----

----

|   | (Mark      One) |   |
|--------|-----------------|--------|

|   | x | QUARTERLY      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------|---|---------------------------------------------------------------------------------------------|

|   | o | TRANSITION      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|--------|---|----------------------------------------------------------------------------------------------|

| Illinois                                                                | 36-3442829                                |
|-------------------------------------------------------------------------|-------------------------------------------|
| (State      or Other Jurisdiction of Incorporationor      Organization) | (I.R.S.      Employer Identification No.) |

| Indicate      by check mark whether the registrant (1) filed all reports required to be      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during      the past 12 months (or for such shorter period that the registrant was      required to file such reports), and (2) has been subject to such filing      requirements for the past 90 days.  Yes x   No      o |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                            |
| Indicate      by check mark whether the registrant is a large accelerated filer, an      accelerated filer, or a non-accelerated filer or a smaller reporting      company. See definition of “large accelerated filer”, “accelerated      filer” and “smaller reporting company” in Rule 12b-2 of the Exchange      Act. (Check one):                            |

| Large accelerated      filer o | Accelerated filer      o | Non-accelerated      filer  o | Smaller reporting      company x |
|--------------------------------|--------------------------|-----------------------------------------|----------------------------------|

| Indicate      by check mark whether the registrant is a shell company (as defined in      Rule 12b-2 of the Exchange Act).   Yes o   No      x |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                               |
| As      of September 30, 2008, the issuer had 16,730,226 shares of common      stock, no par value, outstanding.                                              |

----

----

| PART      I —              | FINANCIAL      INFORMATION                                                                            | Page(s) |   |
|----------------------------------|-------------------------------------------------------------------------------------------------------|---------|--------|
|                             |                                                                                                  |    |   |
| ITEM      1.                     | FINANCIAL      STATEMENTS                                                                             | 3       |   |
|                             |                                                                                                  |    |   |
|                             | NOTES      TO CONSOLIDATED FINANCIAL STATEMENTS                                                       | 8       |   |
|                             |                                                                                                  |    |   |
| ITEM      2.                     | MANAGEMENT’S      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF      OPERATIONS | 21      |   |
|                             |                                                                                                  |    |   |
| ITEM      3.                     | QUANTITATIVE      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                       | 24      |   |
|                             |                                                                                                  |    |   |
|         ITEM 4T.       | CONTROLS      AND PROCEDURES                                                                          | 24      |   |
|                             |                                                                                                  |    |   |
| PART      II —             | OTHER      INFORMATION                                                                                | 24      |   |
|                             |                                                                                                  |    |   |
| ITEM      1.                     | LEGAL      PROCEEDINGS                                                                                | 24      |   |
|                             |                                                                                                  |    |   |
|          ITEM 1A. | RISK      FACTORS                                                                                     | 24      |   |
|                             |                                                                                                  |    |   |
| ITEM      2.                     | UNREGISTERED      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                      | 24      |   |
|                             |                                                                                                  |    |   |
| ITEM      3.                     | DEFAULTS      UPON SENIOR SECURITIES                                                                  | 24      |   |
|                             |                                                                                                  |    |   |
| ITEM      4.                     | SUBMISSION      OF MATTERS TO A VOTE OF SECURITY HOLDERS                                              | 24      |   |
|                             |                                                                                                  |    |   |
| ITEM      5.                     | OTHER      INFORMATION                                                                                | 25      |   |
|                             |                                                                                                  |    |   |
| ITEM      6.                     | EXHIBITS                                                                                              | 25      |   |
|                             |                                                                                                  |    |   |
| SIGNATURES                       |                                                                                                  | 26      |   |
|                             |                                                                                                  |    |   |
| EXHIBIT      INDEX               |                                                                                                  | 27      |   |

