|      | /s/ G. Louis      Graziadio III                                |   |
|--------------------------|----------------------------------------------------------------|--------|
|                          | G. Louis Graziadio III, Chairman of the Board and    President |   |
|                          | Principal Executive    Officer                                 |
|                          |                                                      |
|                          |                                                      |
|                     | /s/ Steven G.      Pont                                        |   |
|                          | Steven G. Pont, Vice President of      Finance                 |
|                          | Principal Financial    Officer                                 |

----

----

----

|                                                                                                                     |      | December 26, |      | December 27, |
|---------------------------------------------------------------------------------------------------------------------|--------------------------|--------------|--------------------------|--------------|
| Assets                                                                                                              |                          | 2009         |                          | 2008         |
| Current Assets:                                                                                                     |                          |              |                          |              |  |  |  |  |
|      Cash and cash equivalents                                                                  |                          | $            | 7,050                    |              |  | $ | 803 |  |
|      Accounts      receivable, net of allowance for doubtful accounts and                       |                          |              |                          |              |  |  |  |  |
|           returns 2009      $280; 2008 $240                            |                          |              | 7,573                    |              |  |  | 8,256 |  |
|      Inventories                                                                                |                          |              | 15,227                   |              |  |  | 18,929 |  |
|      Deferred      tax asset                                                                    |                          |              | 1,554                    |              |  |  | 1,141 |  |
|      Prepaid expenses and other                                                                 |                          |              | 403                      |              |  |  | 523 |  |
|                     Total current      assets |                          |              | 31,807                   |              |  |  | 29,652 |  |
| Property and Equipment, net                                                                                         |                          |              | 3,176                    |              |  |  | 3,340 |  |
| Other Assets                                                                                                        |                          |              | 150                      |              |  |  | 48 |  |
| Intangibles, net of accumulated amortization                                                                        |                          |              | 623                      |              |  |  | 457 |  |
| Goodwill                                                                                                            |                          |              | 2,853                    |              |  |  | 2,853 |  |
| Deferred tax asset                                                                                                  |                          |              | 1,813                    |              |  |  | 2,078 |  |
|                                                                                                                     |                          | $            | 40,422                   |              |  | $ | 38,428 |  |
| Liabilities and Stockholders'      Equity                                                                           |                          |              |                          |              |  |  |  |  |
| Current Liabilities:                                                                                                |                          |              |                          |              |  |  |  |  |
|      Current portion of long-termdebt                                                           |                          | $            | 1,091                    |              |  | $ | 496 |  |
|      Accounts      payable                                                                      |                          |              | 2,217                    |              |  |  | 1,860 |  |
|      Accrued payroll and related    expenses                                                    |                          |              | 1,095                    |              |  |  | 1,123 |   |
|      Accrued      promotional expenses                                                          |                          |              | 890                      |              |  |  | 991 |  |
|      Other accrued liabilities                                                                  |                          |              | 624                      |              |  |  | 495 |  |
|           Total current      liabilities                               |                          |              | 5,917                    |              |  |  | 4,965 |  |
| Long-Term Debt                                                                                                      |                          |              | 522                      |              |  |  | 1,607 |  |
| Deferred Compensation                                                                                               |                          |              | 151                      |              |  |  | 146 |  |
| Commitments and Contingencies (Note 4)                                                                              |                          |              |                          |              |  |  |   |  |
| Stockholders' Equity:                                                                                               |                          |              |                          |              |  |  |  |  |
|      Common stock, $.25 par value; authorized      10,000,000 shares;                           |                          |              |                          |              |  |  |  |  |
|           issued and      outstanding 2,116,047 and 2,036,047 shares   |                          |              |                          |              |  |  |  |  |
|           in 2009 and      2008, respectively                          |                          |              | 529                      |              |  |  | 509 |  |
|      Additional      paid-in capital                                                            |                          |              | 66,727                   |              |  |  | 66,521 |  |
|      Accumulated (deficit)                                                                      |                          |              | (33,504                  | )            |  |  | (35,271 | ) |
|           Accumulated other comprehensive income (loss)                                         |                          |              | 80                       |              |  |  | (49 | ) |
|           Total stockholders'      equity                              |                          |              | 33,832                   |              |  |  | 31,710 |  |
|                                                                                                                     |                          | $            |  40,422             |         |  | $ | 38,428 |  |
|                                                                                                                |                          |              |                          |              |  |  |  |  |

----

|                                                                                                                            | 2009 |      | 2008   |      | 2007 |
|----------------------------------------------------------------------------------------------------------------------------|------|--------------------------|--------|--------------------------|------|
| Net sales                                                                                                                  | $    | 48,957                   |        |                          | $    | 55,732 |   |  | $ | 55,197 |  |
|                                                                                                                       |      |                          |        |                          |      |  |  |  |  |  |  |
| Cost of sales                                                                                                              |      | 36,091                   |        |                          |      | 41,961 |  |  |  | 40,817 |  |
|                                                                                                                       |      |                          |        |                          |      |  |  |  |  |  |  |
|                     Gross profit                     |      | 12,866                   |        |                          |      | 13,771 |  |  |  | 14,380 |  |
|                                                                                                                       |      |                          |        |                          |      |  |  |  |  |  |  |
| Operating expenses                                                                                                         |      | 10,945                   |        |                          |      | 11,762 |  |  |  | 12,020 |  |
| Asset impairment losses                                                                                                    |      | -                        |        |                          |      | 792 |  |  |  | - |  |
|                                                                                                                            |      |                          |        |                          |      |  |  |  |  |  |  |
|                     Operating income                 |      | 1,921                    |        |                          |      | 1,217 |  |  |  | 2,360 |  |
|                                                                                                                       |      |                          |        |                          |      |  |  |  |  |  |  |
| Other income and    (expenses):                                                                                            |      |                          |        |                          |      |  |  |  |  |  |  |
|           Interest income                                                                              |      | 18                       |        |                          |      | 40 |  |  |  | 110 |  |
|           Interest expense                                                                             |      | (121                     | )      |                          |      | (210 | ) |  |  | (213 | ) |
|           Other                                                                                        |      | (4                       | )      |                          |      | 22 |  |  |  | 20 |  |
|                                                                                                                            |      | (107                     | )      |                          |      | (148 | ) |  |  | (83 | ) |
|                                                                                                                       |      |                          |        |                          |      |  |  |  |  |  |  |
|                     Income before income tax expense |      | 1,814                    |        |                          |      | 1,069 |  |  |  | 2,277 |  |
|                                                                                                                       |      |                          |        |                          |      |  |  |  |  |  |  |
| Income tax expense (note    10)                                                                                            |      | 797                      |        |                          |      | 531 |  |  |  | 911 |  |
| Change in deferred tax asset valuation (note 10)                                                                           |      | (750                     | )      |                          |      | - |  |  |  | - |  |
|                     Net income                       | $    | 1,767                    |        |                          | $    | 538 |  |  | $ | 1,366 |  |
|                                                                                                                       |      |                          |        |                          |      |  |  |  |  |  |  |
| Basic earnings per common      share                                                                                       | $    | 0.84                     |        |                          | $    | 0.27 |  |  | $ | 0.68 |  |
| Diluted earnings per common share                                                                                          | $    | 0.80                     |   |                          | $    | 0.24 |  |  | $ | 0.62 |   |

