UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549








FORM
10-Q


(Mark
One)


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





For
the quarterly period ended June 28, 2009





OR





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




For the
transition period from ________ to ________





Commission
file number 1-16699





OVERHILL
FARMS, INC.


(Exact
name of registrant as specified in its charter)





Nevada
            75-2590292(State
      or other jurisdiction of incorporation or organization)
            (IRS
      Employer Identification Number)2727
      East Vernon AvenueVernon,
      California
            90058(Address
      of principal executive offices)
            (Zip
      code)








(323)
582-9977


(Registrant’s
telephone number, including area code)





Not
applicable


(Former
name, former address and former fiscal year, if changed since last
report)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
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 T No £





Indicate
by check mark whether the registration 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 £ No £





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





Large
      Accelerated Filer £
            Accelerated
      Filer TNon-Accelerated
      Filer £
            Smaller
      Reporting Company £


(Do not
check if smaller reporting company)





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


Yes £ No T





As of
August 7, 2009, there were 15,823,271 shares of the issuer’s common stock, $.01
par value, outstanding.













OVERHILL FARMS, INC.


FORM
10-Q


QUARTER
ENDED JUNE 28, 2009










TABLE
OF CONTENTS





PART I – FINANCIAL
    INFORMATION
            Page No.Item
      1.
            Financial
      StatementsCondensed Balance Sheets as of June 28, 2009 (unaudited) and
      September 28, 2008
            2Condensed Statements of Income (unaudited) for the Quarters
      Ended June 28, 2009 and June 29, 2008
            4Condensed Statements of Income (unaudited) for the Nine Months
      Ended June 28, 2009 and June 29, 2008
            5Condensed Statements of Cash Flows (unaudited) for the Nine
      Months Ended June 28, 2009 and June 29, 2008
            6Notes to Condensed Financial Statements
      (unaudited)
            8Item
      2.
            Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
            15Item
      3.
            Quantitative and Qualitative Disclosures about Market
      Risk
            23Item
      4.
            Controls and Procedures
            23PART II – OTHER INFORMATIONItem
      1.
            Legal Proceedings
            24Item
      4.
            Submission of Matters to a Vote of Security
      Holders
            24Item 6.
            Exhibits
            26SIGNATURES
            27EXHIBITS ATTACHED TO THIS FORM 10-Q
            28





1
 Table of Contents





Item
1.   Financial Statements





OVERHILL FARMS, INC.


CONDENSED
BALANCE SHEETS











Assets





June 28,
              2009
            
            
            September 28,
              2008(Unaudited)Current
      assets:Cash
            
            $
            7,767,729
            
            
            $
            6,637,576Accounts
      receivable, net of allowance for doubtful accounts of $2,000 and zero at
      June 28, 2009 and September 28, 2008, respectively
            
            
            15,468,925
            
            
            
            20,253,633Inventories
            
            
            16,107,043
            
            
            
            17,294,076Prepaid
      expenses and other
            
            
            828,426
            
            
            
            1,492,977Deferred
      income taxes
            
            
            1,223,241
            
            
            
            1,223,241Total
      current assets
            
            
            41,395,364
            
            
            
            46,901,503Property
      and equipment, at cost:Fixtures
      and equipment
            
            
            24,343,426
            
            
            
            23,705,525Leasehold
      improvements
            
            
            10,439,735
            
            
            
            10,373,256Automotive
      equipment
            
            
            50,854
            
            
            
            50,85434,834,015
            
            
            
            34,129,635Less
      accumulated depreciation and amortization
            
            
            (18,504,313
            )
            
            
            (16,220,194
            )Total
      property and equipment
            
            
            16,329,702
            
            
            
            17,909,441Other
      non-current assets:Goodwill
            
            
            12,188,435
            
            
            
            12,188,435Deferred
      financing costs, net of accumulated amortization of $399,000 and $339,000
      at June 28, 2009 and September 28, 2008, respectively
            
            
            186,747
            
            
            
            247,127Other
            
            
            3,199,849
            
            
            
            2,173,058Total
      other non-current assets
            
            
            15,575,031
            
            
            
            14,608,620Total
      assets
            
            $
            73,300,097
            
            
            $
            79,419,564





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





2
 Table of Contents





OVERHILL
FARMS, INC.


CONDENSED
BALANCE SHEETS (continued)











Liabilities
and Stockholders’ Equity





June 28,
              2009
            
            
            September 28,
              2008(Unaudited)Current
      liabilities:Accounts
      payable
            
            $
            9,694,004
            
            
            $
            11,177,686Accrued
      liabilities
            
            
            3,463,200
            
            
            
            3,201,548Current
      maturities of long-term debt
            
            
            2,792,511
            
            
            
            6,228,881Total
      current liabilities
            
            
            15,949,715
            
            
            
            20,608,115Long-term
      accrued liabilities
            
            
            451,017
            
            
            
            406,309Deferred
      tax liabilities
            
            
            1,730,185
            
            
            
            1,730,185Long-term
      debt, less current maturities, net of unamortized debt discount of
      $617,000 and $861,000 at June 28, 2009 and September 28, 2008,
      respectively
            
            
            25,074,485
            
            
            
            33,479,461Total
      liabilities
            
            
            43,205,402
            
            
            
            56,224,070Commitments
      and contingenciesStockholders’
      equity:Preferred
      stock, $0.01 par value, authorized 50,000,000 shares, 0 shares and 4.43
      shares designated as Series A convertible preferred stock at June 28, 2009
      and September 28, 2008, 0 shares issued and outstanding
            
            
            -
            
            
            
            -Common
      stock, $0.01 par value, authorized 100,000,000 shares, 15,823,271 shares
      issued and outstanding at June 28, 2009 and September 28,
    2008
            
            
            158,233
            
            
            
            158,233Additional
      paid-in capital
            
            
            11,558,479
            
            
            
            11,558,479Retained
      earnings
            
            
            18,377,983
            
            
            
            11,478,782Total
      stockholders’ equity
            
            
            30,094,695
            
            
            
            23,195,494Total
      liabilities and stockholders’ equity
            
            $
            73,300,097
            
            
            $
            79,419,564





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





3
 Table of Contents





OVERHILL FARMS, INC.


CONDENSED
STATEMENTS OF INCOME


(Unaudited)











For the Quarter EndedJune 28,
              2009
            
            
            June 29,
              2008Net
      revenues
            
            $
            54,501,049
            
            
            $
            62,422,674Cost
      of sales
            
            
            47,115,020
            
            
            
            54,023,789Gross
      profit
            
            
            7,386,029
            
            
            
            8,398,885Selling,
      general and administrative expenses
            
            
            2,671,531
            
            
            
            2,223,424Operating
      income
            
            
            4,714,498
            
            
            
            6,175,461Interest
      expense:Interest
      expense
            
            
            (389,727
            )
            
            
            (736,251
            )Amortization
      of debt discount and deferred financing costs
            
            
            (101,504
            )
            
            
            (101,504
            )Total
      interest expense
            
            
            (491,231
            )
            
            
            (837,755
            )Other
      income
            
            
            -
            
            
            
            (1,000
            )Income
      before income taxes
            
            
            4,223,267
            
            
            
            5,336,706Income
      taxes
            
            
            1,651,298
            
            
            
            2,182,714Net
      income
            
            $
            2,571,969
            
            
            $
            3,153,992Net
      income per share:Basic
            
            $
            0.16
            
            
            $
            0.20Diluted
            
            $
            0.16
            
            
            $
            0.20Shares
      used in computing net income per share:Basic
            
            
            15,823,271
            
            
            
            15,802,969Diluted
            
            
            16,033,414
            
            
            
            16,059,963





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





4
 Table of Contents





OVERHILL FARMS, INC.


CONDENSED
STATEMENTS OF INCOME


(Unaudited)











For the Nine Months EndedJune 28,
              2009
            
            
            June 29,
              2008Net
      revenues
            
            $
            161,356,490
            
            
            $
            185,696,987Cost
      of sales
            
            
            140,695,304
            
            
            
            162,887,725Gross
      profit
            
            
            20,661,186
            
            
            
            22,809,262Selling,
      general and administrative expenses
            
            
            7,501,279
            
            
            
            6,493,009Operating
      income
            
            
            13,159,907
            
            
            
            16,316,253Interest
      expense:Interest
      expense
            
            
            (1,526,658
            )
            
            
            (2,604,233
            )Amortization
      of debt discount and deferred financing costs
            
            
            (304,512
            )
            
            
            (304,512
            )Total
      interest expense
            
            
            (1,831,170
            )
            
            
            (2,908,745
            )Other
      expenses
            
            
            -
            
            
            
            (12,414
            )Income
      before income taxes
            
            
            11,328,737
            
            
            
            13,395,094Income
      taxes
            
            
            4,429,536
            
            
            
            5,491,241Net
      income
            
            $
            6,899,201
            
            
            $
            7,903,853Net
      income per share:Basic
            
            $
            0.44
            
            
            $
            0.50Diluted
            
            $
            0.43
            
            
            $
            0.50Shares
      used in computing net income per share:Basic
            
            
            15,823,271
            
            
            
            15,721,404Diluted
            
            
            16,021,082
            
            
            
            15,965,444





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





5
 Table of Contents





OVERHILL FARMS, INC.


