condensed Consolidated Balance Sheets as of December 31, 2010 (Unaudited) (restated) and
March 31, 2010
1

Condensed Consolidated Statements of Operations (Unaudited) (Restated)for the three and nine
month periods ending December 31, 2010 and the period from inception (October 16, 2009) to
December 31, 2009 and the period from inception (October 16, 2009) to December 31, 2010
2

Condensed Consolidated Statement of Stockholders' Equity (Deficit) /(Deficit) (Unaudited)
(Restated) for the period from inception (October 16, 2009) to December 31, 2010
3

Condensed Consolidated Statements of Cash Flows(Unaudited) (Restated) for the nine month
period ending December 31, 2010 and for the period from inception (October 16, 2009) to
December 31, 2009 and for the period from inception (October 16, 2009) to
December 31, 2010
4

Notes to Condensed Consolidated Financial Statements (Unaudited) (Restated)
5

Item 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations
21

Item 3.
Quantitative and Qualitative Disclosures About Market Risk
26

Item 4.
Controls And Procedures
26

PART II. OTHER FINANCIAL INFORMATION

Item 1.
Legal Proceedings.
28


Item 1A.
Risk Factors
28

Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
28

Item 3.
Defaults Upon Senior Securities
29

Item 4.
(Removed and Reserved)
29

Item 5.
Other Information
29

Item 6.
Exhibits
30

Signatures
31











---

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

H&H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                         |  |                   |            |                |   |           |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ---------- | -------------- | - | --------- | -
|                                                                                                                                                                         |  | December 31,
2010 |            | March 31,
2010 |  
|                                                                                                                                                                         |  | (Unaudited)       |            |                |  
|                                                                                                                                                                         |  | Restated          |            |                |  
|ASSETS                                                                                                                                                                   |  |                   |            |                |   |          
|Current Assets:                                                                                                                                                          |  |                   |            |                |   |           |  
|Cash and cash equivalents                                                                                                                                                |  | $                 | 138,527    |                | $ | 74,991    |  
|Accounts receivable, net                                                                                                                                                 |  |                   | 67,014     |                |   | 5,830     |  
|Related party receivables                                                                                                                                                |  |                   |           |                |   | 140,961   |  
|Inventories                                                                                                                                                              |  |                   | 39,037     |                |   | 46,188    |  
|Deferred production costs                                                                                                                                                |  |                   | 19,413     |                |   |          |  
|Prepaid expenses and other current assets                                                                                                                                |  |                   | 107,901    |                |   | 65,170    |  
|Total current assets                                                                                                                                                     |  |                   | 371,892    |                |   | 333,140   |  
|                                                                                                                                                                         |  |                   |            |                |   |           |  
|Investments, at cost                                                                                                                                                     |  |                   | 672,100    |                |   | 90,000    |  
|                                                                                                                                                                         |  |                   |            |                |   |           |  
|Property, plant and equipment, net                                                                                                                                       |  |                   | 93,774     |                |   | 29,685    |  
|                                                                                                                                                                         |  |                   |            |                |   |           |  
|Total Assets                                                                                                                                                             |  | $                 | 1,137,766  |                | $ | 452,825   |  
|                                                                                                                                                                         |  |                   |            |                |   |           |  
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                                                                                                           |  |                   |            |                |   |           |  
|Current Liabilities:                                                                                                                                                     |  |                   |            |                |   |           |  
|Accounts payable                                                                                                                                                         |  | $                 | 195,565    |                | $ | 66,441    |  
|Notes payable officer                                                                                                                                                    |  |                   | 34,585     |                |   | 107,513   |  
|Deferred revenue                                                                                                                                                         |  |                   | 100,000    |                |   | 86,450    |  
|Accrued interest related parties                                                                                                                                         |  |                   | 2,354      |                |   | 2,321     |  
|Accrued registration rights penalty                                                                                                                                      |  |                   | 75,000     |                |   |          |  
|Accrued expenses and other current liabilities                                                                                                                           |  |                   | 83,295     |                |   | 61,050    |  
|Notes Payable  current portion                                                                                                                                          |  |                   | 18,571     |                |   | 737,500   |  
|Warrant liability                                                                                                                                                        |  |                   | 61,444     |                |   |          |  
|Total current liabilities                                                                                                                                                |  |                   | 570,814    |                |   | 1,061,275 |  
|                                                                                                                                                                         |  |                   |            |                |   |           |  
|Commitments and contingencies                                                                                                                                            |  |                   |            |                |   |           |  
|                                                                                                                                                                         |  |                   |            |                |   |           |  
|Stockholders' equity (deficit):                                                                                                                                          |  |                   |            |                |   |           |  
|Preferred stock, $.0001 par value; 10,000,000 shares authorized;
no shares issued and outstanding at December 31, 2010 and
March 31, 2010, respectively.                 |  |                   |           |                |   |          |  
|Common stock, $.0001 par value; 400,000,000 shares authorized;
211,177,481 and 158,187,510 issued and outstanding at
December 31, 2010 and March 31, 2010, respectively. |  |                   | 21,118     |                |   | 15,819    |  
|Additional paid-in capital                                                                                                                                               |  |                   | 2,682,952  |                |   | 293,556   |  
|Deficit accumulated during development stage                                                                                                                             |  |                   | (2,137,118 | )              |   | (917,825  | )
|Total stockholders' equity (deficit)                                                                                                                                     |  |                   | 566,952    |                |   | (608,450  | )
|                                                                                                                                                                         |  |                   |            |                |   |           |  
|Total liabilities and stockholders' deficit                                                                                                                              |  | $                 | 1,137,766  |                | $ | 452,825   |  





See accompanying notes to condensed consolidated financial statements



1



---

H&H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)



|                                                                         |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|------------------------------------------------------------------------ |  | ------------------------------- | ----------- | -------------------------------------------------------- | - | ------------------------------ | - | -------------------------------------------------------- | ----------- | -------------------------------------------------------- | - | ----------- | - | - | ----------- | -
|                                                                         |  | Three Months
Ended
December 31, |             | Period From
Inception
(October 16, 2009) to December 31, |   | Nine Months
Ended
December 31, |   | Period From
Inception
(October 16, 2009) to December 31, |             | Period From
Inception
(October 16, 2009) to December 31, |  
|                                                                         |  | 2010                            |             | 2009                                                     |   | 2010                           |   | 2009                                                     |             | 2010                                                     |  
|                                                                         |  | (Restated)                      |             |                                                          |   | (Restated)                     |   |                                                          |             | (Restated)                                               |  
|Revenues                                                                 |  | $                               | 391,710     |                                                          | $ | 102,450                        |   | $                                                        | 848,941     |                                                          | $ | 102,450     |   | $ | 1,212,430   |  
|Cost of revenues                                                         |  |                                 | 587,309     |                                                          |   | 109,165                        |   |                                                          | 1,168,583   |                                                          |   | 109,165     |   |   | 1,519,106   |  
|Gross profit (loss)                                                      |  |                                 | (195,599    | )                                                        |   | (6,715                         | ) |                                                          | (319,642    | )                                                        |   | (6,715      | ) |   | (306,676    | )
|                                                                         |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Operating expenses:                                                      |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Selling, general and
administrative expenses                             |  |                                 | 1,039,664   |                                                          |   | 135,626                        |   |                                                          | 2,868,897   |                                                          |   | 135,626     |   |   | 3,375,355   |  
|Loss from operations                                                     |  |                                 | (1,235,263  | )                                                        |   | (142,341                       | ) |                                                          | (3,188,539  | )                                                        |   | (142,341    | ) |   | (3,682,031  | )
|                                                                         |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Other (income) expense:                                                  |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Warrant revaluation income                                               |  |                                 | (278,113    | )                                                        |   |                               |   |                                                          | (2,121,288  | )                                                        |   |            |   |   | (2,121,288  | )
|Registration rights penalty                                              |  |                                 |            |                                                          |   |                               |   |                                                          | 75,000      |                                                          |   |            |   |   | 75,000      |  
|Interest income - related party                                          |  |                                 | (2,340      | )                                                        |   |                               |   |                                                          | (10,440     | )                                                        |   |            |   |   | (16,401     | )
|Other (income) expense                                                   |  |                                 | 4,090       |                                                          |   |                               |   |                                                          | (23,602     | )                                                        |   |            |   |   | (34,549     | )
|Interest expenses - notes payable                                        |  |                                 | 339         |                                                          |   | 14,222                         |   |                                                          | 66,145      |                                                          |   | 14,222      |   |   | 505,063     |  
|Interest expense - related party                                         |  |                                 | 20,233      |                                                          |   |                               |   |                                                          | 44,939      |                                                          |   |            |   |   | 47,262      |  
|                                                                         |  |                                 | (255,791    | )                                                        |   | 14,222                         |   |                                                          | (1,969,246  | )                                                        |   | 14,222      |   |   | (1,544,913  | )
|                                                                         |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Loss before income taxes                                                 |  |                                 | (979,472    | )                                                        |   | (156,563                       | ) |                                                          | (1,219,293  | )                                                        |   | (156,563    | ) | $ | (2,137,118  | )
|                                                                         |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Provision for income taxes                                               |  |                                 |            |                                                          |   |                               |   |                                                          |            |                                                          |   |            |   |   |            |  
|                                                                         |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Net loss                                                                 |  | $                               | (979,472    | )                                                        | $ | (156,563                       | ) | $                                                        | (1,219,293  | )                                                        | $ | (156,563    | ) | $ | (2,137,118  | )
|                                                                         |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Income (loss) per common share:                                          |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Basic and diluted                                                        |  | $                               | 0.00        |                                                          | $ | 0.00                           |   | $                                                        | (0.01       | )                                                        | $ | 0.00        |   | $ | 0.00        |  
|                                                                         |  |                                 |             |                                                          |   |                                |   |                                                          |             |                                                          |   |             |   |   |             |  
|Weighted-average numbers of
common shares outstanding:
Basic and diluted |  |                                 | 203,753,991 |                                                          |   | 152,000,010                    |   |                                                          | 193,580,755 |                                                          |   | 152,000,010 |   |   | 179,897,316 |  







See accompanying notes to condensed consolidated financial statements



2



---

H&H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE PERIOD FROM INCEPTION (OCTOBER 16, 2009) THROUGH DECEMBER 31, 2010

(UNAUDITED) (Restated)



|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|--------------------------------------------------------------------------- |  | ----------------------------------------- | ----------- | -------------------------- | - | ------------------- | - | ----- | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                                            |  | Common Shares,
$.0001 Par Value Per Share |             | Additional
Paid-In
Capital |   | Accumulated
Deficit |   | Total |           
|                                                                            |  | Shares
Issued                             |             | Amount                     |   |                     |   |      
|Balance October 16, 2009                                                    |  |                                           |            |                            | $ |                    |   | $     |           |   | $ |           |   | $ |           |  
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Initial founder shares                                                      |  |                                           | 152,000,010 |                            |   | 15,200              |   |       | (15,200    | ) |   |           |   |   |           |  
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Shares issued in connection with
senior working capital notes               |  |                                           | 6,187,500   |                            |   | 619                 |   |       | 308,756    |   |   |           |   |   | 309,375    |  
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Net loss                                                                    |  |                                           |            |                            |   |                    |   |       |           |   |   | (917,825   | ) |   | (917,825   | )
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Balance March 31, 2010                                                      |  |                                           | 158,187,510 |                            |   | 15,819              |   |       | 293,556    |   |   | (917,825   | ) |   | (608,450   | )
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Reverse recapitalization transaction                                        |  |                                           | 2,867,490   |                            |   | 287                 |   |       | (320,287   | ) |   |           |   |   | (320,000   | )
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Common stock issued on towards
settlement of notes payable                  |  |                                           | 10,307,345  |                            |   | 1,031               |   |       | 686,469    |   |   |           |   |   | 687,500    |  
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Common stock issued for services                                            |  |                                           | 2,406,250   |                            |   | 240                 |   |       | 328,260    |   |   |           |   |   | 328,500    |  
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Common stock issued in Private
Placement, net of offering costs
of $349,437 |  |                                           | 38,250,000  |                            |   | 3,825               |   |       | 3,471,738  |   |   |           |   |   | 3,475,563  |  
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Warrants issued in Units Offering                                           |  |                                           |            |                            |   |                    |   |       | (2,182,732 | ) |   |           |   |   | (2,182,732 | )
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Beneficial conversion feature on
related party loan                         |  |                                           |            |                            |   |                    |   |       | 107,000    |   |   |           |   |   | 107,000    |  
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Share based compensation                                                    |  |                                           |            |                            |   |                    |   |       | 450,264    |   |   |           |   |   | 450,264    |  
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Retirement of common shares                                                 |  |                                           | (841,114    | )                          |   | (84                 | ) |       | (151,316   | ) |   |           |   |   | (151,400   | )
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Net loss                                                                    |  |                                           |            |                            |   |                    |   |       |           |   |   | (1,219,293 | ) |   | (1,219,293 | )
|                                                                            |  |                                           |             |                            |   |                     |   |       |            |   |   |            |   |   |            |  
|Balance December 31, 2010                                                   |  |                                           | 211,177,481 |                            | $ | 21,118              |   | $     | 2,682,952  |   | $ | (2,137,118 | ) | $ | 566,952    |  