----

|                                                                                                                                                         |                          |                   |                          |         |     |             |            |                          |        |                    |         |                          |       | Accumulated              |       |        |  |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------|-------------------|--------------------------|---------|-----|-------------|------------|--------------------------|--------|--------------------|---------|--------------------------|-------|--------------------------|-------|--------|--|---|
|                                                                                                                                                         |                          |                   |                          |         |     |             | Additional |      |        |                    |         |      | Other |      | Total |
|                                                                                                                                                         |      | Common      Stock |      | Paid-In |     | Accumulated |            | Comprehensive            |   | Stockholders'      |
|                                                                                                                                                         |                          | Shares            |      | Dollars |     | Capital     |            | (Deficit)                |        | Income      (Loss) |         | Equity                   |
| Balance, December 30,2006                                                                                                                               |                          | 1,981             |                          | $       | 495 |             | $          | 66,324                   |        | $                  | (37,175 | )                        |       | $                        | 52    |        |  | $ | 29,696 |  |
|        Exercise of stock      options                                                                                     |                          | 37                |                          |         | 10  |             |            | 103                      |        |                    | -       |                     |       |                          | -     |        |  |   | 113 |  |
|        Comprehensiveincome:                                                                                               |                          |                   |                          |         |     |             |            |                          |        |                    |         |                          |       |                          |       |        |  |   | - |  |
|                    Net income                                                          |                          | -                 |                          |         | -   |             |            | -                        |        |                    | 1,366   |                          |       |                          | -     |        |  |   | 1,366 |  |
|                    Other comprehensive income (Note 11)                                |                          | -                 |                          |         | -   |             |            | -                        |        |                    | -       |                          |       |                          | 191   |        |  |   | 191 |  |
|                           Comprehensive      income |                          |              |                          |         |     |             |            |                          |        |                    |         |                          |       |                          |       |        |  |   | 1,557 |  |
|        Stock based    compensation                                                                                        |                          | -                 |                          |         | -   |             |            | 36                       |        |                    | -       |                          |       |                          | -     |        |  |   | 36 |  |
| Balance, December 29, 2007                                                                                                                              |                          | 2,018             |                          |         | 505 |             |            | 66,463                   |        |                    | (35,809 | )                        |       |                          | 243   |        |  |   | 31,402 |  |
|        Exercise of stock      options                                                                                     |                          | 18                |                          |         | 4   |             |            | 50                       |        |                    | -       |                          |       |                          | -     |        |  |   | 54 |  |
|        Comprehensiveincome:                                                                                               |                          |                   |                          |         |     |             |            |                          |        |                    |         |                          |       |                          |       |        |  |   | - |  |
|                    Net income                                                          |                          | -                 |                          |         | -   |             |            | -                        |        |                    | 538     |                          |       |                          | -     |        |  |   | 538 |  |
|                    Other comprehensive (loss) (Note 11)                                |                          | -                 |                          |         | -   |             |            | -                        |        |                    | -       |                          |       |                          | (292  | )      |  |   | (292 | ) |
|                           Comprehensive      income |                          |                   |                          |         |     |             |            |                          |        |                    |         |                          |       |                          |       |        |  |   | 246 |  |
|        Stock based    compensation                                                                                        |                          | -                 |                          |         | -   |             |            | 8                        |        |                    | -       |                          |       |                          | -     |        |  |   | 8 |  |
| Balance, December 27,2008                                                                                                                               |                          | 2,036             |                          |         | 509 |             |            | 66,521                   |        |                    | (35,271 | )                        |       |                          | (49   | )      |  |   | 31,710 |  |
|        Exercise of stock      options                                                                                     |                          | 80                |                          |         | 20  |             |            | 120                      |        |                    | -       |                          |       |                          | -     |        |  |   | 140 |  |
|        Comprehensiveincome:                                                                                               |                          |                   |                          |         |     |             |            |                          |        |                    |         |                          |       |                          |       |        |  |   | - |  |
|                    Net income                                                          |                          | -                 |                          |         | -   |             |            | -                        |        |                    | 1,767   |                          |       |                          | -     |        |  |   | 1,767 |  |
|                    Other comprehensive income (Note 11)                                |                          | -                 |                          |         | -   |             |            | -                        |        |                    | -       |                          |       |                     | 129   |        |  |   | 129 |  |
|                           Comprehensive      income |                          |                   |                          |         |     |             |            |                          |        |                    |         |                          |       |                          |       |        |  |   | 1,896 |  |
|        Stock based    compensation                                                                                        |                          | -                 |                          |         | -   |             |            | 86                       |        |                    | -       |                          |       |                          | -     |        |  |   | 86 |   |
| Balance, December 26,      2009                                                                                                                         |                          | 2,116             |                          | $       | 529 |             | $          | 66,727                   |        | $                  | (33,504 | )                        |       | $                        | 80    |   |  | $ | 33,832 |  |
|                                                                                                                                                    |                          |                   |                          |         |     |             |            |                          |        |                    |         |                          |       |                          |       |        |  |   |  |  |

