----

----

| þ                                    | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934     |
|-------------------------------------------|------------------------------------------------------------------------------------------|
|                                      |                                                                                     |
| For the fiscal year ended January 2, 2010 |
|                                      |                                                                                     |
| OR                                        |
|                                      |                                                                                     |
| o                                         | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

| DECORATOR INDUSTRIES, INC.                             |
|--------------------------------------------------------|
| (Exact name of registrant as specified in its charter) |

| Pennsylvania                                                                     |   | 25-1001433                                |
|----------------------------------------------------------------------------------|--------|-------------------------------------------|
| (State or other jurisdiction of incorporation or organization)    |   | (I.R.S. Employer Identification No.) |

| 10011 Pines Blvd., Pembroke Pines, Florida                                     |   | 33024  |
|------------------------------------------------------------------------------------------|--------|-------------|
| (Address of principal executive offices)         |   | (Zip Code)  |

| Title of each class                 |   | Name of each exchange on which registered |
|----------------------------------------------------|--------|-------------------------------------------|
| Common Stock, Par Value $.20 Per Share   |   | American Stock Exchange                   |

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

----

----

----

----

----

| Location                 |   | Principal Use                                                         |   | Approx. Sq. Ft.                                    |   | Status                      |
|--------------------------|--------|-----------------------------------------------------------------------|--------|----------------------------------------------------|--------|-----------------------------|
| Haleyville, Alabama      |   | Offices, manufacturing and warehouse                                  |   | 54,000                                             |   | Owned – Active        |
| Red Bay, Alabama         |   | Offices, manufacturing and warehouse                                  |   | 50,700                                             |   | Owned – Idle          |
| Phoenix, Arizona         |   | Held for sale                                                         |   | 35,000                                             |   | Owned – Held for Sale |
| Pembroke Pines, Florida  |   | Offices                                                               |   |   3,148                                  |   | Leased                      |
| Douglas, Georgia         |   | Held for sale                                                         |   | 28,000                                             |   | Owned – Held for Sale |
| Elkhart, Indiana         |   | Held for sale                                                         |   | 51,000                                             |   | Owned – Held for Sale |
| Goshen, Indiana          |   | Offices, manufacturing and warehouse                                  |   | 55,700                                             |   | Owned - Active              |
| Bossier, Louisiana       |   | Offices, manufacturing and warehouse                                  |   | 20,000                                             |   | Leased                      |
| Hackensack, New Jersey   |   | Offices                                                               |   | 1,550                                              |   | Leased                      |
| Bloomsburg, Pennsylvania |   | Held for sale                                                         |   | 56,500                                             |   | Owned – Held for Sale |
| Abbotsford, Wisconsin    |   | Offices, manufacturing and warehouse                                  |   | 32,000                                             |   | Leased                      |
|                     |   |                                                                  |   |                                               |   |                        |
|                     |   | Total Owned - ActiveTotal Owned - IdleTotal LeasedTotal Held for sale |   | 109,700  50,700  56,698170,500 |   |                        |
|                     |   |                                                                  |   |                                               |   |                        |

----

|           |   | 2009 Sales Prices |   |   | 2008 Sales Prices |   |
|----------------|--------|-------------------|--------|--------|-------------------|--------|
|           |   | High              |   |   | Low               |   |   | High |   |   | Low |   |
| First Quarter  |   | $                 | 0.81   |   |              | $      | 0.50 |   |   | $ | 4.65 |   |   | $ | 3.61 |   |
| Second Quarter |   |              | 1.35   |   |              |   | 0.72 |   |   |   | 3.87 |   |   |   | 2.48 |   |
| Third Quarter  |   |              | 0.97   |   |              |   | 0.55 |   |   |   | 2.50 |   |   |   | 1.70 |   |
| Fourth Quarter |   |              | 1.35   |   |              |   | 0.14 |   |   |   | 1.75 |   |   |   | 0.25 |   |

|                    |   | Number of shares optioned |    |   | Weighted average exercise price |   |   | Number of shares availablefor future options |   |
|-------------------------|--------|---------------------------|---------|--------|---------------------------------|--------|--------|----------------------------------------------|--------|
| 1995 Plan               |   |                      | 128,950 |   |                            | $      | 6.72   |                                         |   |   | 0 |   |
| 2006 Plan               |   |                      | 190,000 |   |                            | $      | 2.30   |                                         |   |   | 60,000 |   |
|    Total |   |                      | 318,950 |   |                            | $      | 4.09   |                                         |   |   | 60,000 |   |

----

|                                                     |   | 2009   |       |   | 2008   |   |       | 2007   |   |   | 2006       |   |   | 2005   |       |
|----------------------------------------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|--------|--------|--------|------------|
|                                                     |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |
| FOR THE YEAR                                             |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |
|     Net Sales                        |   | $      | 18,600,358 |   |   | $      | 39,617,182 |   |   | $      | 46,080,584 |   |   | $      | 52,237,720 |   |   | $ | 50,525,343 |   |
|     Net (Loss)/Income                |   | $      | (3,037,560 | )      |   | $      | (2,585,487 | )      |   | $      | (807,509   | )      |   | $      | 405,393    |   |   | $ | 1,364,814 |   |
|                                                     |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |
| AT YEAR END                                              |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |
|     Total Assets                     |   | $      | 16,170,667 |   |   | $      | 20,146,809 |   |   | $      | 24,263,904 |   |   | $      | 24,998,571 |   |   | $ | 24,294,365 |   |
|     Debt Obligations                 |   | $      | 4,016,484  |   |   | $      | 3,299,000  |   |   | $      | 2,008,444  |   |   | $      | 1,948,259  |   |   | $ | 1,748,554 |   |
|     Funded Debt/Total Capitalization |   |   | 27.71      | %      |   |   | 19.76      | %      |   |   | 10.90      | %      |   |   | 10.05      | % |   |   | 9.28 | % |
|     Working Capital                  |   | $      | (192,595   | )      |   | $      | 407,099    |   |   | $      | 3,913,379  |   |   | $      | 5,382,358  |   |   | $ | 6,092,349 |   |
|     Current Ratio                    |   | 0.96:1 |       |   | 1.07:1 |   |       | 1.70:1 |   |   | 2.08:1     |   |   | 2.20:1 |       |
|     Stockholders' Equity             |   | $      | 10,479,034 |   |   | $      | 13,399,693 |   |   | $      | 16,411,651 |   |   | $      | 17,428,542 |   |   | $ | 17,088,012 |   |
|                                                     |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |
| PER SHARE                                                |   |   |       |   |   |   |       |   |   |   |       |   |   |   |       |   |   |   |   |   |
|     Basic (Loss)/Earnings            |   | $      | (1.01      | )      |   | $      | (0.88      | )      |   | $      | (0.27      | )      |   | $      | 0.14       |   |   | $ | 0.47 |   |
|     Diluted (Loss)/Earnings          |   | $      | (1.01      | )      |   | $      | (0.88      | )      |   | $      | (0.27      | )      |   | $      | 0.13       |   |   | $ | 0.46 |   |
|     Book Value                       |   | $      | 3.39       |   |   | $      | 4.55       |   |   | $      | 5.43       |   |   | $      | 5.81       |   |   | $ | 5.84 |   |
|     Cash Dividends Declared          |   | $      | -          |   |   | $      | 0.06       |   |   | $      | 0.12       |   |   | $      | 0.12       |   |   | $ | 0.12 |   |