----

----

|                                                                                                                                                                                                                                                                                                                              |   | (Unaudited)        |       |   |              |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|------------|--------|-------------------|--------|
|                                                                                                                                                                                                                                                                                                                              |   | September      30, |       |   | December      31, |   |
|                                                                                                                                                                                                                                                                                                                              |   | 2008               |       |   | 2007              |   |   | 2007 |   |
| ASSETS                                                                                                                                                                                                                                                                                                                            |   |               |       |   |              |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |
| Current      assets                                                                                                                                                                                                                                                                                                               |   |               |       |   |              |   |   |   |   |
| Cash      and cash equivalents                                                                                                                                                                                                                                                                                                    |   | $                  | 530,866    |   |              | $      | 1,624,566 |   |   | $ | 595,885 |   |
| Marketable      securities                                                                                                                                                                                                                                                                                                        |   |               | 5,668,940  |   |              |   | 6,557,841 |   |   |   | 6,989,474 |   |
| Inventories                                                                                                                                                                                                                                                                                                                       |   |               | 4,207,094  |   |              |   | 4,061,189 |   |   |   | 3,506,554 |   |
| Accounts      receivable, net of allowance for doubtful accounts of $35,011 and      $39,460 at September 30, 2008 and 2007 and $39,460 at December      31, 2007                                                                                                                                                                 |   |               | 5,161,414  |   |              |   | 4,845,956 |   |   |   | 4,209,662 |   |
| Prepaid      expenses and other current assets                                                                                                                                                                                                                                                                                    |   |               | 20,864     |   |              |   | 13,051 |   |   |   | 21,253 |   |
| Other      receivables                                                                                                                                                                                                                                                                                                            |   |               | 28,918     |   |              |   | 45,810 |   |   |   | 43,111 |   |
| Deferred      income taxes                                                                                                                                                                                                                                                                                                        |   |               | 909,479    |   |              |   | 225,803 |   |   |   | 311,960 |   |
| Refundable      income taxes                                                                                                                                                                                                                                                                                                      |   |               |       |   |              |   | 125,763 |   |   |   | 240,880 |   |
| Total      current assets                                                                                                                                                                                                                                                                                                         |   |               | 16,527,575 |   |              |   | 17,499,979 |   |   |   | 15,918,779 |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Property      and equipment, net                                                                                                                                                                                                                                                                                                  |   |               | 10,989,500 |   |              |   | 9,176,479 |   |   |   | 9,678,948 |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Intangible      assets                                                                                                                                                                                                                                                                                                            |   |               |       |   |              |   |   |   |   |   |   |   |
| Goodwill                                                                                                                                                                                                                                                                                                                          |   |               | 5,414,858  |   |              |   | 3,952,425 |   |   |   | 5,414,858 |   |
| Other      intangible assets, net of accumulated amortization of $841,561 and      $520,979 at September 30, 2008 and 2007 and $601,976 at December      31, 2007                                                                                                                                                                 |   |               | 3,016,077  |   |              |   | 3,342,517 |   |   |   | 3,255,662 |   |
| Total      intangible assets                                                                                                                                                                                                                                                                                                      |   |               | 8,430,935  |   |              |   | 7,294,942 |   |   |   | 8,670,520 |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Other      assets                                                                                                                                                                                                                                                                                                                 |   |               | 500,000    |   |              |   | 500,000 |   |   |   | 500,000 |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Total      assets                                                                                                                                                                                                                                                                                                                 |   | $                  | 36,448,010 |   |              | $      | 34,471,400 |   |   | $ | 34,768,247 |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| LIABILITIES AND      STOCKHOLDERS’      EQUITY                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Current      liabilities                                                                                                                                                                                                                                                                                                          |   |               |       |   |              |   |   |   |   |   |   |   |
| Current      maturities of notes payable                                                                                                                                                                                                                                                                                          |   | $                  | 1,125,608  |   |              | $      | 1,434,903 |   |   | $ | 1,136,126 |   |
| Accounts      payable                                                                                                                                                                                                                                                                                                             |   |               | 2,361,318  |   |              |   | 1,865,041 |   |   |   | 1,594,330 |   |
| Accrued      expenses                                                                                                                                                                                                                                                                                                             |   |               | 532,662    |   |              |   | 441,068 |   |   |   | 414,039 |   |
| Margin      payable                                                                                                                                                                                                                                                                                                               |   |               | 428,951    |   |              |   | — |   |   |   | — |   |
| Accrued      income taxes                                                                                                                                                                                                                                                                                                         |   |               | 308,260    |   |              |   | — |   |   |   | — |   |
| Total      current liabilities                                                                                                                                                                                                                                                                                                    |   |               | 4,756,799  |   |              |   | 3,741,012 |   |   |   | 3,144,495 |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Notes      payable                                                                                                                                                                                                                                                                                                                |   |               | 3,219,338  |   |              |   | 4,424,266 |   |   |   | 4,096,797 |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Deferred      income taxes                                                                                                                                                                                                                                                                                                        |   |               | 1,615,421  |   |              |   | 510,000 |   |   |   | 1,712,795 |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Stockholders’      equity                                                                                                                                                                                                                                                                                                   |   |               |       |   |              |   |   |   |   |   |   |   |
| Common      stock, no par value; 20,000,000 shares authorized; 17,273,776 shares      issued; 16,730,226 shares outstanding at September 30, 2008; 17,273,776      shares issued; 16,825,626 shares outstanding at September 30, 2007; and      17,273,776 shares issues; 16,897,726 shares outstanding at December 31,      2007 |   |               | 6,509,267  |   |              |   | 6,509,267 |   |   |   | 6,509,267 |   |
| Paid-in-capital                                                                                                                                                                                                                                                                                                                   |   |               | 1,175,539  |   |              |   | 1,103,630 |   |   |   | 1,120,669 |   |
| Treasury      stock, at cost                                                                                                                                                                                                                                                                                                      |   |               | (3,207,213 | )      |              |   | (2,081,915 | ) |   |   | (2,078,165 | ) |
| Retained      earnings                                                                                                                                                                                                                                                                                                            |   |               | 23,126,672 |   |              |   | 20,318,323 |   |   |   | 20,471,432 |   |
| Accumulated      other comprehensive income (loss), net of taxes                                                                                                                                                                                                                                                                  |   |               | (747,813   | )      |              |   | (53,183 | ) |   |   | (209,043 | ) |
| Total      stockholders’ equity                                                                                                                                                                                                                                                                                             |   |               | 26,856,452 |   |              |   | 25,796,122 |   |   |   | 25,814,160 |   |
|                                                                                                                                                                                                                                                                                                                              |   |               |       |   |              |   |   |   |   |   |   |   |
| Total      liabilities and stockholders’ equity                                                                                                                                                                                                                                                                             |   | $                  | 36,448,010 |   |              | $      | 34,471,400 |   |   | $ | 34,768,247 |   |

