----

----

|   |   |                                                                                        |
|--------|--------|---------------------------------------------------------------------------------------------|
| þ |   | 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 EXCHANGE  ACT |

|                                                                      |   |                                   |
|---------------------------------------------------------------------------|--------|----------------------------------------|
| Illinois                                                                  |   | 36-3442829                             |
|                                                                      |   |                                   |
| (State      or other jurisdiction of incorporation or organization)  |   | (IRS      Employer Identification No.) |

----

----

INDEX

|                                                                         |   |   |   |   |
|------------------------------------------------------------------------------|--------|--------|--------|--------|
| PART I — FINANCIAL    INFORMATION                                      |   |   | 3      |   |
|                                                                         |   |   |   |   |
| ITEM 1. FINANCIALSTATEMENTS                                                  |   |   | 3      |   |
|                                                                         |   |   |   |   |
| ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR      PLAN OF OPERATION |   |   | 19     |   |
|                                                                         |   |   |   |   |
| ITEM 3. CONTROLS AND    PROCEDURES                                           |   |   | 21     |   |
|                                                                         |   |   |   |   |
| PART II — OTHER INFORMATION                                            |   |   | 21     |   |
|                                                                         |   |   |   |   |
| ITEM 1. LEGAL PROCEEDINGS                                                    |   |   | 21     |   |
|                                                                         |   |   |   |   |
| ITEM 6. EXHIBITS                                                             |   |   | 21     |   |
|                                                                         |   |   |   |   |
| SIGNATURE                                                                    |   |   | 22     |   |
|                                                                         |   |   |   |   |

----

|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|------------|--------|-------------------|--------|------------|--------|--------|
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |
|                                                                                                                                                                                                                                                                                                                     |   | (Unaudited)    |       |   |              |   |
|                                                                                                                                                                                                                                                                                                                     |   | March      31, |       |   | December      31, |   |
|                                                                                                                                                                                                                                                                                                                     |   | 2008           |       |   | 2007              |   |       | 2007   |   |
| ASSETS                                                                                                                                                                                                                                                                                                                   |   |           |       |   |              |   |       |   |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |
| Current      assets                                                                                                                                                                                                                                                                                                      |   |           |       |   |              |   |       |   |   |
| Cash      and cash equivalents                                                                                                                                                                                                                                                                                           |   | $              | 392,790    |   |              | $      | 1,013,345  |   |   | $ | 595,885 |   |
| Marketable      securities                                                                                                                                                                                                                                                                                               |   |           | 6,790,850  |   |              |   | 8,560,756  |   |   |   | 6,989,474 |   |
| Inventories                                                                                                                                                                                                                                                                                                              |   |           | 3,669,990  |   |              |   | 2,883,455  |   |   |   | 3,506,554 |   |
| Accounts      receivable, net of allowance for doubtful accounts                                                                                                                                                                                                                                                         |   |           |       |   |              |   |       |   |   |   |   |   |
| of      $39,460 and $39,460 at March 31, 2008 and 2007 and                                                                                                                                                                                                                                                               |   |           |       |   |              |   |       |   |   |   |   |   |
| $39,460      at December 31, 2007                                                                                                                                                                                                                                                                                        |   |           | 4,926,058  |   |              |   | 4,587,966  |   |   |   | 4,209,662 |   |
| Prepaid      expenses and other current assets                                                                                                                                                                                                                                                                           |   |           | 9,087      |   |              |   | 9,992      |   |   |   | 21,253 |   |
| Other      receivables                                                                                                                                                                                                                                                                                                   |   |           | 134,298    |   |              |   | 50,425     |   |   |   | 43,111 |   |
| Deferred      income taxes                                                                                                                                                                                                                                                                                               |   |           | 467,695    |   |              |   | -          |   |   |   | 311,960 |   |
| Refundable      income taxes                                                                                                                                                                                                                                                                                             |   |           | —    |   |              |   | 158,553    |   |   |   | 240,880 |   |
| Total      current assets                                                                                                                                                                                                                                                                                                |   |           | 16,390,768 |   |              |   | 17,264,492 |   |   |   | 15,918,779 |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| Property      and equipment, net                                                                                                                                                                                                                                                                                         |   |           | 9,854,945  |   |              |   | 8,554,799  |   |   |   | 9,678,948 |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| Intangible      assets                                                                                                                                                                                                                                                                                                   |   |           |       |   |              |   |       |   |   |   |   |   |