See accompanying notes to condensed consolidated financial statements



3



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

|                                                                            |  |                                |            |                                                          |   |                                                          |   |   |            |  
|--------------------------------------------------------------------------- |  | ------------------------------ | ---------- | -------------------------------------------------------- | - | -------------------------------------------------------- | - | - | ---------- | -
|                                                                            |  | Nine Months
Ended
December 31, |            | Period From
Inception
(October 16, 2009) to December 31, |   | Period From Inception
(October 16, 2009) to December 31, |  
|                                                                            |  | 2010                           |            | 2009                                                     |   | 2010                                                     |  
|                                                                            |  | (Restated)                     |            | (Restated)                                               |   | (Restated)                                               |  
|Cash flows from operating activities:                                       |  |                                |            |                                                          |   |                                                          |   |   |            |  
|Net loss                                                                    |  | $                              | (1,219,293 | )                                                        | $ | (156,563                                                 | ) | $ | (2,137,118 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                                |            |                                                          |   |                                                          |   |   |            |  
|Depreciation of property, plant and equipment                               |  |                                | 13,817     |                                                          |   |                                                         |   |   | 15,016     |  
|Amortization of discount on convertible debt                                |  |                                |           |                                                          |   |                                                         |   |   | 309,375    |  
|Amortization of deferred financing costs                                    |  |                                |           |                                                          |   |                                                         |   |   | 105,750    |  
|Share-based compensation                                                    |  |                                | 450,264    |                                                          |   |                                                         |   |   | 450,264    |  
|Interest accretion in related party note payable                            |  |                                | 34,585     |                                                          |   |                                                         |   |   | 34,585     |  
|Shares issued for consulting services                                       |  |                                | 328,500    |                                                          |   |                                                         |   |   | 328,500    |  
|Change in fair value of warrants                                            |  |                                | (2,121,288 | )                                                        |   |                                                         |   |   | (2,121,288 | )
|Accrued interest income -  related party                                    |  |                                | (10,440    | )                                                        |   |                                                         |   |   | (16,401    | )
|Accrued registration rights penalty                                         |  |                                | 75,000     |                                                          |   |                                                         |   |   | 75,000     |  
|Accrued interest-related party                                              |  |                                | 33         |                                                          |   |                                                         |   |   | 2,354      |  
|Changes in operating assets and liabilities:                                |  |                                |            |                                                          |   |                                                          |   |   |            |  
|Accounts receivable                                                         |  |                                | (61,183    | )                                                        |   |                                                         |   |   | (67,014    | )
|Inventories                                                                 |  |                                | 7,151      |                                                          |   |                                                         |   |   | (39,037    | )
|Deferred production costs                                                   |  |                                | (19,413    | )                                                        |   |                                                         |   |   | (19,413    | )
|Prepaid expenses and other current assets                                   |  |                                | (42,733    | )                                                        |   |                                                         |   |   | (107,903   | )
|Accounts payable                                                            |  |                                | 129,122    |                                                          |   |                                                         |   |   | 195,565    |  
|Deferred revenue                                                            |  |                                | 13,550     |                                                          |   |                                                         |   |   | 100,000    |  
|Accrued expenses and other current liabilities                              |  |                                | 22,247     |                                                          |   | 6,684                                                    |   |   | 83,296     |  
|Net cash used in operating activities                                       |  |                                | (2,400,081 | )                                                        |   | (149,879                                                 | ) |   | (2,808,469 | )
|Cash flows from investing activities:                                       |  |                                |            |                                                          |   |                                                          |   |   |            |  
|Investments                                                                 |  |                                | (582,100   | )                                                        |   |                                                         |   |   | (672,100   | )
|Reverse recapitalization transaction                                        |  |                                | (320,000   | )                                                        |   |                                                         |   |   | (320,000   | )
|Loan to related parties                                                     |  |                                |           |                                                          |   | (135,000                                                 | ) |   | (135,000   | )
|Additions to property, plant and equipment                                  |  |                                | (77,907    | )                                                        |   | (2,817                                                   | ) |   | (108,791   | )
|Net cash used in investing activities                                       |  |                                | (980,007   | )                                                        |   | (137,817                                                 | ) |   | (1,235,891 | )
|Cash flows from financing activities:                                       |  |                                |            |                                                          |   |                                                          |   |   |            |  
|Proceeds from issuance of convertible debt                                  |  |                                |           |                                                          |   | 375,000                                                  |   |   | 687,500    |  
|Costs associated with convertible debt                                      |  |                                |           |                                                          |   | (59,762                                                  | ) |   | (105,750   | )
|Proceeds of notes payable                                                   |  |                                | 27,295     |                                                          |   |                                                         |   |   | 77,295     |  
|Repayment of notes payable                                                  |  |                                | (58,721    | )                                                        |   |                                                         |   |   | (58,721    | )
|Loans from related parties                                                  |  |                                | (513       | )                                                        |   |                                                         |   |   | 107,000    |  
|Proceeds from private placement of common stock                             |  |                                | 3,825,000  |                                                          |   |                                                         |   |   | 3,825,000  |  
|Costs associated with private placement                                     |  |                                | (349,437   | )                                                        |   |                                                         |   |   | (349,437   | )
|Net cash provided by financing activities                                   |  |                                | 3,443,624  |                                                          |   | 315,238                                                  |   |   | 4,182,887  |  
|Net cash increase in cash and cash equivalents                              |  |                                | 63,536     |                                                          |   | 27,542                                                   |   |   | 138,527    |  
|Cash and cash equivalents - beginning of period                             |  |                                | 74,991     |                                                          |   |                                                         |   |   |           |  
|Cash and cash equivalents - end of period                                   |  | $                              | 138,527    |                                                          | $ | 27,542                                                   |   | $ | 138,527    |  
|Supplemental disclosures of cash flow information                           |  |                                |            |                                                          |   |                                                          |   |   |            |  
|Interest paid in cash                                                       |  | $                              | 93,884     |                                                          |   |                                                         |   | $ | 93,884     |  
|Taxes paid in cash                                                          |  |                                |           |                                                          |   |                                                         |   |   |           |  
|Common shares issued towards settlement of notes payable                    |  | $                              | 687,500    |                                                          |   |                                                         |   | $ | 687,500    |  
|Common shares issued in payment of related party receivables                |  | $                              | 151,400    |                                                          |   |                                                         |   |   | 151,400    |  
|Warrant liability                                                           |  | $                              | 2,182,732  |                                                          |   |                                                         |   | $ | 2,182,732  |  





See accompanying notes to condensed consolidated financial statements



4



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED) (Restated)

Note 1. Description of Our Business

H&H Import, Inc., a Florida Corporation (H&H), was organized in November 2006 with operating subsidiaries (collectively referred to as the Company) that market and distributes products and services through direct response channels. Our operations are conducted principally through our wholly-owned subsidiaries, TV Goods Holding Corporation, Inventors Business Center, LLC and TV Goods, Inc.

Our executive offices are located in Clearwater, Florida.

Note 2. Basis of Presentation

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for reporting of interim financial information. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. Accordingly, these statements do not include all the disclosures normally required by accounting principles generally accepted in the United States for annual financial statements and should be read in conjunction with Managements Discussion and Analysis of Financial Condition and Results of Operations contained in this report. The accompanying consolidated condensed balance sheet as of March 31, 2010 has been derived from our audited financial statements. The condensed consolidated statements of operations and cash flows for the three months and nine months ended December 31, 2010 are not necessarily indicative of the results of operations or cash flows to be expected for any future period or for the year ending March 31, 2011.

The accompanying unaudited condensed consolidated financial statements have been prepared by management and should be read in conjunction with our consolidated financial statements, including the notes thereto, appearing in our Annual Report on Form 10-K for the year ended March 31, 2010. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position and results of operations as of the dates and for the periods presented.

Effective May 28, 2010, H&H completed an Agreement and Plan of Merger (the Merger Agreement) with TV Goods Holding Corporation, a Florida corporation (TV Goods) and the Companys wholly owned subsidiary, TV Goods Acquisition, Inc. (Acquisition Sub), pursuant to which TV Goods merged with Acquisition Sub and continues its business as a wholly owned subsidiary of the Company. H&H is subject to the reporting requirements of the SEC and its common stock is quoted on the Over-the-Counter Market. Under the terms of the Merger Agreement, the TV Goods shareholders received shares of H&H common stock such that the TV Goods shareholders received approximately 98% of the total shares of H&H issued and outstanding following the merger. Due to the nominal assets and limited operations of H&H prior to the merger, the transaction was accorded reverse recapitalization accounting treatment under the provision of Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 805 whereby TV Goods became the accounting acquirer (legal acquiree) and H&H was treated as the accounting acquiree (legal acquirer). The historical financial records of the Company are those of the accounting acquirer adjusted to reflect the legal capital of the accounting acquiree. In connection with the recapitalization transaction, TV Goods paid $320,000 consideration in cash to the legal acquirer.As the transaction was treated as a recapitalization, no intangibles, including goodwill, were recognized. Concurrent with the effective date of the reverse recapitalization transaction, the Company adopted the fiscal year end of the accounting acquirer, March 31, 2010.

All share and per share information contained in this report gives retroactive effect to a 30 for 1 (30:1) stock split of our outstanding common stock effective March 17, 2010 and reverse recapitalization transaction completed May 28, 2010.

All inter-company account balances and transactions have been eliminated in consolidation.





5



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



Note 3. Restatement

For the quarter ended December 31, 2010, the Company has restated its Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Operations, Condensed Consolidated Statement of Cash Flows and Condensed Consolidated Statement of Stockholders Equity (Deficit) to correct provisions for certain accounting matters as follows:

·

To reclassify Deferred revenue recognized with a corresponding adjustment to Accounts receivable;

·

To reclassify a component of Prepaid expenses and other current assets to Investments and report Accrued registration penalty separately from Accrued expenses and other current liabilities;

·

Correctly recognize the beneficial conversion feature on a related party loan to the Company and the accretion to related interest expense;

·

Correct accounting treatment for certain professional fees initially recognized as cost of capital; and

·

To recognize the fair value of warrants issued to the placement agent that are treated as a liability and related change in fair value.

·

As part of the restatement process, the Company recorded adjustments for items that were previously considered insignificant and were either not recorded or were reclassified.