----

|   | Sales By Market: |
|--------|------------------|

|                     |   | 2009   |   |   | 2008   |   |
|--------------------------|--------|--------|--------|--------|--------|--------|
|                     |   | Net    |   |   | % of   |   |   | Net |   |   | % of |   |
|                     |   | Sales  |   |   | total  |   |   | Sales |   |   | total |   |
| Recreational Vehicle     |   | $      | 3,781  |   |   |   | 20% |   |   | $ | 13,306 |   |   |   | 33% |   |
| Manufactured Housing     |   |   | 5,047  |   |   |   | 27% |   |   |   | 8,559 |   |   |   | 22% |   |
| Hospitality / Healthcare |   |   | 9,772  |   |   |   | 53% |   |   |   | 17,752 |   |   |   | 45% |   |
|                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total Net Sales          |   | $      | 18,600 |   |   |   | 100% |   |   | $ | 39,617 |   |   |   | 100% |   |

|   | Critical Accounting Policies: |
|--------|-------------------------------|

----

|   | Liquidity and Financial Resources: |
|--------|------------------------------------|

| 1)       | Working capital at January 2, 2010 was $(192,595) compared to $407,099 at January 3, 2009. |
|----------------------------------------|--------------------------------------------------------------------------------------------|

| 2)       | The current ratio was .96:1 at year-end 2009 compared to 1.07:1 at year-end 2008. |
|----------------------------------------|-----------------------------------------------------------------------------------|

| 3)       | The liquid ratio was 0.56:1 at year-end 2009 compared to 0.45:1 at year-end 2008. |
|----------------------------------------|-----------------------------------------------------------------------------------|

| 4)       | The funded debt ratio was 27.7% at January 2, 2010 compared to 19.8% a year earlier. |
|----------------------------------------|--------------------------------------------------------------------------------------|

----

| 1)       | Sell the real estate pledged to Wachovia and reduce or pay-off the balance; |
|----------------------------------------|-----------------------------------------------------------------------------|

| 2)       | Complete additional Sale/Leaseback transactions on real-estate; |
|----------------------------------------|-----------------------------------------------------------------|

| 3)       | Find an alternative lender(s) to replace Wachovia as its real-estate lender; or |
|----------------------------------------|---------------------------------------------------------------------------------|

| 4)       | Negotiate with Wachovia to extend the term of its line of credit. |
|----------------------------------------|-------------------------------------------------------------------|

----

|                                    |   | 2009   |      |   | 2008   |   |
|-----------------------------------------|--------|--------|-----------|--------|--------|--------|
| Impairment of Goodwill and              |   |   |      |   |   |   |
| Identifiable Intangible Asset           |   | $      | 546,783   |   |   | $      | 1,015,278 |   |
| Regular amortization of the             |   |   |      |   |   |   |   |   |
| Identifiable Intangible Asset           |   |   | -         |   |   |   | 324,000 |   |
| Impairment of assets related to         |   |   |      |   |   |   |   |   |
| plant closings                          |   |   | 365,500   |   |   |   | 354,799 |   |
| Severance and other plant closing costs |   |   | 164,859   |   |   |   | 334,924 |   |
| Inventory obsolescence costs related    |   |   |      |   |   |   |   |   |
| to plant closings                       |   |   | 369,641   |   |   |   | 125,000 |   |
|                                    |   |   |      |   |   |   |   |   |
| Total impairment, amortization, and     |   |   |      |   |   |   |   |   |
| plant closing costs                     |   | $      | 1,446,783 |   |   | $      | 2,154,001 |   |

|                                |   | Fiscal |       |   | %        |   |   | Fiscal |   |   | %          |   |   | $ Increase |   |   | %      |   |
|-------------------------------------|--------|--------|------------|--------|----------|--------|--------|--------|--------|--------|------------|--------|--------|------------|--------|--------|--------|--------|
|                                |   | 2009   |       |   | of Sales |   |   | 2008   |   |   | of Sales   |   |   | (Decrease) |   |   | Change |   |
|                                |   |   |       |   |     |   |   |   |   |   |       |   |   |       |   |   |   |   |
| Net Sales                           |   | $      | 18,600,358 |   |     |   | 100%   |   |   | $      | 39,617,182 |   |   |       | 100%   |   |   | $      | (21,016,824 | ) |   |   | -53.0% |   |
| Cost of Products Sold               |   |   | 15,091,872 |   |     |   | 81.1%  |   |   |   | 33,109,093 |   |   |       | 83.6%  |   |   |   | (18,017,221 | ) |   |   | -54.4% |   |
| Gross Profit                        |   |   | 3,508,486  |   |     |   | 18.9%  |   |   |   | 6,508,089  |   |   |       | 16.4%  |   |   |   | (2,999,603 | ) |   |   | -46.1% |   |
|                                |   |   |       |   |     |   |   |   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Selling and Administrative Expenses |   |   | 7,633,421  |   |     |   | 41.0%  |   |   |   | 10,989,419 |   |   |       | 27.7%  |   |   |   | (3,355,998 | ) |   |   | -30.5% |   |
| Operating Loss                      |   |   | (4,124,935 | )      |     |   | -22.1% |   |   |   | (4,481,330 | )      |   |       | -11.3% |   |   |   | 356,395 |   |   |   | -8.0% |   |
|                                |   |   |       |   |     |   |   |   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Other Income (Expense)              |   |   |       |   |     |   |   |   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Interest, Investment and            |   |   |       |   |     |   |   |   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |
|    Other Income      |   |   | 25,364     |   |     |   | 0.1%   |   |   |   | 60,670     |   |   |       | 0.2%   |   |   |   | (35,306 | ) |   |   | -58.2% |   |
| Interest Expense                    |   |   | (151,989   | )      |     |   | -0.8%  |   |   |   | (142,797   | )      |   |       | -0.4%  |   |   |   | (9,192 | ) |   |   | 6.4% |   |
| Loss Before Income Taxes            |   |   | (4,251,560 | )      |     |   | -22.8% |   |   |   | (4,563,457 | )      |   |       | -11.5% |   |   |   | 311,897 |   |   |   | -6.8% |   |
| Benefit from Income Taxes           |   |   | (1,214,000 | )      |     |   | -6.5%  |   |   |   | (1,978,000 | )      |   |       | -5.0%  |   |   |   | 764,000 |   |   |   | -38.6% |   |
|                                |   |   |       |   |     |   |   |   |   |   |       |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Net Loss                            |   | $      | (3,037,560 | )      |     |   | -16.3% |   |   | $      | (2,585,457 | )      |   |       | -6.5%  |   |   | $      | (452,103 | ) |   |   | 17.5% |   |