| Goodwill                                                                                                                                                                                                                                                                                                                 |   |           | 5,414,858  |   |              |   | 3,952,425  |   |   |   | 5,414,858 |   |
| Other      intangible assets, net of accumulated amortization                                                                                                                                                                                                                                                            |   |           |       |   |              |   |       |   |   |   |   |   |
| of      $681,837 and $358,985 at March 31, 2008 and 2007 and                                                                                                                                                                                                                                                             |   |           |       |   |              |   |       |   |   |   |   |   |
| $601,976      at December 31, 2007                                                                                                                                                                                                                                                                                       |   |           | 3,175,801  |   |              |   | 3,498,653  |   |   |   | 3,255,662 |   |
| Total      intangible assets                                                                                                                                                                                                                                                                                             |   |           | 8,590,659  |   |              |   | 7,451,078  |   |   |   | 8,670,520 |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| Other      assets                                                                                                                                                                                                                                                                                                        |   |           | 500,000    |   |              |   | —    |   |   |   | 500,000 |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| Total      assets                                                                                                                                                                                                                                                                                                        |   | $              | 35,336,372 |   |              | $      | 33,270,369 |   |   | $ | 34,268,247 |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| LIABILITIES AND      STOCKHOLDERS’      EQUITY                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| Current      liabilities                                                                                                                                                                                                                                                                                                 |   |           |       |   |              |   |       |   |   |   |   |   |
| Current      maturities of notes payable                                                                                                                                                                                                                                                                                 |   | $              | 1,131,725  |   |              |   | 1,129,004  |   |   | $ | 1,136,126 |   |
| Accounts      payable                                                                                                                                                                                                                                                                                                    |   |           | 1,966,926  |   |              |   | 1,239,046  |   |   |   | 1,594,330 |   |
| Accrued      expenses                                                                                                                                                                                                                                                                                                    |   |           | 392,384    |   |              |   | 341,189    |   |   |   | 414,039 |   |
| Accrued      income taxes                                                                                                                                                                                                                                                                                                |   |           | 203,529    |   |              |   | ---        |   |   |   | --- |   |
| Total      current liabilities                                                                                                                                                                                                                                                                                           |   |           | 3,694,564  |   |              |   | 2,709,239  |   |   |   | 3,144,495 |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| Notes      payable                                                                                                                                                                                                                                                                                                       |   |           | 3,813,825  |   |              |   | 5,201,873  |   |   |   | 4,096,797 |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| Deferred      income taxes                                                                                                                                                                                                                                                                                               |   |           | 1,679,859  |   |              |   | 485,244    |   |   |   | 1,712,795 |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| Stockholders’      equity                                                                                                                                                                                                                                                                                          |   |           |       |   |              |   |       |   |   |   |   |   |
| Common      stock, no par value; 20,000,000 shares authorized;17,273,776 shares      issued; 16,792,826 shares outstanding at March 31, 2008; 17,273,776 shares      issued; 16,889,237 shares outstanding at March 31, 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                                                                                                                                                                                                                                                                                                          |   |           | 1,137,709  |   |              |   | 1,080,911  |   |   |   | 1,120,669 |   |
| Treasury      stock, at cost                                                                                                                                                                                                                                                                                             |   |           | (2,437,517 | )      |              |   | (1,411,195 | )      |   |   | (2,078,165 | ) |
| Retained      earnings                                                                                                                                                                                                                                                                                                   |   |           | 21,360,037 |   |              |   | 18,454,103 |   |   |   | 20,471,432 |   |
| Accumulated      other comprehensive income (loss), net of taxes                                                                                                                                                                                                                                                         |   |           | (421,372   | )      |              |   | 240,927    |   |   |   | (209,043 | ) |
| Total      stockholders’ equity                                                                                                                                                                                                                                                                                    |   |           | 26,148,124 |   |              |   | 24,874,013 |   |   |   | 25,814,160 |   |
|                                                                                                                                                                                                                                                                                                                     |   |           |       |   |              |   |       |   |   |   |   |   |
| Total      liabilities and stockholders’ equity                                                                                                                                                                                                                                                                    |   | $              | 35,336,372 |   |              | $      | 33,270,369 |   |   | $ | 34,768,247 |   |