----

|                                                                                                |   | (Unaudited)             |       |   | (Unaudited)            |   |       |              |   |
|-----------------------------------------------------------------------------------------------------|--------|-------------------------|------------|--------|------------------------|--------|------------|-------------------|--------|
|                                                                                                |   | Three      Months Ended |       |   | Nine      Months Ended |   |       | Year      Ended   |   |
|                                                                                                |   | September      30,      |       |   | September      30,     |   |       | December      31, |   |
|                                                                                                |   | 2008                    |       |   | 2007                   |   |       | 2008              |   |   | 2007 |   |   | 2007 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |
| Sales                                                                                               |   | $                       | 11,240,282 |   |                   | $      | 9,817,478  |              |   | $ | 33,885,912 |   |   | $ | 28,554,984 |   |   | $ | 38,729,156 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of goods sold                                                                             |   |                    | 7,505,794  |   |                   |   | 6,901,471  |              |   |   | 22,403,574 |   |   |   | 17,885,885 |   |   |   | 25,582,981 |   |
| Depreciation      expense                                                                           |   |                    | 197,366    |   |                   |   | 195,348    |              |   |   | 581,920 |   |   |   | 546,945 |   |   |   | 726,647 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      cost of goods sold                                                                       |   |                    | 7,703,160  |   |                   |   | 7,096,819  |              |   |   | 22,985,494 |   |   |   | 18,432,830 |   |   |   | 26,309,628 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit                                                                                   |   |                    | 3,537,122  |   |                   |   | 2,720,659  |              |   |   | 10,900,418 |   |   |   | 10,122,154 |   |   |   | 12,419,528 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling      Expenses                                                                               |   |                    | 957,978    |   |                   |   | 1,174,140  |              |   |   | 3,171,269 |   |   |   | 2,856,483 |   |   |   | 3,744,388 |   |
| General      and Administrative                                                                     |   |                    | 1,032,043  |   |                   |   | 916,893    |              |   |   | 3,109,506 |   |   |   | 2,879,582 |   |   |   | 3,914,825 |   |
| Amortization      expense                                                                           |   |                    | 79,862     |   |                   |   | 48,583     |              |   |   | 239,585 |   |   |   | 242,269 |   |   |   | 323,266 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      Operating Expenses                                                                       |   |                    | 2,069,883  |   |                   |   | 2,139,616  |              |   |   | 6,520,360 |   |   |   | 5,978,334 |   |   |   | 7,982,479 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      from operations                                                                         |   |                    | 1,467,239  |   |                   |   | 581,043    |              |   |   | 4,380,058 |   |   |   | 4,143,820 |   |   |   | 4,437,049 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      income (expense):                                                                        |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest      and dividend income                                                                   |   |                    | 95,042     |   |                   |   | 84,918     |              |   |   | 261,037 |   |   |   | 249,082 |   |   |   | 350,286 |   |
| Rental      Income                                                                                  |   |                    | 13,647     |   |                   |   | 9,731      |              |   |   | 36,940 |   |   |   | 27,912 |   |   |   | 48,305 |   |
| Interest      expense                                                                               |   |                    | (71,928    | )      |                   |   | (102,197   | )                 |   |   | (226,851 | ) |   |   | (321,009 | ) |   |   | (410,180 | ) |
| Impairment      of marketable securities                                                            |   |                    | (270,908   | )      |                   |   | —    |              |   |   | (270,908 | ) |   |   |   |   |   |   |   |   |
| Gain      (loss) on sale of marketable securities, net                                              |   |                    | (110,259   | )      |                   |   | 209,207    |              |   |   | (146,404 | ) |   |   | 663,538 |   |   |   | 539,739 |   |
| Total      other income (Expense)                                                                   |   |                    | (344,406   | )      |                   |   | 201,659    |              |   |   | (346,186 | ) |   |   | 619,523 |   |   |   | 528,150 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      before provision for                                                                    |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
|    income      taxes                                                                 |   |                    | 1,122,833  |   |                   |   | 782,702    |              |   |   | 4,033,872 |   |   |   | 4,763,343 |   |   |   | 4,965,199 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for income taxes                                                                     |   |                    | 267,917    |   |                   |   | 314,508    |              |   |   | 1,378,632 |   |   |   | 1,763,792 |   |   |   | 1,812,539 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                     |   | $                       | 854,916    |   |                   | $      | 468,194    |              |   | $ | 2,655,240 |   |   | $ | 2,999,551 |   |   | $ | 3,152,660 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic      and diluted earnings per common share                                                    |   |                    | 0.05       |   |                   |   | 0.03       |              |   |   | 0.16 |   |   |   | 0.18 |   |   |   | 0.19 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted      average number of shares outstanding                                                  |   |                    | 16,730,526 |   |                   |   | 16,824,911 |              |   |   | 16,772,280 |   |   |   | 16,865,390 |   |   |   | 16,855,611 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                                                                           |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income                                                                                     |   | $                       | 854,916    |   |                   | $      | 468,194    |              |   | $ | 2,655,240 |   |   | $ | 2,999,551 |   |   | $ | 3,152,660 |   |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive      income (loss), net      of tax:                                            |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized      gains (losses) on marketable securities (net of tax      benefits)                  |   |                    | (480,045   | )      |                   |   | (57,187    | )                 |   |   | (895,641 | ) |   |   | 181,647 |   |   |   | (47,091 | ) |
| Less      reclassification adjustment for (gains) losses included in net      income (net of taxes) |   |                    | 64,746     |   |                   |   | (123,372   | )                 |   |   | 85,963 |   |   |   | (388,600 | ) |   |   | (315,721 | ) |
|                                                                                                |   |                    |       |   |                   |   |       |              |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive      income                                                                           |   | $                       | 439,617    |   |                   | $      | 287,635    |              |   | $ | 1,845,562 |   |   | $ | 2,792,598 |   |   | $ | 2,789,848 |   |

