UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-QSB
(Mark one)
    
x
  
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
 
For the fiscal quarter ended June 30, 2007
 
OR
 
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 No. 000-50662
 
 AMISH NATURALS, INC.
(Exact Name of Small Business Issuer in its Charter)

Nevada
  
98-0377768
(State or Other Jurisdiction
of Incorporation or
Organization)
 
(I.R.S. Employer
Identification No.)

6399 State Route 83, Holmesville, Ohio 44633
(Address and telephone number of Principal Executive Offices)

(330) 674-0998
(Issuer’s Telephone Number, Including Area Code)

(Former name, former address and former fiscal year, if changed since last report)
 
 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  x     No  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  o     No  x

Number of shares outstanding as of the close of business on August 13, 2007:

TITLE OF CLASS
  
NUMBER OF SHARES
OUTSTANDING
Common Stock, $0.001 par value.
  
44,089,995

Transitional Small Business Disclosure Format (Check one): Yes o          No   x


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements of Amish Naturals, Inc., during the period of the financial statements, as reported herein.

 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Index to the Consolidated Financial Statements
As of June 30, 2007 and
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007

Consolidated Financial Statements of Amish Naturals, Inc. and Subsidiary:
  
   
Consolidated Balance Sheet, June 30, 2007
F-1
   
Consolidated Statements of Operations For the Three-Month and Nine-Month Periods Ended June 30, 2007, For the Three-Month Period Ended June 30, 2006, For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
F-2
   
Consolidated Statements of Cash Flows For the Three-Month and Nine-Month Periods Ended June 30, 2007, For the Three-Month Period Ended June 30, 2006, For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
F-3
   
F-5
 
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Consolidated Balance Sheet
June 30, 2007

ASSETS
  
Current assets:
        
Cash
  
$
299,456
  
Accounts receivable
    
20,282
  
Inventory
    
502,412
  
 
Total current assets
    
822,150
  
 
Property and equipment, net of accumulated depreciation of $73,702
    
2,358,515
  
Deposits
    
8,478
  
 
Total assets
  
$
3,189,143
  
         
 
 LIABILITIES AND SHAREHOLDERS' EQUITY
      
Current liabilities:
        
Accounts payable - trade
  
$
279,719
  
Accrued expenses
    
230,936
  
Advances payable – related party
    
60,526
  
Note payable
    
300,000
  
 
Total current liabilities
    
871,181
  
 
Commitments and contingencies
        
 
Shareholders' equity:
        
Series A convertible preferred, $0.001 par value, 20,000,000 shares authorized, none issued
    
-
  
Common stock, $0.001 par value, 100,000,000 shares authorized, 44,089,995 shares issued and outstanding
   
44,090
  
Additional paid-in capital
    
5,501,290
  
Deficit accumulated during the development stage
    
(3,227,418
)
 
Total shareholders' deficit
    
2,317,962
  
 
Total liabilities and shareholders' deficit
  
$
3,189,143
  
 
The accompanying notes are an integral part of the financial statements.
 
F-1
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Consolidated Statements of Operations
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
               
For the
  
For the
  
               
Period From
  
Period From
  
   
For the
  
For the
  
For the
 
January 1, 2006
  
January 1, 2006
  
   
Three-Month
  
Three-Month
  
Nine-Month
  
(Commencement of
  
(Commencement of
  
   
Period Ended
  
Period Ended
  
Period Ended
  
Operations) to
  
Operations) to
  
   
June 30, 2007
  
June 30, 2006
  
June 30, 2007
  
June 30, 2006
  
June 30, 2007
  
Gross sales
  
$
33,012
    
-
  
$
33,012
    
-
  
$
33,012
  
Less: returns and allowance
    
(4,316
)
  
-
    
(4,316
)
  
-
    
(4,316
)
Less: commissions
    
(1,490
)
  
-
    
(1,490
)
  
-
    
(1,490
)
Net sales
    
27,206
    
-
    
27,206
    
-
    
27,206
  
Cost of sales
    
(16,533
)
  
-
    
(16,533
)
  