----

|                                       |   | (Unaudited)             |       |   |              |   |
|--------------------------------------------|--------|-------------------------|------------|--------|-------------------|--------|
|                                       |   | Three      Months Ended |       |   | Year      Ended   |   |
|                                       |   | March      31,          |       |   | December      31, |   |
|                                       |   | 2008                    |       |   | 2007              |   |   | 2007 |   |
|                                       |   |                    |       |   |              |   |   |   |   |
| Sales                                      |   | $                       | 11,122,238 |   |              | $      | 9,022,244 |   |   | $ | 38,729,156 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Cost      of goods sold                    |   |                    | 7,442,083  |   |              |   | 5,284,532 |   |   |   | 25,582,981 |   |
| Depreciation      expense                  |   |                    | 189,424    |   |              |   | 165,293 |   |   |   | 726,647 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Total      cost of goods sold              |   |                    | 7,631,507  |   |              |   | 5,449,825 |   |   |   | 26,309,628 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Gross      profit                          |   |                    | 3,490,731  |   |              |   | 3,572,419 |   |   |   | 12,419,528 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Selling      Expenses                      |   |                    | 1,059,166  |   |              |   | 770,081 |   |   |   | 3,744,388 |   |
| General      and Administrative            |   |                    | 985,046    |   |              |   | 920,573 |   |   |   | 3,914,825 |   |
| Amortization      expense                  |   |                    | 79,861     |   |              |   | 80,275 |   |   |   | 323,266 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Total      Operating Expenses              |   |                    | 2,124,073  |   |              |   | 1,770,929 |   |   |   | 7,982,479 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Income      from operations                |   |                    | 1,366,658  |   |              |   | 1,801,490 |   |   |   | 4,437,049 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Other      income (expense):               |   |                    |       |   |              |   |   |   |   |   |   |   |
| Interest      and dividend income          |   |                    | 103,133    |   |              |   | 65,799 |   |   |   | 350,286 |   |
| Rental      Income                         |   |                    | 11,647     |   |              |   | 8,600 |   |   |   | 48,305 |   |
| Interest      expense                      |   |                    | (85,956    | )      |              |   | (109,529 | ) |   |   | (410,180 | ) |
| Gain      (loss) on sale of marketable     |   |                    |       |   |              |   |   |   |   |   |   |   |
|   securities,      net           |   |                    | 51,029     |   |              |   | 14,745 |   |   |   | 539,739 |   |
| Total      other income (Expense)          |   |                    | 79,853     |   |              |   | (20,385 | ) |   |   | 528,150 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Income      before provision for           |   |                    |       |   |              |   |   |   |   |   |   |   |
|    income      taxes        |   |                    | 1,446,511  |   |              |   | 1,781,105 |   |   |   | 4,965,199 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Provision      for income taxes            |   |                    | 557,906    |   |              |   | 645,774 |   |   |   | 1,812,539 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Net      income                            |   | $                       | 888,605    |   |              | $      | 1,135,331 |   |   | $ | 3,152,660 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Basic      and diluted earnings per        |   |                    |       |   |              |   |   |   |   |   |   |   |
| common      share                          |   |                    | 0.05       |   |              |   | 0.07 |   |   |   | 0.19 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Weighted      average number of            |   |                    |       |   |              |   |   |   |   |   |   |   |
|   shares      outstanding        |   |                    | 16,814,740 |   |              |   | 16,895,351 |   |   |   | 16,855,611 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| COMPREHENSIVE      INCOME                  |   |                    |       |   |              |   |   |   |   |   |   |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Net      income                            |   | $                       | 888,605    |   |              | $      | 1,135,331 |   |   | $ | 3,152,660 |   |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Other      comprehensive income (loss),    |   |                    |       |   |              |   |   |   |   |   |   |   |
| net      of tax:                           |   |                    |       |   |              |   |   |   |   |   |   |   |
| Unrealized      gains (losses) on          |   |                    |       |   |              |   |   |   |   |   |   |   |
| marketable      securities                 |   |                    |       |   |              |   |   |   |   |   |   |   |
| (net      of tax benefits)                 |   |                    | (182,376   | )      |              |   | 95,783 |   |   |   | (47,091 | ) |
| Less      reclassification adjustment      |   |                    |       |   |              |   |   |   |   |   |   |   |
| for      (gains) losses                    |   |                    |       |   |              |   |   |   |   |   |   |   |
| included      in net income (net of taxes) |   |                    | (29,954    | )      |              |   | (8,626 | ) |   |   | (315,721 | ) |
|                                       |   |                    |       |   |              |   |   |   |   |   |   |   |
| Comprehensive      income                  |   | $                       | 676,275    |   |              | $      | 1,222,488 |   |   | $ | 2,789,848 |   |

----

|                                                                                    |   |  Common      Stock, No Par Value20,000,000      Shares |       |   | #      of Shares |   |          |     |   |   |         |   |   |         |      |   |     |   |      | AccumulatedOther |   |   |                |   |
|-----------------------------------------------------------------------------------------|--------|-------------------------------------------------------------|------------|--------|-----------------------|--------|---------------|----------|--------|--------|--------------|--------|--------|--------------|-----------|--------|----------|--------|-----------|------------------|--------|--------|---------------------|--------|
|                                                                                    |   | 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                                                                |   |                                                        | —    |   |                  |   | ( 37,000 | )        |   |   | 37,000       |   |   |         | —   |   |     |   | —   |             |   |   | ( 363,102      | )      |   |   | — |   |   |   | — |   |   |   | (363,102 | ) |
|                                                                                    |   |                                                        |       |   |                  |   |          |     |   |   |         |   |   |         |      |   |     |   |      |             |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Issuance      of treasury stock for compensation                                        |   |                                                        | —    |   |                  |   | 2,100         |     |   |   | ( 2,100 | )      |   |         | —   |   |     |   | 17,040    |             |   |   | 3,750               |   |   |   | — |   |   |   | — |   |   |   | 20,790 |   |
|                                                                                    |   |                                                        |       |   |                  |   |          |     |   |   |         |   |   |         |      |   |     |   |      |             |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      comprehensive income (loss):                                                 |   |                                                        |       |   |                  |   |          |     |   |   |         |   |   |         |      |   |     |   |      |             |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Unrealized      gains on securities, net of taxes and reclassification      adjustment  |   |                                                        | —    |   |                  |   | —       |     |   |   | —      |   |   |         | —   |   |     |   | —   |             |   |   | —             |   |   |   | — |   |   |   | ( 212,329 | ) |   |   | (212,329 | ) |
|                                                                                    |   |                                                        |       |   |                  |   |          |     |   |   |         |   |   |         |      |   |     |   |      |             |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                                                        |       |   |                  |   |          |     |   |   |         |   |   |         |      |   |     |   |      |             |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income for the three months ended March 31,    2008                            |   |                                                        | —    |   |                  |   | —       |     |   |   | —      |   |   |         | —   |   |     |   | —   |             |   |   | —             |   |   |   | 888,605 |   |   |   | — |   |   |   | 888,605 |   |
|                                                                                    |   |                                                        |       |   |                  |   |          |     |   |   |         |   |   |         |      |   |     |   |      |             |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |                                                        |       |   |                  |   |          |     |   |   |         |   |   |         |      |   |     |   |      |             |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balances      at March 31, 2008                                                         |   |                                                        | 17,273,776 |   |                  |   | 16,792,826    |     |   |   | 480,950      |   |   | $            | 6,509,267 |   |     | $      | 1,137,709 |             |   | $      | (2,437,517          | )      |   | $ | 21,360,037 |   |   | $ | (421,372 | ) |   | $ | 26,148,124 |   |
|                                                                                    |   |                                                        |       |   |                  |   |          |     |   |   |         |   |   |         |      |   |     |   |      |             |   |   |                |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

