**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-Q**

 
| **ý**                                                                                                                                                                                                                                                                     | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)  OF THE  SECURITIES EXCHANGE ACT OF 1934**  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                           |                                                                                           |
| **For the  Quarterly Period Ended March 31, 2006**                                                                                                                                                                                                                             |
|                                                                                                                                                                                                                                                                           |                                                                                           |
| **o**                                                                                                                                                                                                                                                                          | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES EXCHANGE ACT OF 1934** |
|                                                                                                                                                                                                                                                                           |                                                                                           |
| **For the  Transition Period From                       to                    ** |

 

**CommissionFile Number 1-12599**

 

**VITA FOOD PRODUCTS, INC.**

(Exact name ofregistrant as specified in its charter)

 

| **Nevada**                       | ** ** | **36-3171548**       |
|----------------------------------|------------|----------------------|
| (State or other  jurisdiction of |       | (I.R.S. Employer     |
| incorporation or  organization)  |       | Identification  No.) |

 

**2222 West Lake Street, Chicago,Illinois     60612**

(Address ofprincipal executive offices)      (ZipCode)

 

Registrant’s telephonenumber, including area code:   **(312) 738-4500**

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days. Yes  ýNo  o

 

Indicate by check mark whether the registrant is a large acceleratedfiler, an accelerated filer, or a non-accelerated filer. (as defined in Rule12b-2 of the Exchange Act).

Large accelerated filer o              Acceleratedfiler o              Non-acceleratedfiler ý

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act). Yes o   No ý

 

The number ofshares outstanding of registrant’s common stock as of April 30, 2006 was 4,889,822.

 

 

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**VITA FOODPRODUCTS, INC.**

 

**FORM 10-Q**

 

**For the Quarter Ended March 31,2006**

** **

**INDEX**

 
| **PART  I.** | **FINANCIAL  INFORMATION**                                                                  | **3**                                                                                          |
|--------------|---------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------|
| ** **   | ** **                                                                                  | ** **                                                                                     |
| Item 1.      | Financial Statements                                                                        | 3                                                                                              |
|         |                                                                                        |                                                                                           |
|         | a)                                                                                          | Consolidated Balance Sheets as of  March 31, 2006 and December 31, 2005                        | 3 |
|         |                                                                                        |                                                                                           |   |
|         | b)                                                                                          | Consolidated Statements of  Operations for the Three Months Ended March 31, 2006 and 2005      | 4 |
|         |                                                                                        |                                                                                           |   |
|         | c)                                                                                          | Consolidated Statement of  Shareholders’ Equity for the Three Months Ended March 31, 2006 | 5 |
|         |                                                                                        |                                                                                           |   |
|         | d)                                                                                          | Consolidated Statements of  Cash Flows for the Three Months Ended March 31, 2006 and 2005      | 5 |
|         |                                                                                        |                                                                                           |   |
|         | e)                                                                                          | Notes to Consolidated  Financial Statements                                                    | 6 |
|         |                                                                                        |                                                                                           |   |
| Item 2.      | Management’s Discussion and Analysis of Financial  Condition and Results of Operations | 10                                                                                             |
|         |                                                                                        |                                                                                           |
| Item 3.      | Quantitative and Qualitative Disclosures  About Market Risk                                 | 14                                                                                             |
|         |                                                                                        |                                                                                           |
| Item 4.      | Controls and Procedures                                                                     | 14                                                                                             |
|         |                                                                                        |                                                                                           |
| **PART II.** | **OTHER INFORMATION**                                                                       | **15**                                                                                         |
|         |                                                                                        |                                                                                           |
| Item 1A.     | Risk Factors                                                                                | 15                                                                                             |
|         |                                                                                        |                                                                                           |
| Item 6.      | Exhibits                                                                                    | 15                                                                                             |
|         |                                                                                        |
| SIGNATURES   | 16                                                                                          |

 

2

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**PART 1. FINANCIAL STATEMENTS**

 

**Item 1.Financial Statements**

 
| **Consolidated  Balance Sheets** | **Vita Food  Products, Inc.** |
|----------------------------------|-------------------------------|
| ** **                       | **And  Subsidiary**           |