In addition, certain balance sheet accounts have been reclassified to conform with the restated March 31, 2010 presentation. A summary of the restatement at December 31, 2010 is as follows:



|                                               |  |                        |            |            |   |             |   |   |            |  
|---------------------------------------------- |  | ---------------------- | ---------- | ---------- | - | ----------- | - | - | ---------- | -
|Balance Sheet Data                             |  | As Previously
Recorded |            | Adjustment |   | As Restated |  
|                                               |  |                        |            |            |   |             |   |   |            |  
|Accounts receivable, net                       |  | $                      | 129,514    |            | $ | (62,500     | ) | $ | 67,014     |  
|Prepaid expenses and other current assets      |  | $                      | 197,901    |            | $ | (90,000     | ) | $ | 107,901    |  
|Total current assets                           |  | $                      | 524,393    |            | $ | (152,501    | ) | $ | 371,892    |  
|Investments                                    |  | $                      | 582,100    |            | $ | 90,000      |   | $ | 672,100    |  
|Notes payable to officer                       |  | $                      | 107,000    |            | $ | (72,415     | ) | $ | 34,585     |  
|Deferred revenue                               |  | $                      | 162,500    |            | $ | (62,500     | ) | $ | 100,000    |  
|Accrued registration rights penalty            |  | $                      |           |            | $ | 75,000      |   | $ | 75,000     |  
|Accrued expenses and other current liabilities |  | $                      | 148,386    |            | $ | (65,091     | ) | $ | 83,295     |  
|Warrant liability                              |  | $                      |           |            | $ | 61,444      |   | $ | 61,444     |  
|Total current liabilities                      |  | $                      | 634,376    |            | $ | (63,562     | ) | $ | 570,814    |  
|Additional paid-in capital                     |  | $                      | 4,775,752  |            | $ | (2,092,800  | ) | $ | 2,682,952  |  
|Deficit accumulated during development stage   |  | $                      | (4,230,978 | )          | $ | 2,093,860   |   | $ | (2,137,118 | )
|Total stockholders equity (deficit)           |  | $                      | 565,891    |            | $ | 1,061       |   | $ | 566,952    |  



|                                                                  |  |                        |            |            |   |             |   |   |            |  
|----------------------------------------------------------------- |  | ---------------------- | ---------- | ---------- | - | ----------- | - | - | ---------- | -
|Statement of Operations Data Three Months Ended
December 31, 2010 |  | As Previously
Recorded |            | Adjustment |   | As Restated |  
|                                                                  |  |                        |            |            |   |             |   |   |            |  
|Selling, general and administrative expenses                      |  | $                      | 1,002,871  |            | $ | 36,793      |   | $ | 1,039,664  |  
|Loss from operations                                              |  | $                      | (1,198,470 | )          | $ | (36,793     | ) | $ | (1,235,263 | )
|Warrant revaluation income                                        |  | $                      |           |            | $ | (278,113    | ) | $ | (278,113   | )
|Interest expense-related party                                    |  | $                      | 3,210      |            | $ | 17,023      |   | $ | 20,233     |  
|Other income (expense)                                            |  | $                      | 846        |            | $ | 3,244       |   | $ | 4,090      |  
|Interest expenses - notes payable                                 |  | $                      | 376        |            | $ | (37         | ) | $ | 339        |  
|Income (loss) before income taxes                                 |  | $                      | (1,200,562 | )          | $ | 221,090     |   | $ | (979,472   | )
|Net loss                                                          |  | $                      | (1,200,562 | )          | $ | 221,090     |   | $ | (979,472   | )



6



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)





|                                                                 |  |                        |            |   |             |            |   |   |            
|---------------------------------------------------------------- |  | ---------------------- | ---------- | - | ----------- | ---------- | - | - | -----------
|                                                                 |  | As Previously
Recorded |            |   |             |            |   |  
|Statement of Operations Data Nine Months Ended
December 31, 2010 |  |                        | Adjustment |   | As Restated
|                                                                 |  |                        |            |   |             |            |   |   |            
|Selling, general and administrative expenses                     |  | $                      | 2,954,262  |   | $           | (85,365    | ) | $ | 2,868,897  
|Loss from operations                                             |  | $                      | (3,273,904 | ) | $           | 85,365     |   | $ | (3,188,539)
|Warrant revaluation income                                       |  | $                      |           |   | $           | (2,121,288 | ) | $ | (2,121,288)
|Registration rights penalty                                      |  | $                      |           |   | $           | 75,000     |   | $ | 75,000     
|Interest expense-related party                                   |  | $                      | 10,354     |   | $           | 34,585     |   | $ | 44,939     
|Other income (expense)                                           |  | $                      | (23,636    | ) | $           | 34         |   | $ | (23,602)   
|Interest expenses - notes payable                                |  | $                      | 62,971     |   | $           | 3,174      |   | $ | 66,145     
|Loss before income taxes                                         |  | $                      | (3,313,153 | ) | $           | 2,093,860  |   | $ | (1,219,293)
|Net loss                                                         |  | $                      | (3,313,153 | ) | $           | 2,093,860  |   | $ | (1,219,293)



|                                                          |  |                        |            |   |             |            |   |   |            |  
|--------------------------------------------------------- |  | ---------------------- | ---------- | - | ----------- | ---------- | - | - | ---------- | -
|                                                          |  | As Previously
Recorded |            |   |             |            |   |   |           
|Statement of Cash Flows Data:                             |  |                        | Adjustment |   | As Restated |           
|                                                          |  |                        |            |   |             |            |   |   |            |  
|Net loss                                                  |  | $                      | (3,313,153 | ) | $           | 2,093,860  |   | $ | (1,219,293 | )
|Share-based compensation                                  |  | $                      | 507,331    |   | $           | (57,067    | ) | $ | 450,264    |  
|Interest accretion on related party note                  |  | $                      |           |   | $           | 34,585     |   | $ | 34,585     |  
|Change in fair value of warrants                          |  | $                      |           |   | $           | (2,121,288 | ) | $ | (2,121,288 | )
|Accrued registration rights penalty                       |  | $                      |           |   | $           | 75,000     |   | $ | 75,000     |  
|Changes in accounts receivable                            |  | $                      | (73,684    | ) | $           | 12,501     |   | $ | (61,183    | )
|Changes in prepaid expenses and other current assets      |  | $                      | (56,233    | ) | $           | 13,500     |   | $ | (42,733    | )
|Changes in deferred revenue                               |  | $                      | 26,050     |   | $           | (12,500    | ) | $ | 13,550     |  
|Changes in accrued expenses and other current liabilities |  | $                      | 87,336     |   | $           | (65,089    | ) | $ | 22,247     |  
|Net cash used in operating activities                     |  | $                      | (2,363,140 | ) | $           | (36,941    | ) | $ | (2,400,081 | )
|Net cash used in investing activities                     |  | $                      | (980,007   | ) | $           |           |   | $ | (980,007   | )
|Net cash provided by financing activities                 |  | $                      | 3,406,683  |   | $           | 36,941     |   | $ | 3,443,624  |  



Note 4. Liquidity, Going Concern and Significant Accounting Policies

Liquidity

As of December 31, 2010, we had approximately $139,000 in cash and cash equivalents. The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation as a going concern. We have sustained substantial operational losses since our inception, and such operational losses have continued through December 31, 2010. At December 31, 2010, we had a deficit accumulated during development stage of approximately $2.1 million.

We have commenced implementing, and will continue to implement, various measures to address our financial condition, including:

·

Continuing to seek debt and equity financing and possible funding through strategic partnerships.

·

Curtailing operations where feasible to conserve cash through deferring certain costs of our marketing activities until our cash flow improves and we can recommence these activities with appropriate funding.

·

Investigating and pursuing transactions including mergers, and other business combinations and relationships deemed by the board of directors to present attractive opportunities to enhance stockholder value.



7



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of these uncertainties.

There can be no assurance that we will be able to raise sales levels needed to sustain our operations or raise additional funding as may be needed to continue our operations at currently planned levels. If these efforts prove unsuccessful, we could be required to significantly curtail or suspend our operations.

Significant Accounting Policies

Accounting 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 amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reported periods. Our management believes the estimates utilized in preparing our condensed consolidated financial statements are reasonable. Actual results could differ from these estimates.

Cash and Cash Equivalents

Cash and cash equivalents are recorded in the balance sheets at cost, which approximates fair value. All highly liquid investments purchased with an original maturity of three months or less is considered to be cash equivalents.

Revenue Recognition

We recognize revenue from product sales in accordance with FASB ASC 605  Revenue Recognition. Following agreements or orders from customers, we ship product to our customers often through a third party facilitator. Revenue from product sales is only recognized when substantially all the risks and rewards of ownership have transferred to our customers, the selling price is fixed and collection is reasonably assured. Typically, these criteria are met when our customers order is received by them and we receive acknowledgment of receipt by a third party shipper or cash is received by our third party facilitator.

We also offer our customers services consisting of planning, shooting and editing infomercials to aid in the direct response marketing of their product or service. In these instances, revenue is recognized when the contracted services have been provided and accepted by the customer. Deposits, if any, on these services are recorded as deferred revenue until earned. Production costs associated with a given project are deferred until the related revenues are earned and recognized. As of December 31, 2010 and March 31, 2010 we had recognized deferred revenue of $100,000 and $86,450 and deferred production costs of $19,413 and $0, respectively.

Investments

We carry our investments at December 31, 2010 and March 31, 2010, at our direct cash cost. The amounts paid were determined by contract provision on the contract commitment date. Due to our percentage ownership of 10% and lack of significant influence, the investments made by the Company are not accounted for under the consolidation or equity methods of accounting. These investments are accounted for under the cost method as provided under ASC 325-Investments-Other. Under this method, the Companys share of the earnings or losses of each investee company are not included in our Condensed Consolidated Statement of Operations. However, impairment charges, if any, are recognized in the Condensed Consolidated Statement of Operations. If circumstances suggest that the value of the investee company has subsequently recovered, such recovery is not recorded.



8



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



In fiscal 2010, the Company invested $90,000 for a 25% equity position in an entity specifically established to manufacture market and distribute an exercise invention called the Body Jac.  The investment was accounted for under the equity method, whose results from operations were not material.

In October 2010, the Company entered into a three party agreement which provided the Company would invest up to $500,000, to include $250,000 in tooling, in Sleek Audio, LLC. Sleek Audio had developed a proprietary ear phone product which the Company intended to market. The Company invested $432,100 under this agreement. During the fourth fiscal quarter, the contract was terminated by one of the three participants with small likelihood of the Company recovering its investment.  Accordingly, the investment was fully written-off during the fourth fiscal quarter 2011.

During fiscal 2011, the Company invested $150,000 in the Military Shopping Channel, LLC. The agreement, as amended, provided for the Company to hold a 10% interest in a web-based distribution outlet targeting active military personnel, their dependents and retired military personnel. We expect operations to commence in our third fiscal quarter.

Receivables

Accounts receivable consists of amounts due from the sale of our infomercial development services to our customers and amounts due under marketed product sales.  Accounts receivables totaled $67,014 and $5,830 at December 31, 2010 and March 31, 2010, respectively. We recognized no allowance for doubtful accounts at December 31, 2010 and March 31, 2010, respectively.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined using a first-in, first-out, or FIFO, method. We review our inventory for excess or obsolete inventory and write-down obsolete or otherwise unmarketable inventory to its estimated net realizable value. Inventories totaled $39,037 and $46,188 at December 31, 2010 and March 31, 2010, respectively. As we do not internally manufacture any of our products, we do not maintain raw materials or work-in-process inventories.

Property, Plant and Equipment, net

We record property, plant and equipment and leasehold improvements at historical cost. Expenditures for maintenance and repairs are recorded to expense; additions and improvements are capitalized. We provide for depreciation using the straight-line method at rates that approximate the estimated useful lives of the assets. Leasehold improvements are amortized on a straight-line basis over the shorter of the useful life of the improvement or the remaining term of the lease.

Depreciation expense totaled $7,472 and $13,817 for the three month and nine month periods ending December 31, 2010, respectively and $15,016 from inception through December 31, 2010.

Earnings (Loss) Per Share

The Company adopted FASB ASC 260-Earnings Per Share. Basic earnings per share is based on the weighted effect of all common shares issued and outstanding and is calculated by dividing net income (loss) available to common stockholders by the weighted average shares outstanding during the period. Diluted earnings per share is calculated by dividing net income available to common stockholders by the weighted average number of common shares used in the basic earnings per share calculation plus the number of common shares, if any, that would be issued assuming conversion of all potentially dilutive securities outstanding. Potentially issuable shares for all periods presented were anti-dilutive.