|                                                           |   | March      31, |       |   | December      31, |   |
|----------------------------------------------------------------|--------|----------------|------------|--------|-------------------|--------|
|                                                           |   | 2008           |       |   | 2007              |   |   | 2007 |   |
|                                                           |   |           |       |   |              |   |   |   |   |
| Cash flows from      operating activities:                     |   |           |       |   |              |   |   |   |   |
| Net      income                                                |   | $              | 888,605    |   |              | $      | 1,135,331 |   |   | $ | 3,152,660 |   |
| Adjustments      to reconcile net income to net                |   |           |       |   |              |   |   |   |   |   |   |   |
| cash      flows from operating activities, net of acquisition: |   |           |       |   |              |   |   |   |   |   |   |   |
| Depreciation      and amortization                             |   |           | 269,285    |   |              |   | 245,568 |   |   |   | 1,049,913 |   |
| (Gain)Loss      on sale of marketable securities, net          |   |           | (51,029    | )      |              |   | (14,745 | ) |   |   | (539,739 | ) |
| Deferred      income taxes                                     |   |           | (39,280    | )      |              |   | 6,536 |   |   |   | (223,717 | ) |
| Treasury      stock issued for compensation                    |   |           | 20,790     |   |              |   | --- |   |   |   | 48,509 |   |
| Increase      (decrease) in allowance for doubtful accounts    |   |           | ---        |   |              |   | (40,540 | ) |   |   | (40,540 | ) |
| (Increase)      decrease in operating assets:                  |   |           |       |   |              |   |   |   |   |   |   |   |
| Accounts      receivable                                       |   |           | (716,396   | )      |              |   | (604,709 | ) |   |   | (226,405 | ) |
| Other      receivables                                         |   |           | (91,187    | )      |              |   | 20,625 |   |   |   | 27,939 |   |
| Inventories                                                    |   |           | (163,436   | )      |              |   | (361,259 | ) |   |   | (984,358 | ) |
| Refundable      income taxes                                   |   |           | 240,880    |   |              |   | 109,218 |   |   |   | 26,891 |   |
| Prepaid      expenses and other current assets                 |   |           | 12,166     |   |              |   | 1,991 |   |   |   | (9,270 | ) |
| Increase      (decrease) in operating liabilities:             |   |           |       |   |              |   |   |   |   |   |   |   |
| Accounts      payable                                          |   |           | 372,596    |   |              |   | (223,968 | ) |   |   | 131,316 |   |
| Accrued      expenses                                          |   |           | (21,655    | )      |              |   | (138,912 | ) |   |   | (66,062 | ) |
| Accrued      income taxes                                      |   |           | 203,529    |   |              |   | --- |   |   |   |   |   |
| Net      cash provided by operating activities                 |   |           | 924,868    |   |              |   | 135,136 |   |   |   | 2,347,137 |   |
|                                                           |   |           |       |   |              |   |   |   |   |   |   |   |
| Cash flows from      investing activities:                     |   |           |       |   |              |   |   |   |   |   |   |   |
| Investment      in cost method securities                      |   |           | ---        |   |              |   | --- |   |   |   | (500,000 | ) |
| Purchases      of marketable securities                        |   |           | (1,976,684 | )      |              |   | (802,587 | ) |   |   | (5,744,697 | ) |
| Sale      of marketable securities                             |   |           | 1,864,617  |   |              |   | 896,419 |   |   |   | 7,168,246 |   |
| Purchases      of property and equipment                       |   |           | (365,421   | )      |              |   | (139,376 | ) |   |   | (1,824,879 | ) |
| Net      cash used in investing activities                     |   |           | (477,488   | )      |              |   | (45,544 | ) |   |   | (901,330 | ) |
|                                                           |   |           |       |   |              |   |   |   |   |   |   |   |
| Cash flows from      financing activities:                     |   |           |       |   |              |   |   |   |   |   |   |   |
| Proceeds      of note payable                                  |   |           | ---        |   |              |   | --- |   |   |   | 300,000 |   |
| Purchases      of treasury stock, net                          |   |           | (363,102   | )      |              |   | (76,882 | ) |   |   | (752,603 | ) |
| Repayment      of notes payable                                |   |           | (287,373   | )      |              |   | (547,177 | ) |   |   | (1,945,131 | ) |
| Net      cash used in financing activities                     |   |           | (650,475   | )      |              |   | (624,059 | ) |   |   | (2,397,734 | ) |
|                                                           |   |           |       |   |              |   |   |   |   |   |   |   |
| Net      decrease in cash and cash equivalents                 |   |           | (203,095   | )      |              |   | (534,467 | ) |   |   | (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        |   | $              | 392,790    |   |              | $      | 1,013,345 |   |   | $ | 595,885 |   |
|                                                           |   |           |       |   |              |   |   |   |   |   |   |   |