 
| ** **                                                                                                                           | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|------------|-----------------------|------------|
| ** **                                                                                                                           | ** ** | **2006**           | ** ** | **2005**              | ** ** |
|                                                                                                                                 |       |               |       |                  |       |
| **ASSETS**                                                                                                                           |       |               |       |                  |       |
| Current Assets                                                                                                                       |       |               |       |                  |       |
| Cash                                                                                                                                 |       | $                  | 58,090     |                  | $          | 25,133 |   |
| Accounts  receivable-trade, net of allowance for discounts, returns, and doubtful accounts  of $616,000 in 2006 and $563,000 in 2005 |       | 4,959,894          |       | 5,215,912             |       |
| Inventories                                                                                                                          |       |               |       |                  |       |
| Raw material and  supplies                                                                                                           |       | 4,861,372          |       | 5,503,048             |       |
| Work in process                                                                                                                      |       | 257,822            |       | 192,630               |       |
| Finished goods                                                                                                                       |       | 2,302,898          |       | 1,827,245             |       |
| Prepaid expenses  and other current assets                                                                                           |       | 444,511            |       | 400,679               |       |
| Income taxes  receivable                                                                                                             |       | 112,885            |       | 381,312               |       |
| Deferred income  taxes                                                                                                               |       | 519,580            |       | 519,578               |       |
| Total Current  Assets                                                                                                                |       | 13,517,052         |       | 14,065,537            |       |
|                                                                                                                                 |       |               |       |                  |       |
| Property, Plant  and Equipment                                                                                                       |       |               |       |                  |       |
| Land                                                                                                                                 |       | 35,000             |       | 35,000                |       |
| Building and  improvements                                                                                                           |       | 2,793,364          |       | 2,660,975             |       |
| Leasehold  improvements                                                                                                              |       | 582,619            |       | 549,926               |       |
| Machinery and  office equipment                                                                                                      |       | 11,382,229         |       | 11,302,648            |       |
|                                                                                                                                 |       | 14,793,212         |       | 14,548,549            |       |
| Less accumulated  depreciation and amortization                                                                                      |       | (8,913,074         | )          | (8,710,072            | )          |
| Net Property,  Plant and Equipment                                                                                                   |       | 5,880,138          |       | 5,838,477             |       |
|                                                                                                                                 |       |               |       |                  |       |
| Goodwill                                                                                                                             |       | 6,696,705          |       | 6,696,705             |       |
| Other assets                                                                                                                         |       | 422,811            |       | 422,661               |       |
| Total Assets                                                                                                                         |       | $                  | 26,516,706 |                  | $          | 27,023,380 |   |
|                                                                                                                                 |       |               |       |                  |       |
| **LIABILITIES  AND SHAREHOLDERS’ EQUITY**                                                                                       |       |               |       |                  |       |
| Current  Liabilities                                                                                                                 |       |               |       |                  |       |
| Current  maturities of long-term obligations                                                                                         |       | $                  | 2,332,586  |                  | $          | 2,217,840 |   |
| Accounts payable                                                                                                                     |       | 3,297,976          |       | 3,142,406             |       |
| Accrued expenses                                                                                                                     |       | 870,838            |       | 853,982               |       |
| Total Current  Liabilities                                                                                                           |       | 6,501,400          |       | 6,214,228             |       |
|                                                                                                                                 |       |               |       |                  |       |
| Long-term  Obligations, Less Current Maturities                                                                                      |       | 13,387,077         |       | 16,653,369            |       |
|                                                                                                                                 |       |               |       |                  |       |
| Deferred Income  Taxes                                                                                                               |       | 490,728            |       | 453,728               |       |
|                                                                                                                                 |       |               |       |                  |       |
| Shareholders’  Equity                                                                                                           |       |               |       |                  |       |
| Preferred stock,  $.01 par value, authorized 1,000,000 shares; none issued                                                           |       |               |       |                  |       |
| Common stock,  $.01 par value; authorized 10,000,000 shares; issued 4,879,338 shares in 2006 and  3,879,338 shares in 2005      |       | 48,793             |       | 38,793                |       |
| Treasury stock,  at cost 6,516 shares                                                                                                |       | (50,043            | )          | (50,043               | )          |
| Additional  paid-in capital                                                                                                          |       | 6,181,048          |       | 3,812,397             |       |
| Accumulated  deficit                                                                                                                 |       | (42,297            | )          | (99,092               | )          |
| Total  Shareholders’ Equity                                                                                                     |       | 6,137,501          |       | 3,702,055             |       |
| Total  Liabilities and Shareholders’ Equity                                                                                     |       | $                  | 26,516,706 |                  | $          | 27,023,380 |   |

 

See accompanying notes toconsolidated financial statements.

 

3

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| **Consolidated  Statements of Operations** | ** ** | **Vita Food  Products, Inc.** |
|--------------------------------------------|------------|-------------------------------|
| ** **                                 | ** ** | **And  Subsidiary**           |

