UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ

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

For the quarterly period ended June 30, 2010

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 number:   333-132948

Famous Uncle Al’s Hot Dogs & Grille, Inc.

 (Exact name of registrant as specified in its charter)

282 Katonah Ave., Suite 137

Katonah NY 10536

(Address of principal executive offices)

(203) 616-2930

(Issuer's telephone number)

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 þ  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

Non-accelerated filer o

Smaller Reporting Company þ

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

The number of shares outstanding of the issuer's common stock as of July 23, 2010, was 18,858,875 shares.  

FAMOUS UNCLE AL’S HOT DOGS AND GRILLE, INC.

FORM 10-Q

TABLE OF CONTENTS

2

PART I - FINANCIAL INFORMATION

ITEM 1   FINANCIAL STATEMENTS

See notes to unaudited interim financial statements.

3

See notes to unaudited interim financial statements.

4

See notes to unaudited interim financial statements.

5

See notes to unaudited interim financial statements.

6

 FAMOUS UNCLE AL’S HOT DOGS & GRILLE, INC.

NOTES TO UNAUDITED INTERIM FINANCIAL STATEMENTS

Background: We were incorporated as National Franchise Directors, Inc., under the laws of the State of Delaware on March 4, 2005 and on October 25, 2005 changed our name to Famous Uncle Al’s Hot Dogs & Grille, Inc. (Uncle Al). We were formed for the purpose of obtaining all existing and future restaurant franchising rights from Famous Uncle Al’s Hot Dogs, Inc. We acquired those rights on October 6, 2005.  Famous Uncle Al’s Hot Dogs, Inc., owned the exclusive worldwide right to franchise fast casual service restaurants operating under the “Famous Uncle Al’s Hot Dogs” name. Our restaurants serve hot dogs, bratwurst, sausage and other heated sandwiches that use secret recipes and preparation techniques created by Al Stein, the original “Uncle Al”.

The Financial Statements presented herein have been prepared by us in accordance with the accounting policies described in our December 31, 2009 Annual Report on Form 10-K and should be read in conjunction with the Notes to Financial Statements which appear in that report.

The preparation of these financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on going basis, we evaluate our estimates, including those related intangible assets, income taxes, insurance obligations and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates under different assumptions or conditions.

In the opinion of management, the information furnished in this Form 10-Q reflects all adjustments necessary for a fair statement of the financial position and results of operations and cash flows as of and for the three and six-month periods ended June 30, 2010 and 2009. All such adjustments are of a normal recurring nature. Financial Statements have been prepared in accordance with the instructions to Form 10-Q and therefore do not include some information and notes necessary to conform with annual reporting requirements

Basic earnings per share is computed by dividing income available to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. Diluted earnings per share assume that any dilutive convertible securities outstanding were converted, with related preferred stock dividend requirements and outstanding common shares adjusted accordingly. It also assumes that outstanding common shares were increased by shares issuable upon exercise of those stock options for which market price exceeds the exercise price, less shares which could have been purchased by us with the related proceeds. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.

In January 2010, the FASB issued an amendment to ASC 820, Fair Value Measurements and Disclosure, to require reporting entities to separately disclose the amounts and business rationale for significant transfers in and out of Level 1 and Level 2 fair value measurements and separately present information regarding purchase, sale, issuance, and settlement of Level 3 fair value measures on a gross basis. This standard, for which the Company is currently assessing the impact, is effective for interim and annual reporting periods beginning after December 15, 2009 with the exception of disclosures regarding the purchase, sale, issuance, and settlement of Level 3 fair value measures which are effective for fiscal years beginning after December 15, 2010.

In January 2010, the FASB issued an amendment to ASC 505, Equity, where entities that declare dividends to shareholders that may be paid in cash or shares at the election of the shareholders are considered to be a share issuance that is reflected prospectively in EPS, and is not accounted for as a stock dividend. This standard is effective for interim and annual periods ending on or after December 15, 2009 and is to be applied on a retrospective basis. The adoption of this standard is not expected to have a significant impact on the Company’s financial statements

7

We issued 170,000 shares of common stock in exchange for $8,500 in cash in 2009. All common shares issued are restricted as to transferability.

On July 15, 2010, the Company entered into a settlement agreement with N. Scott Fine and Scarsdale Securities, LLC.  As previously reported on Form 8-K as filed on November 8, 2007, the Company retained N. Scott Fine and Scarsdale Equities, LLC as consultants and financial advisors.  As compensation in 2007, the Company agreed to issue common stock purchase warrants for a period of seven (7) years at $.40 per share. The warrant contained cashless exercise provisions.  Pursuant to the mutual release and Settlement Agreement, the Company issued 2,000,000 shares of restricted common stock for cancellation of the outstanding Warrants to Purchase Common Stock.

