-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WcUFRNdYGTdBvM3Fl5GYeT2SApW2Csob6yl6A2MC9hipgG8ZmbBblcX9cIT0I7qu q+7wPSXiWfXg+aFOV2t7xw== 0001104659-09-048989.txt : 20090811 0001104659-09-048989.hdr.sgml : 20090811 20090811171055 ACCESSION NUMBER: 0001104659-09-048989 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20090627 FILED AS OF DATE: 20090811 DATE AS OF CHANGE: 20090811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVENTURE GROUP, INC. CENTRAL INDEX KEY: 0000944508 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FOOD PREPARATIONS & KINDRED PRODUCTS [2090] IRS NUMBER: 860786101 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14556 FILM NUMBER: 091004535 BUSINESS ADDRESS: STREET 1: 3500 S LA COMETA DR CITY: GOODYEAR STATE: AZ ZIP: 85338 BUSINESS PHONE: 6239326200 MAIL ADDRESS: STREET 1: 3500 S LA COMETA DR CITY: GOODYEAR STATE: AZ ZIP: 85338 FORMER COMPANY: FORMER CONFORMED NAME: POORE BROTHERS INC DATE OF NAME CHANGE: 19960926 10-Q 1 a09-18459_110q.htm 10-Q

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 27, 2009

o 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: 1-14556

THE INVENTURE GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware		86-0786101
(State or Other Jurisdiction of Incorporation or		(I.R.S. Employer
Organization)		Identification No.)

5050 N. 40th Street, Suite # 300 Phoenix, Arizona		85018
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (623) 932-6200

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. Yes x No o

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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 18,252,386 as of August 6, 2009.

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Part I. FINANCIAL INFORMATION

Item 1. Financial Statements - Unaudited

	Condensed consolidated balance sheets as of June 27, 2009 and December 27, 2008		3
	Condensed consolidated statements of income for the quarters and six months ended June 27, 2009 and June 28, 2008		4
	Condensed consolidated statements of cash flows for the six months ended June 27, 2009 and June 28, 2008		5
	Notes to unaudited condensed consolidated financial statements		6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			15

Item 3. Quantitative and Qualitative Disclosures About Market Risk			19

Item 4. Controls and Procedures			19

Part II. OTHER INFORMATION

Item 1.		Legal Proceedings	19

Item 1A.		Risk Factors	20

Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.		Defaults Upon Senior Securities	20

Item 4.		Submission of Matters to a Vote of Security Holders	20

Item 5.		Other Information	20

Item 6.		Exhibits	21

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE INVENTURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

	June 27,			December 27,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	1,525,316		$	683,567
Accounts receivable, net of allowance for doubtful accounts of $138,793 in 2009 and $80,740 in 2008	10,196,271			9,767,750
Inventories	16,604,368			13,979,526
Deferred income tax asset	635,733			831,779
Other current assets	875,976			777,192
Total current assets	29,837,664			26,039,814

Property and equipment, net	24,195,964			24,548,060
Goodwill	11,616,225			11,616,225
Trademarks and other intangibles, net	2,778,160			2,799,160
Other assets	271,294			257,783
Total assets	$	68,699,307		$	65,261,042

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	12,319,926		$	7,629,321
Line of credit	5,150,946			8,188,990
Accrued liabilities	5,393,294			4,520,347
Current portion of long-term debt	1,205,706			1,204,080
Total current liabilities	24,069,872			21,542,738

Long-term debt, less current portion	10,639,234			11,251,510
Interest rate swaps	488,315			886,222
Deferred income tax liability	2,635,515			2,529,266
Total liabilities	37,832,936			36,209,736

Commitments and contingencies (Note 6)

Shareholders’ equity:
Preferred stock, $100 par value; 50,000 shares authorized; no shares issued or outstanding at June 27, 2009 and December 27, 2008	—			—
Common stock, $.01 par value; 50,000,000 shares authorized; 18,252,386 shares issued and outstanding at June 27, 2009 and December 27, 2008	183,415			182,525
Additional paid-in capital	25,862,991			25,740,911
Accumulated other comprehensive loss	(209,863		)	(448,610		)
Retained earnings	5,501,023			3,576,480
	31,337,566			29,051,306

Treasury stock, at cost: 367,957 shares at June 27, 2009 and -0- shares at December 27, 2008	(471,195		)	—
Total shareholders’ equity	30,866,371			29,051,306
Total liabilities and shareholders’ equity	$	68,699,307		$	65,261,042

The accompanying notes are an integral part of these condensed consolidated financial statements.

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THE INVENTURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited)

	Quarter Ended						Six Months Ended
	June 27,			June 28,			June 27,			June 28,
	2009			2008			2009			2008

Net revenues	$	33,419,531		$	29,248,655		$	63,138,365		$	55,419,730

Cost of revenues	27,069,402			23,946,832			50,693,891			45,043,172

Gross profit	6,350,129			5,301,823			12,444,474			10,376,558

Selling, general and administrative expenses	4,390,600			3,965,677			8,866,301			7,781,332

Operating income	1,959,529			1,336,146			3,578,173			2,595,226

Interest expense, net	(235,898		)	(128,326		)	(413,952		)	(681,237		)

Income before income tax provision	1,723,631			1,207,820			3,164,221			1,913,989

Income tax provision	(686,253		)	(485,280		)	(1,239,678		)	(780,152		)

Net income	$	1,037,378		$	722,540		$	1,924,543		$	1,133,837

Earnings per common share:
Basic	$	0.06		$	0.04		$	0.11		$	0.06
Diluted	$	0.06		$	0.04		$	0.10		$	0.06

Weighted average number of common shares:
Basic	17,884,429			18,840,415			18,024,326			18,840,582
Diluted	17,955,071			18,840,415			18,530,386			18,840,582

The accompanying notes are an integral part of these condensed consolidated financial statements.

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THE INVENTURE GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

	Six months Ended
	June 27, 2009			June 28, 2008

Cash flows from operating activities:
Net income	$	1,924,543		$	1,133,837
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	1,622,491			1,339,521
Amortization	31,221			7,580
Provision for bad debts	9,173			40,273
Deferred income taxes	302,294			712,302
Share-based compensation expense	116,171			160,374
Amortization of deferred compensation expense	5,909			23,859
Gain on disposition of equipment	—			(4,377		)
Change in operating assets and liabilities:
Accounts receivable	(437,693		)	494,882
Inventories	(2,624,842		)	(1,611,117		)
Other assets and liabilities	(97,396		)	23,774
Accounts payable and accrued liabilities	5,379,272			2,959,672
Net cash provided by operating activities	6,231,143			5,280,580

Cash flows from investing activities:
Purchase of property and equipment	(1,270,394		)	(2,163,866		)
Net cash used in investing activities	(1,270,394		)	(2,163,866		)

Cash flows from financing activities:
Line of credit payments, net	(3,038,044		)	(2,438,989		)
Payments made on long-term debt	(610,651		)	(582,522		)
Proceeds from issuance of common stock	890			—
Treasury stock purchases	(471,195		)	(732		)
Net cash used in financing activities	(4,119,000		)	(3,022,243		)
Net increase in cash and cash equivalents	841,749			94,471
Cash and cash equivalents at beginning of period	683,567			494,918
Cash and cash equivalents at end of period	$	1,525,316		$	589,389

Supplemental disclosures of cash flow information:
Cash paid during the period for interest	$	221,173		$	554,655
Cash paid during the period for income taxes	$	698,000		$	—

Supplemental disclosures of non-cash activities:
Net accrual for interest expense resulting from interest rate swap	$	—		116,698

The accompanying notes are an integral part of these condensed consolidated financial statements.