9



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



Shares potentially issuable at December 31, 2010 were as follows:

|                               |                   | 
|------------------------------ | ----------------- | 
|                               | December 31,
2010 | 
|                               |                  
|Stock options                  | 16,000,000        | 
|Warrants                       | 114,750,000       | 
|Related Party convertible note | 1,426,667         | 
|                               | 132,176,667       | 

As a result of the restatement of our financial statements for the three month and nine month periods ending December 31, 2010, net loss per share, both basic and diluted, changed from a loss of $0.01 and $0.02 per share, respectively, to a loss of $0.00 and $0.01 per share, respectively.

Share-Based Payments

In May 2010, the Company adopted its 2010 Executive Equity Incentive Plan and 2010 Non Executive Equity Incentive Plan. In May 2010, the Board of Directors of TV Goods granted 12,000,000 options under the Executive Equity Incentive Plan and in May 2010 and July 2010, 10,000,000 options under the Non Executive Equity Incentive Plan. These options were exchanged for Company options with identical terms under the Merger Agreement. The weighted-average grant-date fair value of these awards was $880,000.

We recognize share-based compensation expense on stock option awards. Compensation expense is recognized on that portion of option awards that are expected to ultimately vest over the vesting period from the date of grant. All options granted vest over their requisite service periods as follows: 6 months (50% vesting); 12 months (25% vesting) and 18 months (25% vesting). We granted no stock options or other equity awards which vest based on performance or market criteria. We had applied an estimated forfeiture rate of 10% to all share-based awards as of our second fiscal quarter, 2011, which represents that portion we expected would be forfeited over the vesting period. We reevaluate this analysis periodically and adjust our estimated forfeiture rate as necessary.  During the third fiscal quarter 2011, we adjusted our forfeiture rate to reflect the forfeiture of 8,000,000 Non Executive Equity Plan options granted resulting from employee terminations.

We utilized the Black-Scholes option pricing model to estimate the fair value of our stock options. Calculating share-based compensation expense requires the input of highly subjective judgment and assumptions, including estimates of expected life of the award, stock price volatility, forfeiture rates and risk-free interest rates. The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future.

Impairment of Long-Lived Assets

We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable from future undiscounted cash flows. Impairment losses are recorded for the excess, if any, of the carrying value over the fair value of the long-lived assets. No indicators of impairment existed at December 31, 2010 or March 31, 2010, respectively.

Income Taxes

We account for income taxes in accordance with FASB ASC 740  Income Taxes. Under this method, deferred income taxes are determined based on the estimated future tax effects of differences between the financial statement and tax basis of assets and liabilities given the provisions of enacted tax laws. Deferred income tax provisions and benefits are based on changes to the assets or liabilities from year to year. In providing for deferred taxes, we consider tax regulations of the jurisdictions in which we operate, estimates of future taxable income, and available tax planning strategies. If tax regulations, operating results or the ability to implement tax-planning strategies vary, adjustments to the carrying value of deferred tax assets and liabilities may be required. Valuation allowances are



10



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H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



recorded related to deferred tax assets based on the more likely than not criteria of FASB ASC 740  Income Taxes.

FASB ASC 740 also requires that we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The fiscal year ended March 31, 2010 is considered an open tax year in U.S. Federal and State jurisdictions. We currently do not have any audit investigations in any jurisdictions.

Concentration of Credit Risk

Financial instruments that potentially expose us to concentrations of credit risk consist primarily of cash, cash equivalents and trade accounts receivable. Cash and cash equivalents are held with financial institutions in the United States and from time to time we may have balances that exceed the amount of insurance provided by the Federal Deposit Insurance Corporation on such deposits. Concentration of credit risk with respect to our trade accounts receivable to our customers is limited to $67,014 and $5,830 at December 31, 2010 and March 31, 2010, respectively. The Company has one major customer, Home Shopping Network, which represented 0% and 46% of our receivables at December 31, 2010 and March 31, 2010, respectively.  Sales to Home Shopping Network totaled $123,428 or 15% of total sales for the nine month periods ending December 31, 2010. Credit is extended to our customers, based on an evaluation of a customers financial condition and collateral is not required. To date, we have not experienced any material credit losses.

Fair Value Measurements

FASB ASC 820  Fair Value Measurements and Disclosures,defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to us on December 31, 2010 and March 31, 2010, respectively. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of the financial instruments.

FASB ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy are as follows:

Level 1  Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

Level 2  Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models consider various assumptions, including volatility factors, current market prices and contractual prices for the underlying financial instruments. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.



11



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



Level 3  Unobservable inputs for the asset or liability.Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, accounts receivable, accounts payable, notes payable and accrued expenses approximate their fair value based on the short-term maturity of these instruments. Determination of fair value of related party payables is not practicable due to their related party nature.

The Company recognizes all derivative financial instruments as assets or liabilities in the financial statements and measures them at fair value with changes in fair value reflected as current period income or loss unless the derivatives qualify as hedges. As a result, certain warrants issued to a placement agent in connection with an offering completed during the fiscal year 2011 are accounted for as derivatives. See Note 8, Warrant Liabilityand Note 10, Notes Payable, for additional discussion.

New Accounting Standards

There were various accounting standards and interpretations issued recently, none of which had or are expected to have a material impact on our consolidated financial position, results of operations or cash flows.

In January 2010, the FASB issued ASU No. 2010-6, Fair Value Measurements and Disclosures(Topic 820): Improving Disclosures about Fair Value Measurements. This update requires new disclosures for fair value measurements and provides clarification for existing disclosures requirements. Certain of the disclosure requirements will become effective for us on April 1, 2011. As ASU No. 2010-6 only requires enhanced disclosures, the adoption of ASU No. 2010-6 is not expected to have a material effect on our consolidated financial position, results of operations or cash flows or materially expand our financial statement footnote disclosures



Note 5. Prepaid expenses and other current assets

Components of prepaid expenses and other current assets consist of the following:

|                                      |  |                   |         |                |   |        | 
|------------------------------------- |  | ----------------- | ------- | -------------- | - | ------ | 
|                                      |  | December 31,
2010 |         | March 31,
2010 |  
|                                      |  |                   |        
|                                      |  |                   |         |                |   |        | 
|Prepaid expenses                      |  | $                 | 65,481  |                | $ | 2,750  | 
|Deposits                              |  |                   | 12,420  |                |   | 12,420 | 
|Deposit- recapitalization transaction |  |                   | 30,000  |                |   | 50,000 | 
|                                      |  | $                 | 107,901 |                | $ | 65,170 | 



Note 6. Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following:

|                          |  |                   |        |                |   |        | 
|------------------------- |  | ----------------- | ------ | -------------- | - | ------ | 
|                          |  | December 31,
2010 |        | March 31,
2010 |  
|                          |  |                   |       
|                          |  |                   |        |                |   |        | 
|Accrued professional fees |  | $                 | 28,900 |                | $ | 28,300 | 
|Accrued interest          |  |                   | 3,208  |                |   | 21,819 | 
|Accrued rents             |  |                   | 44,187 |                |   |       | 
|Accrued other             |  |                   | 7,000  |                |   | 10,931 | 
|                          |  | $                 | 83,295 |                | $ | 61,050 | 



Note 7. Private Placements



12



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H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



From April 2010 through July 2010, we sold Units containing common stock and warrants raising gross proceeds of $2,600,000 (net proceeds of $2,267,814 after offering related costs of $332,186), to 64 accredited investors (the 2010 Private Placement). We secured $2,495,000 prior to June 30, 2010 and $105,000 in July 2010. The selling price was $0.10 per Unit; each Unit consists of: (1) one share of common stock, par value $0.0001 per share; (2) one series A Warrant to purchase one share of common stock exercisable at $0.15 per share; (3) one series B Warrant to purchase one share of common stock exercisable at $0.25 per share; and (4) one series C Warrant to purchase one share of common stock exercisable at $0.50 per share. In connection with the 2010 Private Placement we issued 26,000,000 shares of common stock and warrants exercisable to purchase 78,000,000 shares of common stock. The warrants expire three years from the date of issuance and are redeemable by the Company at $0.01 per share, subject to certain conditions. Other than the exercise price and call provisions of each series of warrant, all other terms and conditions of the warrants are the same.

Under the terms of the 2010 Private Placement the Company provided that it would use its best reasonable effort to cause a registration statement to become effective within 180 days of the termination date of the offering. If we fail to comply with the registration rights provision, we are obligated to make pro rata payments to the subscribers under the 2010 Private Placement in an amount equal to 1% per month of the aggregate amount invested by the subscribers up to a maximum of 6% of the aggregate amount invested by the subscribers.  The maximum amount of penalty to which the Company may be subject is $156,000. As of December 31, 2010, we had accrued an estimated registration penalty payable of $75,000.

In connection with the 2010 Private Placement, we paid certain fees and commissions to Forge Financial Group, Inc., a broker-dealer and a member of FINRA, as placement agent, of approximately $280,000. In addition, the Company granted Forge Financial Group, Inc. and its assignees a placement agent warrant to purchase up to a maximum amount of $260,000 worth of Units, (the Placement Agent Option). The underlying Series A, Series B and Series C warrants are substantially the same as the warrants issued under the 2010 Private Placement, but contain cashless exercise and anti-dilution provisions.  (See Note 8. Warrant Liability)

From October 2010 through December 31, 2010 (the October 2010 Private Placement), we sold Units containing common stock and warrants raising gross proceeds of $1,225,000 (net proceeds of $1,207,750 after offering related costs of $17,250) to 7 accredited investors. The selling price was $0.10 per Unit; each Unit consists of: (1) one share of common stock, par value $0.0001 per share; (2) one Series A Warrant to purchase one share of common stock exercisable at $0.15 per share; (3) one series B Warrant to purchase one share of common stock exercisable at $0.25 per share; and (4) one series C Warrant to purchase one share of common stock exercisable at $0.50 per share. In connection with the offering, we issued 12,250,000 shares of common stock and warrants exercisable to purchase 36,750,000 shares of common stock. The warrants expire three years from the date of issuance and are redeemable by the Company at $0.01 per share, subject to certain conditions. In the event there is no effective registration covering these Warrants, the holders will have a cashless exercise right. Other than the exercise price and call provisions of each series of warrant, all other terms and conditions of the warrants are the same.

Warrants issued to Forge Financial Group, Inc as placement agent to our April 2010 through July 2010 Unit offering contained an exercise price reset provision (or down-round provision). The Company accounts for these warrants as a liability equal to their fair value on each reporting date. All other warrants issued in connection with the Companys private placements do not contain a down-round provision and were treated as an equity transaction with no separate accounting recognition or valuation being attributed to the warrants contained in the Units sold. These transactions did not contain a security which would require relative fair value analysis or recognition of a discount or beneficial conversion feature requiring accretion of interest expense or recognition of a related dividend. The number of warrants issued with the Units offered was determined through arms-length discussion with investors.



13



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



Note 8. Warrant Liability

Warrants issued to the placement agent in connection with the 2010 Private Placement contained provisions that protect holders from a decline in the issue price of its common stock (or down-round provisions) or that contain net settlement provisions. Accordingly, the Company accounted for these warrants as a liability rather than equity. Down-round provisions reduce the exercise or conversion price of a warrant or convertible instrument if a company either issues equity shares for a price that is lower than the exercise or conversion price of those instruments or issues new warrants or convertible instruments that have a lower exercise or conversion price. Net settlement provisions allow the holder of the warrant to surrender shares underlying the warrant equal to the exercise price as payment of its exercise price, instead of physically exercising the warrant by paying cash. The Company evaluated whether warrants to acquire its common stock contain provisions that protect holders from declines in the stock price or otherwise could result in modification of the exercise price and/or shares to be issued under the respective warrant agreements based on a variable that is not an input to the fair value of a fixed-for-fixed option.

The warrants issued to the placement agent, in conjunction with the 2010 Private Placement, contained a down-round provision. The triggering event of the down-round provision was not based on an input to the fair value of fixed-for-fixed option and therefore was not considered indexed to the Companys stock. Since the warrant contained a net settlement provision, and it was not indexed to the Companys stock, it is accounted for as a liability.