-
    
(16,533
)
Gross profit
    
10,673
    
-
    
10,673
    
-
    
10,673
  
Operating expenses:
                                
Marketing
    
207,000
  
$
3,892
    
462,301
  
$
3,892
    
637,515
  
General and administrative
    
548,169
    
12,327
    
1,223,675
    
17,766
    
1,316,378
  
Product development
    
130,849
    
65,500
    
259,861
    
65,500
    
344,484
  
Professional fees
    
277,674
    
-
    
458,978
    
-
    
481,195
  
Stock-based charges
    
206,397
    
-
    
433,216
    
-
    
433,216
  
Total operating expenses
    
1,370,089
    
81,719
    
2,838,031
    
87,158
    
3,212,788
  
 
Operating loss
    
(1,359,416
)
  
(81,719
)
  
(2,827,358
)
  
(87,158
)
  
(3,202,115
)
 
Other income (expense):
                                
Interest income
    
4,447
    
1,136
    
13,796
    
1,136
    
17,346
  
Interest expense
    
(7,674
)
  
-
    
(12,813
)
  
-
    
(42,648
)
Total other income (expense)
    
(3,227
)
  
1,136
    
983
    
1,136
    
(25,302
)
Net loss
  
$
(1,362,643
)
$
(80,583
)
$
(2,826,375
)
$
(86,022
)
$
(3,227,417
)
Net loss per common share – basic and diluted
  
$
(0.03
)
$
(0.01
)
$
(0.07
)
$
(0.01
)
$
(0.10
)
Weighted average number of shares outstanding – basic and diluted
    
43,622,153
    
10,416,667
    
41,966,834
    
10,416,667
    
33,483,417
  
 
The accompanying notes are an integral part of the financial statements.
 
F-2
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Consolidated Statements of Cash Flows
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
       
For the
  
For the
  
       
Period From
  
Period From
  
   
For the
  
January 1, 2006
  
January 1, 2006
  
   
Nine-Month
  
(Commencement of
  
(Commencement of
  
   
Period Ended
  
Operations) to
  
Operations) to
  
   
June 30, 2007
  
June 30, 2006
  
June 30, 2007
  
Cash flows used in operating activities:
                    
Net loss
  
$
(2,826,375
)
$
(86,022
)
$
(3,227,417
)
Adjustments to reconcile net loss to net cash used in operating activities:
                    
Depreciation
    
73,702
    
-
    
73,702
  
Stock-based charges
    
433,216
    
-
    
433,216
  
Advances payable - related party
    
-
    
-
    
60,526
  
Accrued interest cancelled in exchange for shares
    
29,835
    
-
    
29,835
  
Changes in operating assets and liabilities:
          
-
        
Increase (decrease) in:
          
-
        
Accounts receivable
    
(20,282
)
  
-
    
(20,282
)
Inventory
    
(502,412
)
  
-
    
(502,412
)
Accounts payable - trade
    
179,139
    
-
    
279,719
  
Accrued payroll taxes
    
(9,101
)
  
-
        
Accrued interest
    
201,101
    
-
    
230,936
  
Net cash used in operating activities
    
(2,441,177
)
  
(86,022
)
  
(2,642,177
)
Cash flows used in investing activities:
                    
Purchase of equipment
    
(1,118,565
)
  
(781,406
)
  
(2,432,217
)
Deposits
    
(8,358
)
  
-
    
(8,478
)
Net cash used in investing activities
    
(1,126,923
)
  
(781,406
)
  
(2,440,695
)
Cash flows provided by financing activities:
                    
Proceeds from issuance of common stock
    
4,029,196
    
-
    
4,029,196
  
Proceeds from issuance of notes payable
    
-
    
1,052,888
    
1,699,930
  
Redemption of common shares
    
(249,782
)
  
-
    
(249,782
)
Proceeds from exercise of warrants
    
1,301,814
    
-
    
1,301,814
  
Repayment of notes payable
    
(1,399,930
)
  
-
    
(1,399,930
)
Net cash provided by financing activities
    
3,681,298
    
1,052,888
    
5,381,228
  
Net increase in cash
    
113,198
    
185,460
    
298,356
  
Cash - beginning of period
    
186,258
    
-
    
-
  
Cash - end of period
  
$
299,456
  
$
185,460
  
$
298,356
  
 
The accompanying notes are an integral part of the financial statements.