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THE INVENTURE GROUP, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Summary of Significant Accounting Policies:

The Inventure Group, Inc., (“the Company”) a Delaware corporation, was formed in 1995 as a holding company to acquire a potato chip manufacturing and distribution business, which had been founded by Donald and James Poore in 1986. The Company changed its name from Poore Brothers, Inc. to The Inventure Group, Inc. on April 10, 2006.

In December 1996, the Company completed an initial public offering of its Common Stock. In November 1998, the Company acquired the business and certain assets (including the Bob’s Texas Style® potato chip brand) of Tejas Snacks, L.P. (“Tejas”), a Texas-based potato chip manufacturer. In October 1999, the Company acquired Wabash Foods, LLC (“Wabash”) including the Tato Skins®, O’Boisies®, and Pizzarias® trademarks and the Bluffton, Indiana manufacturing operation and assumed all of Wabash Foods’ liabilities. In June 2000, the Company acquired Boulder Natural Foods, Inc. (“Boulder”) and the Boulder Canyon Natural FoodsTM brand of totally natural potato chips.

In October 2000, the Company launched its T.G.I. Friday’s® brand snacks pursuant to a license agreement with TGI Friday’s Inc., which expires in 2014.

In May 2007, the Company acquired Rader Farms, Inc. including the Rader Farms® trademark and the Lynden, Washington frozen fruit processing operation, for a total cost of $20.9 million.

In October 2007, the Company launched its BURGER KINGTM brand snack products pursuant to a license agreement with Burger King Corporation, which expires in 2012.

The Company’s fiscal year ends on the last Saturday occurring in the month of December of each calendar year. Accordingly, the second quarter of 2009 commenced March 28, 2009 and ended June 27, 2009.

Business

The Company is a $100+ million marketer and manufacturer of healthy/all natural and indulgent specialty food brands. The Company is headquartered in Phoenix, Arizona with plants in Arizona, Indiana and Washington. The goal is to build a rapidly growing specialty brand company that specializes on evolving consumer eating habits in two primary product segments: 1) Healthy/Natural Food Products 2) Indulgent Specialty Snack Food Brands. The company sells its products nationally through a number of channels including: Grocery, Natural, Mass, Drug, Club, Vending, Food Service, Convenience Stores and International.

In the Healthy/Natural portfolio, products include Rader Farms frozen berries and Boulder Canyon Natural Foods™ brand kettle cooked potato chips. In the Indulgent Specialty category, products include TGI Friday’s® brand snacks under license from TGI Friday’s Inc., BURGER KINGTM brand snack products under license from Burger King Corporation, Poore Brother’s® kettle cooked potato chips, Bob’s Texas Style®kettle cooked chips, Tato Skins® brand potato snacks and O’Boises® potato snacks. The Company also manufactures private label snacks for certain grocery retail chains and distributes in Arizona snack food products that are manufactured by others.

The Inventure Group, Inc.’s frozen berry products are manufactured by Rader Farms, Inc. (“Rader Farms”) a Washington corporation located in Whatcom County, and acquired by the Company in May of 2007. Rader Farms grows, processes and markets premium berry blends, raspberries, blueberries, and rhubarb and purchases marionberries, cherries, cranberries, strawberries and other fruits from a select network of fruit growers for resale. The fruit is processed, frozen and packaged for sale and distribution to wholesale customers. The company also uses third party processors for certain products.

The Company’s snack products are manufactured at the Arizona and Indiana plants as well as some third party plants for certain products.

Basis of Presentation

The condensed consolidated financial statements include the accounts of The Inventure Group, Inc. and all of its wholly owned subsidiaries. All significant intercompany amounts and transactions have been eliminated. The financial statements have been prepared in accordance with the instructions for Form 10-Q and, therefore, do not include all the information and footnotes required by accounting principles generally accepted in the United States of America. In the opinion of

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management, the condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary in order to make the condensed consolidated financial statements not misleading. A description of the Company’s accounting policies and other financial information is included in the audited financial statements filed with the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2008. The results of operations for the quarter and six months ended June 27, 2009 are not necessarily indicative of the results expected for the full year.

Fair Value Measurements

The Company adopted SFAS 157, “Fair Value Measurements” (SFAS 157) on December 29, 2007. SFAS 157, among other things, defines fair value, establishes a consistent framework for measuring fair value and expands disclosure for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. SFAS 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level 1: Observable inputs such as quoted prices in active markets;

Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

The Company measures certain assets and liabilities at fair value consisting of cash and equivalents and interest rate swaps.

Adoption of New Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 160, Noncontrolling Interests in Consolidated Financial Statements — an amendment of Accounting Research Bulletin No. 51 (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 also establishes disclosure requirements that clearly identify and distinguish between the controlling and noncontrolling interests and requires the separate disclosure of income attributable to controlling and noncontrolling interests. SFAS 160 is effective for fiscal years and interim periods beginning after December 15, 2008. The adoption of SFAS 160 had no impact on the Company’s financial position, results of operations or liquidity.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, Disclosures about Derivative Instruments and Hedging Activities — an amendment of FASB Statement No. 133 (“SFAS 161”). SFAS 161 applies to all entities and requires specified disclosures for derivative instruments and related hedge items accounted for under SFAS 133, Accounting for Derivative Instruments and Hedging Activities . SFAS 161 requires enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and their effect on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS 161 had no impact on the Company’s financial position, results of operations or liquidity.

FASB Staff Position No. 107-1 and Accounting Principles Board (APB) 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” were issued to outline the required financial statement disclosures relating to fair value of financial instruments during interim reporting periods. FASB Staff Position No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly,” was issued to provide additional guidance in evaluating the fair value of a financial instrument when the volume and level of activity for the asset or liability has significantly decreased. FASB Staff Position No. 115-2 and FASB Staff Position No. 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments,” were issued to provide additional guidance on presenting impairment losses on securities.

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also includes a required disclosure of the date through which an entity has evaluated subsequent events, which for public entities is the date upon which the financial statements are issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The Company adopted SFAS 165 for the interim period ended June 27, 2009. The Company evaluated subsequent events through August 11, 2009, which is the date upon which the Company’s consolidated financial statements for the interim period ended June 27, 2009 were issued. The adoption of SFAS 165 did not have an impact on the Company’s financial position, results of operations or liquidity.

The Company does not expect the adoption of these new pronouncements to have a material effect on its consolidated results of operations or financial condition.

Earnings Per Common Share

Basic earnings per common share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is calculated by including all dilutive common shares such as stock options and restricted stock. Stock options outstanding of 1,175,500 and unvested restricted shares outstanding of 89,000 were excluded from the weighted average per share calculation for the quarter ended June 27, 2009 because inclusion of such would be anti-dilutive. Stock options outstanding of 1,755,500 and unvested restricted shares outstanding of 89,000 were excluded from the weighted average per share calculation for the six months ended June 27, 2009 because inclusion of such would be anti-dilutive. Stock options outstanding of 1,930,833 were excluded from the weighted average per share calculation for the quarter and six months ended June 28, 2008 because inclusion of such would be anti-dilutive. Exercises of outstanding stock options or warrants are assumed to occur for purposes of calculating diluted earnings per share for periods in which their effect would not be anti-dilutive. Earnings per common share was computed as follows for the quarters and six months ended June 27, 2009 and June 28, 2008:

	Quarter Ended				Six Months Ended
	June 27, 2009		June 28, 2008		June 27, 2009		June 28, 2008
Basic Earnings Per Share:
Net income	$	1,037,378	$	722,540	$	1,924,543	$	1,133,837
Weighted average number of common shares	17,884,429		18,840,415		18,024,326		18,840,582
Earnings per common share	$	0.06	$	0.04	$	0.11	$	0.06