On July 15, 2010, the Company converted the JARS FAMILY GROUP, LLC warrants into 1,000,000 shares of the Company’s common stock.  The issuance was not based upon the warrants exercise price, but based upon the Company’s effort to treat all warrant holders equally.

On July 15, 2010, the Company converted the C.C.R.I.  Corporation, a Colorado corporation, warrants into 200,000 shares of the Company’s common stock.  The issuance was not based upon the warrants exercise price, but based upon the Company’s effort to treat all warrant holders equally

As a result of the above issuances, the Company no longer has any outstanding warrants for the purchase of the Company’s common stock.  

On July 15, 2010, the Company granted Troy Pope a one year stock option to purchase up to 25,000,000 non-dilutable restricted shares of common stock at par value for monies advanced and paid in excess of services related to the settlement of a number of our debts with full releases from various creditors, vendors, warrant holders, shareholders, and our Licensor holder.  In exchange for the option to Troy Pope, the Company will not be obligated to reimburse Mr. Pope.

On July 20, 2010, the Company entered into a Release and Settlement Agreement with Newport Capital Consultants, Inc. and Gary Bryant, wherein Mr. Bryant was issued 1,000,000 shares of restricted common stock in exchange for Mr. Bryant releasing, remising and discharging the Company from any claims, causes of action, debts and contracts.  Mr. Bryant and Newport Capital Consultants, Inc. had several agreements with the Company which are now null and void.

In June, 2010 we derecognized accruals for payroll taxes, payroll and other accruals totaling $112,500. The payroll related accruals of $95,000 were based on 2005 estimates no longer deemed accurate. We also renegotiated the amount due Al Stein under our licensing agreement. The renegotiated amount of $2,000 resulted in the derecognition of $75,250, the excess amount due under the original agreement.

In June, 2010 we cancelled approximately $133,000 of amounts due related parties through mutual agreement. We also derecognized $111,090 of notes payable of which we determined are barred by the statute of limitations. The notes were informally assumed as part of our original capitalization and at the request of our management at that time. Such amounts were considered capital transactions.

On June 30, 2010, we entered into a release agreement with Dean Valentino for equity and compensation due for a total of $9,500, wherein Mr. Valentino also agreed to pay from this amount the funds due to the former landlord so that the Company is not longer obligated under any form of lease agreement with the Connecticut landlord, Lernie Danbury, LLC.

On June 30, 2010, the Company entered into a release agreement in consideration of $3,000 with James Wilson for past due legal fees.

On July 9, 2010, Famous Uncle Al’s Hot Dogs & Grille, Inc. (the “Company”) entered into a Supplemental Settlement Agreement (“Supplemental Agreement”) with Famous Uncle Al’s, Inc., a Virginia corporation (“FUA”) regarding the Franchising Rights License Agreement originally dated November 12, 2002.  In 2002, FUA issued an exclusive, worldwide license to market and sublicensed franchises to third parties for operating quick service restaurants and serve hot dogs and other style sandwiches under the franchise name “Famous Uncle Al’s Hot Dogs” restaurant (“License Agreement”). Pursuant to Supplemental Agreement, the respective parties agreed to cancel the License Agreement by only as it relates to the state of Virginia. The Company maintained the exclusive and worldwide license outside the state of Virginia.   In addition, the Supplemental Agreement modified the royalty payments from $3,000.00 per month to a royalty fee of 1% of the gross profits derived from the issuance of any new Franchise Licenses issued by the Company outside the state of Virginia.  Pursuant to the Supplemental Agreement, the parties mutually released and waived all claims against each other related to the prior conduct of the parties.  

8

Under the new terms of the Supplemental Agreement, the Company is only obligated to pay a royalty fee in the event that the Company receives a profit from the issuance of a sublicensed.  The former License Agreement required the Company to pay a monthly fee to FUA regardless of any profit received from the Company.

On July 9, 2010, the Company’s Board of Directors approved a partial assignment of the existing sublicensed franchises to Famous Uncle Al’s Hot Dogs, Inc., a Delaware corporation.  The former franchises were not paying any royalty fees during the prior fiscal year.  Under the terms of the assignment, Famous Uncle Al’s Hot Dogs, Inc., assumed all potential liabilities related to the franchises.  The Company reserved and maintained all rights to issue future Sublicenses.  