F-3
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Consolidated Statements of Cash Flows
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
 
Supplemental Disclosure of Cash Flow Information
  
       
For the
  
For the
  
       
Period From
  
Period From
  
   
For the
  
January 1, 2006
  
January 1, 2006
  
   
Nine-Month
  
(Commencement of
  
(Commencement of
  
   
Period Ended
  
Operations) to
  
Operations) to
  
   
June 30, 2007
  
June 30, 2006
  
June 30, 2007
  
Interest paid
    
-
    
-
    
-
  
Income taxes paid
    
-
    
-
    
-
  
 
The accompanying notes are an integral part of the financial statements.

F-4
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Notes to the Consolidated Financial Statements
As of June 30, 2007 and
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
 
1.   Description of Business
 
Amish Naturals, Inc., formerly Amish Pasta Company, Inc., (the “Company”) was incorporated in Nevada on September 2, 2005, and commenced operations in January 2006. The Company has been in the development stage since commencing operations. As the Company had no activities prior to January 1, 2006, the financial statements for 2006 are for the six-month period after the commencement of its operations.
 
The accompanying interim financial statements as of June 30, 2007 and for the three-month and nine-month periods ended June 30, 2007, for the three-month period ended June 30, 2006, for the period from January 1, 2006 (commencement of operations) to June 30, 2006, and for the period from January 1, 2006 (commencement of operations) to June 30, 2007, are unaudited. In the opinion of management, such financial statements include all adjustments (consisting only of normal recurring accruals) necessary for the fair presentation of the financial position and the results of operations. The results of operations for the three-month and nine-month periods ended June 30, 2007 are not necessarily indicative of the results to be expected for the full year. The interim financial statements should be read in conjunction with the Company's Form 8-K for the period ended September 30, 2006, filed October 27, 2006.
 
2.    Summary of Significant Accounting Policies
 
Inventory
 
Inventory is stated at the lower of first-in, first-out cost, or market. Inventory balances at June 30, 2007 consist of the following:
 
Finished goods
  
$
170,726
  
Raw materials
    
112,130
  
 
Total inventory
  
$
282,856
  
 
F-5
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Notes to the Consolidated Financial Statements
As of June 30, 2007 and
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
 
2.    Summary of Significant Accounting Policies, Continued
 
Basic and Diluted Loss Per Share
 
Basic loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed in the same way as basic loss per common share except that the denominator is increased to include the number of additional common shares that would be outstanding if all potential common shares had been issued and if the additional common shares were dilutive. As of June 30, 2007, the Company had outstanding stock options that can be converted into 3,386,111 shares of common stock. As the Company has recorded a loss for the three-month and nine-month periods ended June 30, 2007, the three-month period ended June 30, 2006, the period from January 1, 2006 (commencement of operations) to June 30, 2006, and for the period from January 1, 2006 (commencement of operations) to June 30, 2007, the options would have an anti-dilutive effect, and therefore, are not included in diluted loss per share.
 
Contingencies
 
Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed.
 
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
 
F-6
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Notes to the Consolidated Financial Statements
As of June 30, 2007 and
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
 
2.    Summary of Significant Accounting Policies, Continued
 
Comprehensive Income or Loss
 
The Company has no items of other comprehensive income or loss in the period from January 1, 2006 (commencement of operations) to June 30, 2007. Therefore, net loss as presented in the Company’s Statement of Operations equals the comprehensive loss.
 
New Accounting Pronouncements
 
In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value Measurements. This statement defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. This statement applies under other accounting pronouncements that require or permit fair value measurements. This statement does not require any new fair value measurements. The Company does not expect the adoption of this statement to have a material impact on its financial position, results of operations or cash flows.
 