CONDENSED
STATEMENTS OF CASH FLOWS


(Unaudited)











For the Nine Months EndedJune 28,
              2009
            
            
            June 29,
              2008Operating
      Activities:Net
      income
            
            $
            6,899,201
            
            
            $
            7,903,853Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
            
            
            2,382,713
            
            
            
            2,264,784Amortization
      of debt discount and deferred financing costs
            
            
            304,512
            
            
            
            304,512Loss
      on asset disposals
            
            
            -
            
            
            
            64,029Loss
      on recalled product
            
            
            -
            
            
            
            885,540Provision
      for doubtful accounts
            
            
            2,000
            
            
            
            9,559Deferred
      income taxes
            
            
            -
            
            
            
            12,647Gain
      on sale of property and equipment
            
            
            (35,019
            )
            
            
            -Loss
      on sale of marketable securities
            
            
            -
            
            
            
            11,644Changes
      in:Accounts
      receivable
            
            
            4,782,708
            
            
            
            (772,605
            )Inventories
            
            
            1,187,033
            
            
            
            637,180Prepaid
      expenses and other assets
            
            
            686,309
            
            
            
            (417,387
            )Accounts
      payable
            
            
            (1,483,682
            )
            
            
            (3,440,155
            )Accrued
      liabilities
            
            
            261,652
            
            
            
            543,561Net
      cash provided by operating activities
            
            
            14,987,427
            
            
            
            8,007,162Investing
      Activities:Additions
      to property and equipment
            
            
            (748,907
            )
            
            
            (1,250,107
            )Proceeds
      from sale of property and equipment
            
            
            37,853
            
            
            
            -Acquisition
      of wastewater capacity units
            
            
            (1,060,741
            )
            
            
            -Sale
      of marketable securities
            
            
            -
            
            
            
            53,976Net
      cash used in investing activities
            
            
            (1,771,795
            )
            
            
            (1,196,131
            )





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





6
 Table of Contents





OVERHILL
FARMS, INC.


CONDENSED
STATEMENTS OF CASH FLOWS (continued)


(Unaudited)











For the Nine Months EndedJune 28,
              2009
            
            
            June 29,
              2008Financing
      Activities:Borrowings
      under financing arrangements
            
            $
            -
            
            
            $
            1,000,000Principal
      payments on debt
            
            
            (11,689,734
            )
            
            
            (4,500,000
            )Principal
      payments on equipment loans
            
            
            (168,687
            )
            
            
            (156,535
            )Principal
      payments on capital lease obligation
            
            
            (227,058
            )
            
            
            (209,345
            )Exercise
      of stock options, including tax benefit
            
            
            -
            
            
            
            444,085Net
      cash used in financing activities
            
            
            (12,085,479
            )
            
            
            (3,421,795
            )Net
      increase in cash
            
            
            1,130,153
            
            
            
            3,389,236Cash
      at beginning of period
            
            
            6,637,576
            
            
            
            1,325,868Cash
      at end of period
            
            $
            7,767,729
            
            
            $
            4,715,104Supplemental
      Schedule of Cash Flow Information:Cash
      paid during the period for:Interest
            
            $
            1,636,900
            
            
            $
            2,394,084Income
      taxes
            
            $
            3,365,000
            
            
            $
            4,569,000





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





7
 Table of Contents





OVERHILL FARMS, INC.


NOTES
TO CONDENSED FINANCIAL STATEMENTS


June
28, 2009


(Unaudited)








1.
            NATURE
      OF BUSINESS AND ORGANIZATIONAL
MATTERS





Overhill
Farms, Inc. (the “Company” or “Overhill Farms”) is a leading value-added
manufacturer of high quality, prepared frozen food products for branded retail,
private label, foodservice and airline customers.  The Company’s
product line includes entrées, plated meals, bulk-packed meal components,
pastas, soups, sauces, poultry, meat and fish specialties, and organic and
vegetarian offerings.





2.
            BASIS
      OF PRESENTATION





The
accompanying unaudited condensed financial statements have been prepared in
accordance with U.S. generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by U.S. generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the quarter and nine months ended June 28,
2009 are not necessarily indicative of the results that may be expected for the
year ending September 27, 2009 or for any other period.





The
preparation of financial statements in conformity with U.S. generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying
notes.  Actual results could differ from those estimates.





The
condensed balance sheet at September 28, 2008 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by U.S. generally accepted accounting principles for
complete financial statements.





For
further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
September 28, 2008.





3.
            RECENT
      ACCOUNTING PRONOUNCEMENTS





In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurements” (“SFAS 157”), which defines fair value, establishes a framework
for measuring fair value and requires enhanced disclosures about fair value
measurements. SFAS 157 requires companies to disclose the fair value of their
financial instruments according to a fair value hierarchy (i.e., levels 1, 2,
and 3, as defined). Additionally, companies are required to provide enhanced
disclosure regarding instruments in the level 3 category, including a
reconciliation of the beginning and ending balances separately for each major
category of assets and liabilities. SFAS 157 became effective for the Company’s
fiscal year that began on September 29, 2008.  The adoption of SFAS
157 did not have a material impact on the Company’s financial position or
results of operations.  As of June 28, 2009, the
Company had financial assets in cash, which are measured at fair value using
quoted prices for identical assets in an active market (Level 1 fair value
hierarchy) in accordance with SFAS 157.





In
February 2008, the FASB issued FASB Staff Position FAS 157-2, "Effective Date of
FASB Statement No. 157" (“FSP SFAS 157-2”), which permits a one-year deferral of
the application of SFAS 157 for all non-financial assets and non-financial
liabilities, except those that are recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually).  FSP
SFAS 157-2 partially defers the effective date of SFAS 157 to fiscal years
beginning after November 15, 2008, and interim periods within those fiscal years
for items within the scope of FSP SFAS 157-2.  The Company is
currently evaluating the potential impact of the adoption FSP SFAS 157-2 on the
Company's financial statements.





In
December 2007, the FASB issued SFAS No. 141 (revised 2007) (“SFAS 141(R)”),
“Business Combinations,” which replaces FASB Statement 141. SFAS 141(R)
establishes principles and requirements for how an acquirer recognizes and
measures in its financial statements the identifiable assets acquired, the
liabilities assumed, any noncontrolling interest in the acquiree and the
goodwill acquired. SFAS 141(R) also modifies the recognition for preacquisition
contingencies, such as environmental or legal issues, restructuring plans and
acquired research and development value in purchase accounting. SFAS 141(R)
amends SFAS No. 109, “Accounting for Income Taxes,” to require the acquirer to
recognize changes in the amount of its deferred tax benefits that are
recognizable because of a business combination either in income from continuing
operations in the period of the combination or directly in contributed capital,
depending on the circumstances. SFAS 141(R) also establishes disclosure
requirements which will enable users to evaluate the nature and financial
effects of the business combination. SFAS 141(R) is effective on or after the beginning
of the first annual reporting period beginning on or after December 15,
2008.  The impact to the Company of the adoption of SFAS 141(R)
will depend on the nature and size of any potential future
acquisitions.





8
 Table of Contents





In
December 2007, the FASB issued SFAS No. 160 (“SFAS 160”), “Accounting for
Noncontrolling Interests,” which clarifies the classification of noncontrolling
interests in consolidated statements of financial position and the accounting
for and reporting of transactions between the reporting entity and holders of
such noncontrolling interests. SFAS 160 will be effective for fiscal years
beginning after December 15, 2008.  The Company currently is
evaluating the impact adoption may have on its financial condition or results of
operations.





In April
2009, FASB issued FSP 107-1 and APB 28-1, “ Interim Disclosures about Fair Value
of Financial Instruments” (“FSP 107 and APB 28-1”).FSP 107-1 and APB 28-1
enhance consistency in financial reporting by increasing the frequency of fair
value disclosures from annually to quarterly. FSP 107-1 and APB 28-1 require
disclosures on a quarterly basis of, qualitative and quantitative information
about fair value estimates for all those financial instruments not measured on
the balance sheet at fair value. The disclosure requirement under this FSP
became effective beginning with the Company’s first interim reporting period
ending after June 15, 2009. The adoption of this FSP did not have a material
impact on the Company’s results of operations or financial
condition.





In May
2008, the FASB issued SFAS No. 162 (“SFAS 162”), “The Hierarchy of Generally
Accepted Accounting Principles.”  SFAS 162 is intended to improve
financial reporting by identifying a consistent hierarchy for selecting
accounting principles to be used in preparing financial statements that are
prepared in conformity with generally accepted accounting principles. Unlike
Statement on Auditing Standards No. 69, “The Meaning of Present Fairly in
Conformity With GAAP,” SFAS 162 is directed to the entity rather than the
auditor.  SFAS 162 is effective 60 days following approval by the U.S.
Securities and Exchange Commission of the Public Company Accounting Oversight
Board’s amendments to AU Section 411, “The Meaning of Present Fairly in
Conformity with Generally Accepted Accounting Principles.” The Company does not
expect SFAS 162 to have a material impact on its financial condition or results
of operations.





On May
28, 2009, the FASB issued SFAS No. 165 ("SFAS 165"), "Subsequent Events". SFAS
165 is effective for interim or annual periods ending after June 15, 2009 and
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. Entities are also required to disclose the date
through which subsequent events have been evaluated and the basis for that date.
The Company has evaluated subsequent events through the date of issuance of
these financial statements, August 7, 2009.





In June
2009, the FASB issued SFAS No. 168 (“SFAS 168”), “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting
Principles”.  SFAS 168 will become the source of authoritative U.S.
generally accepted accounting principles (“GAAP”) recognized by the FASB to be
applied by nongovernmental entities.  Rules and interpretive releases
of the Securities and Exchange Commission (“SEC”) under authority of federal
securities laws are also sources of authoritative GAAP for SEC
registrants.  On the effective date of this statement, the
codification will supersede all then-existing non-SEC accounting and reporting
standards.  All other non-grandfathered non-SEC accounting literature
not included in the codification will become non-authoritative.  This
statement is effective for financial statements issued for interim and annual
periods ending after September 15, 2009.  The Company does not expect
the adoption of SFAS 168 to have a material impact on the Company’s results of
operations, financial condition or cash flows.