----

|   | EBITDA |
|--------|--------|

|                    |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|-------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Net Loss                |   | $      | (3,037,560 | )      |   | $      | (2,585,457 | )      |   | $ | (807,509 | ) |
| Add:                    |   |   |       |   |   |   |       |   |   |   |   |   |
| Income Tax Benefit      |   |   | (1,214,000 | )      |   |   | (1,978,000 | )      |   |   | (484,000 | ) |
| Interest Expense        |   |   | 151,989    |   |   |   | 142,797    |   |   |   | 92,216 |   |
| Depreciation and        |   |   |       |   |   |   |       |   |   |   |   |   |
| Amortization            |   |   | 463,050    |   |   |   | 1,067,674  |   |   |   | 1,461,810 |   |
| (Gain) Loss on Disposal |   |   | 63,834     |   |   |   | (353       | )      |   |   | (13,944 | ) |
| of Assets               |   |   |       |   |   |   |       |   |   |   |   |   |
| Noncash Charge for      |   |   |       |   |   |   |       |   |   |   |   |   |
| Asset Impairment        |   |   | 912,283    |   |   |   | 1,370,077  |   |   |   | 0 |   |
|                    |   |   |       |   |   |   |       |   |   |   |   |   |
| EBITDA                  |   | $      | (2,660,404 | )      |   | $      | (1,983,262 | )      |   | $ | 248,573 |   |

----

----

----

| (a)   | The following documents are filed as a part of this report: |
|-----------------|-------------------------------------------------------------|

|        (1)       | Independent Auditors' Report |
|-----------------------------------------------------------------------------------|------------------------------|

| (2)       | Balance Sheets – January 2, 2010 and January 3, 2009 |
|-----------------------------------------|------------------------------------------------------------|

| (3)       | Statements of Earnings for the three fiscal years for the period ended January 2, 2010 |
|-----------------------------------------|----------------------------------------------------------------------------------------|

| (4)       | Statements of Stockholders' Equity for the three fiscal years for the period ended January 2, 2010 |
|-----------------------------------------|----------------------------------------------------------------------------------------------------|

| (5)       | Statements of Cash Flows for the three fiscal years for the period ended January 2, 2010 |
|-----------------------------------------|------------------------------------------------------------------------------------------|

| (6)       | Notes to the Financial Statements |
|-----------------------------------------|-----------------------------------|

| (7)       | Independent Auditors' Report on Financial Statement Schedule |
|-----------------------------------------|--------------------------------------------------------------|

|   | 3A | Articles of Incorporation as amended to date, filed as Exhibit 3A to Form 10-K for the fiscal year ended December 28, 1985 and incorporated herein by reference. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 3B.2 | By-laws as amended to date, filed as Exhibit 3B.2 to Form 10-Q for the Quarter ended March 29, 2008 and incorporated herein by reference. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10M.1 | Medical and Dental Reimbursement Plan, as amended to date, filed as Exhibit 10M.1 to Form 10-K for the fiscal year ended January 3, 1987 and  incorporated herein by reference.* |
|--------|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10T | Employment Agreement dated August 2, 1994 between the registrant and William Bassett, filed as Exhibit 10T to Form 10-Q for the quarter ended July 2, 1994 and incorporated herein by reference.* |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10T.1 | Amendment dated July 29, 2003 to Employment Agreement between the registrant and William Bassett, filed as Exhibit 10T.1 to Form 10-Q for the quarter ended June 28, 2003 and incorporated herein by reference.* |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10T.2 | Amendment dated May 25, 2004 to Employment Agreement between the registrant and William Bassett, filed as Exhibit 10T.2 to Form 10-Q for the quarter ended July 3, 2004 and incorporated herein by reference.* |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | 10T.3 | Amendment dated December 29, 2008 to Employment Agreement between the registrant and William Bassett, filed as Exhibit 10T.3 to Form 10-K for the fiscal year ended January 3, 2009 and incorporated herein by reference.* |
|--------|-------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10U.3 | 1995 Incentive Stock Option Plan, as amended, filed as Exhibit 10U.3 to Form 10-Q for the quarter ended July 3, 2004 and incorporated herein by reference.* |
|--------|-------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10W.1 | Amended and Restated Stock Plan for Non-Employee Directors and related Grantor Trust Agreement, as amended, effective July 1, 2004, filed as Exhibit 10W.1 to Form 10-Q for the quarter ended July 3, 2004 and incorporated herein by reference.* |
|--------|-------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10AA | Revolving Promissory Note and Term Promissory Note, and related Loan Agreement and Addendum, filed as Exhibit 10AA to Form 10-Q for the quarter ended July 1, 2006 and incorporated herein by reference. |
|--------|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10AA.1 | Waiver dated March 25, 2008 regarding Loan Agreement, filed as Exhibit 10AA.1 to Form 10-K for the year ended December 29, 2007 and incorporated herein by reference. |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10AA.2 | Amended and Restated Revolving Promissory Note, and related Amended Loan Agreement and Addendum, filed as Exhibit 10AA.2 to Form 10-Q for the Quarter ended March 29, 2008 and incorporated herein by reference. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10AA.3  | Modification Agreement dated September 30, 2009 and filed herewith. |
|--------|--------------|---------------------------------------------------------------------|

|   | 10BB | 2006 Incentive Stock Option Plan, filed as Exhibit 10BB to Form 10-Q for the quarter ended July 1, 2006 and incorporated herein by reference.* |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10CC | Lease dated May 1, 2009 between registrant, as lessee, and Sperber Investments I, L.L.C. covering property at 1400 Ash Street, Abbotsford, Wisconsin, filed as Exhibit 10CC to Form 10-Q for the quarter ended April 4, 2009 and incorporated herein by reference. |
|--------|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 10DD  | Lease dated May 7, 2009 between registrant, as lessee, and Viking Properties, L.L.C. covering property located at 4300 Viking Drive, Bossier City, Louisiana, filed as Exhibit 10DD to Form 10-Q for the quarter ended April 4, 2009 and incorporated herein by reference. |
|--------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 11S | Computation of diluted earnings per share, filed herewith. |
|--------|-----|------------------------------------------------------------|