----

|                                                                                                                            |   | Common      Stock, No Par Value  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      | Accumulated  |   |   |                |   |
|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|--------|-----------------------|--------|----------------|----------|--------|--------|--------------|--------|--------|--------------|-----------|--------|----------|--------|-----------|-------------------|--------|--------|---------------------|--------|
|                                                                                                                            |   | 20,000,000      Shares                |       |   | #      of Shares |   |           |     |   |   |         |   |   |         |      |   |     |   |      | Other             |   |   |                |   |
|                                                                                                                            |   | Authorized                            |       |   | of                    |   |           |     |   |   |         |   |   |         |      |   |     |   |      | Comprehensive     |   |   |                |   |
|                                                                                                                            |   | #      of Shares                      |       |   | #      of Shares      |   |           | Treasury |   |   | Common       |   |   | Paid      In |      |   | Treasury |   |      | Retained          |   |   | Income      (Loss), |   |   |   |   |
|                                                                                                                            |   | Issued                                |       |   | Outstanding           |   |           | Stock    |   |   | Stock        |   |   | Capital      |      |   | Stock    |   |      | Earnings          |   |   | Net      of Tax     |   |   | Total |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |
| Balances      at December 31, 2006                                                                                              |   |                                  | 17,273,776 |   |                  |   | 16,897,826     |     |   |   | 375,950      |   |   |         | 6,509,267 |   |     |   | 1,080,911 |              |   |   | (1,334,313          | )      |   |   | 17,318,772 |   |   |   | 153,770 |   |   |   | 23,728,407 |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Redemption      of stock                                                                                                        |   |                                  | —    |   |                  |   | ( 75,000  | )        |   |   | 75,000       |   |   |         | —   |   |     |   | —   |              |   |   | ( 752,603      | )      |   |   | — |   |   |   | — |   |   |   | ( 752,603 | ) |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of treasury stock for compensation                                                                                |   |                                  | —    |   |                  |   | 4,900          |     |   |   | ( 4,900 | )      |   |         | —   |   |     |   | 39,758    |              |   |   | 8,751               |   |   |   | — |   |   |   | — |   |   |   | 48,509 |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      comprehensive income (loss): Unrealized losses on securities, net      of taxes and      reclassification adjustment |   |                                  | —    |   |                  |   | —        |     |   |   | —      |   |   |         | —   |   |     |   | —   |              |   |   | —             |   |   |   | — |   |   |   | ( 362,813 | ) |   |   | ( 362,813 | ) |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income for the year ended December 31, 2007                                                                            |   |                                  | —    |   |                  |   | —        |     |   |   | —      |   |   |         | —   |   |     |   | —   |              |   |   | —             |   |   |   | 3,152,660 |   |   |   | — |   |   |   | 3,152,660 |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances      at December 31, 2007                                                                                              |   |                                  | 17,273,776 |   |                  |   | 16,827,726     |     |   |   | 446,050      |   |   |         | 6,509,267 |   |     |   | 1,120,669 |              |   |   | (2,078,165          | )      |   |   | 20,471,432 |   |   |   | ( 209,043 | ) |   |   | 25,814,160 |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Redemption      of stock                                                                                                        |   |                                  | —    |   |                  |   | ( 100,000 | )        |   |   | 100,000      |   |   |         | —   |   |     |   | —   |              |   |   | (      1,139,987    | )      |   |   | — |   |   |   | — |   |   |   | ( 1,139,987 | ) |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of treasury stock for compensation                                                                                |   |                                  | —    |   |                  |   | 2,500          |     |   |   | ( 2,500 | )      |   |         | —   |   |     |   | 54,870    |              |   |   | 10,939              |   |   |   | — |   |   |   | — |   |   |   | 65,809 |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      comprehensive income (loss): Unrealized gains on securities, net of      taxes      and reclassification adjustment  |   |                                  | —    |   |                  |   | —        |     |   |   | —      |   |   |         | —   |   |     |   | —   |              |   |   | —             |   |   |   | — |   |   |   | ( 538,770 | ) |   |   | ( 538,770 | ) |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income for the nine months ended September 30,      2008                                                               |   |                                  | —    |   |                  |   | —        |     |   |   | —      |   |   |         | —   |   |     |   | —   |              |   |   | —             |   |   |   | 2,655,240 |   |   |   | — |   |   |   | 2,655,240 |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances      at September 30, 2008                                                                                             |   |                                  | 17,273,776 |   |                  |   | 16,730,226     |     |   |   | 543,550      |   |   | $            | 6,509,267 |   |     | $      | 1,175,539 |              |   | $      | (3,207,213          | )      |   | $ | 23,126,672 |   |   | $ | (747,813 | ) |   | $ | 26,856,452 |   |
|                                                                                                                            |   |                                  |       |   |                  |   |           |     |   |   |         |   |   |         |      |   |     |   |      |              |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                                                                           |   | (Unaudited)            |       |   |              |   |
|----------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|--------|-------------------|--------|
|                                                                                                           |   | Nine      Months Ended |       |   |              |   |
|                                                                                                           |   | September      30,     |       |   | December      31, |   |
|                                                                                                           |   | 2008                   |       |   | 2007              |   |   | 2007 |   |
|                                                                                                           |   |                   |       |   |              |   |   |   |   |
| Cash flows from      operating activities:                                                                     |   |                   |       |   |              |   |   |   |   |
| Net      income                                                                                                |   | $                      | 2,655,240  |   |              | $      | 2,999,551 |   |   | $ | 3,152,660 |   |
| Adjustments      to reconcile net income to net cash flows from operating      activities, net of acquisition: |   |                   |       |   |              |   |   |   |   |   |   |   |
| Depreciation      and amortization                                                                             |   |                   | 821,505    |   |              |   | 789,215 |   |   |   | 1,049,913 |   |
| (Gain)Loss      on sale of marketable securities, net                                                          |   |                   | 146,404    |   |              |   | (663,538 | ) |   |   | (539,739 | ) |
| Impairment      of marketable securities                                                                       |   |                   | 270,908    |   |              |   | — |   |   |   | — |   |
| Deferred      income taxes                                                                                     |   |                   | (125,221   | )      |              |   | 12,419 |   |   |   | (223,717 | ) |
| Treasury      stock issued for compensation                                                                    |   |                   | 65,809     |   |              |   | 27,720 |   |   |   | 48,509 |   |
| Increase      (decrease) in allowance for doubtful accounts                                                    |   |                   | (4,449     | )      |              |   | (40,540 | ) |   |   | (40,540 | ) |
| (Increase)      decrease in operating assets:                                                                  |   |                   |       |   |              |   |   |   |   |   |   |   |
| Accounts      receivable                                                                                       |   |                   | (947,303   | )      |              |   | (862,699 | ) |   |   | (226,405 | ) |
| Other      receivables                                                                                         |   |                   | 14,193     |   |              |   | 25,240 |   |   |   | 27,939 |   |
| Inventories                                                                                                    |   |                   | (700,540   | )      |              |   | (1,538,993 | ) |   |   | (984,358 | ) |
| Refundable      income taxes                                                                                   |   |                   | 240,880    |   |              |   | 142,008 |   |   |   | 26,891 |   |
| Prepaid      expenses and other current assets                                                                 |   |                   | 665        |   |              |   | (1,068 | ) |   |   | (9,270 | ) |
| Increase      (decrease) in operating liabilities:                                                             |   |                   |       |   |              |   |   |   |   |   |   |   |
| Accounts      payable                                                                                          |   |                   | 766,988    |   |              |   | 402,027 |   |   |   | 131,316 |   |
| Accrued      expenses                                                                                          |   |                   | 118,650    |   |              |   | (44,891 | ) |   |   | (66,062 | ) |
| Accrued      income taxes                                                                                      |   |                   | 308,260    |   |              |   | — |   |   |   | — |   |
| Net      cash provided by operating activities                                                                 |   |                   | 3,631,989  |   |              |   | 1,246,451 |   |   |   | 2,347,137 |   |
|                                                                                                           |   |                   |       |   |              |   |   |   |   |   |   |   |
| Cash flows from      investing activities:                                                                     |   |                   |       |   |              |   |   |   |   |   |   |   |
| Investment      in cost method securities                                                                      |   |                   | —    |   |              |   | (500,000 | ) |   |   | (500,000 | ) |
| Purchases      of marketable securities                                                                        |   |                   | (4,864,873 | )      |              |   | (4,408,170 | ) |   |   | (5,744,697 | ) |
| Sale      of marketable securities                                                                             |   |                   | 4,659,350  |   |              |   | 6,652,670 |   |   |   | 7,168,246 |   |
| Increase      in margin payable                                                                                |   |                   | 428,951    |   |              |   | — |   |   |   | — |   |
| Purchases      of property and equipment                                                                       |   |                   | (1,892,472 | )      |              |   | (1,142,709 | ) |   |   | (1,824,879 | ) |
| Net      cash used in investing activities                                                                     |   |                   | (1,669,044 | )      |              |   | 601,791 |   |   |   | (901,330 | ) |
|                                                                                                           |   |                   |       |   |              |   |   |   |   |   |   |   |
| Cash flows from      financing activities:                                                                     |   |                   |       |   |              |   |   |   |   |   |   |   |
| Proceeds      of note payable                                                                                  |   |                   | —    |   |              |   | 300,000 |   |   |   | 300,000 |   |
| Purchases      of treasury stock, net                                                                          |   |                   | (1,139,987 | )      |              |   | (752,603 | ) |   |   | (752,603 | ) |
| Repayment      of notes payable                                                                                |   |                   | (887,977   | )      |              |   | (1,318,885 | ) |   |   | (1,945,131 | ) |
| Net      cash used in financing activities                                                                     |   |                   | (2,027,964 | )      |              |   | (1,771,488 | ) |   |   | (2,397,734 | ) |
|                                                                                                           |   |                   |       |   |              |   |   |   |   |   |   |   |
| Net      decrease in cash and cash equivalents                                                                 |   |                   | (65,019    | )      |              |   | 76,754 |   |   |   | (951,927 | ) |
|                                                                                                           |   |                   |       |   |              |   |   |   |   |   |   |   |
| Cash      and cash equivalents at the beginning of the period                                                  |   |                   | 595,885    |   |              |   | 1,547,812 |   |   |   | 1,547,812 |   |
|                                                                                                           |   |                   |       |   |              |   |   |   |   |   |   |   |
| Cash      and cash equivalents at the end of the period                                                        |   | $                      | 530,866    |   |              | $      | 1,624,566 |   |   | $ | 595,885 |   |