----

----

|                                        |   | March      31, |      |   | December      31, |   |
|---------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                                        |   | 2008           |      |   | 2007              |   |   | 2007 |   |
| Amounts      insured                        |   | $              | 280,180   |   |              | $      | 244,029 |   |   | $ | 576,563 |   |
| Uninsured      and uncollateralized amounts |   |           | 762,102   |   |              |   | 1,045,160 |   |   |   | 523,295 |   |
| Total      bank balances                    |   | $              | 1,042,282 |   |              | $      | 1,289,189 |   |   | $ | 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 othercustomer      related intangibles |   | 15    |
| Lease      agreement                                           |   | 7     |
| Trade      names                                               |   | 15    |
| Formula                                                        |   | 10    |
| Customer      relationships                                    |   | 12    |

----

----

|                                                       |   | March      31, 2008 |      |   | March      31, 2007           |   |    | December      31, 2007 |   |
|------------------------------------------------------------|--------|---------------------|-----------|--------|-------------------------------|--------|---------|------------------------|--------|
|                                                       |   | Cost                |      |   | Accumulated      Amortization |   |    | Cost                   |   |   | Accumulated      Amortization |   |   | Cost |   |   | Accumulated      Amortization |   |
| Recipes                                                    |   | $                   | 43,600    |   |                          | $      | 38,831  |                   |   | $ | 43,600 |   |   | $ | 29,067 |   |   | $ | 43,600 |   |   | $ | 37,242 |   |
| Customer      lists and other customer related intangibles |   |                | 305,200   |   |                          |   | 151,873 |                   |   |   | 305,200 |   |   |   | 110,453 |   |   |   | 305,200 |   |   |   | 141,518 |   |
| Lease      acquisition                                     |   |                | 87,200    |   |                          |   | 45,676  |                   |   |   | 87,200 |   |   |   | 33,219 |   |   |   | 87,200 |   |   |   | 42,562 |   |
| Other                                                      |   |                | 6,638     |   |                          |   | 3,651   |                   |   |   | 6,638 |   |   |   | 2,323 |   |   |   | 6,638 |   |   |   | 3,319 |   |
| Customer      relationship                                 |   |                | 985,000   |   |                          |   | 136,806 |                   |   |   | 985,000 |   |   |   | 54,723 |   |   |   | 985,000 |   |   |   | 116,285 |   |
| Contractual      backlog                                   |   |                | 12,000    |   |                          |   | 12,000  |                   |   |   | 12,000 |   |   |   | 12,000 |   |   |   | 12,000 |   |   |   | 12,000 |   |
| Trade      names                                           |   |                | 1,980,000 |   |                          |   | 220,000 |                   |   |   | 1,980,000 |   |   |   | 88,000 |   |   |   | 1,980,000 |   |   |   | 187,000 |   |
| Formula                                                    |   |                | 438,000   |   |                          |   | 73,000  |                   |   |   | 438,000 |   |   |   | 29,200 |   |   |   | 438,000 |   |   |   | 62,050 |   |
|                                                       |   | $                   | 3,857,638 |   |                          | $      | 681,837 |                   |   | $ | 3,857,638 |   |   | $ | 358,985 |   |   | $ | 3,857,638 |   |   | $ | 601,976 |   |

| 2009                                                                                                                                                       |   |   | $      | 317,857   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|-----------|--------|
| 2010                                                                                                                                                       |   |   |   | 307,275   |   |
| 2011                                                                                                                                                       |   |   |   | 303,372   |   |
| 2012                                                                                                                                                       |   |   |   | 294,735   |   |
|                          2013 |   |   |   | 268,783   |   |
| Thereafter                                                                                                                                                 |   |   |   | 1,683,779 |   |
|                                                                                                                                                       |   |   | $      | 3,175,801 |   |

----

| MARCH 31,      2008                           |   | Cost   |      |   | UnrealizedGains |   |    | UnrealizedLosses |   |   | FairValue      |   |
|-----------------------------------------------|--------|--------|-----------|--------|-----------------|--------|---------|------------------|--------|--------|----------------|--------|
|                                          |   |   |      |   |            |   |    |             |   |   |           |   |
| Equities                                      |   | $      | 3,074,223 |   |            | $      | 114,067 |             |   | $      | ( 481,142 | )      |   | $ | 2,707,148 |   |
| Mutual      Funds                             |   |   | 927,055   |   |            |   | 3,744   |             |   |   | ( 144,622 | )      |   |   | 786,177 |   |
| Preferred      Securities                     |   |   | 1,655,421 |   |            |   | 7,680   |             |   |   | ( 167,259 | )      |   |   | 1,495,842 |   |
| Corporate      Bonds                          |   |   | 1,249,426 |   |            |   | 1,586   |             |   |   | ( 55,070  | )      |   |   | 1,195,942 |   |
| Municipal      Bonds                          |   |   | 4,586     |   |            |   | 330     |             |   |   | —        |   |   |   | 4,916 |   |
| Government      agency  Obligations |   |   | 597,978   |   |            |   | 2,955   |             |   |   | ( 108     | )      |   |   | 600,825 |   |
| Total                                         |   | $      | 7,508,689 |   |            | $      | 130,362 |             |   | $      | ( 848,201 | )      |   | $ | 6,790,850 |   |