|   | 14 | Code of Conduct and Ethics, filed as Exhibit 14 to Form 10-Q for the fiscal quarter ended September 29, 2007 and incorporated herein by reference. |
|--------|----|----------------------------------------------------------------------------------------------------------------------------------------------------|

|   | 23F | Consent of Independent Auditors, filed herewith. |
|--------|-----|--------------------------------------------------|

|   | 31.1  | Certification of Principal Executive Officer, filed herewith. |
|--------|------------|---------------------------------------------------------------|

|   | 31.2 | Certification of Principal Financial Officer, filed herewith. |
|--------|------|---------------------------------------------------------------|

|   | 32 | Certificate required by 18 U.S.C. §1350, filed herewith. |
|--------|----|---------------------------------------------------------------|

----

|                                                                                   | DECORATOR INDUSTRIES, INC. (Registrant) |                        |
|----------------------------------------------------------------------------------------|----------------------------------------------|-----------------------------|
|                                                                                   |                                         |                        |   |
|                                                                                   | By:                                          | /s/ Michael K. Solomon |   |
|                                                                                   |                                         | Michael K. Solomon          |   |
|                                                                                   |                                         | Vice President              |   |
| Dated:           March 31, 2010 |                                         |                        |   |

|  Name                |                                                                                   | Title                        |                 | Signature |   |   | Date |
|---------------------------|----------------------------------------------------------------------------------------|------------------------------|----------------------|-----------|--------|--------|------|
|  William A. Johnson  |  President, Chief Executive Officer and Director                                  |  /s/ William A. Johnson |  March 31, 2010 |
|   William A. Johnson |
|  Michael K. Solomon  |  Vice President, Treasurer, Secretary, Principal Financial and Accounting Officer |  /s/ Michael K. Solomon |  March 31, 2010 |
|   Michael K. Solomon |
|                      |
| William A. Bassett        | Chairman and Director                                                                  | /s/ William A. Bassett       | March 31, 2010       |
|   William A. Bassett |
|  Joseph N. Ellis     |  Director                                                                         | /s/ Joseph N. Ellis          |  March 31, 2010 |
|                      |                                                                                   |  Joseph N. Ellis        |                 |
|  Ellen Downey        |  Director                                                                         | /s/ Ellen Downey             |  March 31, 2010 |
|                      |                                                                                   | Ellen Downey            |                 |
|  Thomas Dusthimer    |  Director                                                                         | /s/ Thomas Dusthimer         |  March 31, 2010 |
|                      |                                                                                   |  Thomas Dusthimer       |                 |
|  William Dixon       |  Director                                                                         | /s/ William Dixon            |  March 31, 2010 |
|                      |                                                                                   |  William Dixon          |                 |
|  Terrence Murphy     |  Director                                                                         | /s/ Terrence Murphy          |  March 31, 2010 |
|                      |                                                                                   | Terrence Murphy         |                 |

----

----

| DECORATOR INDUSTRIES, INC                                        |   |
|------------------------------------------------------------------|--------|
| BALANCE SHEETS                                                   |   |
|                                                             |   |   |   |   |   |   |
| ASSETS                                                           |   | January 2, |   |   | January 3, |   |
|                                                             |   | 2010 |   |   | 2009 |   |
|                                                             |   |   |   |   |   |   |
| Current Assets:                                                  |   |   |   |   |   |   |
|      Cash and Cash Equivalents               |   | $ | 156,171 |   |   | $ | 16,499 |   |
|      Accounts Receivable, less allowance for |   |   |   |   |   |   |   |   |
| doubtful accounts ($269,080 and $446.421)                        |   |   | 1,164,669 |   |   |   | 2,214,256 |   |
|   Inventories                                               |   |   | 2,107,151 |   |   |   | 3,783,581 |   |
| Income Taxes Receivable                                          |   |   | 1,215,000 |   |   |   | ---- |   |
| Other Current Assets                                             |   |   | 366,047 |   |   |   | 524,879 |   |
| Total Current Assets                                             |   |   | 5,009,038 |   |   |   | 6,539,215 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Property and Equipment                                           |   |   |   |   |   |   |   |   |
| Land, Buildings & Improvements                               |   |   | 2,872,421 |   |   |   | 4,805,667 |   |
| Machinery, Equipment, Furniture & Fixtures and Software      |   |   | 7,270,508 |   |   |   | 7,750,046 |   |
| Total Property and Equipment                                     |   |   | 10,142,929 |   |   |   | 12,555,713 |   |
| Less: Accumulated Depreciation and Amortization                  |   |   | 7,075,614 |   |   |   | 7,355,020 |   |
| Active Assets, Net                                               |   |   | 3,067,315 |   |   |   | 5,200,693 |   |
| Property Held for Sale, Net                                      |   |   | 3,357,565 |   |   |   | 3,369,374 |   |
| Net Property and Equipment                                       |   |   | 6,424,880 |   |   |   | 8,570,067 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Goodwill, less accumulated Amortization of $1,348,569            |   |   | 3,305,008 |   |   |   | 3,799,300 |   |
| Deferred Income Taxes                                            |   |   | 1,053,000 |   |   |   | 876,000 |   |
| Other Assets                                                     |   |   | 378,741 |   |   |   | 362,227 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Total Assets                                                     |   | $ | 16,170,667 |   |   | $ | 20,146,809 |   |
|                                                             |   |   |   |   |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |
| LIABILITIES & STOCKHOLDERS' EQUITY                           |   |   |   |   |   |   |   |   |
|                                                             |   |   |   |   |   |   |   |   |
| Current Liabilities:                                             |   |   |   |   |   |   |   |   |
|  Accounts Payable                                           |   | $ | 553,086 |   |   | $ | 830,153 |   |
| Current Maturities of Long-term Debt                             |   |   | 3,526,484 |   |   |   | 2,684,000 |   |
| Checks Issued but Not Yet Presented                              |   |   | 135,518 |   |   |   | 321,703 |   |
|  Accrued Expenses:                                          |   |   |   |   |   |   |   |   |
|        Compensation           |   |   | 175,311 |   |   |   | 420,583 |   |
|        Other                  |   |   | 811,234 |   |   |   | 1,875,677 |   |
| Total Current Liabilities                                        |   |   | 5,201,633 |   |   |   | 6,132,116 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Long-Term Debt                                                   |   |   | 490,000 |   |   |   | 615,000 |   |
| Total Liabilities                                                |   |   | 5,691,633 |   |   |   | 6,747,116 |   |
|                                                             |   |   |   |   |   |   |   |   |
| Stockholders' Equity                                             |   |   |   |   |   |   |   |   |
| Common Stock $.20 par value: Authorized shares, 10,000,000;      |   |   |   |   |   |   |   |   |
| Issued shares, 4,808,729 and 4,658,729                           |   |   | 961,746 |   |   |   | 931,746 |   |
| Paid-in Capital                                                  |   |   | 2,098,287 |   |   |   | 2,011,386 |   |
|   Retained Earnings                                         |   |   | 15,731,924 |   |   |   | 18,769,484 |   |
|                                                             |   |   | 18,791,957 |   |   |   | 21,712,616 |   |
| Less: Treasury stock, at cost: 1,713,844 shares                  |   |   | 8,312,923 |   |   |   | 8,312,923 |   |
| Total Stockholders' Equity                                       |   |   | 10,479,034 |   |   |   | 13,399,693 |   |
| Total Liabilities and Stockholders' Equity                       |   | $ | 16,170,667 |   |   | $ | 20,146,809 |   |