9
 Table of Contents





4.
            INVENTORIES





Inventories
are summarized as follows:




June 28,
              2009
            
            
            September 28,
              2008Raw
      ingredients
            
            $
            6,267,384
            
            
            $
            5,287,858Finished
      product
            
            
            7,821,221
            
            
            
            9,580,980Packaging
            
            
            2,018,438
            
            
            
            2,425,238$
            16,107,043
            
            
            $
            17,294,076





5.
            LONG-TERM
      DEBT





Long-term
debt of the Company as of June 28, 2009 and September 28, 2008 is summarized as
follows:





June 28,
              2009
            
            
            September 28,
              2008Tranche
      A Term Loans payable to GCF
            
            $
            15,100,028
            
            
            $
            23,989,762Tranche
      B Term Loans payable to GCF
            
            
            12,850,000
            
            
            
            15,650,000Equipment
      loans
            
            
            481,195
            
            
            
            649,882Capital
      lease
            
            
            52,364
            
            
            
            279,42228,483,587
            
            
            
            40,569,066Less
      current maturities
            
            
            (2,792,511
            )
            
            
            (6,228,881
            )Less
      debt discount
            
            
            (616,591
            )
            
            
            (860,724
            )$
            25,074,485
            
            
            $
            33,479,461





The
Company executed a senior secured credit agreement with Guggenheim Corporate
Funding, LLC (“GCF”) on April 17, 2006. Under the credit agreement, GCF acts as
collateral agent, administrative agent, arranger and syndication agent in
connection with loans made by various lenders, including affiliates of
GCF.  The facility was originally structured as a $7.5
million non-amortizing revolving loan, a $25.0 million amortizing Tranche A Term
Loan and a $15.0 million non-amortizing Tranche B Term Loan.





On March
9, 2007, the Company executed a second amendment to the senior secured credit
agreement allowing for $7.0 million of additional capital expenditures to
facilitate new business by increasing plant capacity and improving line
efficiency, to be funded by increases of $3.5 million in each of the Tranche A
and Tranche B Term Loans.





As of
June 28, 2009, the facility with GCF, reflecting principal payments and the
March 9, 2007 amendment, was a $49.7 million senior secured credit facility
maturing in May 2011, secured by a first priority lien on substantially all of
the Company’s assets.  The facility was structured as a $7.5 million
non-amortizing revolving loan, a $26.5 million amortizing Tranche A Term Loan
and a $15.7 million non-amortizing Tranche B Term Loan. The facility bears
interest, adjustable quarterly, at the London Inter Bank Offered Rate (“LIBOR”)
plus the applicable margin for LIBOR loans or, at the Company’s option in the
case of the revolving loans, an alternate base rate equal to the greater of the
prime rate and the federal funds effective rate plus 0.50%, plus the applicable
margin for alternate base rate loans, as follows:





10
 Table of Contents








Total Debt to EBITDA Ratio for Last Twelve
      Months
            
            Applicable Margin for Alternate Base Rate
      Loans
            
            
            Applicable Margin for
                LIBOR LoansRevolving Loan
            
            
            Revolving Loan
            
            
            Tranche A
                Term Loan
            
            
            Tranche B
                Term LoanGreater
      than
            3.00:1.00
            
            
            2.50
            %
            
            
            3.50
            %
            
            
            3.75
            %
            
            
            6.25
            %Greater
      than or equal to but less than or equal to
            2.00:1.00
              3.00:1.00
            
            
            2.25
            %
            
            
            3.25
            %
            
            
            3.50
            %
            
            
            6.00
            %Less than
            2.00:1.00
            
            
            2.00
            %
            
            
            3.00
            %
            
            
            3.25
            %
            
            
            5.75
            %





As of
June 28, 2009, the Company’s principal balances on the loans totaled $28.0
million, consisting of $15.1 million in Tranche A Term Loans and $12.9 million
in Tranche B Term Loans.  At June 28, 2009, interest rates on the
Tranche A Term Loans and Tranche B Term Loans were 3.6% and 6.1%,
respectively.  As of June 28, 2009 and September 28, 2008, the
Company’s total debt to EBITDA ratio for the last twelve months was 1.38 and
1.71, respectively.  Therefore, for the quarter and nine months ended
June 28, 2009, the Company qualified for the lowest applicable margin for the
alternate base rate and LIBOR loans.  For the nine months ended June
28, 2009, the Company incurred $1.5 million in interest expense, excluding
amortization of deferred financing costs.  For the nine months ended
June 29, 2008, the Company incurred $2.6 million in interest expense, excluding
amortization of deferred financing costs, net of $43,000 in capitalized
interest.  During the nine months ended June 28, 2009, the outstanding
balance of the facility was reduced by mandatory and voluntary principal
payments on the Tranche A Term Loan of $3.9 million and $5.0 million,
respectively.  The $5.0 million voluntary principal payment was made
during the quarter ended June 28, 2009.  In addition, the Company also
made a voluntary principal payment on the Tranche B Term Loan of $2.8 million
during the first quarter of fiscal year 2009.  As of June 28, 2009,
the Company had $7.5 million available to borrow under the revolving loan, as
the balance was zero.





Initial
proceeds from the GCF facility, received on or about May 16, 2006, were used to
repay approximately $44.5 million in existing debt and related fees and expenses
in connection with the termination of the Company’s former financing
arrangements and to pay approximately $1.6 million in fees and expenses relating
to the new financing.  Of these fees, $617,000 is recorded as debt
discount, net of accumulated amortization, on the accompanying balance sheet as
of June 28, 2009.  The Company paid GCF an additional $132,000 in fees
and expenses on March 9, 2007 related to the second amendment, which was
recorded as a debt discount.





The GCF
facility contains covenants whereby, among other things, the Company is required
to maintain compliance with agreed levels of earnings before interest, taxes,
depreciation and amortization, interest coverage, fixed charge coverage,
leverage targets, annual capital expenditures and incremental indebtedness
limits.  Mandatory prepayments under the facility are required based
on excess cash flow, as defined in the agreement, and upon receipt of proceeds
from a disposition or payment from a casualty or condemnation of the
collateralized assets, and voluntary prepayments under the facility are
generally permitted as provided in the agreement. The facility also contains
customary restrictions on incurring indebtedness and liens, making investments,
repurchasing shares, paying dividends and making loans or advances.





As of
June 28, 2009, the Company was in compliance with the covenant requirements of
the agreement with GCF.  The Company believes it is probable that it
will remain in compliance with all of those covenant requirements for the
foreseeable future.  However, if the Company fails to achieve certain
revenue, expense and profitability levels, a violation of the financial
covenants under its financing arrangements could result and interest rate
increases and acceleration of maturity of the loans could occur, which could
adversely affect its financial condition, results of operations and cash
flows.





The
Company entered into the following amortizing loans with Key Bank to finance the
purchase of machinery used for manufacturing processes: a 5-year loan in the
principal amount of $324,000 at a fixed interest rate of 7.5% on September 21,
2006, a 5-year loan in the principal amount of $216,617 at a fixed interest rate
of 7.5% on November 27, 2006 and a 4-year loan in the principal amount of
$476,043 at a fixed interest rate of 7.5% on January 9, 2007.





11
 Table of Contents





The
Company amended its existing operating lease agreements with General Electric
Capital Corporation on October 2, 2006. The amended lease resulted in a
three-year capital lease in the principal amount of $842,168 at a fixed interest
rate of 8.15%, with a $1 bargain purchase option at the expiration of the
lease.  As of June 28, 2009, the remaining balance of the capital
lease was due within 12 months.  The assets acquired under this
capital lease have an acquisition cost of $911,647.  As of June 28,
2009 the net book value of the assets was $430,933.





6.
            PER
      SHARE DATA





The
following table sets forth the calculation of earnings per share (“EPS”) for the
periods presented:





Quarter EndedJune 28,
              2009
            
            
            June 29,
              2008Basic
      EPS Computation:Numerator:Net
      income
            
            $
            2,571,969
            
            
            $
            3,153,992Denominator:Weighted
      average common shares outstanding
            
            
            15,823,271
            
            
            
            15,802,969Total
      shares
            
            
            15,823,271
            
            
            
            15,802,969Basic
      EPS
            
            $
            0.16
            
            
            $
            0.20Diluted
      EPS Computation:Numerator:Net
      income
            
            $
            2,571,969
            
            
            $
            3,153,992Denominator:Weighted
      average common shares outstanding
            
            
            15,823,271
            
            
            
            15,802,969Incremental
      shares from assumed exercise of stock options
            
            
            210,143
            
            
            
            256,994Total
      shares
            
            
            16,033,414
            
            
            
            16,059,963Diluted
      EPS
            
            $
            0.16
            
            
            $
            0.20





Nine Months EndedJune 28,
              2009
            
            
            June 29,
              2008Basic
      EPS Computation:Numerator:Net
      income
            
            $
            6,899,201
            
            
            $
            7,903,853Denominator:Weighted
      average common shares outstanding
            
            
            15,823,271
            
            
            
            15,721,404Total
      shares
            
            
            15,823,271
            
            
            
            15,721,404Basic
      EPS
            
            $
            0.44
            
            
            $
            0.50Diluted
      EPS Computation:Numerator:Net
      income
            
            $
            6,899,201
            
            
            $
            7,903,853Denominator:Weighted
      average common shares outstanding
            
            
            15,823,271
            
            
            
            15,721,404Incremental
      shares from assumed exercise of stock options
            
            
            197,811
            
            
            
            244,040Total
      shares
            
            
            16,021,082
            
            
            
            15,965,444Diluted
      EPS
            
            $
            0.43
            
            
            $
            0.50





12
 Table of Contents





During
the three and nine months ended June 28, 2009, there were no shares issued in
connection with the exercise of employee stock options.  During the
three and nine months ended June 29, 2008, the Company issued 30,572 and 203,000
shares, respectively, of common stock in connection with the exercise of
employee stock options for total proceeds of approximately $20,000 and $294,000,
respectively.