Diluted Earnings Per Share:
Net income	$	1,037,378	$	722,540	$	1,924,543	$	1,133,837

Weighted average number of common shares	17,884,429		18,840,415		18,024,326		18,840,582
Incremental shares from assumed conversions of stock options and non- vested shares of restricted stock	70,642		—		506,060		—
Adjusted weighted average number of common shares	17,955,071		18,840,415		18,530,386		18,840,582
Earnings per common share	$	0.06	$	0.04	$	0.10	$	0.06

Stock Options, Stock-Based Compensation and Shareholders’ Equity

The Company’s 1995 Stock Option Plan (the “1995 Plan”), as amended, provided for the issuance of options to purchase 3,500,000 shares of Common Stock. The options granted pursuant to the 1995 Plan expire over a five-year period and generally vest over three years. In addition to options granted under the 1995 Plan, the Company also issued non-qualified options (non-plan options) to purchase Common Stock to certain Directors and Officers which are exercisable and expire either five or ten years from date of grant. All options are issued at an exercise price of fair market value of the underlying common stock on the date of grant and are non-compensatory. The 1995 Plan expired in May 2005 with 410,518 reserved but unissued shares of Common Stock available for issuance under the 1995 Plan, and was replaced by the Inventure Group, Inc. 2005 Equity Incentive Plan (the “2005 Plan”) as described below.

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The 2005 Plan was approved at the Company’s 2005 Annual Meeting of Shareholders and reserved for issuance that number of shares of Common Stock determined by adding (a) 410,518, which is the number of reserved but unissued shares available for issuance under the 1995 Plan, (b) 500,000, which is the number of additional shares approved by the stockholders on May 23, 2006 to be added to the 2005 Plan, (c) 500,000, which is the number of additional shares approved by the stockholders on May 19, 2008 to be added to the 2005 Plan and (d) 500,000, which is the number of additional shares approved by the stockholders on May 19, 2009 to be added to the 2005 Plan. If any shares of Common Stock subject to awards granted under the 1995 Plan or the 2005 Plan are canceled, those shares will be available for future awards under the 2005 Plan. The 2005 Plan expires in May 2015, and awards granted under the 2005 Plan may include nonqualified stock options, incentive stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and stock-reference awards. Prior to May 2008, all stock option grants had a 5-year term. The fair value of these stock option grants is amortized to expense over the vesting period, generally three years for employees and one year for the Board of Directors. In May 2008, the Company’s Board of Directors approved a 10 year term for all future stock option grants, with vesting periods of five years and one year for employees and Board of Director members, respectively.

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment,” which requires that compensation cost related to all share-based payment arrangements, including employee stock options, be recognized in the financial statements based on the fair value method of accounting. In addition, SFAS No. 123R requires that excess tax benefits related to share-based payment arrangements be classified as cash inflows from financing activities and cash outflows from operating activities. SFAS No. 123R is a revision of SFAS No. 123, “Accounting for Stock-Based Compensation,” and supersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations.

On June 1, 2009, the Company issued to its Chief Executive Officer 52,000 shares of restricted stock under the company’s 2005 Equity Incentive Plan, subject to vesting in equal installments over three years. The restricted stock was valued at the fair market value of the Common Stock on the close of business of the day prior to the date of grant, and the resulting deferred compensation expense of $124,280 was included in additional paid-in-capital and is being amortized over the vesting period. As of June 27, 2009, amortization expense of $3,452 is included in selling, general, and administrative expenses.

On June 1, 2009, the Company issued to its Chief Financial Officer 37,000 shares of restricted stock under the company’s 2005 Equity Incentive Plan, subject to vesting in equal installments over three years. The restricted stock was valued at the fair market value of the Common Stock on the close of business of the day prior to the date of grant, and the resulting deferred compensation expense of $88,430 was included in additional paid-in-capital and is being amortized over the vesting period. As of June 27, 2009, amortization expense of $2,456 is included in selling, general, and administrative expenses.

During the six months ending June 27, 2009 and June 28, 2008, the total share-based compensation expense recognized from restricted stock awards in the financial statements was $5,908 and $23,812 respectively, and is included in selling, general and administrative expenses. There were no share-based compensation costs which were capitalized. As of June 27, 2009 and June 28, 2008 the total unrecognized costs related to non-vested restricted stock awards granted was $206,802 and $12,328, respectively.

There were no restricted stock awards granted during the quarter and six months ended June 28, 2008.

During the six months ended June 27, 2009 and June 28, 2008, the Company recorded $116,171 and $160,374 of share-based compensation expense, respectively related to stock options. During the quarters ended June 27, 2009 and June 28, 2008, the Company recorded $60,271 and $86,455 of share-based compensation expense, respectively, related to stock options.

There were no stock options exercised during the six months ended June 27, 2009 and June 28, 2008.

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the quarter and six months ended:

	Quarter Ended				Six Months Ended
	June 27, 2009		June 28, 2008		June 27, 2009		June 28, 2008
Expected dividend yield	0	%	0	%	0	%	0	%
Expected volatility	73	%	46	%	73	%	46	%
Risk-free interest rate	3.3% - 3.7	%	3.1	%	2.9% - 3.7	%	2.5% - 3.1	%
Expected life – Employees options	6.5 years		1.8 years		6.5 years		1.8 years
Expected life – Board of directors options	1.2 years		1.6 years		1.2 years		1.6 years

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The expected dividend yield was based on the Company’s expectation of future dividend payouts. The volatility assumption was based on historical volatility during the time period that corresponds to the expected life of the option. The expected life (estimated period of time outstanding) of stock options granted was estimated based on historical exercise activity. The risk-free interest rate assumption was based on the interest rate of U.S. Treasuries on the date the option was granted.

As of June 27, 2009, the amount of unrecognized compensation expense related to stock options to be recognized over the next two years, in accordance with SFAS 123R, is approximately $0.4 million. This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future. Generally, the Company issues new shares upon the exercise of stock options as opposed to reissuing treasury shares.

The following table summarizes stock option activity during the six months ended June 27, 2009:

	Plan Options
	Options Outstanding		Weighted Average Exercise Price
Balance, December 27, 2008	2,223,833		$	2.34
Granted	360,000		$	2.19
Forfeited	(403,333	)	$	2.63
Exercised	—		—
Balance, June 27, 2009	2,180,500		$	2.26

The intrinsic value related to total stock options outstanding was $835,300 as of June 27, 2009 and zero as of June 28, 2008. The intrinsic value related to vested stock options outstanding was $147,043 as of June 27, 2009 and zero as of June 28, 2008. The aggregate intrinsic value is based on the exercise price and the Company’s closing stock price of $2.55 as of June 27, 2009 and $1.80 as of June 28, 2008.

Issuer Purchases of Equity Securities

The Company’s Board of Directors approved a stock re-purchase program that was publicly announced on Form 8-K filed with the SEC on September 26, 2008 whereby up to $2 million of common stock could be purchased from time to time at the discretion of management (the “2008 program”). The repurchased shares are generally held as treasury stock and are available for general corporate purposes unless and until such shares are retired by the Board. The 2008 program expires August 23, 2009 and the Company continues to evaluate its share repurchase opportunities. Below is a table showing repurchased shares for each month included in the period covered by this report:

Period	Total Number of Shares Repurchased	Weighted Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Programs	Maximum that may yet be Purchased Under the 2008 Program

12/28/08 – 1/31/09	—	$	—	—	$	1,272,878

2/1/09 – 2/28/09	—	$	—	—	$	1,272,878

3/1/09 - 03/28/09	367,957	$	1.28	367,957	$	(471,195	)

3/29/09 – 6/27/09	—	$	—	—	$	801,683

Total					$	801,683

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On December 27, 2008 the Company’s Board of Directors approved the retirement of all treasury stock shares purchased under the 2006, 2007, and 2008 programs. A total of 1,933,827 shares were retired at cost. The Company’s treasury stock balance of shares held as of December 27, 2008 was zero.