On July 20, 2010, the Company entered into a Release and Settlement Agreement with Newport Capital Consultants, Inc. and Gary Bryant, wherein Mr. Bryant was issued 1,000,000 shares of restricted common stock in exchange for Mr. Bryant releasing, remising and discharging the Company from any claims, causes of action, debts and contracts.  Mr. Bryant and Newport Capital Consultants, Inc. had several agreements with the Company which are now null and void.

At June 30 2010, we had working capital deficiency of approximately $145,000.  We have recognized inconsistent revenue to date. Our operations have been financed to date through sales of our common stock through private placements, loans, sales of franchise territory agreements and royalties from franchisee sales.  We require significant additional capital for the expansion of our franchising operations.  We believe additional funding will be required to fund our operations until at least December 31, 2010.  However,  no assurance can be given that additional funds will not be required prior to the expiration of such period or that any funds which may be required will be available,  if at all, on acceptable terms. If additional funds are required, our inability to raise such funds will have an adverse effect upon our operations. If adequate capital is not available, we will have to reduce or eliminate our planned expansion activities, which could otherwise ultimately provide significant revenue.

On July 13, 2010 the conversion terms of the two outstanding convertible notes having a total face value of $35,000.00 were amended to provide for a ceiling on the amount of shares potentially issuable. The terms of the original notes stipulated a conversion formula that was based on a percentage of market bid/ask as of the conversion date. The indeterminate amount of shares issuable under the original conversion feature resulted in derivative treatment. Under the revised terms the conversion instruments will be capped at an aggregate of 3.5 million shares which is a reduction of the estimated 12,000,000 common shares that would currently be issuable.

Also on July 13, 2010 we issued an option to acquire 25 million shares of our common stock for an effective strike price of $0.008 per share. We received $20,985 as a prepayment as of June 30, 2010.

On July 13, 2010, our board of directors by unanimous consent, to effect a reverse stock split on a 1-for-460 basis whereby every 460 shares of our common stock will be combined and reduced into one share of common stock, which is referred to herein as the “Reverse Stock Split”.  The effective date of the reverse stock split is scheduled for July 28, 2010.

After the effective date of the Reverse Stock Split, each stockholder will own a reduced number of shares of common stock.  However, the Reverse Stock Split will affect all of existing stockholders of the Company uniformly and will not affect any stockholder’s percentage ownership interest in the company, except to the extent that the Reverse Stock Split results in any of its stockholders owning a fractional share as described below. Proportionate voting rights and other rights and preferences of the holders of common stock will not be affected by the Reverse Stock Split, other than as a result of the rounding of fractional shares ad described below. The number of stockholders of record will not be affected by the Reverse Stock Split.

On July 20, 2010, the Company entered into a Release and Settlement Agreement with Newport Capital Consultants, Inc. and Gary Bryant, wherein Mr. Bryant was issued 1,000,000 shares of restricted common stock in exchange for Mr. Bryant releasing, remising and discharging the Company from any claims, causes of action, debts and contracts.  Mr. Bryant and Newport Capital Consultants, Inc. had several agreements with the Company which are now null and void.

9

ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

This report includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). For example, statements included in this report regarding our financial position, business strategy and other plans and objectives for future operations, and assumptions and predictions about future product demand, supply, manufacturing, costs, marketing and pricing factors are all forward-looking statements. When we use words like "intend," "anticipate," “will,” “may,” “should,” “could,” “predict,” “potential,” "believe," "estimate," "plan" or "expect," we are making forward-looking statements. We believe that the assumptions and expectations reflected in such forward-looking statements are reasonable, based on information available to us on the date hereof, but we cannot assure you that these assumptions and expectations will prove to have been correct or that we will take any action that we may presently be planning. We have disclosed certain important factors that could cause our actual results to differ materially from our current expectations elsewhere in this report. You should understand that forward-looking statements made in this report are necessarily qualified by these factors. We are not undertaking to publicly update or revise any forward-looking statement if we obtain new information or upon the occurrence of future events or otherwise.

Description of Business.

A.