----

|                                                                                                                                                                                                                                                                 |      | 2009   |      | 2008   |      | 2007   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------|--------|--------------------------|--------|--------------------------|--------|
| Cash Flows from Operating      Activities:                                                                                                                                                                                                                      |                          |        |                          |        |                          |        |  |  |  |  |  |  |
|        Net income                                                                                                                                                                                                                 |                          | $      | 1,767                    |        |                          | $      | 538 |  |  | $ | 1,366 |  |
|        Adjustments to reconcile net      income to net cash                                                                                                                                                                       |                          |        |                          |        |                          |        |  |  |  |  |  |  |
|                    provided by (used in) operating activities:                                                                                                                                 |                          |        |                          |        |                          |        |  |  |  |  |  |  |
|                    Depreciation and amortization                                                                                                                                               |                          |        | 640                      |        |                          |        | 654 |  |  |  | 534 |  |
|                    Stock based compensation                                                                                                                                                    |                          |        | 86                       |        |                          |        | 8 |  |  |  | 36 |  |
|                    Deferred tax expense (benefit note 10)                                                                                                                                      |                          |        | (158                     | )      |                          |        | 414 |  |  |  | 772 |  |
|                    Goodwill Impairment                                                                                                                                                         |                          |        | -                        |        |                          |        | 757 |  |  |  | - |  |
|                    Patent Impairment                                                                                                                                                           |                          |        | -                        |        |                          |        | 35 |  |  |  | - |  |
|                    Non-Cash Asset Donation                                                                                                                                                     |                          |        | -                        |        |                          |        | 173 |  |  |  | - |  |
|                    Changes in assets and liabilities net of acquisitions:                                                                                                                      |                          |        |                     |        |                          |        |  |  |  |  |  |  |
|                           (Increase) decrease in:                                                                                                           |                          |        |                          |        |                          |        |  |  |  |  |  |  |
|                 Accounts      receivable                                                                                                                                        |                          |        | 751                      |        |                          |        | (84 | ) |  |  | 48 |  |
|                 Inventories                                                                                                                                                     |                          |        | 3,843                    |        |                          |        | (3,156 | ) |  |  | (1,100 | ) |
|                 Prepaid      expenses and other                                                                                                                                 |                          |        | 35                       |        |                          |        | 12 |  |  |  | 40 |  |
|                 Other      assets                                                                                                                                               |                          |        | (9                       | )      |                          |        | 59 |  |  |  | 12 |  |
|                           Increase (decrease) in:                                                                                                           |                          |        |                          |        |                          |        |  |  |  |  |  |  |
|                 Accounts      payable                                                                                                                                           |                          |        | 135                      |        |                          |        | (206 | ) |  |  | 579 |  |
|                 Accrued      liabilities                                                                                                                                        |                          |        | (9                       | )      |                          |        | 116 |  |  |  | 246 |  |
|                                         Net cash provided by      (used in) operating |                          |        |                          |        |                          |        |  |  |  |  |  |  |
|                                         activities                                    |                          |        | 7,081                    |        |                          |        | (680 | ) |  |  | 2,533 |  |
|                                                                                                                                                                                                                                                            |
| Cash Flows from Investing      Activities:                                                                                                                                                                                                                      |                          |        |                          |        |                          |   |  |  |  |  |  |  |
|        Purchases of property and      equipment                                                                                                                                                                                   |                          |        | (226                     | )      |                          |        | (380 | ) |  |  | (343 | ) |
|        Acquisitions                                                                                                                                                                                                               |                          |        | (388                     | )      |                          |        | - |  |  |  | (887 | ) |
|                                         Net cash used in      investing               |                          |        |                          |        |                          |        |  |  |  |  |  |  |
|                                         activities                                    |                          |        | (614                     | )      |                          |        | (380 | ) |  |  | (1,230 | ) |
|                                                                                                                                                                                                                                                            |
| Cash Flows from Financing      Activities:                                                                                                                                                                                                                      |                          |        |                          |        |                          |        |  |  |  |  |  |  |
|        Net payments on revolving line      of credit                                                                                                                                                                              |                          |        | (35                      | )      |                          |        | - |  |  |  | - |  |
|        Borrowing on long-term      obligations                                                                                                                                                                                    |                          |        | -                        |        |                          |        | - |  |  |  | 405 |  |
|        Repayment of long-term      obligations                                                                                                                                                                                    |                          |        | (502                     | )      |                          |        | (477 | ) |  |  | (427 | ) |
|        Proceeds from exercise of      stock options                                                                                                                                                                               |                          |        | 140                      |        |                          |        | 51 |  |  |  | 86 |  |
|                                         Net cash provided by      (used in) financing |                          |        |                          |   |                          |        |  |  |  |  |  |  |
|                                         activities                                    |                          |        | (397                     | )      |                          |        | (426 | ) |  |  | 64 |  |
| Effect of exchange rate changes on      cash                                                                                                                                                                                                                    |                          | $      | 177                      |        |                          | $      | (268 | ) |  | $ | 188 |  |
|                                         Increase (decrease) in      cash and          |                          |   |                          |        |                          |        |  |  |  |   |  |  |
|                                         cash      equivalents                         |                          | $      | 6,247                    |        |                          | $      | (1,754 | ) |  | $ | 1,555 |   |

----

| Boss Holdings, Inc. and      Subsidiaries                                   |
|-----------------------------------------------------------------------------|
|                                                                   |
| Consolidated Statements of Cash      Flows (Continued)                      |
| Years Ended December 26, 2009,      December 27, 2008 and December 29, 2007 |
| (Dollars in    Thousands)                                                   |

|                                                                                                          | 2009 |       | 2008 |       | 2007   |
|----------------------------------------------------------------------------------------------------------|------|--------------------------------|------|--------------------------------|--------|
| Cash and cashequivalents:                                                                                |      |                                |      |                           |   |  |   |   |
|      Beginning                                                                       |      | 803                            |      |                                | 2,557  |  |  | 1,002 |
|     Ending                                                                           | $    | 7,050                          |      | $                              | 803    |  | $ | 2,557 |
|                                                                                                |
| Supplemental Disclosures of Cash      Flows Information,                                                 |      |                                |      |                                |        |  |  |  |
|      cash payments      for:                                                         |      |                                |      |                                |        |  |  |  |
|      Interest      paid                                                              | $    | 121                            |      | $                              | 210    |  | $ | 213 |
|      Income taxes paid,      net                                                     |      | 121                            |      |                                | 239    |  |  | 236 |
|                                                                                                |
| Supplemental Disclosures of Noncash      Investing and                                                   |      |                                |      |                                |        |  |  |  |
|      Financing      Activities:                                                      |      |                                |      |                                |        |  |  |  |
|      Reduction in net      operating loss carryover due to excess tax                |      |                                |      |                                |        |  |  |  |
|                benefits from the exercise of stock options, |      |                                |      |                                |        |  |  |  |
|                under the tax-law ordering approach          |      | 82                             |      |                                | 3      |  |  | 27 |
|      Fixed assets acquired      by entering into capital lease                       |      | -                              |      |                                | 103    |  |  | - |
|                                                                                                     |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

- Rebates and other  volume-based incentives – The Company records a revenue reduction and  associated accrued liability each period based on the estimated rebate total.  Rebates paid are then charged to the accrued liability. Each quarter,  management compares the accrued liability balance to the estimated rebates  payable compiled for all customers and makes adjustments as appropriate to  revenues and the accrued rebate liability.   
- Terms discounts – the Company  offers cash discounts to certain customers, recorded as revenue reductions in  each period with an associated accounts receivable allowance. Management  periodically analyzes this allowance account to ensure its adequacy, adjusting  sales and the accounts receivable allowance when appropriate.  
- Cooperative advertising and  marketing allowances – the Company supports certain customer advertising and  marketing initiatives to promote product sales at retail. In many cases,  customers advertise Company products using mutually agreed specifications such  as the Boss logo and trade names, with the Company then reimbursing a portion  of the advertising cost incurred by the customer.  The Company also supports various other  advertising and marketing initiatives to promote sales. All such costs are  treated as a reduction of revenues for accounting purposes.   
- To a lesser extent, the  Company occasionally utilizes additional incentives to increase market share  such as buying back a competitor’s inventory from a new customer, offering  conversion allowances and providing other new customer incentives. Such  methods are common in certain retail industry channels.  All such costs are treated as a  reduction of revenues for accounting purposes. 