Deferred Compensation Plan

Effective January 1, 2007 the Company entered into a deferred compensation plan. The assets are vested in mutual funds and are reflected in other current assets and the related obligation is reflected in accrued liabilities in the balance sheet.

2. Accrued Liabilities:

Accrued liabilities consisted of the following as of June 27, 2009 and December 27, 2008:

	June 27, 2009		December 27, 2008
Accrued payroll and payroll taxes	$	2,017,335	$	1,531,079
Accrued royalties and commissions	895,203		679,152
Accrued advertising and promotion	1,003,393		669,256
Accrued other	1,477,363		1,640,860
	$	5,393,294	$	4,520,347

3. Inventories:

Inventories consisted of the following as of June 27, 2009 and December 27, 2008:

	June 27,		December 27,
	2009		2008
Finished goods	$	11,287,198	$	6,133,453
Raw materials	5,317,170		7,846,073
	$	16,604,368	$	13,979,526

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4. Goodwill, Trademarks and Other Intangibles, Net:

Goodwill, trademarks and other intangibles, net consisted of the following as of June 27, 2009 and December 27, 2008:

	Estimated Useful Life	June 27, 2009			December 27, 2008
Goodwill:
The Inventure Group, Inc.		$	5,986,252		$	5,986,252
Rader Farms, Inc.		5,629,973			5,629,973

Total Goodwill		$	11,616,225		$	11,616,225

Trademarks:
The Inventure Group, Inc.		$	1,535,659		$	1,535,659
Rader Farms, Inc.		$	1,070,000		$	1,070,000

Other intangibles:
Rader - Covenant-not-to-compete, gross carrying amount	5 years	$	160,000		$	160,000
Rader - Covenant-not-to-compete, accum. amortization		(66,675		)	(50,673		)
Rader - Customer relationship, gross carrying amount	10 years	100,000			100,000
Rader - Customer relationship, accum. amortization		(20,824		)	(15,826		)

Total Trademarks and other intangibles, net		$	2,778,160		$	2,799,160

Amortization expense for the six months ended June 27, 2009 and June 28, 2008 amounted to $21,000 and $7,580, respectively. As of December 27, 2008, we expect amortization expense on these intangible assets over the next five years to be as follows:

2009	$	42,000
2010	$	42,000
2011	$	42,000
2012	$	23,327
2013	$	10,000

Goodwill and trademarks are reviewed for impairment annually in the second fiscal quarter, or more frequently if impairment indicators arise. Goodwill is required to be tested for impairment between the annual tests if an event occurs or circumstances change that more-likely-than-not reduces the fair value of a reporting unit below its carrying value. Intangible assets with indefinite lives are required to be tested for impairment between the annual tests if an event occurs or circumstances change indicating that the asset might be impaired. The carrying values were not impaired as of June 27, 2009.

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5. Long-Term Debt:

Long-term debt consisted of the following as of June 27, 2009 and December 27, 2008:

	June 27,			December 27,
	2009			2008
Mortgage loan due monthly through July, 2012; interest at 9.03%; collateralized by land and building in Goodyear, AZ	$	1,546,783		$	1,577,093
Mortgage loan due monthly through December, 2016; interest rate at 30 day LIBOR plus 165 basis points, fixed through a swap agreement to 6.85%; collateralized by land and building in Bluffton, IN	2,253,234			2,284,909
Equipment term loan due monthly through May, 2014; interest at LIBOR plus 165 basis points; collateralized by equipment at Rader Farms in Lynden, WA	4,285,714			4,714,286
Real Estate term loan due monthly through July, 2017; interest at LIBOR plus 165 basis points; fixed through a swap agreement to 4.28%; secured by a leasehold interest in the real property in Lynden, WA	3,697,035			3,780,919
Vehicle term loan and other miscellaneous loans due in various monthly installments through February, 2011; collateralized by vehicles	53,432			88,183
Office Equipment leases due June 2012	8,742			10,200
	11,844,940			12,455,590
Less current portion of long-term debt	(1,205,706		)	(1,204,080		)
Long-term debt, less current portion	$	10,639,234		$	11,251,510

To fund the acquisition of Rader Farms, the Company entered into a Loan Agreement (the “Loan Agreement”) with U.S. Bank National Association (“U.S. Bank”). Each of our subsidiaries is a guarantor of the Loan Agreement, which is secured by a pledge of all of the assets of our consolidated group. The borrowing capacity available to us under the Loan Agreement consists of notes representing:

· a $15,000,000 revolving line of credit maturing on June 30, 2011; $5,150,946 was outstanding at June 27, 2009. Based on eligible assets, the amount available under the line of credit was $3,848,746 at June 27, 2009. As defined in the revolving credit facility note, all borrowings under the revolving line of credit will bear interest at either (i) the prime rate of interest announced by U.S. Bank from time to time or (ii) LIBOR plus the LIBOR Rate Margin.

· Equipment term loan due May 2014 noted above.

· Real estate term loan due July 2017 noted above.

U.S. Bank may terminate its commitments and accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an event of default (as defined in the Loan Agreement), subject, in certain instances, to the expiration of an applicable cure period. The agreement requires the Company to maintain compliance with certain financial covenants, including a minimum tangible net worth, a minimum fixed charge coverage ratio and a maximum leverage ratio. At June 27, 2009, the Company was in compliance with all of the financial covenants. Deferred financing fees totaling $119,744, which are included in Other Assets, were recorded in connection with the Loan Agreement and are being amortized over the life of the loan.

Interest Rate Swaps

To manage exposure to changing interest rates, the Company selectively enters into interest rate swap agreements. The Company’s interest rate swaps qualify for and are designated as cash flow hedges. Changes in the fair value of a swap that is highly effective and that is designated and qualifies as a cash flow hedge to the extent that the hedge is effective, are recorded in other comprehensive income (loss).

The Company entered into an interest rate swap in December 2006 to convert the interest rate of the mortgage to purchase the Bluffton, Indiana plant from the contractual rate of 30 day LIBOR plus 165 basis points to a fixed rate of 6.85%. On September 28, 2008, the Company’s first day of its fiscal fourth quarter, the Company prospectively redesignated the hedging relationship to a cash flow hedge. The swap has a fixed pay-rate of 6.85% and a notional amount of approximately $2.3 million at June 27, 2009 and expires in December, 2016. We evaluate the effectiveness of the hedge on a quarterly basis and at June 27, 2009 the hedge is highly effective. The interest rate swap had fair value of ($262,800) at June 27, 2009, which is recorded as a liability on the accompanying consolidated balance sheet. The swap value was determined in accordance with SFAS No. 157 using Level 2 observable inputs and approximates the net loss that would have been realized if the contract had been settled on June 27, 2009.