History of the Company

Famous Uncle Al’s Hot Dogs & Grille, Inc. was originally incorporated in the State of Delaware on March 4, 2005.  We were formed for the purpose of receiving future and existing restaurant franchising rights from Famous Uncle Al’s Hot Dogs, Inc., also a Delaware corporation.  Famous Uncle Al’s Hot Dogs, Inc. owned the exclusive worldwide right to franchise quick service restaurants operating under the “Famous Uncle Al’s Hot Dogs” name.  The Famous Uncle Al’s Hot Dogs restaurants serve hot dogs and other style sandwiches that use “secret recipes” and preparation techniques created by Al Stein, the original “Uncle Al”.  Our address is 282 Katonah Ave, # 137, Katonah, NY 10536, and our telephone number is (203) 616-2930.  Our common stock is currently traded on the OTC Bulletin board.

The Famous Uncle Al’s restaurant concept has been in operation since 1985 when the original “Uncle Al”, Al Stein, opened the first restaurant in Virginia Beach, VA. That restaurant continues to operate successfully under Al Stein’s management. Seven additional Famous Uncle Al’s Hot Dogs restaurants were opened by independent operators in the Virginia Beach area under various licensing agreements with Al Stein and continue to operate. One store is owned and operated by Mr. Stein’s son and one by a former employee.

The franchise assignor sold several regional franchise territories prior to assigning the franchise to us.  Company came into those agreements under the global type of arrangement provided for under the Settlement Agreement of October 6, 2006, under which Company agreed to assume the debts, liabilities and obligations of the Company from which we were acquiring the franchise license in exchange for licensing rights.

B.

Current status of business

The primary business of the Company is selling Famous Uncle Al’s Hot Dogs & Grille Franchised restaurants. The Company also sells regional franchises, also known as Territorials or Area Developer agreements. Regional franchises are responsible for the development of franchised restaurants in designated geographic territories. The Company derives revenue from three primary sources. 1) One time fees for individual franchised stores. 2) One time fees for regional franchise territories. 3) Continuing royalties from operating franchised stores (ongoing weekly continuation fees).  

On July 9, 2010, Famous Uncle Al’s Hot Dogs & Grille, Inc. (the “Company”) entered into a Supplemental Settlement Agreement (“Supplemental Agreement”) with Famous Uncle Al’s, Inc., a Virginia corporation (“FUA”) regarding the Franchising Rights License Agreement originally dated November 12, 2002.  In 2002, FUA issued an exclusive, worldwide license to market and sublicensed franchises to third parties for operating quick service restaurants and serve hot dogs and other style sandwiches under the franchise name “Famous Uncle Al’s Hot Dogs” restaurant (“License Agreement”). Pursuant to Supplemental Agreement, the respective parties agreed to cancel the License Agreement by only as it relates to the state of Virginia. The Company maintained the exclusive and worldwide license outside the state of Virginia.   In addition, the Supplemental Agreement modified the royalty payments from $3,000.00 per month to a royalty fee of 1% of the gross profits derived from the issuance of any new Franchise Licenses issued by the Company outside the state of Virginia.  Pursuant to the Supplemental Agreement, the parties mutually released and waived all claims against each other related to the prior conduct of the parties.  

Under the new terms of the Supplemental Agreement, the Company is only obligated to pay a royalty fee in the event that the Company receives a profit from the issuance of a sublicensed.  The former License Agreement required the Company to pay a monthly fee to FUA regardless of any profit received from the Company.

10

On July 9, 2010, the Company’s Board of Directors approved a partial assignment of the existing sublicensed franchises to Famous Uncle Al’s Hot Dogs, Inc., a Delaware corporation.  The former franchises were not paying any royalty fees during the prior fiscal year.  Under the terms of the assignment, Famous Uncle Al’s Hot Dogs, Inc., assumed all potential liabilities related to the franchises.  The Company reserved and maintained all rights to issue future Sublicenses.  

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  The Company may not have adequate readily available resources to fund operations through December 31, 2010. This raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Results of Operations

The following discussion and analysis provides information, which our management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read in conjunction with the financial statements and related notes that appear elsewhere in this report.

Six Months ended June 30, 2010 and June 30, 2009

Profit/Loss

The Company realized net income of $ 156,346 in the first six months of 2010 compared to a net loss of $ 78,437 for the first six months of 2009 resulting in a increase in net income of $ 234,783. The income was primarily generated through a $188,250 gain on the forgiveness of debt coupled with a $50,032 reduction in expenses. We also realized a $6,700 derivative valuation gain in 2010.  In June, 2010 we derecognized accruals for payroll taxes, payroll and other accruals totaling $112,500. The payroll related accruals of $95,000 were based on 2005 estimates no longer deemed accurate. We also renegotiated the amount due Al Stein under our licensing agreement. The renegotiated amount of $2,000 resulted in derecognition of $75,250, the excess amount due under the original agreement.