----

----

|                                        |   | September      30, |    |   | December      31, |   |
|---------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                        |   | 2008               |    |   | 2007              |   |   | 2007 |   |
| Amounts      insured                        |   | $                  | 138,913 |   |              | $      | 251,315 |   |   | $ | 576,563 |   |
| Uninsured      and uncollateralized amounts |   |               | 846,239 |   |              |   | 1,992,169 |   |   |   | 523,295 |   |
| Total      bank balances                    |   | $                  | 985,152 |   |              | $      | 2,243,484 |   |   | $ | 1,099,858 |   |

is other-than-temporarilyimpaired. This evaluation depends on the specific facts and circumstances.Factors that we consider in determining whether an other-than-temporary declinein value has occurred include: the market value of the security in relation toits cost basis; the financial condition of the investee; and the intent andability to retain the investment for a sufficient period of time to allow forpossible recovery in the market value of the investment.

----

| Category                        |   | Years             |
|---------------------------------|--------|-------------------|
| Buildings      and improvements |   | 31      and 39    |
| Machinery      and equipment    |   | 5 –      12 |
| Office      equipment           |   | 5 –      7  |
| Vehicles                        |   | 5                 |

| Category                                                        |   | Years |
|-----------------------------------------------------------------|--------|-------|
| Recipes                                                         |   | 4     |
| Customer      lists and other customer      related intangibles |   | 15    |
| Lease      agreement                                            |   | 7     |
| Trade      names                                                |   | 15    |
| Formula                                                         |   | 10    |
| Customer      relationships                                     |   | 12    |

----

----

|                                                       |   | September      30, 2008 |      |   | September      30, 2007       |   |    | December      31, 2007 |   |
|------------------------------------------------------------|--------|-------------------------|-----------|--------|-------------------------------|--------|---------|------------------------|--------|
|                                                       |   | Cost                    |      |   | Accumulated      Amortization |   |    | Cost                   |   |   | Accumulated      Amortization |   |   | Cost |   |   | Accumulated      Amortization |   |
| Recipes                                                    |   | $                       | 43,600    |   |                          | $      | 42,009  |                   |   | $ | 43,600 |   |   | $ | 34,517 |   |   | $ | 43,600 |   |   | $ | 37,242 |   |
| Customer      lists and other customer related intangibles |   |                    | 305,200   |   |                          |   | 172,583 |                   |   |   | 305,200 |   |   |   | 131,163 |   |   |   | 305,200 |   |   |   | 141,518 |   |
| Lease      acquisition                                     |   |                    | 87,200    |   |                          |   | 51,904  |                   |   |   | 87,200 |   |   |   | 39,448 |   |   |   | 87,200 |   |   |   | 42,562 |   |
| Other                                                      |   |                    | 6,638     |   |                          |   | 4,317   |                   |   |   | 12,496 |   |   |   | 2,987 |   |   |   | 6,638 |   |   |   | 3,319 |   |
| Customer      relationship                                 |   |                    | 985,000   |   |                          |   | 177,848 |                   |   |   | 985,000 |   |   |   | 95,764 |   |   |   | 985,000 |   |   |   | 116,285 |   |
| Contractual      backlog                                   |   |                    | 12,000    |   |                          |   | 12,000  |                   |   |   | 12,000 |   |   |   | 12,000 |   |   |   | 12,000 |   |   |   | 12,000 |   |
| Trade      names                                           |   |                    | 1,980,000 |   |                          |   | 286,000 |                   |   |   | 1,980,000 |   |   |   | 154,000 |   |   |   | 1,980,000 |   |   |   | 187,000 |   |
| Formula                                                    |   |                    | 438,000   |   |                          |   | 94,900  |                   |   |   | 438,000 |   |   |   | 51,100 |   |   |   | 438,000 |   |   |   | 62,050 |   |
|                                                       |   | $                       | 3,857,638 |   |                          | $      | 841,561 |                   |   | $ | 3,863,496 |   |   | $ | 520,979 |   |   | $ | 3,857,638 |   |   | $ | 601,976 |   |

|   | 2009       |   |   | $      | 313,225   |   |
|--------|------------|--------|--------|--------|-----------|--------|
|   | 2010       |   |   |   | 312,756   |   |
|   | 2011       |   |   |   | 300,964   |   |
|   | 2012       |   |   |   | 285,133   |   |
|   | 2013       |   |   |   | 257,883   |   |
|   | Thereafter |   |   |   | 1,546,116 |   |
|   |       |   |   | $      | 3,016,077 |   |