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The Company entered into another interest rate swap in January 2008 to effectively convert the interest rate of the real estate term loan to a fixed rate of 4.28%. The interest rate swap is structured with a decreasing notional amount to match the expected pay down of the debt. The notional value of the swap at June 27, 2009 was $3.7 million. The interest rate swap is accounted for as a cash flow hedge derivative. We evaluate the effectiveness of the hedge on a quarterly basis and at June 27, 2009 the hedge is highly effective. The interest rate swap had fair value of ($225,515) at June 27, 2009, which is recorded as a liability on the accompanying consolidated balance sheet, and was recorded in “Accumulated other comprehensive loss,” all of which represents the change in fair value as of June 27, 2009. This value was determined in accordance with SFAS No. 157 using Level 2 observable inputs and approximates the net loss that would have been realized if the contract had been settled on June 27, 2009.

The only component of other comprehensive income/loss for the periods presented is the change in fair value of the interest rate swaps. The effect of such is as follows:

	Quarter ended					Six Months Ended
	June 27, 2009		June 28, 2008			June 27, 2009		June 28, 2008

Net income	$	1,037,378	$	722,540		$	1,924,543	$	1,133,837

Change in fair value of interest rate swaps (net of tax)	184,393		(164,378		)	238,747		22,568

Comprehensive Income	$	1,221,771	$	558,162		$	2,163,290	$	1,156,405

6. Litigation:

The Company is periodically a party to various lawsuits arising in the ordinary course of business. Management believes, based on discussions with legal counsel, that the resolution of such lawsuits, individually and in the aggregate, will not have a material adverse effect on the Company’s financial position or results of operations.

The Inventure Group, Inc. was one of eight companies sued by the Environmental Law Foundation in August, 2006 in the Superior Court for the State of California for the County of Los Angeles by the Attorney General of the State of California for alleged violations of California Proposition 65. California Proposition 65 is a state law that, in part, requires companies to warn California residents if a product contains chemicals listed within the statute. The matter was resolved in March 2009, and the Company incurred a settlement liability of $0.2 million.

7. Business Segments:

The Company’s operations consist of three reportable segments: manufactured snack products, berry products and distributed products. The manufactured products segment produces potato chips, potato crisps and potato skins for sale primarily to snack food distributors and retailers. The berry products segment produces frozen berries for sale primarily to groceries, mass merchandisers and club stores. The distributed products segment sells snack food products manufactured by other companies to the Company’s Arizona snack food distributors. The Company’s reportable segments offer different products and services. The majority of the Company’s revenues are attributable to external customers in the United States. The Company does sell to customers in Mexico, Canada, the Caribbean, Latin America, South America, the Middle East, Malta, Germany, India, Hong Kong, Japan, Singapore, Malaysia, Malta, Thailand, Taiwan, Philippines, and the United Kingdom as well, however the revenues attributable to those customers are immaterial. All of the Company’s assets are located in the United States. The Company does not allocate any assets to the distributed products segment.

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (Note 1). The Company does not allocate assets, selling, general and administrative expenses, income taxes or other income and expense to segments.

	Manufactured Snack Products		Berry Products		Distributed Products		Consolidated
Quarter ended June 27, 2009
Net revenues from external customers	$	20,841,367	$	11,717,247	$	860,917	$	33,419,531
Depreciation and amortization in segment gross profit	258,525		155,537		—		414,062
Segment gross profit	4,644,353		1,461,146		244,630		6,350,129

Quarter ended June 28, 2008
Net revenues from external customers	$	17,974,976	$	10,128,567	$	1,145,112	$	29,248,655
Depreciation and amortization in segment gross profit	216,872		85,085		—		301,957
Segment gross profit	3,843,047		1,320,760		138,016		5,301,823

Six months ended June 27, 2009
Net revenues from external customers	$	38,892,239	$	22,425,829	$	1,820,297	$	63,138,365
Depreciation and amortization in segment gross profit	511,188		309,314		—		820,502
Segment gross profit	7,448,532		4,559,549		436,393		12,444,474

Six months ended June 28, 2008
Net revenues from external customers	$	33,548,547	$	19,743,081	$	2,128,102	$	55,419,730
Depreciation and amortization in segment gross profit	452,967		167,997		—		620,964
Segment gross profit	6,911,135		3,184,035		281,388		10,376,558

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The following table reconciles reportable segment gross profit to the Company’s consolidated income before income tax benefit (provision) for the quarters and six months ended June 27, 2009 and June 28, 2008:

	Quarter Ended						Six Months Ended
	June 27, 2009			June 28, 2008			June 27, 2009			June 28, 2008

Segment gross profit	$	6,350,129		$	5,301,823		$	12,444,474		$	10,376,558
Unallocated amounts:
Selling, general and administrative expenses	(4,390,600		)	(3,965,677		)	(8,866,301		)	(7,781,332		)
Interest income (expense), net	(235,898		)	(128,326		)	(413,952		)	(681,237		)
Income before income tax provision	$	1,723,631		$	1,207,820		$	3,164,221		$	1,913,989

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

This Quarterly Report on Form 10-Q, including all documents incorporated by reference, includes “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and The Inventure Group, Inc. (the “Company”) desires to take advantage of the “safe harbor” provisions thereof. Therefore, the Company is including this statement for the express purpose of availing itself of the protections of the safe harbor with respect to all of such forward-looking statements. In this Quarterly Report on Form 10-Q, the words “anticipates,” “believes,” “expects,” “intends,” “estimates,” “projects,” “will likely result,” “will continue,” “future” and similar terms and expressions identify forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q reflect the Company’s current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including specifically the possibility that the Company will need additional financing due to future operating losses or in order to implement the Company’s business strategy, the possible diversion of management resources from the day-to-day operations of the Company as a result of strategic acquisitions, potential difficulties resulting from the integration of acquired businesses with the Company’s business, other acquisition-related risks, lack of consumer acceptance of existing and future products, dependence upon key license agreements, dependence upon major customers, significant competition, risks related to the food products industry, deteriorating economic conditions, volatility of the market price of the Company’s common stock, par value $.01 per share (the “Common Stock”), the possible de-listing of the Common Stock from the Nasdaq Capital Market if the Company fails to satisfy the applicable listing criteria (including a minimum share price) in the future and those other risks and uncertainties discussed herein, that could cause actual results to differ materially from historical results or those anticipated. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Quarterly Report on Form 10-Q will in fact transpire or prove to be accurate. Readers are cautioned to consider the specific risk factors described herein and in “Risk Factors” in the Company’ Annual Report on Form 10-K for the fiscal year ended December 27, 2008 and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that may arise after the date hereof. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this section.

Results of Operations

Quarter ended June 27, 2009 compared to the quarter ended June 28, 2008

Net revenues for the second quarter of fiscal 2009 were $33.4 million, up $4.2 million, or 14.3% higher than the same period last year.

Snack division net revenues were $21.7 million, up 13.5% versus the same period last year. The company attributed the increase in net revenue in the Snack division to higher year-over-year product sales across the majority of its products including Boulder Canyon™ Natural Foods (up 25.7 %), T.G.I. Friday’s®(up 3.5 %), BURGER KING™(up 45.9 %) and Private Label (up 155 %). These increases were partially offset by a year-over-year decline in sales at the Poore Brothers® brand. In the Rader Farms division, net revenues were $11.7 million, an increase of 15.7% over last year.

Gross profit for the quarter ended June 27, 2009 increased 19.8% or $1.0 million as compared to the quarter ended June 28, 2008, and also increased as a percentage of net revenues (19.0% of net revenue for 2009 and 18.1% of net revenue for 2008). The increase was attributable to the sales increases at both the Snack and Rader divisions, as well as the impact of increased pounds processed through the Snack plants.

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Selling, general and administrative expenses were $4.4 million in the second quarter of 2009 as compared to $4.0 million in the second quarter of 2008. These expenses decreased to 13.1% of net revenues in 2009, as compared to 13.6% of net revenues in 2008. This decrease is primarily attributable to the higher sales volume during the quarter, as well as a continued emphasis on cost controls.