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                          |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|       |                                | Years  |
|---------------------------|--------------------------------|--------|
|                           | Machinery and equipment        | 10     |
|                           | Office furniture and equipment | 3 - 10 |
|                           | Buildings andimprovements      | 10 -39 |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                           |                                                                                                        | Estimated |       |   |   |       | Accumulated  |       |        | Net Book |
|--------------------------------|-------------------------------------------------------------------------------------------------------------|-----------|--------------------------------|--------|--------|--------------------------------|--------------|--------------------------------|--------|----------|
|                                |                                                                                                             | Life      |                           |        | Cost   |                                | Amortization |                                |        | Value    |
|       |                                                                                                             | 2009      |
|                                | Customer Lists /    Non-Compete                                                                             |           |                                |        |   |                           |              |                                |   |          |   |
|                                |                     Canadawide Safety | 4 Years   |                                | $      | 105    |                                | $            | 69                             |        | $        | 36 |
|                                |                     Dipcraft          | 5 Years   |                                |        | 343    |                                |              | 146                            |        |          | 196 |
|                                |                     Galaxy            | 7.5 Years |                                |        | 170    |                                |              | 122                            |        |          | 48 |
|                                |                     AGA               | 5 Years   |                                |        | 300    |                                |              | 10                             |        |          | 290 |
|                                | Trademarks                                                                                                  | 5 Years   |                                |        | 164    |                                |              | 111                            |        |          | 53 |
|                                | Patents                                                                                                     | 10 Years  |                                |        | 15     |                                |              | 15                             |        |          | - |
|                                |                                                                                                             |           |                                | $      | 1,097  |                                | $            | 473                            |        | $        | 623 |
|                                |                                                                                                   |
|                                |                                                                                                             | 2008      |
|                                | Customer Lists /    Non-Compete                                                                             |           |                                |        |        |                                |              |                                |        |          |  |
|                                |                     Canadawide Safety | 4 Years   |                                | $      | 90     |                           | $            | 37                             |        | $        | 53 |
|                                |                     Dipcraft          | 5 Years   |                                |        | 343    |                                |              | 77                             |        |          | 266 |
|                                |                     Galaxy            | 7.5 Years |                                |        | 170    |                                |              | 100                            |        |          | 70 |
|                                | Trademarks                                                                                                  | 5 Years   |                                |        | 209    |                                |              | 141                            |        |          | 68 |
|                                | Patents                                                                                                     | 10 Years  |                                |        | 15     |                                |              | 15                             |        |          | 0 |
|                                |                                                                                                             |           |                                | $      | 827    |                                | $            | 370                            |        | $        | 457 |
|                           |

|         |       | Book Value |       | Effect Of |       |            |        |            |       | Book Value |
|--------------|--------------------------------|------------|--------------------------------|-----------|--------------------------------|------------|--------|------------|--------------------------------|------------|
|              |                                | As of      |                                | Exchange  |                                |            |        |            |                                | As Of      |
|              |                                | 12/29/2007 |                           | Rate      |                           | Impairment |   | 12/27/2008 |
| Headlite     |                                | $          | 527                            |           | $                              | -          |        |            | $                              | (527       | ) |  | $ | - |
| Canadawide   |                                |            | 286                            |           |                                | (56        | )      |            |                                | (230       | ) |  |  | - |
| Galaxy       |                                |            | 2,853                          |           |                                | -          |        |            |                                | -          |  |  |  | 2,853 |
|    |
| Total        |                           | $          | 3,666                          |      | $                              | (56        | )      |       | $                              | (757       | ) |   | $ | 2,853 |
|         |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                          |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

- Level 1 -- Quoted market  prices in an active market for identical assets or liabilities.    
- Level 2 – Market data or  inputs, other than quoted prices included in Level 1, that are observable  either directly or indirectly; quoted market prices for similar assets or  liabilities in markets that are not active; or other inputs that are  observable or can be corroborated by observable market data.   
- Level 3 – Unobservable inputs  that are supported by little or no market activity. 

|                                                                   | Carrying Amount        |    |                        |  |                                  |    |              |              |              |     |  |   |     |   |   |
|-------------------------------------------------------------------|------------------------|--------------|------------------------|--|----------------------------------|--------------|--------------|--------------|--------------|-----|--|---|-----|---|--------|
|                                                                   | In Consolidated        |              |                        |  |                                  |              |              |              |              |     |  |   |     |   |        |
|                                                                   | Balance Sheets         |              | Fair Value             |  | Fair Value Measurements    Using |
|                                                                   | December      26, 2009 |              | December 26,      2009 |  | Level      1                     |    | Level      2 |    | Level      3 |
| Marketable Securities (included in      other assets)   | $                      | 151          |                        |  | $                                | 151          |              |              | $            | 151 |  | $ | -   |   |        | $ | - |
| Interest rate swap liability                                      | $                      | (21          | )                      |  | $                                | (21          | )            |              | $            | -   |  | $ | (21 | ) |        | $ | - |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                          |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                          |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                          |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                                | 2009 |       | 2008 |
|--------------------------------|------|--------------------------------|------|
| Land                           | $    | 410                            |      | $ | 410 |
| Machinery and equipment        |      | 1,973                          |      |  | 1,754 |
| Buildings andimprovements      |      | 2,505                          |      |  | 2,496 |
| Office furniture and equipment |      | 2,623                          |      |  | 2,526 |
|                                |      | 7,511                          |      |  | 7,186 |
| Less accumulated depreciation  |      | 4,335                          |      |  | 3,846 |
|                                | $    | 3,176                          |      | $ | 3,340 |
|                           |      |                                |      |  |  |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |       | 2009 |       | 2008 |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|------|--------------------------------|------|
| BHI revolving line of credit      (A)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |                                | $    | -                              |      | $ | - |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                |      |                           |      |  |  |
| Boss Canada Inc revolving line of      credit (B)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                |      | -                              |      |  | 33 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                |      |                                |      |  |  |
| Boss Holdings, Inc. term note      payable to a lender. Requires monthlyprincipal payments through July 2011 of      $21 plus interest at LIBOR plus 2.1%, adjusted monthly (effective rate of      2.33% as of December 26, 2009). The Company has entered into an interest      rate swap agreement related to this note. The swap effectively fixes the      interest rate on approximately 57% of the note at 6.32%. Collateralized by      all assets of Galaxy Balloons, Inc., in addition to accounts receivable      and inventory of Boss Manufacturing Company and      subsidiaries. |                                |      | 417                            |      |  | 667 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| Boss Manufacturing Company mortgage      note payable to a lender. Requires monthly principal payments of $4.      Interest is at LIBOR plus 2.1%, adjusted monthly. The Company has entered      into an interest rate swap agreement related to this mortgage note. The      swap effectively fixes the interest rate on the debt at 5.83%. The final      payment is a balloon payment of $667 due in July 2010. Collateralized by      certain real property of Boss Manufacturing Company located in Kewanee,      Illinois.                                                               |                                |      | 693                            |      |  | 745 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                |      |                                |      |  |  |
|                     Subtotal Forward                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                | $    | 1,110                          |      | $ | 1,445 |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                          |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                     Subtotal Forwarded                                                                                                                                                                                                                                                             |       | $ | 1,110 |       | $ | 1,445 |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|---|-------|--------------------------------|---|-------|
|                                                                                                                                                                                                                                                                                                                                                                |
| Boss Canada Inc. term note payable to a      lender. Requires monthly payment of $7 Canadian Dollar ($6 US Dollar),      using December 26, 2010 exchange rate of .9534, at 6.3% from June 2008      through May 2014. Interest only monthly payments from June 2007 through      May 2008. Collateralized by accounts receivable and inventory of Boss      Canada Inc. |                                |   | 294   |                                |   | 302   |
|                                                                                                                                                                                                                                                                                                                                                                |                                |   |       |                                |   |       |
| Boss Manufacturing Company loan      agreement with a local governmental agency. Requires monthly payments of      $8, including interest at 3%, through April 2010. Collateralized by      certain real property of Boss Manufacturing Company's Kewanee, Illinois      facilities.                                                                                     |                                |   | 32    |                                |   | 124   |
|                                                                                                                                                                                                                                                                                                                                                                |
| Boss Manufacturing Company loan      agreement with a local governmental agency. Requires monthly payments of      $3, including interest at 3%, through October 2012. Collateralized by      certain real property of Boss Manufacturing Company's Kewanee, Illinois      facilities.                                                                                   |                                |   | 107   |                                |   | 143   |
|                                                                                                                                                                                                                                                                                                                                                                |
| Capital lease obligations                                                                                                                                                                                                                                                                                                                                                |                                |   | 70    |                                |   | 89    |
|                                                                                                                                                                                                                                                                                                                                                                     |                                |   | 1,613 |                                |   | 2,103 |
| Less current maturities                                                                                                                                                                                                                                                                                                                                                  |                                |   | 1,091 |                                |   | 496   |
|                                                                                                                                                                                                                                                                                                                                                                          |                                | $ | 522   |                                | $ | 1,607 |
|                                                                                                                                                                                                                                                                                                                                                                     |