| MARCH 31,      2007          |   | Cost   |      |   | UnrealizedGains |   |    | UnrealizedLosses |   |   | FairValue      |   |
|------------------------------|--------|--------|-----------|--------|-----------------|--------|---------|------------------|--------|--------|----------------|--------|
|                         |   |   |      |   |            |   |    |             |   |   |           |   |
| Equities                     |   | $      | 2,810,733 |   |            | $      | 507,649 |             |   | $      | ( 92,378  | )      |   | $ | 3,226,004 |   |
| Mutual      Funds            |   |   | 595,823   |   |            |   | 7,064   |             |   |   | ( 9,323   | )      |   |   | 593,564 |   |
| Preferred      Securities    |   |   | 1,637,458 |   |            |   | 5,865   |             |   |   | ( 15,833  | )      |   |   | 1,627,490 |   |
| Private      Investment LP   |   |   | 600,000   |   |            |   | 94,507  |             |   |   | —        |   |   |   | 694,507 |   |
| Certificates      of Deposit |   |   | 75,000    |   |            |   | — |             |   |   | ( 2,392   | )      |   |   | 72,608 |   |
| Corporate      Bonds         |   |   | 2,137,085 |   |            |   | 2,906   |             |   |   | ( 90,985  | )      |   |   | 2,049,006 |   |
| Municipal      Bonds         |   |   | 160,757   |   |            |   | 3,776   |             |   |   | ( 417     | )      |   |   | 164,116 |   |
| Government      agency       |   |   | 134,776   |   |            |   | — |             |   |   | ( 1,315   | )      |   |   | 133,461 |   |
| Total                        |   | $      | 8,151,632 |   |            | $      | 621,767 |             |   | $      | ( 212,643 | )      |   | $ | 8,560,756 |   |

| 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                                            |   | $                        | 1,844,460 |   |                      | $      | ( 400,927 | )               |   | $ | 205,483 |   |   | $ | ( 80,215 | ) |   | $ | 2,049,943 |   |   | $ | ( 481,142 | ) |
| Mutual      Funds                                   |   |                     | 566,022   |   |                      |   | ( 133,645 | )               |   |   | 118,911 |   |   |   | ( 10,977 | ) |   |   | 684,933 |   |   |   | ( 144,622 | ) |
| Preferred      Securities                           |   |                     | 518,106   |   |                      |   | ( 40,162  | )               |   |   | 870,085 |   |   |   | ( 127,097 | ) |   |   | 1,388,191 |   |   |   | ( 167,259 | ) |
| Corporate      Bonds                                |   |                     | 229,348   |   |                      |   | ( 4,349   | )               |   |   | 678,252 |   |   |   | ( 50,721 | ) |   |   | 907,600 |   |   |   | ( 55,070 | ) |
| Government      Agency   Obligations |   |                     | 33,846    |   |                      |   | ( 108     | )               |   |   | — |   |   |   | — |   |   |   | 33,846 |   |   |   | ( 108 | ) |
|                                                |   | $                        | 3,191,782 |   |                      | $      | ( 579,191 | )               |   | $ | 1,872,731 |   |   | $ | ( 269,010 | ) |   | $ | 5,064,513 |   |   | $ | ( 848,201 | ) |

----

|                     |   | March      31, |      |   | December      31, |   |
|--------------------------|--------|----------------|-----------|--------|-------------------|--------|
|                     |   | 2008           |      |   | 2007              |   |   | 2007 |   |
| Finished      goods      |   | $              | 1,201,472 |   |              | $      | 1,084,748 |   |   | $ | 1,296,985 |   |
| Production      supplies |   |           | 1,357,834 |   |              |   | 1,134,987 |   |   |   | 1,383,384 |   |
| Raw      materials       |   |           | 1,110,684 |   |              |   | 663,720 |   |   |   | 826,185 |   |
| Total      inventories   |   | $              | 3,669,990 |   |              | $      | 2,883,455 |   |   | $ | 3,506,554 |   |

|                               |   |           |       |   |             |   |
|------------------------------------|--------|----------------|------------|--------|------------------|--------|
|                               |   | March      31, |       |   | December      31 |   |
|                               |   | 2008           |       |   | 2007             |   |   | 2007 |   |
| Land                               |   | $              | 969,232    |   |             | $      | 969,232 |   |   | $ | 969,232 |   |
| Buildings      and improvements    |   |           | 6,772,762  |   |             |   | 6,713,743 |   |   |   | 6,743,647 |   |
| Machinery      and equipment       |   |           | 8,166,465  |   |             |   | 7,274,990 |   |   |   | 8,159,199 |   |
| Vehicles                           |   |           | 581,458    |   |             |   | 534,365 |   |   |   | 581,458 |   |
| Office      equipment              |   |           | 102,830    |   |             |   | 97,115 |   |   |   | 101,583 |   |
| Construction      in process       |   |           | 1,047,623  |   |             |   |   |   |   |   | 719,830 |   |
|                               |   |           | 17,640,370 |   |             | $      | 15,589,445 |   |   |   | 17,274,949 |   |
| Less      accumulated depreciation |   |           | 7,785,425  |   |             |   | 7,034,646 |   |   |   | 7,596,001 |   |
| Total      property and equipment  |   | $              | 9,854,945  |   |             | $      | 8,554,799 |   |   | $ | 9,678,948 |   |