The assumptions used in the valuation of the warrants were as follows:

|                                         |  |                   |  |                  
|---------------------------------------- |  | ----------------- |  | -----------------
|                                         |  | December 31, 2010 |  | Initial Valuation
|Number of shares underlying the warrants |  | 10,400,000        |  | 10,400,000       
|Exercise price                           |  | $0.10 - $0.50     |  | $0.10 - $0.50    
|Volatility                               |  | 79%               |  | 79%              
|Risk-free interest rate                  |  | 1.02%             |  | 1.51%            
|Expected dividend yield                  |  | 0.00%             |  | 0.00%            
|Expected warrant life (years)            |  | 2.33-2.58         |  | 3.00             

The Company recognized these warrants as a liability equal to their fair value on each reporting date. As a result of the re-measurement of the warrant liability at December 31, 2010, we recorded other income associated with the remeasurement of $278,113 and $2,121,288 for the three and nine month period ending December 31, 2010, respectively.

No other warrants issued by the Company contain down-round provisions.

Recurring Level 3 Activity and Reconciliation

The table below provides a reconciliation of the beginning and ending balances for the liability measured at fair value using significant unobservable inputs (Level 3). The table reflects gains and losses for the nine months ended December 31, 2010 for all financial liabilities categorized as Level 3 as of December 31, 2010.

Fair Value Measurements Using Significant Unobservable Inputs (Level 3):

|                                   |  |   |            |  
|---------------------------------- |  | - | ---------- | -
|Warrant liability:                 |  |   |            |  
|Balance as of April 1, 2010        |  | $ |           |  
|Initial measurements of warrants   |  |   | 2,182,732  |  
|Decrease in fair value of warrants |  |   | (2,121,288 | )
|Balance as of December 31, 2010    |  | $ | 61,444     |  





14



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H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



Note 9. Related Party Transactions

The current officers and directors of the Company own or beneficially control approximately 118,605,886 common shares representing approximately a 57% ownership interest at December 31, 2010.  Accordingly, they are in a position to control the election of all new directors and dissolve, merge or sell our assets or otherwise direct our affairs. This concentration of ownership may have the effect of delaying, deferring or preventing a change in control; impede a merger, consolidation takeover or other business combination involving the Company, which in turn could depress the market price of our common stock.

Our Chief Executive Officer has loaned the Company funds in the past to meet short-term working capital needs. These loans totaled $107,000, with related accrued interest of $2,354 and $2,321 at December 31, 2010 and March 31, 2010, respectively. The loans were unsecured and bear interest at 12% per annum. In May 2010, this obligation was formalized through the issuance of a 12% Convertible Promissory Note payable in the principal amount of $107,000, due May 25, 2011. The 12% Convertible Promissory Note is convertible into common shares of the Company at $0.075 per share and bears interest at 12% per annum. The conversion feature of the Promissory Note proved beneficial under the guidance of ASC 470. Accordingly, a beneficial conversion feature of $107,000 was recognized and will be accreted to interest expense over the initial one year term of the note.  The accreted note payable to officer balance totaled $34,585 at December 31, 2010.  The loan payable to the officer, prior to being formalized into a note, totaled $107,513 at March 31, 2010.

On November 23, 2010, Mr. Kevin Harrington, Chairman, tendered 841,114 shares of common stock to the Company, representing payment in full of a related party receivable totaling $141,400, inclusive of related interest of approximately $16,400. The shares tendered were valued at $0.18 per share, the closing price of the Companys common stock on the settlement date.

Note 10. Notes Payable

Commencing in November 2009 through March 2010, the Company issued a series of 12% Senior Working Capital Notes and Revenue Participation Agreements totaling $687,500 in gross proceeds with net proceeds of $581,750 after related costs of $105,750.

Terms of the Senior Working Capital Notes included:

·

450,000 common shares issued to the Note investor for each $50,000 invested;

·

Mandatory partial conversions: In the event of a subsequent financing of $2,000,000 or more, 50% of the investors Note principal would automatically be converted into common shares of the Company at a conversion price equal to 66.6% of the subsequent financing price;

·

Voluntary conversion: Following a Mandatory partial conversion, the Note investor may, at their option, convert the remaining 50% of their Note principal into common shares at a conversion price equal to 66.6% of the subsequent financing price;

·

Revenue participation agreement: Note holders receive a pro-rata portion of 1% of the Companys revenues over 24 months from closing on 18 identified products; and

·

Registration rights were granted if the related common shares were not saleable under Rule 144 by the maturity date of the Notes, December 31, 2010.

In connection with the issuance of the Senior Working Capital Notes, the Company recognized deferred financing costs of $105,750 and a discount on the Notes attributable to the fair value of the common shares issued of $309,375. These costs were initially being accreted over the life of the Notes. Subsequent to issuance, and at March 31, 2010, the Notes were in default for failure to pay the required interest. As a result of the default, the Notes became immediately callable by the Note holders. Accordingly, the unaccreted balances remaining attributable to financing costs and Note discount were charged to interest expense.



15



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



Due to the default status of the Notes for failure to make timely interest payments, during the first fiscal quarter 2011, the Company entered into a series of Amendment and Exchange Agreements, modifying the terms and conditions of their 12% Senior Working Capital Notes and Revenue Participation Agreements, which totaled $687,500.

The terms of the Amended and Restated Senior Working Capital Notes modified the terms of the original notes providing:

·

The revenue sharing provision was waived.

·

The definition of Subsequent Financing, which triggered certain conversion provisions, was modified such that Subsequent Financing was amended to mean prior to the note maturity date, the Company closed a reverse acquisition or recapitalization transaction whereby the Company becomes a reporting company under the Securities Exchange Act of 1934, as amended.

·

Interest payment provisions were modified such that in the event of a redefined Subsequent Financing, interest would be paid through the maturity date, December 31, 2010, within thirty days.

·

Prepayment provisions were eliminated.

·

The partial mandatory conversion provisions were modified such that in the event of a subsequent financing, 100% of the outstanding notes shall automatically convert into common shares of the Company at the conversion price.

In May 2010, concurrent with the completion of the Merger Agreement, the Amended and Restated Senior Working Capital Notes totaling $687,500 were converted, at the contractual agreed upon rate of $0.0667 per share, resulting in the issuance of 10,307,345 common shares. Also, as provided in the amended note agreements, upon conversion, the note holders were paid interest through December 31 2010, the maturity date. Actual interest earned prior to conversion plus the additional interest through the maturity date totaled $84,379. The entire interest payment was paid in cash and charged to interest expense in May 2010.

In March 2010, the Company borrowed $50,000 under a note agreement. The note was due on or before the earlier of (a) the initial closing of the Companys then pending 2010 Private Placement or (b) August 30, 2010, the maturity date. The note provided that in the event there was no closing of the 2010 Private Placement prior to the maturity date, the note holder will forgive $25,000 and the related accrued interest. The note carried an interest rate of 12% per annum and could be prepaid at anytime; however, in the event of a prepayment, the company was obligated to pay interest through the maturity date. The lender in this transaction was an officer of the placement agent in the Companys 2010 Private Placement. In May 2010, upon completion of the 2010 Private Placement, the note and related accrued interest were paid-in full.

Note 11. Commitments

On January 20, 2010, the Company entered into a 38-month lease agreement for our 10,500 square foot headquarters facility in Clearwater, Florida. Terms of the lease provide for base rent payments of $6,000 per month for the first six months; a base rent of $7,500 per month for the next 18 months and $16,182 per month from January 2012 through February 2013. The increase in minimum rental payments over the lease term is not dependent upon future events or contingent occurrences. In accordance with the provisions of ASC 840 - Leases,the Company recognizes lease expenses on a straight-line basis, which total $10,462 per month over the lease term.



16



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



The following is a schedule by year of future minimum rental payments required under our lease agreement on December 31, 2010:

|       |  |                  |         |                |   |  
|------ |  | ---------------- | ------- | -------------- | - | -
|       |  | Operating Leases |         | Capital Leases
|Year 1 |  | $                | 90,000  |                | $ | 
|Year 2 |  |                  | 194,184 |                |   | 
|Year 3 |  |                  | 32,364  |                |   | 
|Year 4 |  |                  |        |                |   | 
|Year 5 |  |                  |        |                |   | 
|       |  | $                | 316,548 |                | $ | 



Base rent expense recognized by the Company, all attributable to its headquarters facility, totaled $31,386 and $88,972 for the three month and nine month periods ending December 31, 2010, respectively and $120,286 from inception through December 31, 2010.

Under the terms of the 2010 Private Placement, the Company provided that it would use its best reasonable efforts to cause the related registration statement to become effective within 180 days of the termination date, July 26, 2010 (Termination Date), of the offering. If we fail to comply with this registration rights provision, we are obligated to make pro rata payments to the subscribers under the 2010 Private Placement in an amount equal to 1% per month of the aggregate amount invested by the subscribers up to a maximum of 6% of the aggregate amount invested by the subscribers. The maximum amount of penalty to which the Company may be subject is $156,000.  Under the provisions of ASC 450, we recognized an accrued liability related to the penalty provision of $75,000 at December 31, 2010.

Note 12. Stockholders Equity

Preferred Stock

We are authorized to issue up to 10,000,000 shares of preferred stock, $.0001 par value per share. Our board of directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of the shares of preferred stock in series, and by filing a certificate pursuant to the applicable law of the state of Florida, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and any qualifications, limitations or restrictions thereof. No shares of preferred stock have been designated, issued or were outstanding at December 31, 2010 and March 31, 2010, respectively.

Common Stock

At December 31, 2010 we are authorized to issue up to 400,000,000 shares of common stock, $.0001 par value per share.

At December 31, 2010 and March 31, 2010, the Company had 211,177,481 and 158,187,510 shares outstanding, respectively. Holders are entitled to one vote for each share of common stock (or its equivalent).

All share and per share information contained in this report gives retroactive effect to a 30 for 1 (30:1) forward stock split of our outstanding common stock effective March 17, 2010 and the reverse recapitalization transaction completed in May 2010.

Share Issuances

Common Stock and Warrants

From April 2010 through July 2010, we sold Units containing common stock and warrants raising gross proceeds of $2,600,000 (net proceeds of $2,267,814 after offering related costs of $332,186), to 64 accredited investors (the 2010 Private Placement). We secured $2,495,000 prior to June 30, 2010 and $105,000 in July 2010. The selling



17



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



price was $0.10 per Unit; each Unit consists of: (1) one share of common stock, par value $0.0001 per share; (2) one series A Warrant to purchase one share of common stock exercisable at $0.15 per share; (3) one series B Warrant to purchase one share of common stock exercisable at $0.25 per share; and (4) one series C Warrant to purchase one share of common stock exercisable at $0.50 per share. In connection with the 2010 Private Placement we issued 26,000,000 shares of common stock and warrants exercisable to purchase 78,000,000 shares of common stock. The warrants expire three years from the date of issuance and are redeemable by the Company at $0.01 per share, subject to certain conditions. Other than the exercise price and call provisions of each series of warrant, all other terms and conditions of the warrants are the same.

In connection with the 2010 Private Placement, we paid certain fees and commissions to Forge Financial Group, Inc., a broker-dealer and a member of FINRA, as placement agent, of approximately $280,000. In addition, the Company granted Forge Financial Group, Inc. and its assignees a placement agent warrant to purchase up to a maximum amount of $260,000 worth of Units, (the Placement Agent Option). The underlying Series A, Series B and Series C warrants are substantially the same as the warrants issued under the 2010 Private Placement, but contain cashless exercise and anti-dilution provisions.  (See Note 8. Warrant Liability)

Under the terms of the 2010 Private Placement the Company provided that it would use its best reasonable effort to cause a registration statement to become effective within 180 days of the termination date of the offering. If we fail to comply with the registration rights provision, we are obligated to make pro rata payments to the subscribers under the 2010 Private Placement in an amount equal to 1% per month of the aggregate amount invested by the subscribers up to a maximum of 6% of the aggregate amount invested by the subscribers.  The maximum amount of penalty to which the Company may be subject is $156,000. Under the provisions of ASC 450, we recognized an accrued liability related to the penalty provision of $75,000 at December 31, 2010.