----

| DECORATOR INDUSTRIES, INC                     |   |
|-----------------------------------------------|--------|
| STATEMENTS OF EARNINGS                        |   |
|                                          |   |   |   |   |   |   |   |   |   |
|                                          |   | For the Fiscal Year |   |
|                                          |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                                          |   |   |   |   |   |   |   |   |   |
| Net Sales                                     |   | $ | 18,600,358 |   |   | $ | 39,617,182 |   |   | $ | 46,080,584 |   |
| Cost of Products Sold                         |   |   | 15,091,872 |   |   |   | 33,109,093 |   |   |   | 38,798,908 |   |
| Gross Profit                                  |   |   | 3,508,486 |   |   |   | 6,508,089 |   |   |   | 7,281,676 |   |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling and Administrative Expenses           |   |   | 7,633,421 |   |   |   | 10,989,419 |   |   |   | 8,575,289 |   |
| Operating Loss                                |   |   | (4,124,935 | ) |   |   | (4,481,330 | ) |   |   | (1,293,613 | ) |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Income/(Expense)                        |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest, Investment and                      |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Income                                  |   |   | 25,364 |   |   |   | 60,670 |   |   |   | 94,320 |   |
| Interest Expense                              |   |   | (151,989 | ) |   |   | (142,797 | ) |   |   | (92,216 | ) |
| Loss Before Income Taxes                      |   |   | (4,251,560 | ) |   |   | (4,563,457 | ) |   |   | (1,291,509 | ) |
| Benefit from Income Taxes                     |   |   | (1,214,000 | ) |   |   | (1,978,000 | ) |   |   | (484,000 | ) |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss                                      |   | $ | (3,037,560 | ) |   | $ | (2,585,457 | ) |   | $ | (807,509 | ) |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| EARNINGS PER SHARE                            |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                         |   | $ | (1.01 | ) |   | $ | (0.88 | ) |   | $ | (0.27 | ) |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                                       |   | $ | (1.01 | ) |   | $ | (0.88 | ) |   | $ | (0.27 | ) |
|                                          |   |   |   |   |   |   |   |   |   |   |   |   |
| Weighted Average Number of Shares Outstanding |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                         |   |   | 3,004,467 |   |   |   | 2,934,530 |   |   |   | 3,005,988 |   |
| Diluted                                       |   |   | 3,006,472 |   |   |   | 2,934,530 |   |   |   | 3,005,988 |   |

----

| DECORATOR INDUSTRIES, INC                |   |
|------------------------------------------|--------|
| STATEMENTS OF STOCKHOLDERS' EQUITY  |   |
|                                     |   |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                     |   | COMMON |   |   | PAID-IN |   |   | RETAINED |   |   | TREASURY |   |   |   |   |
|                                     |   | STOCK |   |   | CAPITAL |   |   | EARNINGS |   |   | STOCK |   |   | TOTAL |   |
| Balance at                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 30, 2006                        |   | $ | 925,611 |   |   | $ | 1,797,810 |   |   | $ | 22,698,567 |   |   | $ | (7,993,446 | ) |   | $ | 17,428,542 |   |
| Transactions for 2007                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss                                 |   |   |   |   |   |   |   |   |   |   | (807,509 | ) |   |   |   |   |   |   | (807,509 | ) |
| Issuance of stock for                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Directors compensation                   |   |   |   |   |   |   | 24,475 |   |   |   |   |   |   |   | 66,525 |   |   |   | 91,000 |   |
| Issuance of stock purchased              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| by Directors Trust                       |   |   | 1,664 |   |   |   | 32,789 |   |   |   |   |   |   |   |   |   |   |   | 34,453 |   |
| Stock-Based Compensation                 |   |   |   |   |   |   | 25,787 |   |   |   |   |   |   |   |   |   |   |   | 25,787 |   |
| Dividends paid                           |   |   |   |   |   |   |   |   |   |   | (360,622 | ) |   |   |   |   |   |   | (360,622 | ) |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| December 29, 2007                        |   | $ | 927,275 |   |   | $ | 1,880,861 |   |   | $ | 21,530,436 |   |   | $ | (7,926,921 | ) |   | $ | 16,411,651 |   |
| Transactions for 2008                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss                                 |   |   |   |   |   |   |   |   |   |   | (2,585,457 | ) |   |   |   |   |   |   | (2,585,457 | ) |
| Issuance of stock for                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Directors compensation                   |   |   | 4,471 |   |   |   | 90,529 |   |   |   |   |   |   |   |   |   |   |   | 95,000 |   |
| Purchase of Common                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Stock for treasury                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (386,002 | ) |   |   | (386,002 | ) |
| Stock-Based Compensation                 |   |   |   |   |   |   | 39,996 |   |   |   |   |   |   |   |   |   |   |   | 39,996 |   |
| Dividends paid                           |   |   |   |   |   |   |   |   |   |   | (175,495 | ) |   |   |   |   |   |   | (175,495 | ) |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| January 3, 2009                          |   | $ | 931,746 |   |   | $ | 2,011,386 |   |   | $ | 18,769,484 |   |   | $ | (8,312,923 | ) |   | $ | 13,399,693 |   |
| Transactions for 2009                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Loss                                 |   |   |   |   |   |   |   |   |   |   | (3,037,560 | ) |   |   |   |   |   |   | (3,037,560 | ) |
| Issuance of stock for                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Directors compensation                   |   |   | 30,000 |   |   |   | 58,500 |   |   |   |   |   |   |   |   |   |   |   | 88,500 |   |
| Stock-Based Compensation                 |   |   |   |   |   |   | 28,401 |   |   |   |   |   |   |   |   |   |   |   | 28,401 |   |
| Dividends paid                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 0 |   |
|                                     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| January 2, 2010                          |   | $ | 961,746 |   |   | $ | 2,098,287 |   |   | $ | 15,731,924 |   |   | $ | (8,312,923 | ) |   | $ | 10,479,034 |   |