3.        Property and Equipment
 
The following is a summary of property and equipment, at cost, as of June 30, 2007:
 
Buildings and improvements
  
$
340,727
  
Office equipment
    
65,472
  
Equipment, including deposits of $439,689
    
2,026,018
  
 
Total property and equipment
    
2,432,217
  
Less: accumulated depreciation
    
(73,702
)
 
Total property and equipment
  
$
2,358,515
  
 
Property and equipment was placed in service during March 2007. Depreciation expense for the three-month and nine-month periods ended June 30, 2007 was $56,004 and $73,702, respectively.
 
4.        Note Payable
 
The note payable at June 30, 2007 consists of an unsecured note payable to an individual, with interest at 10.25%, extended due date of September 15, 2007.
 
F-7
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Notes to the Consolidated Financial Statements
As of June 30, 2007 and
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
 
5.        Contingencies, Risks, Uncertainties, Management's Plan and Concentrations
 
Financial Results, Liquidity and Management's Plan
 
The Company has incurred losses for the three-month and nine-month periods ended June 30, 2007 and for the period from January 1, 2006 (commencement of operations) to June 30, 2007 of $1,362,643, $2,826,375 and $3,227,417, respectively. Despite its negative cash flows from operations, the Company has been able to obtain operating capital through a private debt funding source, the sale of shares of its common stock and through the exercise of warrants to purchase shares of its common stock. Management's plans include the continued development and eventual implementation of its business plan.
 
No assurances can be given that the Company can obtain sufficient working capital through the sale of the Company's common stock and borrowing or that the continued implementation of its business plan will generate sufficient revenues in the future to sustain ongoing operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
 
Operating Leases
 
The Company leases four properties on which its production, office and warehouse facilities are located. The leases are for periods of 1 to 5 years with a 5 year renewal option and annual evergreen renewals thereafter. The Company has the option to purchase the property for $280,000. Future minimum lease payments for the periods ending June 30th, are as follows at June 30, 2007:
 
2008
  
$
79,790
  
2009
    
16,200
  
2010
    
16,200
  
2011
   
10,950
  
 
Total minimum lease payments
  
$
123,140
  
 
Concentration of Suppliers
 
The Company expects to purchase its raw materials from producers of organic produce and grains. There is a regionally limited supply of these products. If the Company is unable to obtain these products from the supplier, the Company believes that the impact on its financial statements from such an uncertainty could be substantial.
 
F-8
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Notes to the Consolidated Financial Statements
As of June 30, 2007 and
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
 
5.        Contingencies, Risks, Uncertainties, Managements Plan and Concentrations, Continued
 
Litigation
 
The Company, on an ongoing basis, will be subject to various claims and legal proceedings covering a wide range of matters that arise in the ordinary course of its business activities. Management believes that any liability that may ultimately result from the resolution of these matters will not have a material adverse effect on the financial condition or results of operations of the Company.
 
6.        Equity Transactions
 
Common Stock
 
Stock Split
 
In October 2006 the Company forward split its common stock 2.8 for 1, resulting in 25 million shares of common stock outstanding at the time. At the same time, the Company changed the par value of its common stock to $0.001 per share. All per share amounts reflect this forward split as if it had occurred at January 1, 2006.
 
Reverse Merger
 
In connection with the reverse merger with FII in October 2006, the Company issued 25,200,000 and redeemed 11,200,000 shares of its common stock.
 
Sale of Common Stock
 
In October 2006 the Company sold 2.9 million shares of its common stock and warrants to purchase 1,450,000 shares of its common stock at $0.90 per unit for total proceeds of $2,609,857.
 
In February 2007, the Company sold in a private placement 664,745 shares of its common stock at $2.10 per share to 26 investors. The net proceeds of this placement were $1,395,965.
 
Exercise of Warrants
 
In December 2006 the Company issued 388,889 shares of its common stock upon exercise of warrants at a price of $0.90 per share. The net proceeds of this exercise were $350,000.
 
F-9
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Notes to the Consolidated Financial Statements
As of June 30, 2007 and
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
 
6.        Equity Transactions, Continued
 
Common Stock, Continued
 
Exercise of Warrants, Continued
 
In February 2007, warrants to purchase 500,000 shares of the Company’s common stock were exercised. The exercise price of $0.90 per share resulted in net proceeds to the Company of $449,980.
 