7.
            STOCK
      OPTIONS





In
December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment” (“SFAS
123R”), which requires the Company to measure the cost of all employee
stock-based compensation awards based on the grant date fair value of those
awards and to record that cost as compensation expense over the period during
which the employee is required to perform service in exchange for the award
(generally over the vesting period of the award).  Accordingly, with
the adoption of SFAS 123R, any future option awards will have an impact on the
Company’s results of operations.  The Company adopted SFAS 123R on
October 3, 2005 utilizing the modified prospective method.  The
Company’s adoption of SFAS 123R did not impact the Company’s income before
income tax expense, net income and basic and diluted earnings per share since no
options were granted during the quarters and nine months ended June 28, 2009 and
June 29, 2008 and all of the Company’s outstanding options were fully vested at
the date of adoption of this standard.  No compensation expense
related to this standard was recorded to date.





8.
            INCOME
      TAXES





The
Company adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty of Income Taxes - An Interpretation of FASB Statement No. 109” (“FIN
48”) on October 1, 2007. FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprise's financial statements in accordance
with SFAS No. 109, “Accounting for Income Taxes” (“SFAS 109”). FIN 48 prescribes
a recognition threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognition of tax benefits,
classification on the balance sheet, interest and penalties, accounting in
interim periods, disclosure and transition. The total amount of unrecognized tax
benefits as of the date of adoption was not material. The Company has
substantially concluded all U.S. federal income tax matters for years through
fiscal year 2007.  As a result of the implementation of FIN 48, the
Company recorded no increase in the liability for unrecognized tax
benefits.  The balance of unrecognized tax benefits was zero at June
28, 2009 and September 28, 2008.





The
Company has adopted the accounting policy that interest recognized in accordance
with Paragraph 15 of FIN 48 and penalty recognized in accordance with Paragraph
16 of FIN 48 are classified as part of income taxes. The total amount of
interest and penalty recognized in the statement of income was zero for the
quarters and nine months ended June 28, 2009 and June 29, 2008.





The
Company does not anticipate any significant change within 12 months of this
reporting date of its uncertain tax positions.





The
effective tax rates were 39.1% and 41.0% for the first nine months of each of
fiscal years 2009 and 2008, respectively, which is consistent with the statutory
rate.





9.
            CONTINGENCIES





Legal
Proceedings





The
Company is involved in certain legal actions and claims arising in the ordinary
course of business.  Management believes that such contingencies,
including the matters described below, will be resolved without materially and
adversely affecting the Company’s financial position, results of operations or
cash flows.





On June
29, 2009, the Company filed a lawsuit in Orange County Superior Court against
Nativo (aka Larry) Lopez, Teresa Cortez, Alma Salinas Renteria, Bohemia Y.
Augustiana Saguilan, Marcelino Arteaga, Agapita Padilla, and Fernando Morales
Lira.   The lawsuit is based on the defendants’ unlawful campaign
to coerce the Company to employ individuals who have no valid social security
number and no legal right to work in the United States.  The case
includes claims for defamation, extortion, intentional interference with
customers and employees, and unfair business practices.  The Company
seeks monetary damages and injunctive relief.





13
 Table of Contents





On July
7, 2009, the Company was served with a lawsuit filed in Los Angeles Superior
Court on July 1, 2009 by Bohemia Augustiana, Isela Hernandez and Ana
Munoz.  These three individuals are former Company employees who had
been terminated on May 31, 2009, because they did not have valid social security
numbers, and they had furnished false social security numbers to the
Company.  In their lawsuit, they allege failure to pay minimum wage,
failure to furnish wage and hour statements, waiting time penalties, conversion
and unfair business practices.  They seek unspecified damages,
restitution, an equitable accounting, injunctive relief, attorneys’ fees and
costs of suit, and they allege that they are bringing the action as a class
action on behalf of other similarly situated employees.





As
previously disclosed in the Company’s periodic reports, on September 23, 2008,
the Company filed a lawsuit against one of its customers, American Pie, LLC, who
distributes products under the name “Claim Jumper.” The action involved a
complaint by the Company against customer American Pie and two of its officers,
William R. Collins and Robert G. Blume (collectively,
“defendants”).  The complaint asserted claims for: 1) breach of
contract; 2) breach of implied covenant of good faith and fair dealing; 3)
fraud; 4) unfair business practices; and 5) declaratory relief to recover
amounts American Pie refused to pay for goods delivered by the
Company.  On December 10, 2008, the defendants filed a counterclaim
against the Company alleging:  1) breach of an oral contract; 2)
breach of a written contract; and 3) breach of implied warranties of
merchantability and fitness for an intended purpose to recover price increases,
compensation for products the Company allegedly failed to produce, and for
purportedly contaminated product.  The action was settled to all
parties’ joint satisfaction on terms that are confidential, and the complaint
and counterclaim were dismissed with prejudice pursuant to the parties’
stipulation by order entered May 22, 2009.





Concentrations
of Credit Risk





The
Company’s financial instruments that are exposed to concentrations of credit
risk consist primarily of trade receivables.  The Company performs
on-going credit evaluations of each customer’s financial condition and generally
requires no collateral from its customers.  The Company charges off
uncollectible accounts at the point in time when no recovery is
expected.





A
significant portion of the Company’s total net revenues during the first nine
months of fiscal years 2009 and 2008 was derived from four
customers.  Jenny Craig, Inc., Panda Restaurant Group, Inc., Safeway
Inc. and H. J. Heinz Company, accounted for approximately 25%, 18%, 17% and 13%,
respectively, of the Company’s total net revenues for the nine months ended June
28, 2009 and approximately 25%, 16%, 12% and 18%, respectively, of the Company’s
total net revenues for the nine months ended June 29,
2008.  Receivables related to Jenny Craig, Inc., Panda Restaurant
Group, Inc. (through its distributors), Safeway Inc. and H. J. Heinz Company
accounted for approximately 21%, 32%, 14% and 11%, respectively, of the
Company’s total accounts receivable balance as of June 28, 2009 and
approximately 26%, 15%, 14% and 14%, respectively, of the Company’s total
accounts receivable balance as of June 29, 2008.





10.
            RELATED
      PARTY TRANSACTIONS





In
February 2004, the Company engaged Alexander Auerbach & Co., Inc. (“AAPR”)
to provide the Company with public relations and marketing
services.  AAPR provides public relations, media relations and
communications marketing services to support the Company’s sales
activities.  Alexander Auerbach, who is a director and stockholder of
the Company, is a stockholder, director and officer of AAPR.  Fees
paid to AAPR for services rendered under this engagement during the first nine
months of fiscal years 2009 and 2008 were $25,000 and $31,000,
respectively.





11.
            FINANCIAL
      INSTRUMENTS





The fair
value of financial instruments is determined by reference to market data and by
other valuation techniques as appropriate.  The Company believes the
carrying value of the debt approximates fair value at both June 28, 2009 and
September 28, 2008, as the debt bears interest at variable rates based on
prevailing market conditions.  The fair values of other financial
instruments approximate their recorded values due to their short-term
nature.





12.
            SUBSEQUENT
      EVENTS





The
Company has completed an evaluation of all subsequent events through August 7,
2009, which is the issuance date of these financial statements and concluded no
subsequent events occurred that required recognition or disclosure other than
the legal matters noted in footnote 9 to these financial
statements.





14
 Table of Contents





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





Forward-Looking
Statements





The
following discussion and analysis should be read in conjunction with our
condensed financial statements and notes to condensed financial statements
included elsewhere in this report. This report, and our condensed financial
statements and notes to our condensed financial statements, contain
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995, which statements generally include the plans and
objectives of management for future operations, including plans and objectives
relating to our future economic performance and our current beliefs regarding
revenues we might earn if we are successful in implementing our business
strategies.  The forward-looking statements are based on current
expectations or beliefs.  For this purpose, statements of historical
fact may be deemed to be forward-looking statements.  Forward-looking
statements include statements which are predictive in nature, which depend upon
or refer to future events or conditions, or which include words such
as  “continue,” “efforts,” “expects,” “anticipates,” “intends,”
“plans,” “believes,” “estimates,” “projects,” “forecasts,” “strategy,” “will,”
“goal,” “target,” “prospects,” “optimistic,” “confident,” “likely,” “probable”
or similar expressions.  In addition, any statements concerning future
financial performance (including future revenues, earnings or growth rates),
on-going business strategies or prospects, and possible future company actions,
which may be provided by management, are also forward-looking
statements.  We caution that these statements by their nature involve
risks and uncertainties, and actual results may differ materially depending on a
variety of important factors, including, among others:





·
            the impact of competitive products and
      pricing;





·
            fulfillment by suppliers of existing raw material
      contracts;





·
            market conditions that may affect the costs and/or availability of raw
      materials, fuels, energy, logistics
      and labor as well as the market for our products, including our customers’
      ability to pay and consumer
  demand;





·
            changes in our business environment, including
      actions of competitors and changes in customerpreferences, as well as disruptions to our
      customers’
businesses;





·
            seasonality in the retail
      category;





·
            loss of key customers due to competitive
      environment or production being moved in-house by
      customers;





·
            natural disasters that can impact, among other
      things, costs of fuel and raw
materials;





·
            the occurrence of acts of terrorism, such as the
      events of September 11, 2001, or acts of
  war;





·
            changes in governmental laws and regulations,
      including income taxes;





·
            change
      in control due to takeover or other significant changes in
      ownership;





·
            financial
      viability and resulting effect on revenues and collectibility of accounts
      receivable of our customers during deep recessionary
    periods;





·
            ability
      to obtain additional financing as and when needed, and rising costs of
      credit that may be associated with new
  borrowings;





·
            voluntary
      or government-mandated food recalls;
and





·
            other
      factors as may be discussed in this report and other reports we file with
      the Securities and Exchange Commission (“Commission”), including those
      described in Item 1A of Part I of our annual report on Form 10-K for the
      fiscal year ended September 28, 2008 and any updates
    thereto.