----

| September 30, 2008                      |   | Cost   |      |   | UnrealizedGains |   |    | UnrealizedLosses |   |   | FairValue        |   |
|-----------------------------------------|--------|--------|-----------|--------|-----------------|--------|---------|------------------|--------|--------|------------------|--------|
|                                    |   |   |      |   |            |   |    |             |   |   |             |   |
| Equities                                |   | $      | 3,077,340 |   |            | $      | 55,002  |             |   | $      | ( 639,374   | )      |   | $ | 2,492,968 |   |
| Mutual      Funds                       |   |   | 940,322   |   |            |   | — |             |   |   | ( 287,919   | )      |   |   | 652,403 |   |
| Preferred      Securities               |   |   | 1,714,758 |   |            |   | — |             |   |   | ( 509,150   | )      |   |   | 1,205,608 |   |
| Corporate      Bonds                    |   |   | 917,990   |   |            |   | — |             |   |   | ( 75,144    | )      |   |   | 842,846 |   |
| Municipal      Bonds                    |   |   | 4,586     |   |            |   | 374     |             |   |   | —          |   |   |   | 4,960 |   |
| Government      agency Obligations |   |   | 478,507   |   |            |   | — |             |   |   | ( 8,352     | )      |   |   | 470,155 |   |
| Total                                   |   | $      | 7,133,503 |   |            | $      | 55,376  |             |   | $      | ( 1,519,939 | )      |   | $ | 5,668,940 |   |

| September 30, 2007           |   | Cost   |      |   | UnrealizedGains |   |    | UnrealizedLosses |   |   | FairValue      |   |
|------------------------------|--------|--------|-----------|--------|-----------------|--------|---------|------------------|--------|--------|----------------|--------|
|                         |   |   |      |   |            |   |    |             |   |   |           |   |
| Equities                     |   | $      | 2,323,985 |   |            | $      | 318,165 |             |   | $      | ( 168,993 | )      |   | $ | 2,473,157 |   |
| Mutual      Funds            |   |   | 1,146,517 |   |            |   | 10,889  |             |   |   | ( 67,705  | )      |   |   | 1,089,701 |   |
| Preferred      Securities    |   |   | 1,417,978 |   |            |   | 6,570   |             |   |   | ( 84,438  | )      |   |   | 1,340,110 |   |
| Certificates      of Deposit |   |   | 75,000    |   |            |   | — |             |   |   | ( 395     | )      |   |   | 74,605 |   |
| Corporate      Bonds         |   |   | 1,580,768 |   |            |   | 971     |             |   |   | ( 105,851 | )      |   |   | 1,475,888 |   |
| Municipal      Bonds         |   |   | 4,586     |   |            |   | 187     |             |   |   | —        |   |   |   | 4,773 |   |
| Government      agency       |   |   | 100,000   |   |            |   | — |             |   |   | ( 393     | )      |   |   | 99,607 |   |
| Total                        |   | $      | 6,648,834 |   |            | $      | 336,782 |             |   | $      | ( 427,775 | )      |   | $ | 6,557,841 |   |

| December 31, 2007                       |   | Cost   |      |   | UnrealizedGains |   |    | UnrealizedLosses |   |   | FairValue      |   |
|-----------------------------------------|--------|--------|-----------|--------|-----------------|--------|---------|------------------|--------|--------|----------------|--------|
|                                    |   |   |      |   |            |   |    |             |   |   |           |   |
| Equities                                |   | $      | 3,037,507 |   |            | $      | 331,776 |             |   | $      | ( 309,014 | )      |   | $ | 3,060,269 |   |
| Mutual      Funds                       |   |   | 946,357   |   |            |   | 4,978   |             |   |   | ( 104,529 | )      |   |   | 846,806 |   |
| Preferred      Securities               |   |   | 1,776,750 |   |            |   | 40,020  |             |   |   | ( 241,726 | )      |   |   | 1,575,044 |   |
| Corporate      Bonds                    |   |   | 1,480,433 |   |            |   | 1,556   |             |   |   | ( 79,433  | )      |   |   | 1,402,556 |   |
| Municipal      Bonds                    |   |   | 4,586     |   |            |   | 253     |             |   |   | —        |   |   |   | 4,839 |   |
| Government      agency Obligations |   |   | 100,000   |   |            |   | — |             |   |   | ( 40      | )      |   |   | 99,960 |   |
| Total                                   |   | $      | 7,345,633 |   |            | $      | 378,583 |             |   | $      | ( 734,742 | )      |   | $ | 6,989,474 |   |

----

|                                    |   | Less      Than 12 Months |      |   | 12      Months or Greater |   |           | Total           |   |
|-----------------------------------------|--------|--------------------------|-----------|--------|---------------------------|--------|----------------|-----------------|--------|
| Description      of Securities          |   | Fair      Value          |      |   | Unrealized      Losses    |   |           | Fair      Value |   |   | Unrealized      Losses |   |   | Fair      Value |   |   | Unrealized      Losses |   |
|                                    |   |                     |      |   |                      |   |           |            |   |   |   |   |   |   |   |   |   |   |
| Equities                                |   | $                        | 1,588,687 |   |                      | $      | ( 496,916 | )               |   | $ | 309,164 |   |   | $ | ( 142,458 | ) |   | $ | 1,897,851 |   |   | $ | ( 639,374 | ) |
| Mutual      Funds                       |   |                     | 255,835   |   |                      |   | ( 28,923  | )               |   |   | 253,461 |   |   |   | ( 258,996 | ) |   |   | 509,296 |   |   |   | ( 287,919 | ) |
| Preferred      Securities               |   |                     | 463,578   |   |                      |   | ( 60,188  | )               |   |   | 660,720 |   |   |   | ( 448,962 | ) |   |   | 1,124,298 |   |   |   | ( 509,150 | ) |
| Corporate      Bonds                    |   |                     | 474,208   |   |                      |   | ( 34,858  | )               |   |   | 351,468 |   |   |   | ( 40,286 | ) |   |   | 825,676 |   |   |   | ( 75,144 | ) |
| Government      Agency Obligations |   |                     | 470,155   |   |                      |   | ( 8,352   | )               |   |   | — |   |   |   | — |   |   |   | 470,155 |   |   |   | ( 8,352 | ) |
|                                    |   | $                        | 3,252,463 |   |                      | $      | ( 629,237 | )               |   | $ | 1,574,813 |   |   | $ | (890,702 | ) |   | $ | 4,827,276 |   |   | $ | (      1,519,939 | ) |