In June 2007, warrants to purchase 561,111 shares of the Company's common stock were exercised. The exercise price of $0.90 per share resulted in net proceeds to the Company of $504,880.
 
7.        Share-Based Payment
 
On October 27, 2006 and March 27, 2007, the Company granted options to purchase 2,680,000 shares and 145,000 shares, respectively, of its common stock to officers, directors, employees and consultants. The exercise price of these options is $1.00 per share and $2.30 per share, respectively, which equaled the market price on the effective dates of grant. The options vest at various rates over periods ranging from one to four years after the effective date of the grant. Options to purchase 150,000 shares were exercisable at June 30, 2007.
 
The weighted average estimated fair value of the stock options granted during the three-month and nine-month periods ended June 30, 2007 was $1.76 per share and $0.65 per share, respectively. The amount was determined using the Black-Scholes option pricing model, which values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, the expected dividend payments, and the risk-free interest rate over the expected life of the option.
 
F-10

Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Notes to the Consolidated Financial Statements
As of June 30, 2007 and
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
 
7.        Share-Based Payment, Continued
 
The assumptions used in the Black-Scholes option pricing model for the stock options granted during the nine-month period ended June 30, 2007 and for the period from January 1, 2006 (commencement of operations) to June 30, 2007 were as follows:

     
For the
     
Period From
 
For the
  
January 1, 2006,
 
Nine-Month
  
(Commencement of
 
Period Ended
  
Operations) to
 
June 30, 2007
  
June 30, 2007
 
Risk-free interest rate
4.23% to 4.35%
  
4.23%% to 4.35%
Expected volatility of common stock
68% to 98%
  
68% to 98%
Dividend yield
$0.00
  
$0.00
Expected life of options
5 years
  
5 years
Weighted average fair market value of options granted
$0.65
  
$0.65
 
F-11
 
Amish Naturals, Inc. and Subsidiary
 
(A Company in the Development Stage)
 
Notes to the Consolidated Financial Statements
As of June 30, 2007 and
For the Three-Month and Nine-Month Periods Ended June 30, 2007,
For the Three-Month Period Ended June 30, 2006,
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2006, and
For the Period from January 1, 2006 (Commencement of Operations) to June 30, 2007
 
8.        Related Party Transactions
 
Advances - Related Party
 
The Company’s Chief Executive Officer, who is the majority shareholder, paid certain expenses on behalf of the Company. These amounts do not bear interest and are due on demand. The expenses paid by the related party consisted of the following items:
 
Marketing plan
  
$
53,500
  
Rent
    
5,150
  
Equipment
    
1,360
  
Travel expenses
    
516
  
 
Total
  
$
60,526
  
 
In addition, an entity owned by the Company's Chief Executive Officer's relative made deposits on equipment for the benefit of the Company. These deposits totaled $90,000 and were repaid without interest.
 
Amish Co-op
 
On April 2, 2007 the Company acquired an entity owned by a member of the immediate family of the Company’s Chairman and Chief Executive Officer and another of the Company’s shareholders. The Company issued 75,000 shares of its common stock with a fair value of $130,000 in this transaction. The net assets of the acquired entity were recorded at their predecessor cost of $20,264.
 
F-12
 
Item 2. Management’s Discussion and Analysis

The following discussion should be read in conjunction with the financial information included elsewhere in this Quarterly Report on Form 10-QSB, including the Company’s unaudited financial statements for the six-month period from January 1, 2006 (commencement of operations) to June 30, 2006, the three- and nine-month periods ending June 30, 2007 and for the period from January 1, 2006 (commencement of operations) to June 30, 2007 and related notes. Because of the reverse acquisition, the following discussion relates to the separate financial statements of Amish Naturals, Inc. and reference to the Company and to “we”, “our” and similar words refer to Amish Naturals, Inc.

THE FOLLOWING PRESENTATION OF OUR MANAGEMENT’S DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION INCLUDED ELSEWHERE IN THIS REPORT.