We do not undertake to update, revise or correct any
forward-looking statements, except as otherwise required by
law.





15
 Table of Contents





Overview





We are a
leading value-added manufacturer of high quality, prepared frozen food products
for branded retail, private label, foodservice and airline
customers.  Our product line includes entrées, plated meals,
bulk-packed meal components, pastas, soups, sauces, poultry, meat and fish
specialties, and organic and vegetarian offerings.  Our extensive
research and development efforts, combined with our extensive catalogue of
recipes and flexible manufacturing capabilities, provide customers with a
one-stop solution for new product ideas, formulations and product manufacturing,
as well as precise replication of existing recipes.  Our capabilities
allow customers to outsource product development, product manufacturing and
packaging, thereby avoiding significant fixed-cost and variable investments in
resources and equipment.  Our customers include prominent nationally
recognized names such as Jenny Craig, Inc., Safeway Inc., Panda Restaurant
Group, Inc., H. J. Heinz Company, Pinnacle Foods Group LLC, and American
Airlines, Inc.





Our goal
is to be a leading developer and manufacturer of value-added food products and
provider of custom prepared frozen foods.  We intend to create
superior value for our stockholders by continuing to execute our growth and
operating strategies, including:





·
            diversifying
      and expanding our customer base by focusing on sectors we believe have
      attractive growth characteristics, such as foodservice and
      retail;





·
            investing
      in and operating efficient production
  facilities;





·
            providing
      value-added ancillary support services to
  customers;





·
            offering
      a broad range of products to customers in multiple channels of
      distribution; and





·
            continuing
      to pursue growth through strategic acquisitions and
      investments.





For the
quarter ended June 28, 2009, net revenues of $54.5 million reflected a 12.7%
decrease compared to the quarter ended June 29, 2008.  More than
one-half of the decrease in net revenues was due to the previously disclosed
reduced volume from one retail customer, H.J. Heinz Company, who moved a large
portion of its production to its own facilities.  In addition, we
chose to discontinue production for one of our retail customers that did not
meet our profitability requirements.  The decision to discontinue that
business frees capacity for new and more profitable accounts that we believe are
available in the short term.  During the quarter, retail sales and
sales to airlines continued to be affected by the weak economy.  Lower
retail sales were partially offset by increases in foodservice
sales.  We expect this trend to continue as retail customers have
historically decreased orders on frozen food in the summer
months.  With our increased penetration into the grocery segment, we
expect to see some increased seasonality in the retail category of our
business.  Traditionally, the summer months of June, July and August
see slightly diminished frozen grocery sales.  Sales volume may be
highest in the winter periods (our second quarter) and lowest in the warmer
months (our third and fourth quarters).





For the
nine months ended June 28, 2009, net revenues of $161.4 million reflected a
13.1% decrease compared to the nine months ended June 29, 2008.  The
decrease in net revenues was due to the previously disclosed reduced volume from
one retail customer, H.J. Heinz Company, as well as declines in airline sales
resulting from softness in the airline industry caused by a slowing economy
offset partially by a slight increase in foodservice net revenues.





Gross
profit was $7.4 million for the quarter ended June 28, 2009, compared to $8.4
million for the quarter ended June 29, 2008.  The decrease in gross
profit dollars was due to decreased sales as noted above.  Gross
profit as a percentage of net revenues increased to 13.6% for the quarter ended
June 28, 2009 from 13.5% for the quarter ended June 29, 2008 due largely to
favorable commodity prices, lower product development costs and lower freight
charges offset partially by higher overhead costs as a percentage of net
revenues on lower sales volume.  Although we expect continued lower
commodity prices and lower freight charges for the rest of the fiscal year, we
may also see continued higher overhead costs as a percentage of net revenues as
sales volume is typically lowest in the warmer months (our third and fourth
quarters).





Gross
profit was $20.7 million for the nine months ended June 28, 2009, compared to
$22.8 million for the nine months ended June 29, 2008.  Although gross
profit decreased due to lower revenues, it increased as a percentage of net
revenues to 12.8% for the nine months ended June 28, 2009 from 12.3% for the
nine months ended June 29, 2008.  Gross profit as a percentage of net
revenues increased due to higher margin sales mix along with increased
efficiencies and yields, favorable commodity prices, lower freight charges,
lower product development costs and modest increases in sales prices to several
customers, offset partially by higher overhead costs as a percentage of net
revenues on lower sales volume.  As previously disclosed, in order to
improve our gross profit margins, we continue to analyze our lower margin
accounts in order to increase margins or change to more profitable
business.





16
 Table of Contents





Operating
income for the quarter ended June 28, 2009 was $4.7 million (8.6% of net
revenues), compared to $6.2 million (9.9% of net revenues) for the quarter ended
June 29, 2008.  The decrease was due to lower revenues, increased
total brokerage fees stemming from higher sales to Safeway Inc. and increased
professional fees relating to litigation described in footnote 9 to our most
recent financial statements, which are contained in Part I, Item 1 of this
report.




Operating
income for the nine months ended June 28, 2009 was $13.2 million (8.2% of net
revenues), compared to $16.3 million (8.8% of net revenues) for the nine months
ended June 29, 2008.  The decrease was due to lower revenues,
increased total brokerage fees stemming from higher sales to Safeway Inc. and
increased professional fees relating to litigation described in footnote 9 to
our most recent financial statements.





Critical
Accounting Policies





Management’s
discussion and analysis of our financial condition and results of operations is
based upon our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States.  The
preparation of these financial statements requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes.  Actual results could differ from those
estimates.  See note 2 to the financial statements contained in our
2008 annual report on Form 10-K for the year ended September 28, 2008 for a
summary of our significant accounting policies.  Management believes
the following critical accounting policies are related to our more significant
estimates and assumptions used in the preparation of our financial
statements.





Inventories.  Inventories,
which include material, labor and manufacturing overhead, are stated at the
lower of cost, which approximates the first-in, first-out (“FIFO”) method, or
market.  We use a standard costing system to estimate our FIFO cost of
inventory at the end of each reporting period.  Historically, standard
costs have been materially consistent with actual costs.  We
periodically review our inventory for excess items, and write it down based upon
the age of specific items in inventory and the expected recovery from the
disposition of the items.





We
write-down our inventory for the estimated aged surplus, spoiled or damaged
products and discontinued items and components.  We determine the
amount of the write-down by analyzing inventory composition, expected usage,
historical and projected sales information and other factors.  Changes
in sales volume due to unexpected economic or competitive conditions are among
the factors that could result in material increases in the write-down of our
inventory.





Property and Equipment.The
cost of property and equipment is depreciated over the estimated useful lives of
the related assets, which range from three to ten years.  Leasehold
improvements to our Plant No. 1 in Vernon, California are amortized over the
lesser of the initial lease term plus one lease extension period, initially
totaling 15 years, or the estimated useful lives of the assets.  Other
leasehold improvements are amortized over the lesser of the term of the related
lease or the estimated useful lives of the assets.  Depreciation is
generally computed using the straight-line method.





We assess
property and equipment for impairment whenever events or changes in
circumstances indicate that an asset’s carrying amount may not be
recoverable.





Expenditures
for maintenance and repairs are charged to expense as incurred.  The
costs of materials purchased and labor expended in betterments and major
renewals are capitalized.  Costs and related accumulated depreciation
of properties sold or otherwise retired are eliminated from the accounts, and
gains or losses on disposals are included in operating income.





Goodwill.We
evaluate goodwill at least annually for impairment in accordance with Statement
of Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets.”  We have one reporting unit and estimate fair value based on
a variety of market factors, including discounted cash flow analysis, market
capitalization and other market-based data.  At June 28, 2009, we had
goodwill of $12.2 million.  A deterioration of our operating results
and the related cash flow effect could decrease the estimated fair value of our
business and, thus, cause our goodwill to become impaired and cause us to record
a charge against operations in an amount representing the
impairment.





Income Taxes.We
evaluate the need for a valuation allowance on our deferred tax assets based on
whether we believe that it is more likely than not that all deferred tax assets
will be realized.  We consider future taxable income and on-going
prudent and feasible tax planning strategies in assessing the need for valuation
allowances.  In the event we were to determine that we would not be able to
realize all or part of our deferred tax assets, we would record an adjustment to
the deferred tax asset and a charge to income at that time.