----

| DECORATOR INDUSTRIES, INC                            |   |
|------------------------------------------------------|--------|
| STATEMENTS OF CASH FLOWS                             |   |
|                                                 |   |   |   |   |   |   |   |   |   |
|                                                 |   | For the Fiscal Year |   |
|                                                 |   | 2009 |   |   | 2008 |   |   | 2007 |   |
|                                                 |   |   |   |   |   |   |   |   |   |
| Cash Flows From Operating Activities:                |   |   |   |   |   |   |   |   |   |
| Net Loss                                             |   | $ | (3,037,560 | ) |   | $ | (2,585,457 | ) |   | $ | (807,509 | ) |
| Adjustments to Reconcile Net Loss to Net Cash        |   |   |   |   |   |   |   |   |   |   |   |   |
| (Used in)/Provided by Operating Activities           |   |   |   |   |   |   |   |   |   |   |   |   |
| Depreciation and Amortization                        |   |   | 463,050 |   |   |   | 1,067,674 |   |   |   | 1,461,810 |   |
| Provision for Losses on Accounts Receivable          |   |   | 97,651 |   |   |   | 461,999 |   |   |   | 152,903 |   |
| Deferred Taxes                                       |   |   | 1,000 |   |   |   | (1,978,000 | ) |   |   | 55,000 |   |
| Stock-Based Compensation                             |   |   | 28,401 |   |   |   | 39,996 |   |   |   | 25,787 |   |
| Gain on Disposal of Assets                           |   |   | 63,834 |   |   |   | (353 | ) |   |   | (13,944 | ) |
| Noncash charges for asset impairment                 |   |   | 912,283 |   |   |   | 1,370,077 |   |   |   | - |   |
| Increase (Decrease) from Changes in:                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts Receivable                                  |   |   | 951,936 |   |   |   | 746,857 |   |   |   | 149,192 |   |
| Inventories                                          |   |   | 1,676,430 |   |   |   | 1,398,064 |   |   |   | 850,288 |   |
| Income Taxes Receivable                              |   |   | (1,215,000 | ) |   |   | - |   |   |   | - |   |
| Prepaid Expenses                                     |   |   | (59,422 | ) |   |   | 579,492 |   |   |   | 87,774 |   |
| Other Assets                                         |   |   | (127,680 | ) |   |   | (63,013 | ) |   |   | (316,096 | ) |
| Accounts Payable                                     |   |   | (277,067 | ) |   |   | (1,485,683 | ) |   |   | 415,365 |   |
| Accrued Expenses                                     |   |   | (1,137,330 | ) |   |   | (225,394 | ) |   |   | 22,266 |   |
| Net Cash (Used in)/Provided by Operating Activities  |   |   | (1,659,474 | ) |   |   | (673,741 | ) |   |   | 2,082,836 |   |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Flows From Investing Activities:                |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Cash Paid for Acquisitions                       |   |   | (173,734 | ) |   |   | (25,082 | ) |   |   | (1,300,372 | ) |
| Capital Expenditures                                 |   |   | (109,144 | ) |   |   | (212,316 | ) |   |   | (275,382 | ) |
| Proceeds from Property Dispositions                  |   |   | 1,462,225 |   |   |   | 6,147 |   |   |   | 20,497 |   |
| Net Cash Provided by/(Used in) Investing Activities  |   |   | 1,179,347 |   |   |   | (231,251 | ) |   |   | (1,555,257 | ) |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Flows From Financing Activities:                |   |   |   |   |   |   |   |   |   |   |   |   |
| Long-term Debt Payments                              |   |   | (120,000 | ) |   |   | (599,444 | ) |   |   | (206,815 | ) |
| Dividend Payments                                    |   |   | - |   |   |   | (175,495 | ) |   |   | (360,622 | ) |
| Change in Checks Issued but Not Yet Presented        |   |   | (186,185 | ) |   |   | 79,888 |   |   |   | (346,430 | ) |
| Net Borrowings under Line-of-Credit Agreements       |   |   | 837,484 |   |   |   | 1,890,000 |   |   |   | 267,000 |   |
| Issuance of Stock for Directors' Trust               |   |   | 88,500 |   |   |   | 95,000 |   |   |   | 91,000 |   |
| Proceeds from Directors' Trust Stock Purchase        |   |   | - |   |   |   | - |   |   |   | 34,453 |   |
| Purchase of Common Stock for Treasury                |   |   | - |   |   |   | (386,002 | ) |   |   | - |   |
| Net Cash Provided by/(Used in) Financing Activities  |   |   | 619,799 |   |   |   | 903,947 |   |   |   | (521,414 | ) |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net (Decrease)/Increase in Cash and Cash Equivalents |   |   | 139,672 |   |   |   | (1,045 | ) |   |   | 6,165 |   |
| Cash and Cash Equivalents at Beginning of Year       |   |   | 16,499 |   |   |   | 17,544 |   |   |   | 11,379 |   |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and Cash Equivalents at End of Period           |   | $ | 156,171 |   |   | $ | 16,499 |   |   | $ | 17,544 |   |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental Disclosures of Cash Flow Information:   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash Paid for:                                       |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest                                             |   | $ | 152,728 |   |   | $ | 131,569 |   |   | $ | 79,717 |   |
| Income Taxes                                         |   | $ | - |   |   | $ | 7,353 |   |   | $ | 50,061 |   |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Increase in Acquisition Cost/Goodwill                |   | $ | 52,491 |   |   | $ | 169,357 |   |   | $ | 1,300,372 |   |
| Working Capital, other than Cash                     |   |   | 121,243 |   |   |   | (144,275 | ) |   |   | - |   |
|                                                 |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Cash Paid for Acquisition/Goodwill               |   | $ | 173,734 |   |   | $ | 25,082 |   |   | $ | 1,300,372 |   |