|                                   |   |           |    |   |              |   |
|----------------------------------------|--------|----------------|---------|--------|-------------------|--------|
|                                   |   | March      31, |    |   | December      31, |   |
|                                   |   | 2008           |    |   | 2007              |   |   | 2007 |   |
| Accrued      payroll and payroll taxes |   | $              | 101,670 |   |              | $      | 93,727 |   |   | $ | 58,395 |   |
| Accrued      property tax              |   |           | 220,253 |   |              |   | 206,000 |   |   |   | 285,279 |   |
| Other                                  |   |           | 70,461  |   |              |   | 41,458 |   |   |   | 70,365 |   |
|                                   |   | $              | 392,384 |   |              | $      | 341,185 |   |   | $ | 414,039 |   |

----

|                                                                                                                                                                                                                                   |   | March      31, |      |   | 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.               |   | $              | 444,499   |   |              | $      | 451,542 |   |   | $ | 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.                          |   |           | 2,816,481 |   |              |   | 2,888,051 |   |   |   | 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 |   |           | 1,684,570 |   |              |   | 2,991,284 |   |   |   | 1,951,503 |   |
| Total      notes payable                                                                                                                                                                                                               |   |           | 4,945,550 |   |              |   | 6,330,877 |   |   |   | 5,232,923 |   |
| Less      current maturities                                                                                                                                                                                                           |   |           | 1,131,725 |   |              |   | 1,129,004 |   |   |   | 1,136,126 |   |
| Total      long-term portion                                                                                                                                                                                                           |   | $              | 3,813,825 |   |              | $      | 5,201,873 |   |   | $ | 4,096,797 |   |

| For      the Year Ended March 31, |   |   |      |   |
|-----------------------------------|--------|--------|-----------|--------|
| 2009                              |   | $      | 1,131,725 |   |
| 2010                              |   |   | 708,435   |   |
| 2011                              |   |   | 2,684,815 |   |
| 2012                              |   |   | 420,575   |   |
| Total                             |   | $      | 4,945,550 |   |

|                            |   |                            |    |   | For      the      |   |
|---------------------------------|--------|---------------------------------|---------|--------|-------------------|--------|
|                            |   | For      the Three Months Ended |    |   | Year      Ended   |   |
|                            |   | March      31,                  |    |   | December      31, |   |
|                            |   | 2008                            |    |   | 2007              |   |   | 2007 |   |
| Current:                        |   |                            |    |   |              |   |   |   |   |
| Federal                         |   | $                               | 488,599 |   |              | $      | 537,138 |   |   | $ | 1,699,408 |   |
| State      and local            |   |                            | 108,587 |   |              |   | 102,100 |   |   |   | 336,848 |   |
| Total      current              |   |                            | 597,186 |   |              |   | 639,238 |   |   |   | 2,036,256 |   |
| Deferred                        |   |                            | (39,280 | )      |              |   | 6,536 |   |   |   | (223,717 | ) |
| Provision      for income taxes |   | $                               | 557,906 |   |              | $      | 645,774 |   |   | $ | 1,812,539 |   |

----

|                                                                           |   |                            |    |   | For      the      |   |
|--------------------------------------------------------------------------------|--------|---------------------------------|---------|--------|-------------------|--------|
|                                                                           |   | For      the Three Months Ended |    |   | Year      Ended   |   |
|                                                                           |   | March      31,                  |    |   | December      31, |   |
|                                                                           |   | 2008                            |    |   | 2007              |   |   | 2007 |   |
| Federal      income tax expense  computed      at the statutory rate |   | $                               | 491,814 |   |              | $      | 605,576 |   |   | $ | 1,688,168 |   |
| State      and local tax expense, net                                          |   |                            | 69,433  |   |              |   | 85,493 |   |   |   | 238,330 |   |
| Permanent      differences                                                     |   |                            | (3,341  | )      |              |   | (45,295 | ) |   |   | (113,959 | ) |
| Provision      for income taxes                                                |   | $                               | 557,906 |   |              | $      | 645,774 |   |   | $ | 1,812,539 |   |