A Note About Forward-Looking Statements

This Quarterly Report on Form 10-QSB contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on current management’s expectations. These statements may be identified by their use of words like “plans,” “expect,” “aim,” “believe,” “projects,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could,” and other expressions that indicate future events and trends. All statements that address expectations or projections about the future, including statements about our business strategy, expenditures, and financial results are forward-looking statements. We believe that the expectations reflected in such forward-looking statements are accurate. However, we cannot assure you that such expectations will occur.

Actual results could differ materially from those in the forward looking statements due to a number of uncertainties including, but not limited to, those discussed in this section. Factors that could cause future results to differ from these expectations include general economic conditions, further changes in our business direction or strategy; competitive factors, and an inability to attract, develop, or retain technical, consulting, managerial, agents, or independent contractors. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements. You should not unduly rely on these forward-looking statements, which speak only as of the date of this Quarterly Report. except as required by law, we are not obligated to release publicly any revisions to these forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report or to reflect the occurrence of unanticipated events.

Overview of Amish Naturals

Amish Naturals, Inc. is a start-up, development-stage company and although we have made the first sales of our products, we have not yet generated or realized any significant revenues from our business operations. During the period from January 1, 2006 (commencement of operations) to June 30, 2007, Amish Naturals raised capital in the form of short-term notes payable, and the sale of shares of our common stock. The proceeds of the notes payable were used to acquire a production facility site and the equipment management believes is necessary for Amish Naturals to commence operations. The proceeds of the sale of shares of our common stock were used to retire one of the short-term notes payable and acquire additional production equipment. Management’s plan is to produce a line of natural organic, kosher pasta products and related items to be sold through food product distributors.

On October 27, 2006 we completed a merger with FII, Inc. As the now-former stockholders of the former private company hold the majority of our outstanding common stock after the merger, the transaction has been accounted for as a “reverse merger” and the financial statements are those of the former private company. In connection with the merger, we raised $2,610,000 through the sale of 2.9 million equity units. Each unit includes one share of our common stock and a warrant to purchase ½ share of our common stock. Each unit sold for $.90. Neither the shares nor the warrants have any registration rights. We used a portion of the proceeds of this private placement to repay the note payable in full and to redeem shares of FII held by the former majority stockholder of FII. During the nine month period ended June 30, 2007 all of the warrants were exercised with net proceeds of $1,301,814. In February 2007, we raised $1,395,965 through the sale of 664,745 shares of our common stock and obtained $300,000 from a short-term note payable.

In March 2007, we commenced producing product which is available for sale. At June 30, 2007 we had finished goods inventory with a cost of $170,726. During the three month period ended June 30, 2007, we shipped products with total gross sales price of $33,012.

There is no historical financial information about us upon which to base an evaluation of our performance. We are a development stage company and have not generated any significant revenues from our operations. We cannot guarantee we will be successful in our core business, or in any business operations. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources.

We have no assurance that future financing will be available on acceptable terms, if at all. If financing is not available on satisfactory terms or on a timely basis, we may be unable to continue with our current business plan. If equity, or convertible debt, financing is available to us on acceptable terms, it could result in additional dilution to our stockholders.

Results of Operations for the three- and nine-month periods ended June 30, 2007, and for the Period from January 1, 2006 (commencement of operations) to June 30, 2007

During the three- and nine-month periods ended June 30, 2007, and for the period from commencement of operations to June 30, 2007, we had a loss of $1,362,644, 2,826,376, and $3,227,418, respectively. Our expenses relate to the development of a sales and marketing plan, product development activities, commercial production of inventory, costs associated with implementation of the infrastructure necessary to support our operations once they commence, initial sales and marketing activities and stock option expenses, as detailed below. In addition, we incurred legal and accounting fees related to our reverse merger transaction with FII in October 2006. During the period from January 1, 2006 (commencement of operations) to June 30, 2007, our operations were limited to the acquisition and installation of certain of our equipment and introducing our products to distributors and retail organizations.