17
 Table of Contents





We
adopted the provisions of FASB Interpretation No. 48, “Accounting for
Uncertainty of Income Taxes - An Interpretation of FASB Statement No. 109” (“FIN
48”), on October 1, 2007.  FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in an enterprise's financial statements
in accordance with SFAS No. 109, “Accounting for Income Taxes.”  FIN
48 prescribes a recognition threshold and measurement attribute for the
financial statement recognition and measurement of a tax position taken or
expected to be taken in a tax return.  FIN 48 also provides guidance
on derecognition of tax benefits, classification on the balance sheet, interest
and penalties, accounting in interim periods, disclosure and
transition.  As a result of the implementation of FIN 48, we recorded
no increase in the liability for unrecognized tax benefits, and the balance of
unrecognized tax benefits was zero at June 28, 2009.





We have
also adopted the accounting policy that interest recognized in accordance with
Paragraph 15 of FIN 48 and penalties recognized in accordance with Paragraph 16
of FIN 48 are classified as part of income taxes.  No interest and
penalties were recognized in the statement of income for the first nine months
of fiscal year 2009.





Concentrations
of Credit Risk





Our
financial instruments that are exposed to concentrations of credit risk consist
primarily of trade receivables.  We perform on-going credit
evaluations of each customer’s financial condition and generally require no
collateral from our customers.  A bankruptcy or other significant
financial deterioration of any customer could impact its future ability to
satisfy its receivables with us.  Our allowance for doubtful accounts
is calculated based primarily upon historical bad debt experience and current
market conditions.  For the nine months ended June 28, 2009 and June
29, 2008, our write-offs, net of recoveries, to the allowance for doubtful
accounts were immaterial.





A
significant portion of our total net revenues during the first nine months of
fiscal years 2009 and 2008 was derived from four customers.  Jenny
Craig, Inc., Panda Restaurant Group, Inc., Safeway Inc. and H. J. Heinz Company,
and accounted for approximately 25%, 18%, 17% and 13%, respectively, of our
total net revenues for the nine months ended June 28, 2009 and approximately
25%, 16%, 12% and 18%, respectively, of our total net revenues for the nine
months ended June 29, 2008.  Receivables related to Jenny Craig, Inc.,
Panda Restaurant Group, Inc. (through its distributors), Safeway Inc. and H. J.
Heinz Company and accounted for approximately 21%, 32%, 14% and 11%,
respectively, of our total accounts receivable balance as of June 28, 2009 and
approximately 26%, 15%, 14% and 14%, respectively, of our total accounts
receivable balance as of June 29, 2008.





Cash used
primarily for working capital purposes is maintained in two accounts with one
major financial institution. Account balances as of June 28, 2009 exceeded the
Federal Deposit Insurance Corporation insurance limits.  If the
financial banking markets experience disruption, we may need to temporarily rely
on other forms of liquidity, including borrowing under our credit
facility.





Results
of Operations





While we
operate as a single business unit, manufacturing various products on common
production lines, revenues from similar customers are grouped into the following
natural categories: retail, foodservice and airlines.





Quarter
Ended June 28, 2009 Compared to Quarter Ended June 29, 2008





The
quarters ended June 28, 2009 and June 29, 2008 were both 13-week
periods.





Net Revenues.Net
revenues for the quarter ended June 28, 2009 decreased $7.9 million (12.7%) to
$54.5 million from $62.4 million for the quarter ended June 29, 2008 due to a
decrease in airline and retail net revenues.





Retail
net revenues decreased $10.3 million (21.3%) to $38.0 million for the quarter
ended June 28, 2009 from $48.3 million for the quarter ended June 29,
2008.  More than one-half of the decrease in retail net revenues was
due to the previously disclosed reduced volume from one retail customer, H.J.
Heinz Company, who moved a large portion of its production to its own
facilities, which we previously projected could result in a revenue reduction of
approximately $19 million for the current fiscal year, beginning in our second
quarter.  The balance of the reduction in retail net revenues is due
to the elimination of low profit accounts as well as lower sales to key
customers as a result of the current economic downturn.  As previously
discussed, with our increased penetration into the grocery segment, we expect to
see some increased seasonality in the retail category of our
business.  Traditionally, the summer months of June, July and August
see slightly diminished frozen
grocery sales.  Sales volume may be highest in the winter periods (our
second quarter) and lowest in the warmer months (our third and fourth
quarters).





18
 Table of Contents





Foodservice
net revenues increased $4.8 million (52.7%) to $13.9 million for the quarter
ended June 28, 2009 from $9.1 million for the quarter ended June 29,
2008.  The increase was attributable to sales from a new customer and
increased volume from an existing customer, as was previously disclosed in our
second quarter Form 10-Q.  We expect foodservice revenues to increase
as we continue to manufacture full quarters of anticipated volume from
foodservice customers.  We believe the anticipated increased revenues
for the remainder of the fiscal year will partially offset the decreased revenue
from H.J. Heinz Company noted above.





Airline
net revenues decreased $2.4 million (48.0%) to $2.6 million for the quarter
ended June 28, 2009 from $5.0 million for the quarter ended June 29,
2008.  Due to airline industry initiatives to cut costs, airline net
revenues may continue to decrease in future periods.





Gross
Profit.  Gross profit for the quarter ended June 28, 2009
decreased by $1.0 million (11.9%) to $7.4 million from $8.4 million for the
quarter ended June 29, 2008.  Gross profit as a percentage of net
revenues increased slightly to 13.6% for the quarter ended June 28, 2009 from
13.5% for the quarter ended June 29, 2008 due largely to higher margin sales mix
along with favorable commodity prices, lower product development costs and lower
freight charges offset by higher overhead costs as a percentage of net revenues
on lower sales volume.  Although we expect continued lower commodity
prices and lower freight charges for the rest of the fiscal year, we may also
see continued higher overhead costs as a percentage of net revenues as sales
volume is typically lowest in the warmer months (our third and fourth
quarters).





Selling, General and Administrative
Expenses. Selling, general and administrative (“SG&A”) expenses
increased $500,000 (22.7%) to $2.7 million (5.0% of net revenues) for the
quarter ended June 28, 2009 from $2.2 million (3.5% of net revenues) for the
quarter ended June 29, 2008.  SG&A expenses were driven by higher
brokerage fees stemming from higher sales to Safeway Inc., and higher
professional fees relating to litigation described in footnote 9 to our most
recent financial statements.





Operating
Income.Operating income decreased $1.5 million (24.2%) to
$4.7 million for the quarter ended June 28, 2009 from $6.2 million for the
quarter ended June 29, 2008.  The decrease in operating income was the
result of the decrease in gross profit and an increase in SG&A expenses as
noted above.





Total Interest Expense.
Total interest expense for the quarter ended June 28, 2009 was $491,000,
compared to $838,000 for the quarter ended June 29, 2008.  The
decrease in interest expense is due to lower debt balances and lower variable
interest rates.





Income Tax
Provision.  Income tax expense was $1.7 million for the quarter
ended June 28, 2009, compared to $2.2 million for the quarter ended June 29,
2008.  The effective tax rates were 39.1% for the quarter ended June
28, 2009 and 40.9% for the quarter ended June 29, 2008 and did not materially
differ from the statutory rate.





Net Income.Net income for
the quarter ended June 28, 2009 was $2.6 million, or $0.16 per basic and diluted
share, compared to net income of $3.2 million, or $0.20 per basic and diluted
share, for the quarter ended June 29, 2008.





Nine
Months Ended June 28, 2009 Compared to Nine Months Ended June 29,
2008





The nine
month periods ended June 28, 2009 and June 29, 2008 were both 39-week
periods.





Net Revenues.Net
revenues decreased $24.3 million (13.1%) to $161.4 million for the nine months
ended June 28, 2009 from $185.7 million for the nine months ended June 29, 2008,
due to a decrease in retail and airline net revenues.





Retail
net revenues decreased $18.3 million (13.5%) to $117.3 million for the nine
months ended June 28, 2009 from $135.6 million for the nine months ended June
29, 2008.  The decrease in retail net revenues was largely due to the
previously disclosed reduced volume from H.J. Heinz Company.  This
reduction in volume resulted in a decrease in revenues of approximately $12.9
million. The remaining decrease in retail net revenues is attributed to a $5.0
million decline in sales to Jenny Craig, Inc. due to the current economic
downturn and their inventory management plans.





Foodservice
net revenues increased $1.0 million (2.9%) to $35.5 million for the nine months
ended June 28, 2009 from $34.5 million for the nine months ended June 29,
2008.  The increase was largely due to sales from a new customer as
well as the anticipated increased
volume from an existing customer, primarily in the third quarter of the current
fiscal year.  For the nine months ended June 28, 2009, the foodservice
category as a percentage of net revenues increased to 22% from
19%.





19
 Table of Contents





Airline
net revenues decreased $7.0 million (44.9%) to $8.6 million for the nine months
ended June 28, 2009 from $15.6 million for the nine months ended June 29,
2008.  Due to the airline industry initiatives to cut costs, airline
net revenues may continue to decrease in future periods.





Gross
Profit.Gross profit decreased by $2.1 million (9.2%) to $20.7
million for the nine months ended June 28, 2009 from $22.8 million for the nine
months ended June 29, 2008.  However, gross profit as a percentage of
revenues increased to 12.8% for the nine months ended June 28, 2009 from 12.3%
for the nine months ended June 29, 2008 due to higher margin sales mix along
with increased efficiencies and yields, favorable commodity prices, lower
freight charges, lower product development costs and modest increases in sales
prices to several customers, offset partially by higher overhead costs as a
percentage of net revenues on lower sales volume.





Selling, General and Administrative
Expenses. SG&A expenses increased $1.0 million (15.4%) to $7.5
million (4.6% of net revenues) for the nine months ended June 28, 2009 from $6.5
million (3.5% of net revenues) for the nine months ended June 29,
2008.  SG&A expenses were driven by higher brokerage fees stemming
from higher sales to Safeway Inc., and higher professional fees relating to
litigation described in footnote 9 to our most recent financial
statements.