----

----

----

----

| Year of Grant |   | Valuation Method |   | Dividend Yield |   | Expected Volatility |   | Risk-free Interest rate |   | Expected Life |
|---------------|--------|------------------|--------|----------------|--------|---------------------|--------|-------------------------|--------|---------------|
| 1998          |   | Black-Scholes    |   | 2.6%           |   | 47.7%               |   | 5.6%                    |   | 5.0 years     |
| 1999          |   | Black-Scholes    |   | 2.5%           |   | 42.8%               |   | 5.8%                    |   | 5.0 years     |
| 2002          |   | Black-Scholes    |   | 2.3%           |   | 41.2%               |   | 3.6%                    |   | 10.0 years    |
| 2004          |   | Black-Scholes    |   | 1.5%           |   | 40.1%               |   | 2.8%                    |   | 5.0 years     |
| 2005          |   | Black-Scholes    |   | 1.3%           |   | 41.0%               |   | 4.1%                    |   | 5.0 years     |
| 2007          |   | Black-Scholes    |   | 2.9%           |   | 33.7%               |   | 3.6%                    |   | 6.5 years     |
| 2009          |   | Black-Scholes    |   | 0.0%           |   | 92.8%               |   | 2.4%                    |   | 6.0 years     |

----

----

|                            |   | 2009   |      |   | 2008   |   |
|---------------------------------|--------|--------|-----------|--------|--------|--------|
| Raw materials & supplies    |   | $      | 1,653,893 |   |   | $      | 3,166,886 |   |
| In process & finished goods |   |   | 453,258   |   |   |   | 616,695 |   |
|                            |   | $      | 2,107,151 |   |   | $      | 3,783,581 |   |

| 2010       |   | $ | 373,354   |   |
|------------|--------|---|-----------|--------|
| 2011       |   | $ | 284,239   |   |
| 2012       |   | $ | 206,169   |   |
| 2013       |   | $ | 169,906   |   |
| 2014       |   | $ | 173,305   |   |
| Thereafter |   | $ | 1,886,241 |   |

| 2010 |   | $ | 446,754 |   |
|------|--------|---|---------|--------|
| 2011 |   | $ | 420,834 |   |
| 2012 |   | $ | 358,834 |   |

----

|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 2009   |      |   | 2008   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |      |   |   |   |
| Bond payable in quarterly installments through March 2014.  The interest rate is variable and is  0.85% at January 2, 2010.  This bond is secured by the Company’s Goshen, IN property.                                                                                                                                                                                                                                  |   | $      | 615,000   |   |   | $      | 735,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |      |   |   |   |   |   |
| Borrowings on revolving line of credit.  The interest rate is variable and is 5.25% at January 2, 2010 with interest payable monthly. The loan was modified on September 30, 2009 with the maturity date extended to December 31, 2010. The line will be reduced to $3,322,000 by April 15, 2010 and will cease to be a revolving line on that date. The loan is secured by six properties which are held for sale (4) or used for production (2). |   |   | 3,401,484 |   |   |   | 2,564,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   |      |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |   | 4,016,484 |   |   |   | 3,299,000 |   |
| Less amount due within one year                                                                                                                                                                                                                                                                                                                                                                                                                              |   |   | 3,526,484 |   |   |   | 2,684,000 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   | $      | 490,000   |   |   | $      | 615,000 |   |

| 2010        |   | $      | 3,526,484 |   |
|------------------|--------|--------|-----------|--------|
| 2011             |   |   | 140,000   |   |
|  2012       |   |   | 150,000   |   |
|  2013  |   |   | 100,000   |   |
|  2014  |   |   | 100,000   |   |

----

| 1)       | Sell the real estate pledged to Wachovia and reduce or pay-off the balance. |
|----------------------------------------|-----------------------------------------------------------------------------|

| 2)       | Complete additional Sale/Leaseback on real-estate. |
|----------------------------------------|----------------------------------------------------|

| 3)       | Find an alternative lender(s) to replace Wachovia as its real-estate lender. |
|----------------------------------------|------------------------------------------------------------------------------|

| 4)       | Negotiate with Wachovia to extend the term of its line of credit. |
|----------------------------------------|-------------------------------------------------------------------|

| (7) | EMPLOYEE BENEFIT PLANS |
|-----|------------------------|

----

|                                        |   | 2009       |    |   | 2008      |   |   | 2007       |   |
|---------------------------------------------|--------|------------|---------|--------|-----------|--------|--------|------------|--------|
|                                        |   |       |    |   | Exercise  |   |   |       |   |   | Exercise |   |   |   |   |   | Exercise |   |
|                                        |   | Shares (1) |    |   | Price (2) |   |   | Shares (1) |   |   | Price (2) |   |   | Shares (1) |   |   | Price (2) |   |
|                                        |   |       |    |   |      |   |   |       |   |   |   |   |   |   |   |   |   |   |
| Outstanding at beginning of year            |   |       | 273,950 |   |      | $      | 5.70   |       |   |   | 318,950 |   |   | $ | 5.83 |   |   |   | 243,762 |   |   | $ | 6.74 |   |
| Granted                                     |   |       | 105,000 |   |      |   | 0.81   |       |   |   | - |   |   |   | - |   |   |   | 115,000 |   |   |   | 4.14 |   |
| Exercised                                   |   |       | -       |   |      |   | -      |       |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Forfeited/Cancelled                         |   |       | (60,000 | )      |      |   | 5.75   |       |   |   | (45,000 | ) |   |   | 6.59 |   |   |   | (39,812 | ) |   |   | 6.53 |   |
|                                        |   |       |    |   |      |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Outstanding at year-end                     |   |       | 318,950 |   |      | $      | 4.09   |       |   |   | 273,950 |   |   | $ | 5.70 |   |   |   | 318,950 |   |   | $ | 5.83 |   |
|                                        |   |       |    |   |      |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Options exercisable at year-end             |   |       | 142,450 |   |      |   |   |       |   |   | 173,910 |   |   |   |   |   |   |   | 173,370 |   |   |   |   |   |
| Weighted average fair value of              |   |       |    |   |      |   |   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   options granted during the year |   | $          | 1.19    |   |      |   |   |       |   |   | - |   |   |   |   |   |   | $ | 1.19 |   |   |   |   |   |

| Number outstanding (1)                              | 318,950               |
|---------------------------------------------------------------|-----------------------|
| Range of exercise prices                       | $0.81 to $9.30        |
| Weighted-average exercise price      | $4.09                 |
| Weighted-average remaining contractual life    | 6.73  years |

| (1)  | As adjusted for the five-for-four stock split in July 1998. |
|-----------|-------------------------------------------------------------|
|      |                                                        |
| (2)  | Based on the weighted-average exercise price.               |