From October 2010 through December 31, 2010, we sold Units containing common stock and warrants raising gross proceeds of $1,225,000 (net proceeds of $1,207,750 after offering related costs of $17,250) to 7 accredited investors. The selling price was $0.10 per Unit; each Unit consists of: (1) one share of common stock, par value $0.0001 per share; (2) one Series A Warrant to purchase one share of common stock exercisable at $0.15 per share; (3) one series B Warrant to purchase one share of common stock exercisable at $0.25 per share; and (4) one series C Warrant to purchase one share of common stock exercisable at $0.50 per share. In connection with the offering, we issued 12,250,000 shares of common stock and warrants exercisable to purchase 36,750,000 shares of common stock. The warrants expire three years from the date of issuance and are redeemable by the Company at $0.01 per share, subject to certain conditions. In the event there is no effective registration covering these Warrants, the holders will have a cashless exercise right. Other than the exercise price and call provisions of each series of warrant, all other terms and conditions of the warrants are the same.

On August 18, 2010, under the provisions of a three month investor relations consulting agreement, the Company issued 1,000,000 common shares.  The shares issued had a fair value on the contract date of $180,000. The fair value of the common shares was derived from the closing price of our common stock on the contract commitment date.  The Company recognizes the expense related to shares issued for services over the service period.

On October 18, 2010, under the provisions of a three month investor relations agreement, the Company issued 156,250 common shares. The shares issued had a fair value on the contract date of $25,000. The fair value of the common shares was derived from the closing price of our common stock on the contract commitment date.  The Company recognizes the expense related to shares issued for services over the service period.

On November 2, 2010, under a consulting agreement related to the Companys investor relations activities, the Company issued 100,000 shares with a fair value of $15,000 on the contract date. The fair value of the common shares was derived from the closing price of our common stock on the contract commitment date.  The Company recognizes the expense related to shares issued for services over the service period.



18



---

H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)



On November 11, 2010, the Company issued 150,000 shares under a Consulting and Management Agreement with a fair value on the contract date of $28,500. The fair value of the common shares was derived from the closing price of our common stock on the contract commitment date.  The company recognizes the expense related to shares issued for services over the service period.

On November 23, 2010, Mr. Kevin Harrington, Chairman, tendered 841,114 shares of common stock to the Company representing payment in full of a related party receivable totaling $151,400, inclusive of related interest of approximately $16,400. The shares tendered were valued at $0.18 per share, the closing price of the Companys common stock on the settlement date.

On December 31, 2010, under the terms of a consulting agreement related to studio productions, the Company issued 1,000,000 shares with a fair value on the contract date of $80,000. The fair value of the common shares was derived from the closing price of our common stock on the contract commitment date.  The Company recognizes the expense related to shares issued for services over the service period.

Equity Compensation Plans

In May 2010, the Company adopted its 2010 Executive Equity Incentive Plan and 2010 Non Executive Equity Incentive Plan (collectively, the Plans) and granted 12,000,000 options and 9,000,000 options, respectively, under TV Goods stock option plans and such options were exchanged for Company options under the Merger Agreement.

In May 2010, our Board of Directors granted 12,000,000 options under the Executive Equity Incentive Plan, exercisable at $0.075 per share to two officers and directors of the Company. The shares vest over eighteen months from grant and are exercisable for five (5) years from grant date (May 26, 2010). At December 31, 2010, there were no options available for future issuance under the Executive Equity Incentive Plan.

In May 2010, our Board also granted options to purchase an aggregate of 9,000,000 shares of our common stock with an exercise price of $0.075 per share under the Non Executive Equity Incentive Plan. The options granted vest over eighteen months from the date of the grant (March 26, 2010) and are exercisable for five (5) years from their grant date. On July 15, 2010, the Company issued an additional 1,000,000 shares under the Non Executive Incentive Plan under terms similar to the May 2010 grant. During the quarter ended December 31, 2010, we adjusted our estimated forfeiture rate to reflect the forfeiture of 8,000,000 Non Executive Equity Plan options granted resulting from employee terminations. During the quarter ending December 31, 2010, an additional 2,000,000 options were granted under this Plan. At December 31, 2010, there were no shares available for future issuance under the Non Executive Equity Incentive Pan.

Stock-based compensation expense recognized totaled $80,511 and $450,264 for the three months and nine months ended December 31, 2010, respectively, which has been allocated to general and administrative expenses.

Information related to options granted under both our option plans at December 31, 2010 and activity for the nine months then ended is as follows:

|                                 |      
|-------------------------------- | -----
|Dividend yield                   | 0%   
|Expected volatility              | 79%  
|Risk free interest rate          | 2.08%
|Estimated holding period (years) | 5    





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H & H IMPORTS, INC. AND SUBSIDIARIES

(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)





|                                 |  |        |            |                                 |   |                                                     |  |                           |      |  |   |   | 
|-------------------------------- |  | ------ | ---------- | ------------------------------- | - | --------------------------------------------------- |  | ------------------------- | ---- |  | - | - | 
|                                 |  | Shares |            | Weighted
Average
Exercise
Price |   | Weighted Average
Remaining
Contractual Life
(Years) |  | Aggregate
Intrinsic Value |     
|                                 |  |        |            |                                 |   |                                                     |  |                           |      |  |   |   | 
|Outstanding at April 1, 2010     |  |        |           |                                 | $ |                                                    |  |                           |     |  | $ |  | 
|Granted                          |  |        | 24,000,000 |                                 |   | 0.079                                               |  |                           | 4.49 |  |   |  | 
|Exercised                        |  |        |           |                                 |   |                                                    |  |                           |     |  |   |  | 
|Forfeited                        |  |        | (8,000,000 | )                               |   |                                                    |  |                           |     |  |   |  | 
|Expired                          |  |        |           |                                 |   |                                                    |  |                           |     |  |   |  | 
|Outstanding at December 31, 2010 |  |        | 16,000,000 |                                 | $ | 0.079                                               |  |                           | 4.49 |  | $ |  | 
|Exercisable at December 31, 2010 |  |        | 7,000,000  |                                 | $ | 0.075                                               |  |                           | 4.42 |  | $ |  | 

No tax benefits are attributable to our share based compensation expense recorded in the accompanying condensed financial statements because we are in a net operation loss position and a full valuation allowance is maintained for all net deferred tax assets. For non-qualified stock options, the amount of the tax deductions is generally the excess of the fair market value of our shares of common stock over the exercise price of the stock options at the date of exercise.

In the event of any stock split of our outstanding common stock, the Board of Directors in its discretion may elect to maintain the stated amount of shares reserved under the Plans without giving effect to such stock split. Subject to the limitation on the aggregate number of shares issuable under the Plans, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person. Plan options may either be (i) ISOs, (ii) NSOs (iii) awards of our common stock or (iv) rights to make direct purchases of our common stock which may be subject to certain restrictions. Any option granted under the Plans must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant, but the exercise price of any ISO granted to an eligible employee owning more than 10% of our outstanding common stock must not be less than 110% of fair market value on the date of the grant. The Plans further provide that with respect to ISOs the aggregate fair market value of the common stock underlying the options which are exercisable by any option holder during any calendar year cannot exceed $100,000. The term of each plan option and the manner in which it may be exercised is determined by the Board of Directors or the compensation committee, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the common stock, no more than five years after the date of the grant.

Note 13. Subsequent Events

In January 2011, the Company sold Units for gross proceeds of $650,000 to two private investors. In connection with this transaction, the Company issued 6,500,000 Units. Each Unit consisted of: (1) one share of common stock, par value $0.0001 per share; (2) one Series A Warrant to purchase one share of common stock exercisable at $0.15 per share; (3) one series B Warrant to purchase one share of common stock exercisable at $0.25 per share; and (4) one Series C Warrant to purchase one share of common stock exercisable at $0.50 per share. The Warrants expire three (3) years from the date of issuance and are redeemable by the Company at $0.01 per share, subject to certain conditions. The warrants may be exercised on a cashless basis until such time as the related registration statement is declared effective by the Securities and Exchange Commission. The Series B Warrant may not be exercised until after the Series A Warrant has been exercised in full and the Series C Warrant may not be exercised until after the Series B Warrant has been exercised in full. The selling price of the Units was $0.10 per Unit. No commissions were paid in connection with the sale of the Units. Other than the exercise price and call provisions of each series of Warrant, all other terms and conditions of the warrants are the same.

Warrants issued in connection with the January 2011 Private Placements were treated as an equity transaction with no separate accounting recognition or valuation being attributed to the warrants contained in the Units sold. The transactions did not contain a security which would require relative fair value analysis or recognition of a discount or beneficial conversion feature requiring accretion of interest expense or recognition of a related dividend. The number of warrants issued with the Units offered was determined through arms-length discussion with investors.



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ITEM 2.

MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on our managements beliefs, assumptions and expectations and on information currently available to our management. Generally, you can identify forward-looking statements by terms such as may, will, should, could, would, expects, plans, anticipates, believes, estimates, projects, predicts, potential and similar expressions intended to identify forward-looking statements, which generally are not historical in nature. All statements that address operating or financial performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements, including without limitation our expectations with respect to product sales, future financings, or the commercial success of our products or services. We may not actually achieve the plans, projections or expectations disclosed in forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Our management believes that these forward-looking statements are reasonable as and when made. However, you should not place undue reliance on forward-looking statements because they speak only as of the date when made. We do not assume any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by federal securities laws and the rules of the Securities and Exchange Commission (the SEC). We may not actually achieve the plans, projections or expectations disclosed in our forward-looking statements, and actual results, developments or events could differ materially from those disclosed in the forward-looking statements. Forward-looking statements are subject to a number of risks and uncertainties, including without limitation those described from time to time in our future reports filed with the SEC.

The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited interim condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q/A.

Company Overview

We are a direct response marketing company. Our Company identifies, develops, and markets consumer products. Our strategy employs three primary channels: Direct Response Television (Infomercials), Television Shopping Networks and Retail Outlets. We seek to offer a turnkey solution enabling entrepreneurs to introduce products to the consumer market. Entrepreneurs can leverage our experience in functions such as product selection, marketing development, media buying and direct response television production. Inventors and entrepreneurs submit products or business concepts for our input and advice. We generate revenues from three primary sources (i) infomercial production fees, (ii) sales of consumer products, we receive a share of net profits of consumer products sold, and (iii) royalty fees. We do not manufacture any of our products. TV Goods was formed in October 2009 and as a result has a limited operating history. As of the date of this filing we have generated limited revenues and do not rely on any principal products.

As of December 31, 2010, we had total assets of $1,137,766 and cash on-hand of $138,527, a working capital deficit of $198,922 and a deficit accumulated during development stage of $2,137,118.

Primarily all of our operations are conducted through TV Goods. TV Goods holds an interest in the following wholly owned subsidiaries;

-

TV Goods, Inc., a Florida corporation, (“TVG”) which was organized and in operations since October 2009, and

-

Inventors Business Center, LLC, a Florida limited liability company (“IBC”) which was organized in January 2010.

Although we hold an interest in these various entities, primarily all of our historical and current operations are conducted through TVG, which was organized as a wholly owned subsidiary of TV Goods in October 2009. Furthermore, due to the similar nature of the underlying business and the overlap of our operations, we view and manage these operations as one business; accordingly, we do not report as segments.



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Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with accounting principles generally accepted in the United States. We are required to make estimated and judgments in preparing our financial statements that affect the reported amounts of our assets, liabilities, revenue and expenses. We base our estimates on our historical experience to the extent practicable and on various other assumptions that we believe are reasonable under the circumstances and at the time they are made. If our assumptions prove to be inaccurate or if our future results are not consistent with our historical experience, we may be required to make adjustments in our policies that affect our reported results. Our most critical accounting policies and estimates include revenue recognition and share based compensation and fair value calculations. We also have other key accounting policies that are less subjective and therefore, their application would not have a material impact on our reported results of operations. The following is a discussion of our most critical policies, as well as the estimated and judgments involved.