Operating
Income.Operating income decreased $3.1 million
(19.0%) to $13.2 million for the nine months ended June 28, 2009 from $16.3
million for the nine months ended June 29, 2008.  The decrease in
operating income was the result of the decrease in gross profit and an increase
in SG&A expenses as noted above.





Total Interest Expense.
Total interest expense for the nine months ended June 28, 2009 was $1.8 million,
compared to $2.9 million for the nine months ended June 29, 2008.  The
decrease in interest expense was due to lower debt balances and lower variable
interest rates.





Income Tax
Provision.  Income tax expense was $4.4 million for the nine
months ended June 28, 2009, compared to $5.5 million for the nine months ended
June 29, 2008.  The effective tax rates were 39.1% for the nine months
ended June 28, 2009 and 41.0% for the nine months ended June 29, 2008 and did
not materially differ from the statutory rate.





Net Income.Net income for
the nine months ended June 28, 2009 was $6.9 million, or $0.44 per basic and
$0.43 per diluted share, compared to net income of $7.9 million, or $0.50 per
basic and diluted share, for the nine months ended June 29, 2008.





Liquidity
and Capital Resources





During
the nine month periods ended June 28, 2009 and June 29, 2008, our operating
activities provided cash of $15.0 million and $8.0 million,
respectively.  Cash generated from operations before working capital
changes for the first nine months of fiscal year 2009 was $9.6
million.  Cash generated by changes in working capital was $5.4
million during the first nine months of fiscal year 2009 and resulted from
decreases in accounts receivable, inventory and prepaid expenses and other
assets of $4.8 million, $1.2 million and $686,000, respectively, as well as an
increase in accrued liabilities of $262,000.  This was partially
offset by cash used to decrease accounts payable by $1.5 million.  As
of June 28, 2009, we had working capital of $25.4 million compared to working
capital of $26.3 million at fiscal year end 2008.  The decrease was
due to continued focus on timely collections of our receivables as well as lower
inventory balances due to our traditional slower summer sales.  We
were able to fund our operations in the first nine months of fiscal year 2009
internally while decreasing our external debt.





During
the first nine months of fiscal year 2009, our investing activities, consisting
primarily of an acquisition of wastewater capacity units for our plant No. 1 in
Vernon, California, and capital expenditures of $1.1 million and $749,000,
respectively, resulted in a net use of cash of approximately $1.8 million,
compared to a net use of cash of approximately $1.2 million during the first
nine months of fiscal year 2008.  The wastewater capacity units, which
are required by California law, and the property and equipment additions were
made to accommodate additional business opportunities, meet anticipated growth
and improve operating efficiency.





During
the first nine months of fiscal year 2009, our financing activities resulted in
a use of cash of $12.1 million, compared to a use of cash of $3.4 million during
the first nine months of fiscal year 2008.  The increased use of cash
was largely due to $11.7 million
in mandatory and voluntary principal payments we made on our Tranche A and
Tranche B Term Loans during the first nine months of fiscal year 2009, as
described below.





20
 Table of Contents





We
believe that our cash and financial liquidity positions are sufficient to fund
current working capital needs and future growth initiatives.  We
intend to continue to reduce our debt with regularly scheduled debt reduction
payments and additional voluntary prepayments where liquidity and loan
agreements allow.





On March
9, 2007, we executed a second amendment to the senior secured credit agreement
with GCF allowing for $7.0 million of additional capital expenditures to
facilitate new business by increasing plant capacity and improving line
efficiency, to be funded by increases of $3.5 million in each of the Tranche A
and Tranche B Term Loans.





As of
June 28, 2009, the facility with GCF, reflecting principal payments and the
March 9, 2007 amendment, was a $49.7 million senior secured credit facility
maturing in May 2011, secured bya first priority lien on
substantially all of our assets.  The facility was structured as a
$7.5 million non-amortizing revolving loan, a $26.5 million amortizing Tranche A
Term Loan and a $15.7 million non-amortizing Tranche B Term Loan.  The
facility bears interest, adjustable quarterly, at the London Inter Bank Offered
Rate (“LIBOR”) plus the applicable margin (listed below) for LIBOR loans or, at
our option in the case of the revolving loans, an alternate base rate equal to
the greater of the prime rate and the federal funds effective rate plus 0.50%,
plus an applicable margin, as follows:





Total Debt to EBITDA Ratio for Last Twelve
      Months
            
            Applicable Margin for Alternate Base Rate
      Loans
            
            
            Applicable Margin for
                LIBOR LoansRevolving Loan
            
            
            Revolving Loan
            
            
            Tranche A
                Term Loan
            
            
            Tranche B
                Term LoanGreater
      than
            3.00:1.00
            
            
            2.50
            %
            
            
            3.50
            %
            
            
            3.75
            %
            
            
            6.25
            %Greater
      than or equal to but less than or equal to
            2.00:1.00
              3.00:1.00
            
            
            2.25
            %
            
            
            3.25
            %
            
            
            3.50
            %
            
            
            6.00
            %Less than
            2.00:1.00
            
            
            2.00
            %
            
            
            3.00
            %
            
            
            3.25
            %
            
            
            5.75
            %





As of
June 28, 2009, our principal balances on the loans totaled $28.0 million,
consisting of $15.1 million in Tranche A Term Loans and $12.9 million in Tranche
B Term Loans.  At June 28, 2009, interest rates on the Tranche A Term
Loans and Tranche B Term Loans were 3.6% and 6.1%, respectively.  As
of June 28, 2009 and September 28, 2008, our total debt to EBITDA ratio for the
last twelve months was 1.38 and 1.71, respectively and, therefore, for the
quarter and nine months ended June 28, 2009, we qualified for the lowest
applicable margin for the alternate base rate and LIBOR loans.  For
the nine months ended June 28, 2009, we incurred $1.5 million in interest
expense, excluding amortization of deferred financing costs.  For the
nine months ended June 29, 2008, we incurred $2.6 million in interest expense,
excluding amortization of deferred financing costs, net of $43,000 in
capitalized interest.  During the nine months ended June 28, 2009, the
outstanding balance of the facility was reduced by mandatory and voluntary
principal payments on the Tranche A Term Loan of $3.9 million and $5.0 million,
respectively.  The $5.0 million voluntary principal payment was made
during the third quarter ended June 28, 2009.   In addition, we
also made a voluntary principal payment on the Tranche B Term Loan of $2.8
million during the first quarter of fiscal year 2009.  As of June 28,
2009, we had $7.5 million available to borrow under the revolving loan, as the
balance was zero.





Initial proceeds from the GCF facility,
received on or about May 16, 2006, were used to repay approximately $44.5
million in existing debt and related fees and expenses in connection with the
termination of our former financing arrangements and to pay approximately $1.6
million in fees and expenses relating to the new financing.  Of these
fees, $617,000 is recorded as debt discount, net of accumulated amortization, on
our balance sheet as of June 28, 2009.  We paid GCF an additional
$132,000 in fees and expenses on March 9, 2007 related to the second amendment,
which we recorded as a debt discount.





21
 Table of Contents





The GCF
facility contains covenants whereby, among other things, we are required to
maintain compliance with agreed levels of earnings before interest, taxes,
depreciation and amortization, interest coverage, fixed charge coverage,
leverage targets, annual capital expenditures and incremental indebtedness
limits.  Mandatory prepayments under the facility are required based
on excess cash flow, as defined in the agreement, and upon receipt of proceeds
from a disposition or payment from a casualty or condemnation of the
collateralized assets, and voluntary prepayments under the facility are
generally permitted as provided in the agreement.  The facility also
contains customary restrictions on incurring indebtedness and liens, making
investments, repurchasing shares, paying dividends and making loans or
advances.





As of
June 28, 2009, we were in compliance with the covenant requirements of the
agreement with GCF.  We believe it is probable that we will remain in
compliance with all of those covenant requirements for the foreseeable
future.  However, if we fail to achieve certain revenue, expense and
profitability levels, a violation of the financial covenants under our financing
arrangements could result and interest rate increases and acceleration of
maturity of the loans could occur, which could adversely affect our financial
condition, results of operations or cash flows.





We
entered into the following amortizing loans with Key Bank to finance the
purchase of machinery used for manufacturing processes: a 5-year loan in the
principal amount of $324,000 at a fixed interest rate of 7.5% on September 21,
2006, a 5-year loan in the principal amount of $216,617 at a fixed interest rate
of 7.5% on November 27, 2006 and a 4-year loan in the principal amount of
$476,043 at a fixed interest rate of 7.5% on January 9, 2007.





We
amended our existing operating lease agreements with General Electric Capital
Corporation on October 2, 2006. The amended lease resulted in a three-year
capital lease in the principal amount of $842,168 at a fixed interest rate of
8.15%, with a $1 bargain purchase option at the expiration of the
lease.  As of June 28, 2009, the remaining balance of the capital
lease was due within 12 months.  The assets acquired under this
capital lease have an acquisition cost of $911,647.  As of June 28,
2009 the net book value of the assets was $430,933.