Net interest expense was $235,898 in the second quarter of 2009 compared to net interest expense of $128,326 in the second quarter of 2008. The decrease primarily relates to a change in accounting treatment of swap instruments. See “Interest Rate Swaps” for further detail. The Company recognized $113,521 of interest income as a result of an interest rate swap in the first quarter of 2008, with no similar benefit incurred in the second quarter of 2009.

Net income was $1.0 million, or $0.06 per basic and diluted share, compared to net income of $0.7 million, or $0.04 per basic and diluted share in the second quarter of last year.

Six months ended June 27, 2009 compared to the six months ended June 28, 2008

For the six months ended June 27, 2009 net revenues increased 13.9%, or $7.7 million, to $63.1 million, compared with net revenue of $55.4 million in the first half of the previous year. Total net revenues for the six months ended June 27, 2009 include $22.4 million from Rader Farms, representing an increase of 13.7%, or $2.7 million, from the $19.7 million of net revenues from Rader Farms in the first six months of 2008. For the snack business, total net revenues for the six months ended June 27, 2009 were 40.7 million, representing an increase of 14.0%, or $5.0 million, from the $35.7 million of snack net revenues for the six months of 2008.

Gross profit for the six months ended June 27, 2009 was $12.4 million, or 19.7% of net revenues, compared to $10.4 million, or 18.7% of net revenues for the six months ended June 30, 2008. This increase of $2.0 million, or 20%, was attributable to the revenue growth at both the Snack and Rader divisions, growth in pounds processed through the snack division plant, and the composition of inventory utilized at Rader Farms during the period. Rader Farms margins can vary depending on the mix of grown versus purchased berries. During the six month period ended June 27, 2009, the mix was more heavily weighted to grown berries. These gains were partially offset by a shift in sales in the snack division to lower margin channels, a resultant impact of the current economic environment and price increases in certain commodities.

Selling, general and administrative expenses increased to $8.9 million for the six months ended June 27, 2009 from $7.8 million for the six months ended June 28, 2008. Selling, general and administrative expenses were 14.0% of total net revenues for the six months ended June 27, 2009 and June 28, 2008. The consistent percentage is due primarily to the increase in net revenues, offset by the company’s continued investment in information technology and increased investment in selling and marketing at Rader Farms.

Net interest expense was $0.4 million in the first six months of 2009 compared to net interest expense of $0.7 million in the first six months of 2008. The decrease relates to the company’s $3.0 million reduction in its outstanding line of credit balance from $8.2 million at December 27, 2008 to $5.2 million at June 27, 2009. In addition, the company changed their accounting treatment of swap instruments. See “Interest Rate Swaps” for further detail. The Company recognized $0.1 million of interest expense as a result of an interest rate swap in the first six months of 2008, with no similar expense incurred in the first six months of 2009.

Net income for the six months ended June 27, 2009 was $1.9 million, or $0.11 per basic share and $0.10 per diluted share, compared with net income of $1.1 million, or $0.06 per basic and diluted share, in the prior-year period.

Liquidity and Capital Resources

Net working capital was $5.8 million (a current ratio of 1.2:1) at June 27, 2009 and $4.5 million (a current ratio of 1.2:1) at December 27, 2008. For the six months ended June 27, 2009, the Company generated cash flow of $6.2 million from operating activities, invested $1.3 million in equipment, utilized $3.6 million to pay down its line of credit and other debt and purchased $0.5 million of treasury shares. For the six months ended June 28, 2008, the Company generated cash flow of $5.3 million from operating activities, invested $2.2 million in equipment and utilized $3.0 million to pay down its line of credit and other debt. Inventories increased $2.6 million while accounts payable increased $5.5 million as compared to December 27, 2008 balances, primarily due to increased plant processing efficiencies realized at the Rader division, as well as purchasing increases of fruit inventory ahead of the Rader harvest season.

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The Company’s Goodyear, Arizona manufacturing and distribution facility is subject to a $1.6 million mortgage loan from Morgan Guaranty Trust Company of New York, bears interest at 9.03% per annum and is secured by the building and the land on which it is located. The loan matures on July 1, 2012; however monthly principal and interest installments of $16,825 are determined based on a twenty-year amortization period.

The Company’s Bluffton, Indiana manufacturing and distribution facility was purchased for $3.0 million in December, 2006. The facility is subject to a $2.3 million mortgage loan from U.S. Bank National Association, bears interest at the 30 day LIBOR plus 165 basis points and is secured by the building and the land on which it is located. The interest rate associated with this debt instrument was fixed to 6.85% via an interest rate swap agreement with U.S. Bank National Association in December 2006. The loan matures in December, 2016; however monthly principal and interest installments of $18,392 are determined based on a twenty-year amortization period.

To fund the acquisition of Rader Farms the Company entered into a Loan Agreement (the “Loan Agreement”) with U.S. Bank National Association (“U.S. Bank”). Each of our subsidiaries is a guarantor of the Loan Agreement, which is secured by a pledge of all of the assets of our consolidated group. The borrowing capacity available to us under the Loan Agreement consists of notes representing:

· a $15,000,000 revolving line of credit maturing on June 30, 2011; based on asset eligibility, there was $3.8 million of borrowing availability under the line of credit at June 27, 2009

· an equipment term loan, secured by the equipment acquired, subject to a $5.8 million mortgage loan from U.S. Bank National Association, and bearing interest at the 30 day LIBOR plus 165 basis points. The loan matures in May, 2014 and monthly principal installments are $71,429 plus interest and

· a real estate term loan, secured by a leasehold interest in the real property we are leasing from the former owners of Rader Farms in connection with the acquisition, subject to a $4.0 million real estate term loan from U.S. Bank National Association, and bearing interest at the 30 day LIBOR plus 165 basis points. The interest rate associated with this debt instrument was fixed to 4.28% via an interest rate swap agreement with U.S. Bank National Association in January 2008. The loan matures in July, 2017; however monthly principal and interest installments of $36,357 are determined based on a fifteen-year amortization period.

All borrowings under the revolving line of credit will bear interest at either (i) the prime rate of interest announced by U.S. Bank from time to time or (ii) LIBOR, plus the LIBOR Rate Margin (as defined in the revolving credit facility note). The term loan will bear interest at LIBOR, plus the LIBOR Rate Margin (as defined in the term loan note).

As is customary in such financings, U.S. Bank may terminate its commitments and accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an event of default (as defined in the Loan Agreement), subject, in certain instances, to the expiration of an applicable cure period. The agreement requires the Company to maintain compliance with certain financial covenants, including a minimum tangible net worth, a minimum fixed charge coverage ratio and a maximum leverage ratio. At June 27, 2009, the Company was in compliance with all of the financial covenants.

Interest Rate Swaps

See Footnote 5 “Long-Term Debt” in the Company’s “Notes to Unaudited Condensed Consolidated Financial Statements” for detail regarding the Company’s interest rate swaps.

Contractual Obligations

The Company’s future contractual obligations consist principally of long-term debt, operating leases, minimum commitments regarding third party warehouse operations services, remaining minimum royalty payments due licensors pursuant to brand licensing agreements and severance charges to terminated executives. As of June 27, 2009 there have been no material changes to the Company’s contractual obligations since its December 27, 2008 fiscal year end, other than scheduled payments. The Company currently has no material marketing or capital expenditure commitments.