Revenue Recognition

We recognize revenue from product sales in accordance with FASB ASC 605  Revenue Recognition. Following agreements or orders from customers, we ship product to our customers often through a third party facilitator. Revenue from product sales is only recognized when substantially all the risks and rewards of ownership have transferred to our customers, the selling price is fixed and collection is reasonably assured. Typically, these criteria are met when our customers order is received by them and we receive acknowledgment of receipt by a third party shipper.

We also offer our customers services consisting of planning, shooting and editing infomercials to aid in the direct response marketing of their product or service. In these instances, revenue is recognized when the contracted services have been provided and accepted by the customer. Deposits, if any, on these services are recognized as deferred revenue until earned.  Costs associated with a given project are deferred until the related revenues are recognized.  As of December 31, 2010 and 2009, we had recognized deferred production costs of $19,413 and $0 and deferred revenue of $100,000 and $86,450, respectively.

Share-Based Payments and Warrants

In May 2010, the Board of Directors issued 12,000,000 options and 9,000,000 options, respectively, under its Executive Equity Incentive Plan and Non Executive Equity Incentive Plan. In July 2010, the Company granted an additional 1,000,000 options under the Non Executive Incentive Plan under terms similar to the May 2010 grant. The weighted-average grant-date fair value of these awards was $880,000. We recognized share-based compensation expense in connection with our share-based awards, net of an estimated forfeiture rate over the service period of the award. We utilized the Black-Scholes option pricing model to estimate the fair value of our stock options. Calculating share-based compensation expense requires the input of highly subjective judgment and assumptions, including estimates of expected life of the award, stock price volatility, forfeiture rates and risk-free interest rates. The assumptions used in calculating the fair value of share-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our share-based compensation expense could be materially different in the future.

Liquidity and Capital Resources

At December 31, 2010, we had a cash balance of approximately $139,000 a working capital deficit of approximately$200,000 and a deficit accumulated during development stage of approximately $2.1 million. This increase in both the cash balances and sharp reduction in working capital deficit, as compared to March 31, 2010, was due to the conversion of $687,500 in convertible notes payable into common stock in May 2010 and the completion of a series of Private Placements with net proceeds to the Company of approximately $3,475,000. However, since inception, we have continued to incur operational losses.

We have commenced implementing, and will continue to implement, various measures to address our financial condition, including:

·

Continuing to seek debt and equity financing, funding through strategic partnerships.

·

Curtailing operations where feasible to conserve cash through deferring certain of our marketing activities until our cash flow improves and we can recommence these activities with appropriate funding.



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·

Investigating and pursuing transactions including mergers, acquisitions, and other business combinations and relationships deemed by the board of directors to present attractive opportunities to enhance shareholder value.

These factors, among others, raise substantial doubt about our ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of these uncertainties.

There can be no assurance that we will be able to raise additional funding as may be needed to continue our operations at currently planned levels. If these efforts prove unsuccessful, we could be required to significantly curtail our operations.

2010 Private Placements

In July 2010, we completed a Private Placement of Units containing common stock and warrants raising gross proceeds of $2,600,000 and net proceeds of approximately $2,268,000 after offering related costs of approximately $332,000. In connection with the Unit offering, the Company issued 26,000,000 Units.  Each Unit consists of: (1) one share of common stock, par value $0.0001 per share; (2) one Series A Warrant to purchase one share of common stock exercisable at $0.15 per share; (3) one series B Warrant to purchase one share of common stock exercisable at $0.25 per share; and (4) one Series C Warrant to purchase one share of common stock exercisable at $0.50 per share. The Warrants expire three (3) years from the date of issuance and are redeemable by the Company at $0.01 per share, subject to certain conditions. The Series B Warrant may not be exercised until after the Series A Warrant has been exercised in full and the Series C Warrant may not be exercised until after the Series B Warrant has been exercised in full. The selling price of the Units was $0.10 per Unit.

Other than the exercise price and call provisions of each series of Warrant, all other terms and conditions of the warrants are the same.

In connection with the 2010 Private Placement, we paid certain fees and commissions to Forge Financial Group, Inc., a broker-dealer and a member of FINRA, as placement agent, of approximately $280,000. In addition, the Company granted Forge Financial Group, Inc. and its assignees a placement agent warrant to purchase up to a maximum amount of $260,000 worth of Units, (the Placement Agent Option). The underlying Series A, Series B and Series C warrants are substantially the same as the warrants issued under the 2010 Private Placement, but contain cashless exercise and anti-dilution provisions (See Note 8. Warrant Liability).

From October 2010 through December, 2010, we sold Units containing common stock and warrants raising gross proceeds of $1,225,000 (net proceeds of $1,207,750 after offering related costs of $17,250) to 7 accredited investors. The selling price was $0.10 per Unit; each Unit consists of: (1) one share of common stock, par value $0.0001 per share; (2) one Series A Warrant to purchase one share of common stock exercisable at $0.15 per share; (3) one series B Warrant to purchase one share of common stock exercisable at $0.25 per share; and (4) one series C Warrant to purchase one share of common stock exercisable at $0.50 per share. In connection with the offering, we issued 12,250,000 shares of common stock and warrants exercisable to purchase 36,750,000 shares of common stock. The warrants expire three years from the date of issuance and are redeemable by the Company at $0.01 per share, subject to certain conditions. In the event there is no effective registration covering these Warrants, the holders will have a cashless exercise right. Other than the exercise price and call provisions of each series of warrant, all other terms and conditions of the warrants are the same.

Warrants issued to Forge Financial Group, Inc as placement agent to our April 2010 through July 2010 Unit offering contained an exercise price reset provision (or down-round provision). The Company accounts for these warrants as a liability equal to their fair value on each reporting data. All other warrants issued in connection with the Companys private placements do not contain a down-round provision and were treated as an equity transaction with no separate accounting recognition or valuation being attributed to the warrants contained in the Units sold. These transactions did not contain a security which would require relative fair value analysis or recognition of a discount or beneficial conversion feature requiring accretion of interest expense or recognition of a related dividend. The number of warrants issued with the Units offered was determined through arms-length discussion with investors.







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Notes Payable

Commencing in November 2009 through March 2010, the Company issued a series of 12% Senior Working Capital Notes and Revenue Participation Agreements totaling $687,500 in gross proceeds with net proceeds of $581,750 after related costs of $105,750.

Terms of the Senior Working Capital Notes included:

·

450,000 common shares issued to the Note investor for each $50,000 invested;

·

Mandatory partial conversions: In the event of a subsequent financing of $2,000,000 or more, 50% of the investors Note principal would automatically be converted into common shares of the Company at a conversion price equal to 66.6% of the subsequent financing price;

·

Voluntary conversion: Following a Mandatory partial conversion, the Note investor may, at their option, convert the remaining 50% of their Note principal into common shares at a conversion price equal to 66.6% of the subsequent financing price;

·

Revenue participation agreement: Note holders receive a pro-rata portion of 1% of the Companys revenues over 24 months from closing on 18 identified products; and

·

Registration rights were granted if the related common shares were not saleable under Rule 144 by the maturity date of the Notes, December 31, 2010.

In connection with the issuance of the Senior Working Capital Notes, the Company recognized deferred financing costs of $105,750 and a discount on the Notes attributable to the fair value of the common shares issued of $309,375. These costs were initially being accreted over the life of the Notes. Subsequent to issuance, and at March 31, 2010, the Notes were in default for failure to pay the required interest. As a result of the default, the Notes became immediately callable by the Note holders. Accordingly, the unaccreted balances remaining attributable to financing costs and Note discount were charged to interest expense.

Due to the default status of the Notes for failure to make timely interest payments, during the first fiscal quarter, the Company entered into a series of Amendment and Exchange Agreements, modifying the terms and conditions of their 12% Senior Working Capital Notes and Revenue Participation Agreements, which totaled $687,500.

The terms of the Amended and Restated Senior Working Capital Notes modified the terms of the original notes providing:

·

The revenue sharing provision was waived.

·

The definition of Subsequent Financing, which triggered certain conversion provisions, was modified such that Subsequent Financing was amended to mean prior to the note maturity date, the Company closed a reverse acquisition or recapitalization transaction whereby the Company becomes a reporting company under the Securities Exchange Act of 1934, as amended.

·

Interest payment provisions were modified such that in the event of a redefined Subsequent Financing, interest would be paid through the maturity date, December 31, 2010, within thirty days.

·

Prepayment provisions were eliminated.

·

The partial mandatory conversion provisions were modified such that in the event of a subsequent financing, 100% of the outstanding notes shall automatically convert into common shares of the Company at the conversion price.

In May 2010, concurrent with the completion of the Merger Agreement, the Amended and Restated Senior Working Capital Notes totaling $687,500 were converted, at the contractual agreed upon rate of $0.0667 per share, resulting in the issuance of 10,307,345 common shares. Also, as provided in the amended note agreements, upon conversion, the note holders were paid interest through December 31 2010, the maturity date. Actual interest earned prior to conversion plus the additional interest through the maturity date totaled $84,379. The entire interest payment was paid in cash and charged to interest expense in May 2010.

In March 2010, the Company borrowed $50,000 under a note agreement. The note was due on or before the earlier of (a) the initial closing of the Companys then pending 2010 Private Placement or (b) August 30, 2010, the maturity date. The note provided that in the event there was no closing of the 2010 Private Placement prior to the maturity



24



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date, the note holder will forgive $25,000 and the related accrued interest. The note carried an interest rate of 12% per annum and could be prepaid at anytime; however, in the event of a prepayment, the company was obligated to pay interest through the maturity date. The lender in this transaction was an officer of the placement agent in the Companys 2010 Private Placement. In May 2010, upon completion of the 2010 Private Placement, the note and related accrued interest were paid-in full.

During the period ended March 31, 2010, TV Goods also borrowed $107,513 from the Chief Executive Officer of TV Goods to meet short term operational needs. In May 2010, these borrowings were formalized in the form of a note payable which is convertible at $0.075 per common share bearing interest at 12% per annum. The note is convertible at any time and is due on or before May 25, 2011.

Commitments

On January 20, 2010, the Company entered into a 38-month lease agreement for our 10,500 square foot headquarters facility in Clearwater, Florida. Terms of the lease provide for base rent payments of $6,000 per month for the first six months; a base rent of $7,500 per month for the next 18 months and $16,182 per month from January 2012 through February 2013. The increase in minimum rental payments over the lease term is not dependent upon future events or contingent occurrences. In accordance with the provisions of ASC 840 - Leases,the Company recognizes lease expenses on a straight-line basis, which total $10,462 per month over the lease term.

The following is a schedule by year of future minimum rental payments required under our lease agreement on December 31, 2010:

|       |  |                  |         |                |  |  
|------ |  | ---------------- | ------- | -------------- |  | -
|       |  | Operating Leases |         | Capital Leases
|Year 1 |  | $                | 90,000  |                |  | 
|Year 2 |  |                  | 194,184 |                |  | 
|Year 3 |  |                  | 32,364  |                |  | 
|Year 4 |  |                  |        |                |  | 
|Year 5 |  |                  |        |                |  | 
|       |  | $                | 316,548 |                |  | 

Base rent expense recognized by the Company, all attributable to its headquarters facility, totaled $31,386 and $88,972 for the three month and nine month periods ending December 31, 2010, respectively.

Under the terms of the 2010 Private Placement, the Company provided that it would use its best reasonable efforts to cause the related registration statement to become effective within 180 days of the termination date, July 26, 2010 (Termination Date), of the offering. If we fail to comply with this registration rights provision we are obligated to make pro rata payments to the subscribers under the 2010 Private Placement in an amount equal to 1% per month of the aggregate amount invested by the subscribers up to a maximum of 6% of the aggregate amount invested by the subscribers. The maximum amount of penalty to which the Company may be subject is $156,000.  Under the provisions of ASC 450, we recognized an accrued liability related to the penalty provision of $75,000 at December 31, 2010.

Results of Operations

The condensed consolidated financial statements as of December 31, 2010 and for the three months and nine months then ended, have been restated for the correction of errors. See Note 3 to the condensed consolidated financial statements.