|                                                                                    |   |           |       |   |     |   |
|-----------------------------------------------------------------------------------------|--------|----------------|------------|--------|----------|--------|
|                                                                                    |   | March      31, |       |   | December |   |
|                                                                                    |   | 2008           |       |   | 2007     |   |   | 2007 |   |
| Non-current      deferred tax liabilitiesarising      from:Temporary      differences - |   |           |       |   |     |   |   |   |   |
| accumulated      depreciation and amortization                                          |   | $              | (1,679,859 | )      |     | $      | (454,212 | ) |   | $ | (1,712,795 | ) |
| Current      deferred tax assets (liabilities) arising from:                            |   |           |       |   |     |   |   |   |   |   |   |   |
| Unrealized      losses (gains) on marketable securities                                 |   |           | 296,468    |   |     |   | (169,511 | ) |   |   | 147,077 |   |
| Inventory                                                                               |   |           | 154,930    |   |     |   | 122,183 |   |   |   | 148,586 |   |
| Allowance      for doubtful accounts                                                    |   |           | 16,297     |   |     |   | 16,296 |   |   |   | 16,297 |   |
| Total      current deferred tax assets(liabilities)                                     |   |           | 467,695    |   |     |   | (31,032 | ) |   |   | 311,960 |   |
| Net      deferred tax liability                                                         |   | $              | (1,212,164 | )      |     | $      | (485,244 | ) |   | $ | (1,400,835 | ) |

|              |   |                     |    |   | For      the      |   |
|-------------------|--------|--------------------------|---------|--------|-------------------|--------|
|              |   | For      the Years Ended |    |   | Year      Ended   |   |
|              |   | March      31,           |    |   | December      31, |   |
|              |   | 2008                     |    |   | 2007              |   |   | 2007 |   |
| Interest          |   | $                        | 85,956  |   |              | $      | 96,908 |   |   | $ | 430,098 |   |
| Income      taxes |   | $                        | 133,250 |   |              | $      | 551,386 |   |   | $ | 2,026,031 |   |

----

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|                                               |   | Quoted      Prices in Active      Markets for      Identical Assets      (Level 1) |      |   | Significant      Other Observable Inputs (Level      2) |   |    | Significant      UnobservableInputs      (Level 3) |   |   | Balance      at March      31, 2008 |   |
|----------------------------------------------------|--------|------------------------------------------------------------------------------------|-----------|--------|---------------------------------------------------------|--------|---------|----------------------------------------------------|--------|--------|-------------------------------------|--------|
| Assets                                             |   |                                                                               |      |   |                                                    |   |    |                                               |   |   |                                |   |
| Investment      securities- available - for - sale |   | $                                                                                  | 6,790,850 |   |                                                    | $      | — |                                               |   | $      | —                             |   |   | $ | 6,790,850 |   |

goodwill, andintangible assets, which are recorded at fair value only upon impairment. TheFASB’s deferral is intended to allow additional time to consider the effect ofvarious implementation issues relating to these non-financial instruments, anddefers disclosures under SFAS No. 157 until January 1,2009.

----

----

| ·   | 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; |
|--------------------|---------------------------------------------------------|

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| ·   | 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 3. CONTROLS ANDPROCEDURES

PART II — OTHERINFORMATION

ITEM 1.LEGAL PROCEEDINGS 

|    |   |                                                                                                                                                                                                                                                                                           |
|---------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit |   |                                                                                                                                                                                                                                                                                           |
| Number  |   | Description                                                                                                                                                                                                                                                                                    |
|    |   |                                                                                                                                                                                                                                                                                           |
| 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    |   | Rule 13a-14(a)/15d-14(a)      Certification of Julie Smolyansky.                                                                                                                                                                                                                          |
|    |   |                                                                                                                                                                                                                                                                                           |
| 31.2    |   | Rule 13a-14(a)/15d-14(a)      Certification of Edward P. Smolyansky.                                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                                           |
| 32.1    |   | Section 1350      Certification of Julie Smolyansky.                                                                                                                                                                                                                                      |
|    |   |                                                                                                                                                                                                                                                                                           |
| 32.2    |   | Section 1350      Certification of Edward P. Smolyansky.                                                                                                                                                                                                                                  |
|    |   |                                                                                                                                                                                                                                                                                           |
|    |   |                                                                                                                                                                                                                                                                                           |

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SIGNATURE

|   |   |                                                             |   |   |
|--------|--------|------------------------------------------------------------------|--------|--------|
|   |   | LIFEWAY      FOODS, INC.                                         |   |   |
|   |   |                                                             |   |   |
|   |   |  /s/      Julie Smolyansky                                  |   |   |
|   |   | Julie      Smolyansky                                            |   |   |
|   |   | Chief      Executive Officer, President, and  Director |   |   |
|   |   |                                                             |   |   |
|   |   |  /s/      Edward P. Smolyansky                              |   |   |
|   |   | Chief      Financial and Accounting Officer                      |   |   |
|   |   | and      Treasurer                                               |   |   |

----

| ExhibitNumber  |   | Description                                                          |
|---------------------|--------|---------------------------------------------------------------------------|
|                |   |                                                                      |
| 31.1                |   | Rule 13a-14(a)/15d-14(a)      Certification of Julie Smolyansky.     |
|                |   |                                                                      |
| 31.2                |   | Rule 13a-14(a)/15d-14(a)      Certification of Edward P. Smolyansky. |
|                |   |                                                                      |
| 32.1                |   | Section 1350      Certification of Julie Smolyansky.                 |
|                |   |                                                                      |
| 32.2                |   | Section 1350      Certification of Edward P. Smolyansky.             |
|                |   |                                                                      |
|                |   |                                                                      |

----