| Year ending:                                    |   |       |   |   |
|-------------------------------------------------|---|-------|--------|--------|
|      December      25, 2010 | $ | 1,091 |
|      December      31, 2011 |   | 286   |
|      December      29, 2012 |   | 112   |
|      December      28, 2013 |   | 93    |
|           December27,2014   |   | 31    |
|                                                 |   |       | $      | 1,613  |
|                                                 |

| (A) |       | Effective      January 4, 2010, the Company modified its loan and security agreement (the      “Credit Agreement”) with a commercial bank. The revised Credit Agreement      expires in January 2011 and provides a revolving credit facility up to      $7,000 based on a formula that includes eligible accounts receivable and      inventories. Interest is payable monthly at the bank’s prime rate less      1.25% or, at the Company’s option, LIBOR plus 1.25% (effective rate of      2.0% as of December 26, 2009). The Company incurs an unused line fee of      1/8% per annum on the unused portion of the credit facility. As of      December 26, 2009, the Company had no borrowings on the revolving credit      facility. Availability under this credit agreement was $7,000 as of      December 26, 2009. |
|-----|---------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|     |                           | The Credit      Agreement includes certain restrictive covenants and requires maintenance      of certain financial ratios including current ratio, minimum tangible net      worth, debt service coverage, and debt to tangible net worth. The      Company’s accounts receivable and inventories secure the credit      facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                          |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

| (B)    |       | Effective      Jan. 4, 2009, the Company modified its loan and security agreement (the      “Credit Agreement”) with a commercial bank for Boss Canada. The revised      Credit Agreement expires in January 2011 and provides a revolving credit      facility up to $100 Canadian based on a formula that includes eligible      accounts receivable and inventories. Interest is payable monthly at the      bank’s Canadian prime rate (effective rate of 2.25% as of December 26,      2009). As of December 26, 2009, there were no borrowings on the Canadian      revolving credit facility. Availability under this credit agreement was      $100 Canadian as of December 26, 2009. |
|--------|--------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |
|   |                                | The Credit      Agreement includes certain restrictive covenants and requires maintenance      of certain financial ratios including current ratio, minimum tangible net      worth, debt service coverage, and debt to tangible net worth. The      Company’s accounts receivable and inventories secure the credit      facility.                                                                                                                                                                                                                                                                                                                                                                       |

| Year ending:                                                                             |   |       |   |   |
|------------------------------------------------------------------------------------------|---|-------|--------|--------|
|      December      25,2010                                           | $ | 488   |
|      December      31, 2011                                          |   | 410   |
|      December      29, 2012                                          |   | 374   |
|      December      28, 2013                                          |   | 197   |
|           Total      minimum lease payments | $ | 1,469 |
|                                                                                     |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                                                        |                                            | Year      Ended   |
|--------------------------------------------------------|--------------------------------------------|-------------------|
|                                                        |                                            | December 26, 2009 |  | December 27, 2008 |  | December 29, 2007 |
|                                                        |                                            |                   |  |  | Weighted |  |  |  |  | Weighted |  |  |  |  | Weighted |
|                                                        |                                            |                   |  |  | Average |  |  |  |  | Average |  |  |  |  | Average |
|                                                        |                                            |                   |  |  | Exercise |  |  |  |  | Exercise |  |  |  |  | Exercise |
|                                                        |         | Shares            |         | Price |         | Shares |         | Price |         | Shares |         | Price |
| Outstanding, beginning                                 |                                            | 316,000           |  |  | $ | 3.34 |  | 336,000 |  |  | $ | 3.33 |  | 381,000 |  |  | $ | 3.31 |
|      Granted                  |                                            | -                 |  |  |  | - |  | - |  |  |  | - |  | 10,000 |  |  |  | 6.21 |
|      Exercised                |                                            | (80,000           | ) |  |  | 1.75 |  | (20,000 | ) |  |  | 3.16 |  | (45,000 | ) |  |  | 3.02 |
|      Expired                  |                                            | (5,000            | ) |  |  | 1.75 |  | - |  |  |  | - |  | (10,000 | ) |  |  | 7.00 |
| Outstanding, ending                                    |                                            | 231,000           |  |  | $ | 3.92 |  | 316,000 |  |  | $ | 3.34 |  | 336,000 |  |  | $ | 3.33 |
|                                                   |
| Options exercisable,                                   |                                            |                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|      end      of year         |                                            | 231,000           |  |  | $ | 3.92 |  | 314,540 |  |  | $ | 3.34 |  | 329,333 |  |  | $ | 3.27 |
|                                                   |
| Weighted average fair                                  |                                            |                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|      value      per option of |                                            |                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|      options granted          |                                            |                   |  |  |  | N/A |  |  |  |  |  | N/A |  |  |  |  | $ | 2.70 |
|                                                   |                                            |                   |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                                                                                                                           |                                            | Year      Ended |
|---------------------------------------------------------------------------------------------------------------------------|--------------------------------------------|-----------------|
|                                                                                                                           |                                            | December 26,    |  | December 27, |  | December 29, |
|                                                                                                                           |         | 2009            |         | 2008 |         | 2007 |
| Numerator, earnings attributable      to                                                                                  |                                            |                 |  |  |  |  |  |  |  |
|      common stockholders                                                                         |                                            | $               | 1,767 |  | $ | 538 |  | $ | 1,366 |
|                                                                                                                      |
| Denominator:                                                                                                              |                                            |                 |  |  |  |  |  |  |  |
|      Basic-weighted average    common                                                            |                                            |                 |  |  |  |  |  |  |  |
|           shares      outstanding                                       |                                            |                 | 2,101,102 |  |  | 2,022,758 |  |  | 2,010,449 |
|      Dilutive effect of employee stock      options                                              |                                            |                 | 103,112 |  |  | 183,413 |  |  | 194,563 |
|                Diluted outstanding      shares |                                            |                 | 2,204,214 |  |  | 2,206,171 |  |  | 2,205,012 |
|                                                                                                                      |
| Basic earnings, per common      share                                                                                     |                                            | $               | 0.84 |  | $ | 0.27 |  | $ | 0.68 |
| Diluted earnings, per common share                                                                                        |                                            | $               | 0.80 |  | $ | 0.24 |  | $ | 0.62 |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