TV Goods was formed and commenced operations on October 16, 2009 as a development stage company. Revenues for the three months and nine months ended December 31, 2010 totaled $391,710 and $848,941, respectively and consisted primarily of fees charged for the shooting and editing of infomercials for our clients. Cost of revenues, which totaled $587,309 and $1,168,583, respectively for the corresponding periods, represented costs incurred by the Company directly related to the infomercials developed. These costs included studio rentals, the hiring of on-screen talent and editing consulting services. No significant revenues or cost of goods sold were generated or incurred from the sale of products during the three month and nine month periods ended December 31, 2010.  Operating expenses, consisted of general and administrative expenses, were incurred primarily in our Clearwater Florida facilities. As the Company commenced operations in October 2009, traditional year over year comparisons and analysis are not feasible.



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Selling, general and administrative expenses totaled $1,039,664 and $2,868,897 for the three months and nine months ended December 31, 2010, respectively.  Included in these amounts are costs associated with the Companys equity compensation plans and grants made in May, 2010.  The costs of these grants are recognized over their respective vesting periods and totaled $80,511 and $450,264 for the three month and nine month periods ended December 31, 2010, respectively.  Due to the vesting schedule of the grants, with 50% vesting after the first nine months, 25% vesting after one year and 25% vesting after 18 months of service, much of the cost being recognized by the Company is front-loaded relative to the total costs of the options granted.

Also included are administrative labor costs of approximately $279,538 and $799,402 for the three months and nine months ended December 31, 2010, respectively. While we do expect administrative salaries to increase, due to our development stage, we anticipate they will decrease as a percentage of revenues over time.

Selling, general and administrative costs for the nine months ended December 31, 2010 also included $333,230 in consulting costs associated with our investor relations and public relations efforts. Of this amount, $205,000 represents the fair value of shares issued for services during the period. These costs, while expected to be reduced as a percentage of revenues, are anticipated to continue in the future as the Company continues its efforts to expand its exposure and penetration into the Direct Response market.

Warrant revaluation income of $278,113 and $2,121,288 for the three months and nine months ended December 31, 2010, represents the non-cash income recognized when re-measuring the fair value of the warrant liability recognized on placement agent warrants issued in connection with our 2010 Private Placements. It should be noted that absent these revaluations, the Company would have recognized losses of approximately $1,257,585 and $3,340,581 for the three month and nine month periods ending December 31, 2010, respectively. Further, it should be noted, the fair value of the warrant liability recognized each reporting period varies mainly due to fluctuations in our stock price. Accordingly, if our stock price were to increase in the future, for which there is no assurance, the fair value of the warrant liability would increase requiring the Company to recognize a non-cash expense for the increase in fair value.

Interest expense  notes payable for the three month and nine month periods ending December 31, 2010 totaled $339 and $66,145, respectively, and was attributable primarily to the Senior Working Capital Notes issued by the Company between November 2009 and February 2010. Included in the total interest expense figures was a component attributable to a provision of the Senior Working Capital Notes which required the payment of interest, in cash, through December 31, 2010, the maturity date, upon conversion of the Notes, regardless of the date the Notes were converted into common shares. Completion of the Companys reverse recapitalization transaction in May 2010 triggered mandatory conversion of the Notes and payment of the related accrued interest through December 31, 2010.

Interest expense-related party totaled $20,233 and $44,939 for the three months and nine months ended December 31, 2010. This interest represents accretion of the beneficial conversion feature attributable to the $107,000 note payable to the Companys CEO and interest paid in cash at 12% per annum.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable to smaller reporting companies.

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management carried out an evaluation with the participation of our Chief Executive Officer and who serves as our principal executive officer and principal financial and accounting officer, required by Rule 13a-15 of the Securities Exchange Act of 1934 (the Exchange Act) of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) under the Exchange Act.

Based on this evaluation, our Chief Executive Officer concluded that as of December 31, 2010, our disclosure controls and procedures were not effective such that the information relating to our company required to be disclosed in our SEC reports (i) is recorded processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) is accumulated and communicated to our management to allow timely decisions regarding required disclosures. Our management concluded that our disclosure controls and procedures were not



26



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effective as described in more detail below. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting such that a reasonable possibility that a material misstatement of the financial statements will not be prevented or detected on a timely basis.

The specific weaknesses identified by our management were insufficient segregation of duties in our finance and accounting functions and lack of sufficient review by corporate management. The weaknesses are principally due to our recent transition from a private company to public company and lack of resources and working capital. During the period covered by this report we had limited staff. These deficiencies resulted in the following:

·

On and after May 28, 2010, we did not have the appropriate policies and procedures in place to ensure that the reverse merger transaction with H&H Imports, Inc. was accounted for as a reverse recapitalization rather that a reverse acquisition transaction.

·

We did not properly recognize our base rent expense on our Clearwater, Florida facility using the straight-line method.

·

We did not provide certain required, expended disclosures in our financial footnotes relating to our share based payments and warrant issuances during the periods reported.

·

Certain adjustments were made to our financial statements as a result of improper accounting treatment of complex debt and equity transactions.

·

Insufficient resources which restricts the Companys ability to complete financial statements in a timely manner.

·

Lack of an audit committee which results in ineffective oversight over the Companys financial reporting and accounting.

To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and accounting consultants. As we grow, we expect to increase our number of employees, which will enable us to implement adequate segregation of duties within the internal control framework. To correct these ongoing material weaknesses referenced above, management has implemented an overall program of enhanced disclosures and review procedures. We continue to formalize and update the documentation of our internal control processes, including our financial reporting processes. Subject to additional working capital we intend to hire additional accounting personnel.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





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PART II.OTHER FINANCIAL INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

From time to time, we are periodically a party to or otherwise involved in legal proceedings arising in the normal and ordinary course of business. As of the date of this report, we are not aware of any proceeding, threatened or pending, against us which, if determined adversely, would have a material effect on our business, results of operations, cash flows or financial position.

ITEM 1A.

RISK FACTORS

Not applicable to smaller reporting companies.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 8, 2010, November 8, 2010, and November 30, 2010 the Company sold 2,000,000, 1,650,000 and 7,500,000 Units of common stock, respectively, to a total of 5 accredited investors at $0.10 per Unit resulting in the issuance of 11,150,000 shares and 33,450,000 warrants, each Unit consisting of: (i) one Share of Common Stock; (ii) one Series A Warrant to purchase one share of Common Stock exercisable at $0.15 per share; (iii) one Series B Warrant to purchase one share of Common Stock exercisable at $0.25 per share; and (iv) one Series C Warrant to purchase one share of Common Stock exercisable at $0.50 per share (the Series A Warrant, Series B Warrant and Series C Warrants, collectively the Warrants). The securities were issued under the exemption from registration provided by Section 4(2) of the Securities Act. The investors had access to information concerning the Company and the securities issued to the investor contain a legend restricting transferability absent registration or applicable exemption.

Warrants issued in connection with the Companys 2010 Private Placements were treated as an equity transaction with no separate accounting recognition or valuation being attributed to the warrants contained in the Units sold. The transactions did not contain a security which would require relative fair value analysis or recognition of a discount or beneficial conversion feature requiring accretion of interest expense or recognition of a related dividend. The number of warrants issued with the Units offered was determined through arms-length discussion with investors.

On October 18, 2010, under the provisions of a three month investors relations agreement, the Company issued 156,250 common shares with a fair value of $25,000 on the contract date. The fair value of the common shares was derived from the closing price of our common stock on the contract commitment date. The securities issued to the consultant were issued under the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The securities contain a legend restricting transferability absent registration or applicable or applicable exemption. The consultant received current information about the Compnay and had the opportunity to ask questions about the Company.

On November 2, 2010, under a consulting agreement related to the Companys investor relations activities, the Company issued 100,000 shares with a fair value of $15,000 on the contract date. The fair value of the common shares was derived from the closing price of our common stock on the contract commitment date. The securities issued to the consultant were issued under the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The securities contain a legend restricting transferability absent registration or applicable exemption. The consultant received current information about the Company and had the opportunity to ask questions about the Company.

On November 11, 2010, the Company issued 150,000 shares under a Consulting and Management Agreement with a fair value on the contract date of $28,500. The fair value of the common shares was derived from the closing price of our common stock on the contract commitment date. The securities issued to the consultant were issued under the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The securities contain a legend restricting transferability absent registration or applicable exemption. The consultant received current information about the Company and had the opportunity to ask questions about the Company.



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On November 23, 2010, Mr. Kevin Harrington, Chairman, tendered 841,114 shares of common stock to the Company representing payment in full of a related party receivable totaling $151,400, inclusive of related interest of approximately $16,400. The shares tendered were valued at $0.18 per share, the closing price of the Companys common stock on the settlement date.

In December 2010 the Company issued 1,000,000 shares of common stock to a consultant, valued at $0.08 per share, pursuant to a consulting agreement. The securities issued to the consultant were issued under the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended. The securities contain a legend restricting transferability absent registration or applicable exemption. The consultant received current information about the Company and had the opportunity to ask questions about the Company.

On December 31, 2010 the Company issued 1,000,000 Units to an accredited investor, each Unit consisting of: (i) one Share of Common Stock; (ii) one Series A Warrant to purchase one share of Common Stock exercisable at $0.15 per share; (iii) one Series B Warrant to purchase one share of Common Stock exercisable at $0.25 per share; and (iv) one Series C Warrant to purchase one share of Common Stock exercisable at $0.50 per share at a price per Unit of $0.10. The Company received gross proceeds of $100,000 from the sale of the Units. The Company did not pay any commissions or finder fees in connection with the issuance. Warrants issued in connection with the Companys 2010 Private Placements were treated as an equity transaction with no separate accounting recognition or valuation being attributed to the warrants contained in the Units sold. The transactions did not contain a security which would require relative fair value analysis or recognition of a discount or beneficial conversion feature requiring accretion of interest expense or recognition of a related dividend. The number of warrants issued with the Units offered was determined through arms-length discussion with investors. The Company intends to use the proceeds from the sale of Units for general working capital. The securities issued to the investor were issued under the exemption from registration provided by Section 4(2) of the Securities Act of 1933, amended. The securities contain a legend restricting transferability absent registration or applicable exemption. The investor received current information about the Company and had the opportunity to ask questions about the Company.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

(REMOVED AND RESERVED)

ITEM 5.

OTHER INFORMATION

None



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ITEM 6.

EXHIBITS



|               |  |                                                                                                                                                  
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit
Number |  | Description                                                                                                                                      
|2.1            |  | Merger Agreement dated May 28, 2010 (1)                                                                                                          
|3.1            |  | Articles of Incorporation(2)                                                                                                                     
|3.2            |  | Articles of Amendment(2)                                                                                                                         
|3.3            |  | Bylaws(2)                                                                                                                                        
|4.1            |  | Form of Series A, B and C Common Stock Purchase Warrant(1)                                                                                       
|4.2            |  | Placement Agent Warrant(1)                                                                                                                       
|4.3            |  | Convertible Promissory Note issued to Steve Rogai(1)                                                                                             
|10.1           |  | Employment Agreement with Kevin Harrington(1)                                                                                                    
|10.2           |  | Executive Equity Incentive Plan(3)                                                                                                               
|10.3           |  | Non Executive Equity Incentive Plan(3)                                                                                                           
|31.1           |  | Certification of Chief Executive Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act                             
|31.2           |  | Certification of Chief Financial Officer pursuant to Rule 13A-14(a) or Rule 15d-14(a) of the Securities Exchange Act                             
|32.1           |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|32.2           |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



(1)

Incorporated by reference to the Companys current report on Form 8-K dated May 28, 2010 filed on June 4, 2010.

(2)

Incorporated by reference to the Companys registration statement on Form S-1 filed April 24, 2008.

(3)

Incorporated by reference to the Companys Schedule 14C Definitive Information Statement filed on July 8, 2010.



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SIGNATURES

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

Date: November 15, 2011

| |                   |                        
| | ----------------- | -----------------------
| |                   |                        
| | H&H Imports, Inc.
| |                   |                        
| | By:               | /s/ STEVEN ROGAI       
| |                   | Steven Rogai,          
| |                   | Chief Executive Officer
| |                   |                        













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