Revenue

Total revenue for the first six months of 2010 was $ 9,067 compared to $ 28,098 for the first six months in 2009 resulting in a decrease in revenue of $ 19,031 or a 68 % decrease.

Royalty and other revenue, which includes marketing contributions from vendors, for the first tsix months of 2010 was $ 1,200 compared to $ 17,889 in the first six months of 2009 resulting in a decrease of $ 16,689 .

Expenses

Expenses for the first six months of 2010 were $ 47,671 compared to $ 97,703 for the first six months in 2009 resulting in a decrease in expenses of $ 50,032..Franchise sales expenses included as a component of total expenses decreased from $17,685 to $435 or $17,258 of the total decrease of $50,032.

C.

Management Plans

Management believes that the Company will require additional funding to maintain operations and to grow the Company. The Company has been limited in its ability to attract regional franchisees and franchisees. Management believes that current economic conditions, in particular the inability of prospective franchisees to secure bank loans to fund a Famous Uncle Al’s Hot Dogs & Grille restaurant, has had a significant negative impact on the Company’s ability to sell franchises. The general economic downturn has also affected existing store sales resulting in diminished royalty revenue.

Management is considering alternative means to expand the Company other than just through Regional and Individual franchise sales. One beneficial result of the current economic downturn is an increased availability of commercial retail locations. There are an increasing number of locations that are particularly well suited for our restaurants. Many available locations include partial build outs and some included equipment that can be reused by a Famous Uncle Al’s restaurant. In general, lease costs have declined considerably over the last year. Management believes that the increased availability of commercial space, declining lease costs and more cooperative and flexible landlords presents an opportunity for prospective franchisees to obtain retail space at advantageous terms.  

Management believes that the existing business is a suitable platform for expansion. The fundamentals of the restaurant operating system, menu offerings, store décor and procedures are completed. There is no significant expenditure required for development.

11

However, the current economic conditions, in particular the inability of franchisees to obtain financing, severely impact the Company’s ability to attract new franchisees.

Although the Company has suspended active marketing and solicitation of franchisees it will continue to offer its regional and individual franchise for sale.  

Liquidity and Capital Resources

D.

Capital Resources

The Company is experiencing a burn rate of approximately $ 2000 per month for the second three months of 2010. The Company has not developed sufficient ongoing royalty revenue to support active operations. Essentially all marketing activities have been suspended. Until the Company develops sufficient ongoing revenue from royalties, the Company will be dependent on franchise and regional franchise fees to support active operations. In lieu of such sales materializing, the Company is dependent on loans and alternative sources of revenue.

The Company believes that regional franchise sales and franchise sales are critical to the success of the Company. Failure of these sales to materialize will have a detrimental effect on the Company. Failure to either secure additional funding or generate revenue through regional franchise and franchise fees will have a detrimental effect on the Company’s ability to support ongoing operations. We have been unsuccessful in raising the required capital in the second quarter of 2010.

Each regional franchisee fee is $50,000. Regional franchises are designated geographic territories. We may not sell franchises in Virginia under our new agreement with the franchisor.  Each regional franchisee is responsible for developing individual franchised restaurants in the territory. The Company believes there are at least 49 suitable regions available for sale.   

A regional franchisee purchases a defined geographic area and is obligated to develop Famous Uncle Al’s Hot Dogs & Grille restaurants in their defined territory. Regional franchisees endeavor to sell the individual franchise opportunity to prospects. The Company benefits in the short term by receiving a one-time fee from the regional franchisee and a one-time fee from each individual franchisee that the regional franchisee sells. The Company benefits long term from the weekly ongoing royalties collected from each individual franchise. This structure is designed to create a network of regional franchisees that serve as a sales force for the Company. Regional franchisees are compensated on a commission basis only.

E.

Employees:

As of June 30, 2010 all employees have been terminated.

F.

Research and Development and Expenditures

No direct costs have been incurred for research and development in the last 2 years. The Company believes that the basic restaurant concept has been developed but continues to work to enhance menu selection and products. The Company does not maintain research and development facilities and utilizes existing franchised restaurants to test menu items and vendors to develop products.

G.

Subsidiaries

The Company has no subsidiaries.

H.

Patents and Trademarks

The Company markets itself under its Famous Uncle Al’s Hot Dogs trademark.  The Company has received trademark and service mark protection of this name and related designs from the United States Patent and Trademark Office and considers these trademarks and service marks to be important to its business.  The Company received the right to this trademark by virtue of its application to the U.S. Patent and Trademark Office, and the approved assignment of it to us, dated August 16, 2005.  The continuing right to license under this assignment is considered essential by the Company.