----

|     |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|----------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Current: |   |   |       |   |   |   |       |   |   |
| Federal  |   | $      | (1,215,000 | )      |   | $      | -          |   |   | $ | (470,000 | ) |
| State    |   |   | -          |   |   |   | -          |   |   |   | (69,000 | ) |
| Deferred |   |   | 1,000      |   |   |   | (1,978,000 | )      |   |   | 55,000 |   |
|     |   |   |       |   |   |   |       |   |   |   |   |   |
| Total    |   | $      | (1,214,000 | )      |   | $      | (1,978,000 | )      |   | $ | (484,000 | ) |

|                                         |   | 2009   |      |   | 2008   |   |
|----------------------------------------------|--------|--------|-----------|--------|--------|--------|
| Net Operating Loss Carryforward              |   | $      | 1,931,000 |   |   | $      | 1,754,000 |   |
| Depreciation                                 |   |   | (524,000  | )      |   |   | (568,000 | ) |
| Amortization                                 |   |   | (627,000  | )      |   |   | (547,000 | ) |
| Inventories, due to additonal cost           |   |   |      |   |   |   |   |   |
| recorded for income tax purposes             |   |   | 6,000     |   |   |   | 11,000 |   |
| Accounts receivable, due to allowance        |   |   |      |   |   |   |   |   |
| for doubtful accounts                        |   |   | 105,000   |   |   |   | 174,000 |   |
| Directors' Trust                             |   |   | 272,000   |   |   |   | 237,000 |   |
| Reserve for Plant Closings                   |   |   |      |   |   |   | 97,000 |   |
| Accrued liabilities, due to expenses not yet |   |   |      |   |   |   |   |   |
| deductible for income tax purposes           |   |   | 27,000    |   |   |   | 33,000 |   |
|                                         |   |   |      |   |   |   |   |   |
| Net Deferred Asset                           |   | $      | 1,190,000 |   |   | $      | 1,191,000 |   |

----

| (9) | INCOME TAXES (Continued) |
|-----|--------------------------|

|            |   | 2009   |      |   | 2008   |   |
|-----------------|--------|--------|-----------|--------|--------|--------|
| Current Asset   |   | $      | 137,000   |   |   | $      | 315,000 |   |
| Long-term Asset |   |   | 1,053,000 |   |   |   | 876,000 |   |

|                                                  |   | 2009   |   |   | 2008   |   |   | 2007   |   |
|-------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| Federal statutory rate                                |   |   | 34.0%  |   |   |   | 34.0%  |   |   |   | 34.0% |   |
| State income taxes, net of federal income tax benefit |   |   | -      |   |   |   | 4.8    |   |   |   | 4.9 |   |
| Other                                                 |   |   | (5.4   | )      |   |   | 4.5    |   |   |   | (1.4 | ) |
| Effective income tax rate                             |   |   | 28.6%  |   |   |   | 43.3%  |   |   |   | 37.5% |   |

|                       |   | 2009   |       |   | 2008   |   |       | 2007   |   |
|----------------------------|--------|--------|------------|--------|--------|--------|------------|--------|--------|
| Numerator:                 |   |   |       |   |   |   |       |   |   |
| Net Loss                   |   | $      | (3,037,560 | )      |   | $      | (2,585,457 | )      |   | $ | (807,509 | ) |
|                       |   |   |       |   |   |   |       |   |   |   |   |   |
| Denominator                |   |   |       |   |   |   |       |   |   |   |   |   |
| Weighted-average number of |   |   |       |   |   |   |       |   |   |   |   |   |
| Common Shares outstanding  |   |   | 3,004,467  |   |   |   | 2,934,530  |   |   |   | 3,005,988 |   |
| Dilutive effect of stock   |   |   |       |   |   |   |       |   |   |   |   |   |
| options on net income      |   |   | 2,005      |   |   |   | 0          |   |   |   | 0 |   |
|                       |   |   |       |   |   |   |       |   |   |   |   |   |
|                       |   |   | 3,006,472  |   |   |   | 2,934,530  |   |   |   | 3,005,988 |   |
|                       |   |   |       |   |   |   |       |   |   |   |   |   |
| Diluted Loss per share     |   | $      | (1.01      | )      |   | $      | (0.88      | )      |   | $ | (0.27 | ) |

----

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| COLUMN A                   |   | COLUMN B   |    |   | COLUMN C   |   |    | COLUMN D   |   |   | COLUMN E   |   |
|----------------------------|--------|------------|---------|--------|------------|--------|---------|------------|--------|--------|------------|--------|
|                       |   |       |    |   | Additions  |   |    |       |   |   |       |   |
|                       |   |       |    |   |       | (1)    |    |       |   | (2)    |       |   |   |   |   |   |   |
|                       |   |       |    |   | Charged to |   |    | Charged to |   |   |       |   |   |   |   |
|                       |   | Balance at |    |   | Costs      |   |    | Other      |   |   |       |   |   | Balance at |   |
|                       |   | Beginning  |    |   | And        |   |    | Accounts   |   |   | Deductions |   |   | End |   |
| Description                |   | of Period  |    |   | Expenses   |   |    | Described  |   |   | Described  |   |   | of Period |   |
|                       |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |
| DEDUCTED FROM ASSETS       |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |
|  TO WHICH THEY APPLY: |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |
|                       |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |
| ALLOWANCE FOR              |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |
| DOUBTFUL ACCOUNTS          |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |
|                       |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |
| 2009                       |   | $          | 446,421 |   |       |   | 97,651  |       |   |   | 0          |   |   |   | 274,992 |   | (A) | $ | 269,080 |   |
| 2008                       |   | $          | 136,745 |   |       |   | 461,999 |       |   |   | 0          |   |   |   | 152,323 |   | (A) | $ | 446,421 |   |
| 2007                       |   | $          | 201,355 |   |       |   | 152,903 |       |   |   | 0          |   |   |   | 217,513 |   | (A) | $ | 136,745 |   |
|                       |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |   |   |   |
| (A) Write-off bad debts    |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |   |   |   |
|                       |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |   |   |   |
|                       |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |   |   |   |
| ALLOWANCE FOR SALES        |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |   |   |   |
| RETURNS                    |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |   |   |   |
|                       |   |       |    |   |       |   |    |       |   |   |       |   |   |   |   |   |   |   |   |   |
| 2009                       |   | $          | 84,000  |   |       |   | (79,000 | )          |   |   | 0          |   |   |   | 0 |   |   | $ | 5,000 |   |
| 2008                       |   | $          | 90,000  |   |       |   | (6,000  | )          |   |   | 0          |   |   |   | 0 |   |   | $ | 84,000 |   |
| 2007                       |   | $          | 71,849  |   |       |   | 18,151  |       |   |   | 0          |   |   |   | 0 |   |   | $ | 90,000 |   |

----