| Aquisition cost:                                                                                |        |        |        |   |
|-------------------------------------------------------------------------------------------------|--------------------------------------|--------|--------|--------|
|      Base purchase price                                                    |                                 | $      | 364    |   |
|           Closing      Costs                       |                                 |   | 19     |   |
|                     Total |                                 | $      | 383    |   |
|                                                                                            |                                 |   |   |   |
| Allocation of purchase    cost:                                                                 |                                 |   |   |   |
|       Current assets                                                   |                                 | $      | 216    |   |
|       Property and      equipment                            |                                 |   | 14     |   |
|       Customer lists                                              |                                 |   | 100    |   |
|       Goodwill                                               |                                 |   | 255    |   |
|       Accounts payable and accured      expenses                  |                                 |   | (202   | )      |
|                                                                                            |                                 |   | 383    |   |
|       Less Acquisition      indebtedness                          |                                 |   | 46     |   |
|                                                                                                 |                                      | $      | 337    |   |
|                                                                                            |                                      |        |        |   |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                                                                                           |                                            | Year      Ended |
|-------------------------------------------------------------------------------------------|--------------------------------------------|-----------------|
|                                                                                           |                                            | December 26,    |  | December 27, |  | December 29, |
|                                                                                           |         | 2009            |         | 2008 |         | 2007 |
| Current income tax    expense:                                                            |                                            |                 |  |  |  |  |  |  |  |  |  |
|      Federal                                                     |                                            | $               | 96 |  |  | $ | 25 |  |  | $ | 39 |
|      State      and local                                        |                                            |                 | 109 |  |  |  | 92 |  |  |  | 100 |
|                                                                                           |                                            |                 | 205 |  |  |  | 117 |  |  |  | 139 |
| Deferred income tax expense      (benefit):                                               |                                            |                 |  |  |  |  |  |  |  |  |  |
|      Federal                                                     |                                            |                 | (159 | ) |  |  | 435 |  |  |  | 759 |
|      State      and local                                        |                                            |                 | 1 |  |  |  | (21 | ) |  |  | 13 |
|                                                                                           |                                            |                 | (158 | ) |  |  | 414 |  |  |  | 772 |
|           Total income tax      expense |                                            | $               | 47 |  |  | $ | 531 |  |  | $ | 911 |

|                                                                                                     |                                            | Year      Ended |
|-----------------------------------------------------------------------------------------------------|--------------------------------------------|-----------------|
|                                                                                                     |                                            | December 26,    |  | December 27, |  | December 29, |
|                                                                                                     |         | 2009            |         | 2008 |         | 2007 |
| Income tax expense    computed                                                                      |                                            |                 |  |  |  |  |  |  |  |  |
|      at      the U.S. corporate tax rate of 34%                            |                                            | $               | 617 |  |  | $ | 364 |  | $ | 774 |
| Adjustments attributable to:                                                                        |                                            |                 |  |  |  |  |  |  |  |  |
|      State      income taxes, net of the federal benefit                   |                                            |                 | 73 |  |  |  | 53 |  |  | 114 |
|      Change In deferred tax asset      valuation allowance                 |                                            |                 | (750 | ) |  |  | - |  |  | - |
|      Effect of foreignoperations                                           |                                            |                 | 100 |  |  |  | 86 |  |  | - |
|      Other                                                                 |                                            |                 | 7 |  |  |  | 28 |  |  | 23 |
|           Total income tax expense      (benefit) |                                            | $               | 47 |  |  | $ | 531 |  | $ | 911 |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                                                                                                 |                                            | December 26, |                                            | December 27, |
|-------------------------------------------------------------------------------------------------|--------------------------------------------|--------------|--------------------------------------------|--------------|
|                                                                                                 |         | 2009         |         | 2008         |
| Deferred income tax    assets:                                                                  |                                            |              |                                            |              |  |  |
|      Operating losscarryforwards                                       |                                            | $            | 7,644                                      |              | $ | 8,258 |
|      Accounts receivable                                               |                                            |              | 127                                        |              |  | 111 |
|      Accruals                                                          |                                            |              | 144                                        |              |  | 133 |
|      Compensation related                                              |                                            |              | 360                                        |              |  | 388 |
|      Inventories                                                       |                                            |              | 367                                        |              |  | 440 |
|      Intangibles                                                       |                                            |              | 167                                        |              |  | 152 |
|      Tax credit carryforwards                                          |                                            |              | 495                                        |              |  | 467 |
|           Gross deferred tax      assets      |                                            |              | 9,304                                      |              |  | 9,949 |
|      Deferred tax asset valuation      allowance                       |                                            |              | 5,750                                      |              |  | 6,500 |
|           Net deferred tax      assets        |                                            |              | 3,554                                      |              |  | 3,449 |
|                                                                                            |
| Deferred income tax      liabilities:                                                           |                                            |              |                                            |              |  |  |
|      Intangibles                                                       |                                            |              | -                                          |              |  | - |
|      Property and equipment                                            |                                            |              | 187                                        |              |  | 230 |
|                                                                                                 |                                            |              | 187                                        |              |  | 230 |
|           Net deferred income tax      assets |                                            | $            | 3,367                                      |              | $ | 3,219 |
|                                                                                            |                                            |              |                                            |              |  |  |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

| Year of expiration:                 |        |   |        |
|-------------------------------------|--------------------------------------|---|--------|
|      2011       |                                      | $ | 11,818 |
|         2012    |                                      |   | 9,197  |
|      Thereafter |                                      |   | 1,468  |
|                                     |                                      | $ | 22,483 |
|                                |                                      |   |        |