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Management’s Plans

In connection with the implementation of the Company’s business strategy, the Company may incur operating losses in the future and may require future debt or equity financings (particularly in connection with future strategic acquisitions, new brand introductions or capital expenditures). Expenditures relating to acquisition-related integration costs, market and territory expansion and new product development and introduction may adversely affect promotional and operating expenses and consequently may adversely affect operating and net income. These types of expenditures are expensed for accounting purposes as incurred, while revenue generated from the result of such expansion or new products may benefit future periods. Management believes that the Company will generate positive cash flow from operations during the next twelve months, which, along with its existing working capital and borrowing facilities, will enable the Company to meet its operating cash requirements for the next twelve months, including planned capital expenditures, including planned improvements to our Goodyear, Arizona facility in 2009. The belief is based on current operating plans and certain assumptions, including those relating to the Company’s future revenue levels and expenditures, industry and general economic conditions and other conditions. For instance, if current general economic conditions continue or worsen, we believe that our sales forecasts may prove to be less reliable than they have in the past as consumers may change their buying habits with respect to snack food products. Unexpected price increases for commodities used in our snack products, or adverse weather conditions affecting our Rader Farms crop yield could also impact our financial condition. If any of these factors change, the Company may require future debt or equity financings to meet its business requirements. There can be no assurance that any required financings will be available or, if available, will be on terms attractive to the Company.

Critical Accounting Policies and Estimates

There have been no significant changes to the Company’s critical accounting policies and estimates since the filing of its Form 10-K for the year ended December 27, 2008.

Recent Accounting Pronouncements

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141(R)”), which replaces SFAS No. 141, “Business Combinations.” SFAS No. 141(R) retains the underlying concepts of SFAS No. 141 that require all business combinations to be accounted for at fair value under the acquisition method of accounting, however, SFAS No. 141(R) significantly changes certain aspects of the prior guidance including: (i) acquisition-related costs, except for those costs incurred to issue debt or equity securities, will no longer be capitalized and must be expensed in the period incurred; (ii) non-controlling interests will be valued at fair value at the acquisition date; (iii) in-process research and development will be recorded at fair value as an indefinite-lived intangible asset at the acquisition date; (iv) restructuring costs associated with a business combination will no longer be capitalized and must be expensed subsequent to the acquisition date; and (v) changes in deferred tax asset valuation allowances and income tax uncertainties after the acquisition date will no longer be recorded as an adjustment of goodwill, rather such changes will be recognized through income tax expense or directly in contributed capital. SFAS 141(R) is effective for all business combinations having an acquisition date on or after the beginning of the first annual period subsequent to December 15, 2008, with the exception of the accounting for valuation allowances on deferred taxes and acquired tax contingencies.

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In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS 165”). SFAS 165 defines subsequent events as events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued, and establishes general standards of accounting for and disclosure of subsequent events. SFAS 165 also includes a required disclosure of the date through which an entity has evaluated subsequent events, which for public entities is the date upon which the financial statements are issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009, and shall be applied prospectively. The Company adopted SFAS 165 for the interim period ended June 27, 2009. The Company evaluated subsequent events through August 11, 2009, which is the date upon which the Company’s consolidated financial statements for the interim period ended June 27, 2009 were issued. The adoption of SFAS 165 did not have an impact on the Company’s financial position, results of operations or liquidity.

The Company does not expect the adoption of these new pronouncements to have a material effect on its consolidated results of operations or financial condition.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

This information has been omitted pursuant to Item 305(e) of Regulation S-K, promulgated under the Securities Act of 1933, as amended.

Item 4. Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures as of the end of the period covered by this report have been designed and are functioning effectively to provide reasonable assurance that the information required to be disclosed by the Company in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms.

The Company’s Chief Executive Officer and Chief Financial Officer do not expect that the Company’s internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of internal controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

No change occurred in the Company’s internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information

Item 1. Legal Proceedings

Table of Contents

Item 1A. Risk Factors

During the quarter and six months ended June 27, 2009, there were no material changes from the risk factors as previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2008.

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

See Footnote 1 “Issuer Purchases of Equity Securities” in the Company’s “Notes to Unaudited Condensed Consolidated Financial Statements” in this report for a summary of stock repurchases made by the Company pursuant to our stock repurchase program that was publicly announced on Form 8-K filed with the SEC on September 26, 2008.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

(a) The Annual Meeting of Shareholders of the Company (the “Meeting”) was held on May 19, 2009.

(b) Proxies for the Meeting were solicited pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended. There was no solicitation in opposition to the Board’s nominees listed in the proxy statement and all of such nominees were elected.

(1) the election of seven directors of the Company. The nominees were Messrs. Ashton D. Asensio, Macon Bryce Edmonson, Mark S. Howells, Itzhak Reichman, Larry R. Polhill, Ronald C. Kesselman, and Terry McDaniel. There were no other nominees. The following are the respective numbers of votes cast “for” and “withheld” with respect to each nominee.

Name of Nominee	Votes Cast For	Votes Withheld
Ashton D. Asensio	16,788,451	557,560
Macon Bryce Edmonson	16,670,081	675,930
Mark S. Howells	16,245,055	1,100,956
Ronald C. Kesselman	16,501,121	844,890
Larry R. Polhill	16,689,354	656,657
Itzhak Reichman	16,624,120	721,891
Terry McDaniel	16,673,466	672,545

(2) an amendment to The Inventure Group, Inc. 2005 Equity Incentive Plan (as amended, the “Plan”) to increase the number of shares of Common Stock authorized for issuance under the Plan by 500,000. The following are the respective numbers of votes cast “for”, “against” or “abstain” with respect to the amendment.

Votes Cast For		Votes Cast Against		Abstain
10,930,694		1,252,034		14,435

Item 5. Other Information

None.

Table of Contents

Item 6. Exhibits

(a) Exhibits:

10.69*	— Form of Restricted Stock Award Agreement — Amended and Restated 2005 Equity Incentive Plan.

31.1 —	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

31.2 —	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

32.1 —	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management compensatory plan or arrangement.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated:	August 11, 2009	THE INVENTURE GROUP, INC.


		By:	/s/ Terry McDaniel
				Terry McDaniel
				Chief Executive Officer
				(Principal Executive Officer)

Table of Contents

EXHIBIT INDEX

10.69*-	Form of Restricted Stock Award Agreement — Amended and Restated 2005 Equity Incentive Plan

31.1 —	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

31.2 —	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15(d)-14(a).

32.1 —	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Rule 13a-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Management compensatory plan or arrangement.

EX-10.69 2 a09-18459_1ex10d69.htm EX-10.69

EXHIBIT 10.69

Form of Restricted Stock Award Agreement – Amended and Restated 2005 Equity Incentive Plan

THE INVENTURE GROUP, INC.

RESTRICTED STOCK AGREEMENT

The Inventure Group, Inc. (the “Company”) hereby grants you, (“Employee”), a grant of restricted stock. The date of this Agreement is . Subject to the provisions set forth in this Agreement and the provisions of the Company’s Amended and Restated 2005 Equity Incentive Plan, a copy of which is attached hereto as Exhibit A (the “Plan”), the principal features of this grant are as follows:

NUMBER OF SHARES OF RESTRICTED STOCK:

PURCHASE PRICE PER SHARE:

$0.01

SCHEDULED VESTING DATES		NUMBER OF SHARES

Employee understands that under Section 83 of the Internal Revenue Code of 1986, as amended (the “Code”), as the Shares vest, the fair value of such Shares will be reportable as ordinary income at that time. Employee further understands that instead of being taxed when and as the Shares vest, Employee may elect to be taxed as of the purchase date of the Shares with respect to the fair value of all Shares on such date less the purchase price paid for the Shares. Such election may only be made under Section 83(b) of the Code with the I.R.S. within thirty (30) days after the Purchase Date. The form for making this election may be provided by the Company for Employee’s convenience only. Employee understands that failure to make this filing within the thirty (30) day period will result in the recognition of ordinary income as the Shares vest. EMPLOYEE ACKNOWLEDGES THAT IT IS EMPLOYEE’S SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF EMPLOYEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON EMPLOYEE’S BEHALF. EMPLOYEE IS RELYING SOLELY ON EMPLOYEE’S ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE AN 83(b) ELECTION.