We commenced commercial production in March 2007 and had our initial sales in May 2007. Since we commenced production, many of the expenditures recorded as product development costs through February 2007 are now recorded as inventory and eventually will be recorded as cost of sales. We continue to incur product development costs as we expand our product lines.

In October 2006 our Board of Directors authorized the grant of options to purchase 2,680,000 shares of our common stock to officers, directors, employees, and consultants. The exercise price of these options is $1.00 per share and vest at various times over four years. We determined the value of these options using the Black Scholes Merton option valuation model to be $1,569,140. We are amortizing this amount over the vesting period of each option. We charged $206,397 and $443,216 to expense during the three- and nine-month periods ended June 30, 2007 related to these options.

Liquidity and Capital Resources

At June 30, 2007, our total assets were $3,189,143, which included cash balances of $299,456. We invested $2,432,217 in property and equipment, which was placed in service on March 1, 2007. Our total liabilities were $871,181, all of which were current, resulting in negative working capital of $49,031.

In February 2007 we sold 664,745 shares of our common stock in a private offering to 26 accredited investors. The net proceeds of this offering were $1,395,965. Also in February 2007 warrants to purchase 500,000 shares of our common stock were exercised. The proceeds from this exercise were $450,000. In June 2007, warrants to purchase 561,111 shares of our common stock were exercised. The proceeds of this exercise were $504,880. In July 2007 we obtained a short term loan of $100,000 and in August 2007 we obtained a short term loan of $500,000.

Despite our negative cash flows from operation of $2,441,177 and $2,642,177 for the nine-month period ended June 30, 2007 and the period from January 1, 2006 (commencement of operations) to June 30, 2007, we have been able to obtain operating capital through private debt funding sources, the sale of shares of our common stock and the exercise of warrants to purchase shares of our common stock. Management’s plan includes the continued development and implementation of our business plan.

As of the date of this Quarterly Report, we have yet to generate significant revenues from our business operations.

 
Plan of Operation for the Next 12 Months

During the next 12 months, we plan to continue producing and commence sales of our line of pasta products. We have executed distribution agreements for our products with national food product distributors and will continue our development of products that are complementary to our pasta lines. We commenced sales to our distributors and retail stores in May 2007.

Since inception, we have funded its operations from the proceeds of short-term borrowings, some of which were repaid in October 2006 from the proceeds of private placements of common stock, and of common stock and warrants. Although we expect that, during the next 12 months, our operating capital needs will be met by our current economic resources and, if required, by additional private capital stock transactions, there can be no assurance that funds required will be available on terms acceptable to us or at all. If we are unable to raise sufficient funds on terms acceptable to us or on a timely basis, we may be unable to continue with our business plan. If equity, or convertible debt, financing is available to us on acceptable terms, it could result in additional dilution to our stockholders.

Off-Balance Sheet Arrangements

We have no off balance sheet arrangements at June 30, 2007.

Item 3. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified under the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Our management, including our Principal Executive Officer and our Principal Financial Officer, does not expect that our disclosure controls or procedures will prevent all error 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 benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within us have been detected.

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, our Principal Executive Officer and our Principal Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

There has been no change in our internal controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.


PART II OTHER INFORMATION

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

On April 2, 2007, we sold and issued 75,000 shares of our common stock to (i) the wife of a co-founder and our current President and Chief Executive Officer and (ii) a co-founder and significant stockholder in connection with our purchase of the business and substantially all of the assets of Amish Co-op, Inc. Based upon the $1.85 per share closing price of our common stock on April 2, 2007, the shares had an aggregate value of $138,750. We accounted for the related party transaction by recording the predecessor cost of the assets of Amish Co-op, Inc., in accordance with U.S. GAAP in the amount of $20,264. The issuance was made pursuant to Section 4(2) of the Securities Act. We believe the exemption is available because (i) the issuees are sophisticated investors, (ii) no advertising or general solicitation was employed in offering the securities, and (iii) transfer was restricted in accordance with the requirements of the Securities Act (including by legending of certificates representing the securities).
 