----

|                     |   | September      30, |      |   | December      31, |   |
|--------------------------|--------|--------------------|-----------|--------|-------------------|--------|
|                     |   | 2008               |      |   | 2007              |   |   | 2007 |   |
| Finished      goods      |   | $                  | 1,375,304 |   |              | $      | 1,835,452 |   |   | $ | 1,296,985 |   |
| Production      supplies |   |               | 1,604,106 |   |              |   | 1,318,991 |   |   |   | 1,383,384 |   |
| Raw      materials       |   |               | 1,227,684 |   |              |   | 906,746 |   |   |   | 826,185 |   |
| Total      inventories   |   | $                  | 4,207,094 |   |              | $      | 4,061,189 |   |   | $ | 3,506,554 |   |

|                               |   | September      30, |       |   | December      31 |   |
|------------------------------------|--------|--------------------|------------|--------|------------------|--------|
|                               |   | 2008               |       |   | 2007             |   |   | 2007 |   |
| Land                               |   | $                  | 969,232    |   |             | $      | 969,232 |   |   | $ | 969,232 |   |
| Buildings      and improvements    |   |               | 7,102,608  |   |             |   | 6,813,045 |   |   |   | 6,743,647 |   |
| Machinery      and equipment       |   |               | 8,227,558  |   |             |   | 8,127,460 |   |   |   | 8,159,199 |   |
| Vehicles                           |   |               | 610,558    |   |             |   | 581,458 |   |   |   | 581,458 |   |
| Office      equipment              |   |               | 137,120    |   |             |   | 101,583 |   |   |   | 101,583 |   |
| Construction      in process       |   |               | 2,120,346  |   |             |   |   |   |   |   | 719,830 |   |
|                               |   |               | 19,167,422 |   |             |   | 16,592,778 |   |   |   | 17,274,949 |   |
| Less      accumulated depreciation |   |               | 8,177,922  |   |             |   | 7,416,299 |   |   |   | 7,596,001 |   |
| Total      property and equipment  |   | $                  | 10,989,500 |   |             | $      | 9,176,479 |   |   | $ | 9,678,948 |   |

|                                   |   | September      30, |    |   | December      31, |   |
|----------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                   |   | 2008               |    |   | 2007              |   |   | 2007 |   |
| Accrued      payroll and payroll taxes |   | $                  | 111,631 |   |              | $      | 82,981 |   |   | $ | 58,395 |   |
| Accrued      property tax              |   |               | 363,699 |   |              |   | 340,717 |   |   |   | 285,279 |   |
| Other                                  |   |               | 57,359  |   |              |   | 17,370 |   |   |   | 70,365 |   |
|                                   |   | $                  | 532,689 |   |              | $      | 441,068 |   |   | $ | 414,039 |   |

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|                                                                                                                                                                                                                                   |   | September      30, |      |   | December      31, |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|-----------|--------|-------------------|--------|
|                                                                                                                                                                                                                                   |   | 2008               |      |   | 2007              |   |   | 2007 |   |
| Mortgage      note payable to a bank, payable in monthly installments of $3,273      including interest at 7%, with a balloon payment of $416,825 due September      25, 2011.  Collateralized by real estate.               |   | $                  | 440,874   |   |              | $      | 448,269 |   |   | $ | 446,450 |   |
| Mortgage      note payable to a bank, payable in monthly installments of $19,513      including interest at 5.6%, with a balloon payment of $2,652,143 due July      14, 2010. Collateralized by real estate.                          |   |               | 2,779,572 |   |              |   | 2,853,203 |   |   |   | 2,834,970 |   |
| Note      payable to Amani Holding LLC, payable in quarterly installments of      $262,500 plus interest at the floating prime rate per annum (7.25% at      December 31, 2007) due September 1, 2010 secured by letter of      credit |   |               | 1,124,500 |   |              |   | 2,257,697 |   |   |   | 1,951,503 |   |
| Note      payable to officer, payable on demand                                                                                                                                                                                        |   |               | —   |   |              |   | 300,000 |   |   |   |   |   |
| Total      notes payable                                                                                                                                                                                                               |   |               | 4,344,946 |   |              |   | 5,859,169 |   |   |   | 5,232,923 |   |
| Less      current maturities                                                                                                                                                                                                           |   |               | 1,125,608 |   |              |   | 1,434,903 |   |   |   | 1,136,126 |   |
| Total      long-term portion                                                                                                                                                                                                           |   | $                  | 3,219,338 |   |              | $      | 4,424,266 |   |   | $ | 4,096,797 |   |

| For      the Year Ended September 30,  |   |   |      |
|---------------------------------------------|--------|--------|-----------|
| 2009                                        |   | $      | 1,125,608 |   |
| 2010                                        |   |   | 2,786,472 |   |
| 2011                                        |   |   | 432,866   |   |
| Total                                       |   | $      | 4,344,946 |   |

|                            |   |                           |      |   | For      the      |   |
|---------------------------------|--------|--------------------------------|-----------|--------|-------------------|--------|
|                            |   | For      the Nine Months Ended |      |   | Year      Ended   |   |
|                            |   | September      30,             |      |   | December      31, |   |
|                            |   | 2008                           |      |   | 2007              |   |   | 2007 |   |
| Current:                        |   |                           |      |   |              |   |   |   |   |
| Federal                         |   | $                              | 1,267,998 |   |              | $      | 1,465,229 |   |   | $ | 1,699,408 |   |
| State      and local            |   |                           | 235,855   |   |              |   | 286,145 |   |   |   | 336,848 |   |
| Total      current              |   |                           | 1,503,853 |   |              |   | 1,751,374 |   |   |   | 2,036,256 |   |
| Deferred                        |   |                           | (125,221  | )      |              |   | 12,418 |   |   |   | (223,717 | ) |
| Provision      for income taxes |   | $                              | 1,378,632 |   |              | $      | 1,763,792 |   |   | $ | 1,812,539 |   |

----

|                                                                           |   |                           |      |   | For      the      |   |
|--------------------------------------------------------------------------------|--------|--------------------------------|-----------|--------|-------------------|--------|
|                                                                           |   | For      the Nine Months Ended |      |   | Year      Ended   |   |
|                                                                           |   | September      30,             |      |   | December      31, |   |
|                                                                           |   | 2008                           |      |   | 2007              |   |   | 2007 |   |
| Federal      income tax expense  computed      at the statutory rate |   | $                              | 1,463,625 |   |              | $      | 1,619,535 |   |   | $ | 1,688,168 |   |
| State      and local tax expense, net                                          |   |                           | 206,629   |   |              |   | 228,640 |   |   |   | 238,330 |   |
| Permanent      differences                                                     |   |                           | (291,622  | )      |              |   | (84,383 | ) |   |   | (113,959 | ) |
| Provision      for income taxes                                                |   | $                              | 1,378,632 |   |              | $      | 1,763,792 |   |   | $ | 1,812,539 |   |