| Year of expiration:                 |   |     |
|-------------------------------------|---|-----|
|      2014       | $ | 26  |
|         2015    |   | 1   |
|      Thereafter |   | 612 |
|                                     | $ | 639 |
|                                |   |     |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                                                                                        |                                            | Year      Ended |
|----------------------------------------------------------------------------------------|--------------------------------------------|-----------------|
|                                                                                        |                                            | December 26,    |  | December 27, |  | December 29, |
|                                                                                        |         | 2009            |         | 2008 |         | 2007 |
| Foreign currency items:                                                                |                                            |                 |  |  |  |  |  |  |  |  |  |  |
|      Beginning balance                                        |                                            | $               | (21 | ) |  | $ | 244 |  |  | $ | 25 |  |
|           Current      period change |                                            |                 | 114 |  |  |  | (265 | ) |  |  | 219 |  |
|      Ending balance                                           |                                            |                 | 93 |  |  |  | (21 | ) |  |  | 244 |  |
|                                                                                   |
| Interest swap agreements, net of      income taxes:                                    |                                            |                 |  |  |  |  |  |  |  |  |  |  |
|      Beginning balance                                        |                                            |                 | (28 | ) |  |  | (1 | ) |  |  | 27 |  |
|           Current      period change |                                            |                 | 15 |  |  |  | (27 | ) |  |  | (28 | ) |
|      Ending balance                                           |                                            |                 | (13 | ) |  |  | (28 | ) |  |  | (1 | ) |
|      Accumulated other comprehensive      income (loss)       |                                            | $               | 80 |  |  | $ | (49 | ) |  | $ | 243 |  |
|                                                                                   |                                            |                 |  |  |  |  |  |  |  |  |  |  |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                                            |                         |                                            | Work       |                                            |          |                                            |               |                                            |                |                                            |       |   |        |   |  |   |
|--------------------------------------------|-------------------------|--------------------------------------------|------------|--------------------------------------------|----------|--------------------------------------------|---------------|--------------------------------------------|----------------|--------------------------------------------|-------|---|--------|---|--|---|
|                                            |                         |                                            | Gloves and |                                            |          |                                            |               | Promotional                                |                |                                            |       |   |        |   |  |
|                                            |                         |                                            | Protective |                                            | Pet      |                                            | and Specialty |                                            | Corporate      |                                            |       |   |
|                                            |                         |         | Wear       |         | Supplies |         | Products      |         | and      Other |         | Total |
| 2009                                       |                         |                                            |            |                                            |          |                                            |               |                                            |                |                                            |       |   |        |   |  |   |
|         | Revenue                 |                                            | $          | 31,356                                     |          | $                                          | 7,817         |                                            | $              | 9,784                                      |       | $ | -      |   |  | $ | 48,957 |
|                                            | Operating income (loss) |                                            |            | 1,307                                      |          |                                            | 818           |                                            |                | 1,003                                      |       |   | (1,207 | ) |  |   | 1,921 |
|                                            | Goodwill                |                                            |            | -                                          |          |                                            | -             |                                            |                | 2,853                                      |       |   | -      |   |  |   | 2,853 |
|                                            | Total assets            |                                            |            | 25,310                                     |          |                                            | 5,581         |                                            |                | 6,192                                      |       |   | 3,339  |   |  |   | 40,422 |
|                                            | Capital expenditures    |                                            |            | 182                                        |          |                                            | 18            |                                            |                | 114                                        |       |   | -      |   |  |   | 314 |
|                                            | Depreciation            |                                            |            | 298                                        |          |                                            | 17            |                                            |                | 163                                        |       |   | -      |   |  |   | 478 |
|                                            | Amortization            |                                            |            | 55                                         |          |                                            | 6             |                                            |                | 101                                        |       |   | -      |   |  |   | 162 |
|                                            |                    |
| 2008                                       |                         |                                            |            |                                            |          |                                            |               |                                            |                |                                            |       |   |        |   |  |   |
|                                            | Revenue                 |                                            | $          | 38,283                                     |          | $                                          | 6,525         |                                            | $              | 10,924                                     |       | $ | -      |   |  | $ | 55,732 |
|                                            | Operating income (loss) |                                            |            | 507                                        |          |                                            | 459           |                                            |                | 1,148                                      |       |   | (897   | ) |  |   | 1,217 |
|                                            | Goodwill                |                                            |            | -                                          |          |                                            | -             |                                            |                | 2,853                                      |       |   | -      |   |  |   | 2,853 |
|                                            | Impairment charges      |                                            |            | 792                                        |          |                                            | -             |                                            |                | -                                          |       |   | -      |   |  |   | 792 |
|                                            | Total assets            |                                            |            | 25,907                                     |          |                                            | 3,257         |                                            |                | 6,108                                      |       |   | 3,156  |   |  |   | 38,428 |
|                                            | Capital expenditures    |                                            |            | 227                                        |          |                                            | 21            |                                            |                | 132                                        |       |   | -      |   |  |   | 380 |
|                                            | Depreciation            |                                            |            | 305                                        |          |                                            | 40            |                                            |                | 146                                        |       |   | -      |   |  |   | 491 |
|                                            | Amortization            |                                            |            | 65                                         |          |                                            | 7             |                                            |                | 91                                         |       |   | -      |   |  |   | 163 |
|                                            |                    |
|                                            | 2007                    |                                            |            |                                            |          |                                            |               |                                            |                |                                            |       |   |        |   |  |   |  |
|                                            | Revenue                 |                                            |            | 37,689                                     |          |                                            | 6,693         |                                            |                | 10,815                                     |       |   | -      |   |  |   | 55,197 |
|                                            | Operating income (loss) |                                            |            | 1,502                                      |          |                                            | 635           |                                            |                | 1,228                                      |       |   | (1,005 | ) |  |   | 2,360 |
|                                            | Goodwill                |                                            |            | 813                                        |          |                                            | -             |                                            |                | 2,853                                      |       |   | -      |   |  |   | 3,666 |
|                                            | Total assets            |                                            |            | 26,203                                     |          |                                            | 3,013         |                                            |                | 6,087                                      |       |   | 3,684  |   |  |   | 38,987 |
|                                            | Capital expenditures    |                                            |            | 143                                        |          |                                            | 118           |                                            |                | 82                                         |       |   | -      |   |  |   | 343 |
|                                            | Depreciation            |                                            |            | 322                                        |          |                                            | 33            |                                            |                | 137                                        |       |   | -      |   |  |   | 492 |
|                                            | Amortization            |                                            |            | 5                                          |          |                                            | -             |                                            |                | 37                                         |       |   | -      |   |  |   | 42 |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                                            |                                                    |                                            | First   |                                            | Second  |                                            | Third   |                                            | Fourth  |                                            |       |           |
|--------------------------------------------|----------------------------------------------------|--------------------------------------------|---------|--------------------------------------------|---------|--------------------------------------------|---------|--------------------------------------------|---------|--------------------------------------------|-------|-----------|
|                                            |                                                    |         | Quarter |         | Quarter |         | Quarter |         | Quarter |         | Total |
| 2009                                       |                                                    |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |
|         | Net      sales                                     |                                            | $       | 11,582                                     |         |                                            | $       | 10,890                                     |         |                                            | $     | 12,258    |  | $ | 14,227 |  |  | $ | 48,957 |
|                                            | Gross profit                                       |                                            |         | 2,723                                      |         |                                            |         | 2,505                                      |         |                                            |       | 3,309     |  |  | 4,329 |  |  |  | 12,866 |
|                                            | Net income (loss)                                  |                                            |         | (51                                        | )       |                                            |         | (315                                       | )       |                                            |       | 661       |  |  | 1,472 |  |  |  | 1,767 |
|                                            |                                               |
|                                            | Net earnings (loss), per                           |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      common share:        |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      Basic                |                                            | $       | (0.02                                      | )       |                                            | $       | (0.15                                      | )       |                                            | $     | 0.31      |  | $ | 0.70 |  |  | $ | 0.84 |
|                                            |      Diluted              |                                            | $       | (0.02                                      | )       |                                            | $       | (0.14                                      | )       |                                            | $     | 0.30      |  | $ | 0.66 |  |  | $ | 0.80 |
|                                            |                                               |
|                                            | Denominator for net                                |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      earnings (loss), per |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      common share:        |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      Basic                |                                            |         | 2,056,267                                  |         |                                            |         | 2,116,047                                  |         |                                            |       | 2,116,047 |  |  | 2,116,047 |  |  |  | 2,101,102 |
|                                            |      Diluted              |                                            |         | 2,056,267                                  |         |                                            |         | 2,210,159                                  |         |                                            |       | 2,207,591 |  |  | 2,213,572 |  |  |  | 2,204,214 |
|                                            |                                               |
| 2008                                       |                                                    |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |
|                                            | Net sales                                          |                                            | $       | 13,355                                     |         |                                            | $       | 13,286                                     |         |                                            | $     | 14,070    |  | $ | 15,021 |  |  | $ | 55,732 |
|                                            | Gross profit                                       |                                            |         | 2,987                                      |         |                                            |         | 3,096                                      |         |                                            |       | 3,679     |  |  | 4,009 |  |  |  | 13,771 |
|                                            | Net income (loss)                                  |                                            |         | (10                                        | )       |                                            |         | 125                                        |         |                                            |       | 438       |  |  | (15 | ) |  |  | 538 |
|                                            |                                               |
|                                            | Net earnings (loss), per                           |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      common share:        |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      Basic                |                                            | $       | (0.00                                      | )       |                                            | $       | 0.06                                       |         |                                            | $     | 0.22      |  | $ | (0.01 | ) |  | $ | 0.27 |
|                                            |      Diluted              |                                            | $       | (0.00                                      | )       |                                            | $       | 0.06                                       |         |                                            | $     | 0.20      |  | $ | 0.00 |  |  | $ | 0.24 |
|                                            |                                               |
|                                            | Denominator for net                                |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      earnings (loss), per |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      common share:        |                                            |         |                                            |         |                                            |         |                                            |         |                                            |       |           |  |  |  |  |  |  |  |
|                                            |      Basic                |                                            |         | 2,018,345                                  |         |                                            |         | 2,018,345                                  |         |                                            |       | 2,018,345 |  |  | 2,036,047 |  |  |  | 2,022,758 |
|                                            |      Diluted              |                                            |         | 2,018,345                                  |         |                                            |         | 2,215,559                                  |         |                                            |       | 2,196,892 |  |  | 2,188,257 |  |  |  | 2,206,171 |