 
Item 6. Exhibits

Exhibit Number
  
Description
2.1
  
Agreement and Plan of Merger by and among FII International, Inc., Amish Pasta Company, Inc., and APC Acquisition Corp., dated October 27, 2006 (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
3.1
  
Corporate Charter (incorporated by reference to Exhibit 3.1 to FII’s Registration Statement on Form SB-2, filed on August 15, 2002)
3.2
  
Articles of Incorporation (incorporated by reference to FII’s Registration Statement on Form SB-2, filed August 15, 2002)
3.3
  
Certificate of Amendment to Articles of Incorporation as filed with the Secretary of State of the State of Nevada on October 30, 2006 (incorporated by reference to Exhibit 3.3 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
3.4
  
Certificate of Change in number of authorized shares as filed with the Secretary of State of the State of Nevada on October 30, 2006 (incorporated by reference to Exhibit 3.4 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
3.5
  
Articles of Merger as filed with the Secretary of State of the State of Nevada on October 30, 2006 (incorporated by reference to Exhibit 3.5 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
3.6
  
Bylaws of the Registrant (incorporated by reference to Exhibit 3.6 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
4.1
  
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form SB-2, filed April 30, 2007)
4.2
  
Form of Warrant granted in October 2006 (incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form SB-2, filed April 30, 2007)
10.1
  
Lease and Purchase Option Agreement between David C. Skinner, Sr., and Ronald Sparkman and Amish Pasta Company, dated October 27, 2006 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
10.2
  
Assignment of Lease and Purchase Agreement between David C. Skinner, Sr., and Ronald Sparkman and Amish Pasta Company, dated October 27, 2006 (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
10.3
  
Employment Agreement with David C. Skinner, Sr., dated as of October 27, 2006 (incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
10.4
  
Employment Agreement with Donald G. Alarie, dated as of October 27, 2006 (incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
10.5
  
Consulting Agreement with Dale Paisley, dated as of October 27, 2006 (incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
10.5a
  
Consulting Agreement with Dale Paisley, dated as of January 1, 2007 (incorporated by reference to Exhibit 10.5a of the Registrant’s Registration Statement on Form SB-2, filed April 30, 2007)
10.6
  
2006 Incentive Plan (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
10.7
  
Form of Nonqualified Stock Option Award Agreement under the 2006 Incentive Plan (incorporated by reference to Exhibit 10.7 of the Registrant’s Current Report on Form 8-K, filed October 31, 2006)
10.8
  
Agreement with Natural Specialty Sales, LLC (incorporated by reference to Exhibit 10.8 of the Registrant’s Quarterly Report on Form 10-QSB for the period ended December 31, 2006, as filed on February 16, 2007) [Confidential treatment was requested for section 9 of such Agreement, when filed]
10.9
  
Asset Purchase Agreement, dated April 2, 2007, by and among Amish Co-op, Inc., Ronald Sparkman, Kimberly A. Skinner, and Amish Natural Sub, Inc. (incorporated by reference to Exhibit 10.9 of the Registrant’s Registration Statement on Form SB-2, filed April 30, 2007)
 
 
10.9a
  
Addendum to Asset Purchase Agreement, dated April 2, 2007, by and among Amish Co-op, Inc., Ronald Sparkman, Kimberly A. Skinner, Amish Natural Sub, Inc., and in respect of Section 1 thereof, the registrant (incorporated by reference to Exhibit 10.9a of the Registrant’s Registration Statement on Form SB-2, filed April 30, 2007)
10.10
  
Employment Agreement with Troy Treangen, dated December 11, 2006 (incorporated by reference to Exhibit 10.10 of the Registrant’s Amended Registration Statement on Form SB-2/A, filed June 6, 2007)
16.1
  
Letter of Former Accountant (incorporated by reference to Exhibit 16.1 of the Registrant’s Current Report on Form 8-K, filed May 29, 2007)
31.1*
  
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
  
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
  
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     

*Filed with this report.


SIGNATURES

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

Amish Naturals, Inc.
    
     
(Registrant)
    
     
August 14, 2007
/s/ David C. Skinner, Sr.
  
 
David C. Skinner, Sr.
  
 
President, Chief Executive Officer, and Director