I.

Reports to Security Holders

At this time, the Company has not provided annual reports to security holders.  However, shareholders and the general public may view copies of all of our filings with the SEC, by visiting the SEC website (http://www.sec.gov) and performing a search of Famous Uncle Al’s Hot Dogs & Grille, Inc.’s electronic filings.

12

ITEM 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Substantially all of our financial assets consist of bank deposits and we own no portfolio investments that would expose our Company to the type of risks described in Item 304 of Regulation S-K.

ITEM 4   CONTROLS AND PROCEDURES

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2010. This evaluation was accomplished under the supervision and with the participation of our chief executive officer, principal executive officer, chief financial officer/principal accounting officer who concluded that our disclosure controls and procedures are not effective to ensure that all material information required to be filed in the quarterly report on Form 10-Q has been made known to him.

Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

Based upon an evaluation conducted for the period ended June 30, 2010, Paul Esposito, who served as our Chief Executive Officer and Chief Financial Officer (which duties include that of principal accounting officer) as of June 30, 2010, and the date of this Report, has concluded that as of the end of the period covered by this report, we have identified the following material weakness of our internal controls: 

Reliance upon independent financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions.  

Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.

In order to remedy our existing internal control deficiencies, as soon as our finances allow, we will hire a Chief Financial Officer who will be sufficiently versed in public Company accounting to implement appropriate procedures for timely and accurate disclosures

Changes in internal control over financial reporting  

We have not yet made any changes in our internal control over financial reporting that occurred during the period covered by this report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

13

PART II - OTHER INFORMATION

ITEM 1   LEGAL PROCEEDINGS

Famous is not currently a party to any legal proceedings.

ITEM 1A   RISK FACTORS

There have been no material changes in our risk factors since December 31, 2009.  See Risk Factors at December 31, 2009, within our Form 10-K.

ITEM 2   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

We issued 170,000 shares of common stock in exchange for $8,500 in cash in 2009. All common shares issued are restricted as to transferability.

On July 15, 2010, the Company entered into a settlement agreement with N. Scott Fine and Scarsdale Securities, LLC.  As previously reported on Form 8-K as filed on November 8, 2007, the Company retained N. Scott Fine and Scarsdale Equities, LLC as consultants and financial advisors.  As compensation in 2007, the Company agreed to issue common stock purchase warrants for a period of seven (7) years at $.40 per share. The warrant contained cashless exercise provisions.  Pursuant to the mutual release and Settlement Agreement, the Company issued 2,000,000 shares of restricted common stock for cancellation of the outstanding Warrants to Purchase Common Stock.

On July 15, 2010, the Company converted the JARS FAMILY GROUP, LLC warrants into 1,000,000 shares of the Company’s common stock.  The issuance was not based upon the warrants exercise price, but based upon the Company’s effort to treat all warrant holders equally.

On July 15, 2010, the Company converted the C.C.R.I.  Corporation, a Colorado corporation, warrants into 200,000 shares of the Company’s common stock.  The issuance was not based upon the warrants exercise price, but based upon the Company’s effort to treat all warrant holders equally

As a result of the above issuances, the Company no longer has any outstanding warrants for the purchase of the Company’s common stock.  

On July 15, 2010, the Company granted Troy Pope a one year stock option to purchase up to 25,000,000 non-dilatable restricted shares of common stock at par value for monies advanced and paid in excess of services related to the settlement of a number of our debts with full releases from various creditors, vendors, warrant holders, shareholders, and our Licensor holder.  In exchange for the option to Troy Pope, the Company will not be obligated to reimburse Mr. Pope.

ITEM 3   DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5   OTHER INFORMATION

The Company is in default of two convertible notes totaling $ 35,000.  On July 13, 2010 the conversion terms of the two outstanding convertible notes having a total face value of $35,000.00 were amended to provide for a ceiling on the amount of shares potentially issuable. The terms of the original notes stipulated a conversion formula that was based on a percentage of market bid/ask as of the conversion date. The indeterminate amount of shares issuable under the original conversion feature resulted in derivative treatment. Under the revised terms the conversion instruments will be capped at an aggregate of 3.5 million shares which is a reduction of the estimated 12,000,000 common shares that would currently be issuable.

14

ITEM 6   EXHIBITS

15

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

FAMOUS UNCLE AL’S HOT DOGS & GRILLE, INC.

16