----

| Boss Holdings, Inc. and      Subsidiaries          |
|----------------------------------------------------|
|                                               |
| Notes to Consolidated Financial      Statements    |
| (Dollars in Thousands, Except Per      Share Data) |

|                                                                                            |                                            |           |                                            |          | Additions                                  |          |                                            |            |   |     |                                            |        |       |
|--------------------------------------------------------------------------------------------|--------------------------------------------|-----------|--------------------------------------------|----------|--------------------------------------------|----------|--------------------------------------------|------------|---|-----|--------------------------------------------|--------|-------|
|                                                                                            |                                            |           |                                            |          | Charged to                                 |          | Charged                                    |            |   |     |                                            |        |       |  |  |
|                                                                                            |                                            |           |                                            |          | Costs and                                  |          | to Other                                   |            |   |     |                                            |        |       |  |  |
|                                                                                            |         | Beginning |         | Expenses |         | Accounts |         | Deductions |   |     |         | Ending |
| Year ended December 26,    2009:                                                           |                                            |           |                                            |          |                                            |          |                                            |            |   |     |                                            |        |       |    |  |  |  |  |
|      Accounts receivable                                          |                                            | $         | 240                                        |          | $                                          | 33       |                                            |            | $ | 169 |                                            | $      | 162   |  | (a) |  |  | 280 |
|      Inventories                                                  |                                            |           | 565                                        |          |                                            | 125      |                                            |            |   | 173 |                                            |        | 356   |  | (b) |  |  | 507 |
|      Deferred income tax asset                                    |                                            |           | 6,500                                      |          |                                            | (750     | )                                          |            |   | 214 |                                            |        | 214   |  |  |  |  | 5,750 |
|      Sales      allowance                                         |                                            |           | 991                                        |          |                                            | 2,859    |                                            |            |   | -   |                                            |        | 2,960 |  | (b) |  |  | 890 |
|           Total allowances      deducted |                                            |           |                                            |          |                                            |          |                                            |            |   |     |                                            |        |       |  |  |  |  |  |
|           from assets                    |                                            | $         | 8,296                                      |          | $                                          | 2,267    |                                            |            | $ | 556 |                                            | $      | 3,692 |  |  |  | $ | 7,427 |
|                                                                                       |
| Year ended December 27,    2008:                                                           |                                            |           |                                            |          |                                            |          |                                            |            |   |     |                                            |        |       |  |  |  |  |  |
|      Accounts receivable                                          |                                            | $         | 225                                        |          | $                                          | 96       |                                            |            | $ | -   |                                            | $      | 81    |  | (a) |  |  | 240 |
|      Inventories                                                  |                                            |           | 736                                        |          |                                            | 90       |                                            |            |   | 33  |                                            |        | 294   |  | (b) |  |  | 565 |
|      Deferred income tax asset                                    |                                            |           | 6,500                                      |          |                                            | -        |                                            |            |   | 163 |                                            |        | 163   |  |  |  |  | 6,500 |
|      Sales      allowance                                         |                                            |           | 556                                        |          |                                            | 2,732    |                                            |            |   | -   |                                            |        | 2,297 |  | (b) |  |  | 991 |
|           Total allowances      deducted |                                            |           |                                            |          |                                            |          |                                            |            |   |     |                                            |        |       |  |  |  |  |  |
|           from assets                    |                                            | $         | 8,017                                      |          | $                                          | 2,918    |                                            |            | $ | 196 |                                            | $      | 2,835 |  |  |  | $ | 8,296 |
|                                                                                       |
| Year ended December 29,    2007:                                                           |                                            |           |                                            |          |                                            |          |                                            |            |   |     |                                            |        |       |  |  |  |  |  |
|      Accounts receivable                                          |                                            | $         | 221                                        |          | $                                          | 65       |                                            |            | $ | -   |                                            | $      | 61    |  | (a) |  |  | 225 |
|      Inventories                                                  |                                            |           | 842                                        |          |                                            | 267      |                                            |            |   | -   |                                            |        | 373   |  | (b) |  |  | 736 |
|      Deferred income tax asset                                    |                                            |           | 6,500                                      |          |                                            | -        |                                            |            |   | -   |                                            |        | -     |  |  |  |  | 6,500 |
|      Sales      allowance                                         |                                            |           | 627                                        |          |                                            | 1,620    |                                            |            |   | -   |                                            |        | 1,691 |  | (b) |  |  | 556 |
|           Total allowances      deducted |                                            |           |                                            |          |                                            |          |                                            |            |   |     |                                            |        |       |  |  |  |  |  |
|           from assets                    |                                            | $         | 8,190                                      |          | $                                          | 1,952    |                                            |            | $ | -   |                                            | $      | 2,125 |  |  |  | $ | 8,017 |
|                                                                                       |                                            |           |                                            |          |                                            |          |                                            |            |   |     |                                            |        |       |  |  |  |  |  |

----