Following
is a summary of our contractual obligations at June 28, 2009:





Payments Due By PeriodContractual
                  Obligations
                
                Total
                
                
                Remainder of Fiscal Year
    2009
                
                
                2-3 Years
                
                
                4-5 Years
                
                
                More than
                  5 YearsDebt
      maturities
                
                $
                28,431,221
                
                
                $
                683,364
                
                
                $
                27,739,257
                
                
                $
                8,600
                
                
                $
                -Interest
      expense(1)
                
                
                3,551,792
                
                
                
                487,836
                
                
                
                3,063,875
                
                
                
                81
                
                
                
                -Capital
      lease obligation
                
                
                52,364
                
                
                
                52,364
                
                
                
                -
                
                
                
                -
                
                
                
                -Operating
      lease obligations (2)
                
                
                17,037,289
                
                
                
                849,067
                
                
                
                6,597,750
                
                
                
                4,838,514
                
                
                
                4,751,958Other
      contractual obligations
                
                
                195,004
                
                
                
                97,502
                
                
                
                97,502
                
                
                
                -
                
                
                
                -Open
      purchase orders
                
                
                26,919,882
                
                
                
                15,164,127
                
                
                
                11,755,755
                
                
                
                -
                
                
                
                -Total
      contractual obligations
                
                $
                76,187,552
                
                
                $
                17,334,260
                
                
                $
                49,254,139
                
                
                $
                4,847,195
                
                
                $
                4,751,958


____________


(1)
            Assumes
      only mandatory principal pay-downs and the use of LIBOR as of June 26,
      2009 on the GCF debt and fixed rate interest payments on equipment loans
      and capital lease obligation.


(2)
            Includes
      real estate leases.





22
 Table of Contents





Item
      3.
            Quantitative
      and Qualitative Disclosures about Market
Risk





Interest Rate Risk –
Obligations. We are subject to
interest rate risk on variable interest rate obligations.  A
hypothetical 10% increase in average market interest rates would increase by
approximately $137,000 the annual interest expense on our debt outstanding as of
June 28, 2009.  We are also subject to interest rate risk on our fixed
interest rate obligations.  Based upon outstanding amounts of fixed
rate obligations as of June 28, 2009, a hypothetical 10% decrease in average
market interest rates would increase the fair value of outstanding fixed rate
debt by approximately $3,000.





Item
      4.
            Controls
      and Procedures





Our Chief
Executive Officer and Interim Chief Financial Officer (our principal executive
officer and principal financial officer, respectively) have concluded, based on
their evaluation as of June 28, 2009, that the design and operation of our
“disclosure controls and procedures” (as defined in Rule 13a-15(e) under the
Exchange Act) are effective at a reasonable assurance level to ensure that
information required to be disclosed by us in the reports filed or submitted by
us under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules and forms, including
to ensure that information required to be disclosed by us in the reports we file
or submit under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Interim Chief Financial
Officer, as appropriate to allow timely decisions regarding required
disclosure.





During
the quarter ended June 28, 2009, there were no changes in our "internal control
over financial reporting" (as defined in Rule 13a-15(f) under the Exchange Act)
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.





23
 Table of Contents





PART
II - OTHER INFORMATION





Item
      1.
            Legal
      Proceedings





We are
involved in various lawsuits, claims and proceedings related to the conduct of
our business. Management does not believe that the disposition of any pending
claims, including the matters described below, is likely to have a material
adverse effect our financial condition, results of operations, or cash
flows.





On June
29, 2009, we filed a lawsuit in Orange County Superior Court against Nativo (aka
Larry) Lopez, Teresa Cortez, Alma Salinas Renteria, Bohemia Y. Augustiana
Saguilan, Marcelino Arteaga, Agapita Padilla, and Fernando Morales
Lira.   The lawsuit is based on the defendants’ unlawful campaign
to coerce us to employ individuals who have no valid social security number and
no legal right to work in the United States.  The case includes claims
for defamation, extortion, intentional interference with customers and
employees, and unfair business practices.  We seek monetary damages
and injunctive relief.





On July
7, 2009, we were served with a lawsuit filed in Los Angeles Superior Court on
July 1, 2009 by Bohemia Augustiana, Isela Hernandez and Ana
Munoz.  These three individuals are our former employees who had been
terminated on May 31, 2009, because they did not have valid social security
numbers, and they had furnished false social security numbers to
us.  In their lawsuit, they allege failure to pay minimum wage,
failure to furnish wage and hour statements, waiting time penalties, conversion
and unfair business practices.  They seek unspecified damages,
restitution, an equitable accounting, injunctive relief, attorneys’ fees and
costs of suit, and they allege that they are bringing the action as a class
action on behalf of other similarly situated employees.





As
previously disclosed in the our periodic reports, on September 23, 2008, we
filed a lawsuit against one of our customers, American Pie, LLC, who distributes
products under the name “Claim Jumper.” The action involved a complaint by us
against customer American Pie and two of its officers, William R. Collins and
Robert G. Blume (collectively, “defendants”).  The complaint asserted
claims for: 1) breach of contract; 2) breach of implied covenant of good faith
and fair dealing; 3) fraud; 4) unfair business practices; and 5) declaratory
relief to recover amounts American Pie refused to pay for goods delivered by
us.  On December 10, 2008, the defendants filed a counterclaim against
us alleging:  1) breach of an oral contract; 2) breach of a written
contract; and 3) breach of implied warranties of merchantability and fitness for
an intended purpose to recover price increases, compensation for products we
allegedly failed to produce, and for purportedly contaminated
product.  The action was settled to all parties’ joint satisfaction on
terms that are confidential, and the complaint and counterclaim were dismissed
with prejudice pursuant to the parties’ stipulation by order entered May 22,
2009.





Item4.
            Submission
      of Matters to a Vote of Security
Holders





We held
our 2009 annual meeting of stockholders on June 1, 2009.  There were
15,823,271shares of our
common stock outstanding and entitled to vote at the meeting.  Each
holder of record of our common stock on the record date was entitled to cast one
vote per share on each proposal.




Five
nominees were presented for election and elected to our board of directors at
the meeting.  The results of the vote for the election of directors
were as follows:





Nominee
            For
            WithheldJames
      Rudis
            13,325,894
            489,194Harold
      Estes
            13,236,376
            578,712Geoffrey
      A. Gerard
            13,070,110
            744,978Alexander
      Auerbach
            9,668,329
            4,146,759Alexander
      Rodetis, Jr.
            13,071,111
            743,997





24
 Table of Contents





The
holders of common stock were also asked to consider and vote upon a proposal to
approve amendments to procedures contained in our articles of incorporation for
advance notice of nominations by stockholders, as described in proposal 2 in the
proxy statement.  The results of the vote were as
follows:





For
            Against
            Withheld
            Broker Non-Votes7,971,883
            570,326
            635,488
            4,637,391





The
holders of common stock were also asked to consider and vote upon a proposal to
approve amendments to procedures contained in our articles of incorporation for
advance notice of business proposed to be conducted by stockholders at an annual
meeting, as described in proposal 3 in the proxy statement.  The results of
the vote were as follows:





For
            Against
            Withheld
            Broker Non-Votes7,962,296
            580,491
            634,910
            4,637,391





The
holders of common stock were also asked to consider and vote upon a proposal to
approve amendments to indemnification and limited liability provisions contained
in our articles of incorporation, as described in proposal 4 in the proxy
statement.  The results of the vote were as follows:





For
            Against
            Withheld
            Broker Non-Votes13,373,524
            290,017
            151,543
            -





The
holders of common stock were also asked to consider and vote upon a proposal to
approve the amendment and restatement of our articles of incorporation in order
to update various provisions, as described in proposal 5 in the proxy
statement.  The results of the vote were as follows:





For
            Against
            Withheld
            Broker Non-Votes13,035,414
            627,131
            152,539
            -





Accordingly,
all five of the proposals were approved by our stockholders.





25
 Table of Contents





Item6.
            Exhibits





(a)
            Exhibits





Number
            
            Description3.1
      (1)
            
            Second
      Amended and Restated Articles of Incorporation of Overhill Farms, Inc.
      filed with the Nevada Secretary of State June 1,
  20093.2
      (2)
            
            Second
      Amended and Restated Bylaws of Overhill Farms, Inc. adopted effective as
      of April 2, 2009 (Exhibit 3.1)31.1
      (1)
            
            Certification
      of Chief Executive Officer Required by Rule 13a-14(a) of the Securities
      Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200231.2
      (1)
            
            Certification
      of Interim Chief Financial Officer Required by Rule 13a-14(a) of the
      Securities Exchange Act of 1934, as amended, as Adopted Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200232
      (1)
            
            Certification
      of Chief Executive Officer and Interim Chief Financial Officer Pursuant to
      18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002(1)
            
            Attached
      hereto.(2)
            
            Incorporated
      by reference to the exhibit shown in parentheses included in our Current
      Report on Form 8-K for April 9,
2009.





26
 Table of Contents





SIGNATURES








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








OVERHILL
      FARMS, INC.(Registrant)Date:  August
      7, 2009
            By:
            /s/ James RudisJames
      RudisChairman,
      President andChief
      Executive OfficerDate:  August
      7, 2009
            By:
            /s/ Tracy E. QuinnTracy
      E. QuinnInterim
      Chief Financial Officer





27
 Table of Contents





EXHIBITS ATTACHED TO THIS FORM 10-Q











Number
            Description3.1
            Second
      Amended and Restated Articles of Incorporation of Overhill Farms, Inc.
      filed with the Nevada Secretary of State June 1, 200931.1
            Certification
      of Chief Executive Officer Required by Rule 13a-14(a) of the Securities
      Exchange Act of 1934, as amended, as Adopted Pursuant to Section 302 of
      the Sarbanes-Oxley Act of 200231.2
            Certification
      of Interim Chief Financial Officer Required by Rule 13a-14(a) of the
      Securities Exchange Act of 1934, as amended, as Adopted Pursuant to
      Section 302 of the Sarbanes-Oxley Act of 200232
            Certification
      of Chief Executive Officer and Interim Chief Financial Officer Pursuant to
      18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002






28