|                                                                                    |   | September      30, |       |   | December |   |
|-----------------------------------------------------------------------------------------|--------|--------------------|------------|--------|----------|--------|
|                                                                                    |   | 2008               |       |   | 2007     |   |   | 2007 |   |
| Non-current      deferred tax liabilitiesarising      from:Temporary      differences - |   |               |       |   |     |   |   |   |   |
| accumulated      depreciation and amortization                                          |   | $                  | (1,615,421 | )      |     | $      | (510,000 | ) |   | $ | (1,712,795 | ) |
| Current      deferred tax assets (liabilities) arising from:                            |   |               |       |   |     |   |   |   |   |   |   |   |
| Unrealized      losses (gains) on marketable securities                                 |   |               | 716,749    |   |     |   | 37,418 |   |   |   | 147,077 |   |
| Inventory                                                                               |   |               | 178,271    |   |     |   | 172,088 |   |   |   | 148,586 |   |
| Allowance      for doubtful accounts                                                    |   |               | 14,459     |   |     |   | 16,297 |   |   |   | 16,297 |   |
| Total      current deferred tax assets(liabilities)                                     |   |               | 909,479    |   |     |   | 225,803 |   |   |   | 311,960 |   |
| Net      deferred tax liability                                                         |   | $                  | (705,942   | )      |     | $      | (284,197 | ) |   | $ | (1,400,835 | ) |

|              |   |                     |    |   | For      the      |   |
|-------------------|--------|--------------------------|---------|--------|-------------------|--------|
|              |   | For      the Years Ended |    |   | Year      Ended   |   |
|              |   | September      30,       |    |   | December      31, |   |
|              |   | 2008                     |    |   | 2007              |   |   | 2007 |   |
| Interest          |   | $                        | 222,166 |   |              | $      | 313,215 |   |   | $ | 430,098 |   |
| Income      taxes |   | $                        | 937,967 |   |              | $      | 1,626,031 |   |   | $ | 2,026,031 |   |

----

----

|                                               |   | Quoted      Prices in Active      Markets for      Identical Assets      (Level 1) |      | Significant      Other Observable      Inputs (Level      2) | Significant      UnobservableInputs      (Level 3) |   | Balance      at September      30, 2008 |   |
|----------------------------------------------------|--------|------------------------------------------------------------------------------------|-----------|--------------------------------------------------------------|----------------------------------------------------|--------|-----------------------------------------|--------|
| Assets                                             |   |                                                                               |      |                                                         |                                               |   |                                    |   |
| Investment      securities- available - for - sale |   | $                                                                                  | 5,668,940 |                                                         |                                               |   |                                    | $      | 5,668,940 |   |

----

----

----

----

| ·   | Changes      in economic conditions, commodityprices; |
|--------------------|-------------------------------------------------------|

| ·   | Shortages      of and price increase for fuel, labor strikes or work stoppages, market      acceptance of the Company’s newproducts; |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant      changes in the competitiveenvironment; |
|--------------------|---------------------------------------------------------|

| ·   | Changes      in laws, regulations, and tax rates;and |
|--------------------|------------------------------------------------------|

| ·   | Management’s      ability to achieve reductions in cost and employment levels, to realize      production efficiencies and to implement capital expenditures, all at of      the levels and times planned bymanagement. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

ITEM 1.    LEGAL PROCEEDINGS 

----

| ExhibitNumber |   | Description      of Document                                                                                                                                                                                                                                                                        |
|---------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                                                                                                                                                                |
| 3.4           |   | Amended      and Restated By-laws (incorporated by reference to      Exhibit No. 3.5 of Lifeway’s Current Report on      Form 8-K dated and filed on December 10, 2002). (File      No. 000-17363)                                                         |
|          |   |                                                                                                                                                                                                                                                                                                |
| 3.5           |   | Articles      of Incorporation, as amended and currently in effect (incorporated by      reference to Exhibit 3.5 of Lifeway’s Quarterly Report on      Form 10-QSB for the quarter ended June 30, 2000 and filed on      August 8, 2000). (File No. 000-17363) |
|          |   |                                                                                                                                                                                                                                                                                                |
| 31.1          |   | Officer’s      Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302      of the Sarbanes-Oxley Act of 2002.                                                                                                                                                             |
|          |   |                                                                                                                                                                                                                                                                                                |
| 31.2          |   | Officer’s      Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302      of the Sarbanes-Oxley Act of 2002.                                                                                                                                                             |
|          |   |                                                                                                                                                                                                                                                                                                |
| 32.1          |   | Certification      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted      Pursuant to Section 906 of the Sarbanes-Oxley Act of      2002.                                                                                                                              |
|          |   |                                                                                                                                                                                                                                                                                                |
| 32.2          |   | Certification      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted      Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002.                                                                                                                                       |
|          |   |                                                                                                                                                                                                                                                                                                |
| 99.1          |   | Press      Release dated November 14, 2008.  “Lifeway Foods Reports Record      3rd Quarter 2008 Results.”                                                                                                                                                                    |

----

|   |                    |   |      |                                                                               |   |
|--------|-------------------------|--------|-----------|------------------------------------------------------------------------------------|--------|
| Date:  | November      14, 2008  |   | By:  | /s/      Julie Smolyansky                                                          |   |
|   |                    |   |      | Julie      Smolyansky Chief      Executive Officer, President and Director    |   |
|   |                    |   |      |                                                                               |   |
|   |                    |   |      |                                                                               |   |
| Date:  | November      14 , 2008 |   | By:  | /s/      Edward P. Smolyansky                                                      |   |
|   |                    |   |      | Edward      P. SmolyanskyChief      Financial and Accounting Officer and Treasurer |   |
|   |                    |   |      |                                                                               |   |

----

| ExhibitNumber |   | Description      of Document                                                                                                                                  |
|---------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |   |                                                                                                                                                          |
| 31.1          |   | Officer’s      Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302      of the Sarbanes-Oxley Act of 2002.                  |
|          |   |                                                                                                                                                          |
| 31.2          |   | Officer’s      Certificate Pursuant to 15 U.S.C. 7241, as Adopted Pursuant to Section 302      of the Sarbanes-Oxley Act of 2002.                       |
|          |   |                                                                                                                                                          |
| 32.1          |   | Certification      of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted      Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002. |
|          |   |                                                                                                                                                          |
| 32.2          |   | Certification      of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted      Pursuant to Section 906 of the Sarbanes-Oxley Act of  2002. |
|          |   |                                                                                                                                                          |
| 99.1          |   | Press      Release dated November 14, 2008.  “Lifeway Foods Reports Record      3rd Quarter 2008 Results.”                              |

----