Your signature below indicates your agreement and understanding that this grant is subject to all of the terms and conditions contained in this Agreement and the Plan attached hereto as Exhibit A, including without limitation provisions relating to vesting and forfeiture of shares covered by this grant. PLEASE BE SURE TO READ THIS AGREEMENT AND THE PLAN IN THEIR ENTIRETY.

THE INVENTURE GROUP, INC.						EMPLOYEE

By:
Print Name:						Print Name:
Print Title:						Date:
Date:

TERMS AND CONDITIONS

1. Incorporation of the Plan. The Plan attached hereto is incorporated by reference into this Agreement, and any capitalized term not defined in this Agreement shall have the meaning ascribed to such term under the Plan. To the extent that any provisions of this Agreement violates or is inconsistent with the Plan, the Plan shall govern and any inconsistent provision in this Agreement shall be of no force or effect.

2. Grant. The Company hereby grants to the Employee shares (the “Shares”) of the Company’s Common Stock, $0.01 par value per share (the “Common Stock”) at a purchase price of $0.01 per Share, subject to all of the terms and conditions in this Agreement. The Employee has until to make such purchase after which date Employee will have no further right to purchase the Shares under this Agreement. The date on which Employee timely purchases the Shares hereunder shall be referred to as the “Purchase Date”.

3. Shares Held in Escrow. Unless and until the Shares have vested in the manner set forth in paragraphs 4 or 5, such Shares will be issued in the name of the Employee and held by the Secretary of the Company as escrow agent (the “Escrow Agent”), and cannot be sold, transferred or otherwise disposed of, nor pledged or otherwise hypothecated. The Company may instruct the transfer agent for its Common Stock to place a legend on the certificates representing the Shares or otherwise note its records as to the restrictions on transfer set forth in this Agreement. The certificate or certificates representing such Shares will not be delivered by the Escrow Agent to the Employee unless and until the Shares have vested and all other terms and conditions in this Agreement have been satisfied.

4. Vesting Schedule. Except as provided in Section 5, and subject to Section 6, Shares subject to this grant will vest on , Shares subject to this grant will vest on and Shares subject to this grant will vest on ; provided, however, that vesting will occur only if the Company employs the Employee through the applicable vesting date.

5. Board Discretion. The Board, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Shares at any time. If so accelerated, such Shares will be considered as having vested as of the date specified by the Board.

6. Forfeiture. Notwithstanding any contrary provision of this Agreement, the balance of the Shares that have not vested pursuant to paragraphs 4 or 5 will thereupon be forfeited and automatically transferred to and reacquired by the Company at no cost to the Company upon the date the Employee’s employment with the Company terminates for any reason. The Employee will not be entitled to a refund of the price paid for any Shares returned to the Company pursuant to this paragraph 6. The Employee hereby appoints the Escrow Agent with full power of substitution, as the Employee’s true and lawful attorney-in-fact with irrevocable power and authority in the name and on behalf of the Employee to take any action and execute all documents and instruments, including, without limitation, stock powers which may be necessary to transfer the certificate or certificates evidencing such unvested Shares to the Company upon such termination.

7. Death of Employee. Any distribution or delivery to be made to the Employee under this Agreement will, if the Employee is then deceased, be made to the Employee’s designated beneficiary, or if no beneficiary survives the Employee, to the administrator or executor of the Employee’s estate. Any such transferee must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.

8. Withholding. Notwithstanding any contrary provision of this Agreement, no certificate representing the Shares may be released from the escrow established pursuant to paragraph 3 unless and until satisfactory arrangements (as determined by the Board) will have been made by the Employee with respect to the payment of income and employment taxes which the Company determines must be withheld with respect to such Shares.

9. Rights as Shareholder. Employee shall have all rights of a shareholder prior to the vesting of the Shares, including the right to vote the Shares and receive all dividends and other distributions paid or made with respect thereto.

10. No Effect on Employment. Only the terms of any written employment agreement between the Company and Employee (and not this Agreement) shall govern the terms of Employee’s employment, and nothing in this Agreement shall constitute any assurance of employment of Employee by the Company for any period, including any period necessary for the Shares to vest. The Company will have the right, which is hereby expressly reserved, to terminate or change the terms of the employment of the Employee at any time for any reason whatsoever, with or without good cause, subject to the terms of any such written employment agreement.

11. Entire Agreement; Amendment. This Agreement embodies the entire understanding and agreement of the parties in relation to the subject matter hereof, and no promise, condition, representation or warranty, expressed or implied, not herein stated, shall bind either party hereto. This Agreement may be amended only by a writing executed by the Company and Employee that specifically states that it is amending this Agreement. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to Employee, and provided that no such amendment adversely affects the rights of Employee hereunder without Employee’s written consent. Without limiting the foregoing, the Board reserves the right to change, by written notice to Employee, the provisions of the Shares or this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling or judicial decisions, provided that any such change shall be applicable only to the Shares which are then subject to restrictions as provided herein.

12. Severability. If all or any part of this Agreement is declared by any court or government authority to be unlawful or invalid, such unlawfulness or invalidity shall not invalidate any portion of this Agreement not declared to be unlawful or invalid. Any Section of this Agreement so declared to be unlawful or invalid shall, if possible, be construed in a manner that will give effect to the terms of such Section to the fullest extent possible while remaining lawful and valid.

13. Binding Effect and Benefit. This Agreement shall be binding upon and, subject to the conditions hereof, inure to the benefit of the Company, its successors and assigns, and Employee and Employee’s successors and assigns.

14. Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Arizona without regard to principles of conflicts of law.

EX-31.1 3 a09-18459_1ex31d1.htm EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

Pursuant to Securities and Exchange Commission Rules 13a-14(a) and 15(d)-14(a)

under the Securities Exchange Act of 1934

CERTIFICATION

I, Terry McDaniel, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Inventure Group, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2009

/s/ Terry McDaniel
Terry McDaniel
Chief Executive Officer
(Principal Executive Officer)

EX-31.2 4 a09-18459_1ex31d2.htm EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

Pursuant to Securities and Exchange Commission Rules 13a-14(a) and 15(d)-14(a)

under the Securities Exchange Act of 1934

CERTIFICATION

I, Steve Weinberger, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of The Inventure Group, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2009

/s/ Steve Weinberger
Steve Weinberger
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

EX-32.1 5 a09-18459_1ex32d1.htm EX-32.1

EXHIBIT 32.1

Certification of Chief Executive Officer and Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

CERTIFICATION

The undersigned hereby certifies, for the purposes of section 1350 of chapter 63 of title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, in his capacity as an officer of The Inventure Group, Inc. (the “Company”), that, to his knowledge, the Quarterly Report of the Company on Form 10-Q for the period ended June 27, 2009, fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company. This written statement is being furnished to the Securities and Exchange Commission as an exhibit to such Form 10-Q. A signed original of this statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Date: August 11, 2009

/s/ Terry McDaniel
Terry McDaniel
Chief Executive Officer
(Principal Executive Officer)


/s/ Steve Weinberger
Steve Weinberger
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)

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