 
| ** **                                         | ** ** | **For the three months ended  March 31,** | ** ** |
|----------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                         | ** ** | **2006**                                                           | ** ** | **2005** | ** ** |
| ** **                                         | ** ** | ** **                                                         | ** ** | ** ** | ** ** |
| Net Sales                                          |       | $                                                                  | 12,788,448 |   | $ | 10,897,429 |   |
| Cost of Goods  Sold                                |       | 8,892,006                                                          |       | 7,695,936 |   |
| Gross Margin                                       |       | 3,896,442                                                          |       | 3,201,493 |   |
|                                               |       |                                                               |       |   |   |
| Selling and  Administrative Expenses               |       |                                                               |       |   |   |
| Selling,  Marketing and Distribution               |       | 2,325,363                                                          |       | 2,184,928 |   |
| Administrative                                     |       | 1,151,569                                                          |       | 1,234,671 |   |
| Total Selling  and Administrative Expenses         |       | 3,476,932                                                          |       | 3,419,599 |   |
| Operating Profit  (Loss)                           |       | 419,510                                                            |       | (218,106 | ) |
|                                               |       |                                                               |       |   |   |
| Interest Expense                                   |       | 325,715                                                            |       | 210,950 |   |
| Income (Loss)  Before Income Tax Expense (Benefit) |       | 93,795                                                             |       | (429,056 | ) |
| Income Tax  Expense (Benefit)                      |       | 37,000                                                             |       | (172,000 | ) |
| Net Income  (Loss)                                 |       | $                                                                  | 56,795     |   | $ | (257,056 | ) |
|                                               |       |                                                               |       |   |   |
| Basic Earnings  (Loss) Per Share                   |       | $                                                                  | 0.01       |   | $ | (0.07 | ) |
| Weighted Average  Common Shares Outstanding        |       | 3,995,044                                                          |       | 3,858,738 |   |
|                                               |       |                                                               |       |   |   |
| Diluted Earnings  (Loss) Per Share                 |       | $                                                                  | 0.01       |   | $ | (0.07 | ) |
| Weighted Average  Common Shares Outstanding        |       | 4,016,193                                                          |       | 3,858,738 |   |

 
| **Consolidated  Statement of Shareholders’ Equity** | ** ** | **Vita Food  Products, Inc.** |
|----------------------------------------------------------|------------|-------------------------------|
| ** **                                               | ** ** | **And  Subsidiary**           |

 
| ** **                              | ** ** | ** **            | ** ** | ** **   | ** ** | ** **  | ** ** | **Additional**  | ** ** | ** **  | ** ** | ** ** | ** ** |
|-----------------------------------------|------------|-----------------------|------------|--------------|------------|-------------|------------|-----------------|------------|-------------|------------|------------|------------|
| ** **                              | ** ** | **Common Stock** | ** ** | **Treasury** | ** ** | **Paid-in** | ** ** | **Accumulated** | ** ** | ** **  | ** ** |
| ** **                              | ** ** | **Shares**            | ** ** | **Amount**   | ** ** | **Stock**   | ** ** | **Capital**     | ** ** | **Defecit** | ** ** | **Total**  | ** ** |
|                                    |       |                  |       |         |       |        |       |            |       |        |       |       |       |
| Balance, at  January 1, 2006            |       | 3,879,338             |       | $            | 38,793     |        | $          | (50,043         | )          | $           | 3,812,397  |       | $          | (99,092 | ) | $ | 3,702,055 |   |
| Common stock and  warrant issuance, net |       | 1,000,000             |       | 10,000       |       | —      |       | 2,363,851       |       | —      |       | 2,373,851  |       |
| Stock - based  compensation expense     |       | —                |       | —       |       | —      |       | 4,800           |       | —      |       | 4,800      |       |
| Net income                              |       | —                |       | —       |       | —      |       | —          |       | 56,795      |       | 56,795     |       |
| Balance, at March  31, 2006             |       | 4,879,338             |       | $            | 48,793     |        | $          | (50,043         | )          | $           | 6,181,048  |       | $          | (42,297 | ) | $ | 6,137,501 |   |

 

See accompanying notes to consolidated financialstatements.

 

4

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| **Consolidated  Statements of Cash Flows** | **Vita Food  Products, Inc.** |
|--------------------------------------------|-------------------------------|
| ** **                                 | **And  Subsidiary**           |

 
| ** **                                                                               | ** ** | **For the three months ended  March 31,** | ** ** |
|------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                                                               | ** ** | **2006**                                                           | ** ** | **2005** | ** ** |
| ** **                                                                               | ** ** | ** **                                                         | ** ** | ** ** | ** ** |
| **Cash  Flows From Operating Activities**                                                |       |                                                               |       |   |   |
| Net income  (loss)                                                                       |       | $                                                                  | 56,795     |   | $ | (257,056 | ) |
| Adjustments to  reconcile net income (loss) to net cash provided by operating activities |       |                                                               |       |   |   |
| Depreciation and  amortization                                                           |       | 227,376                                                            |       | 234,425 |   |
| Deferred income  tax provision (benefit)                                                 |       | 36,998                                                             |       | (172,000 | ) |
| Non-cash  stock-based compensation expense                                               |       | 4,800                                                              |       | — |   |
| Changes in  assets and liabilities:                                                      |       |                                                               |       |   |   |
| Accounts  receivable                                                                     |       | 256,018                                                            |       | 1,132,896 |   |
| Inventories                                                                              |       | 100,831                                                            |       | (189,794 | ) |
| Prepaid expenses  and other current assets                                               |       | (43,832                                                            | )          | 134,672 |   |
| Income taxes  receivable                                                                 |       | 268,427                                                            |       | (3,292 | ) |
| Accounts payable                                                                         |       | 155,570                                                            |       | (128,264 | ) |
| Accrued expenses  and other long term obligations                                        |       | (81,998                                                            | )          | 83,223 |   |
| Net cash  provided by operating activities                                               |       | 980,985                                                            |       | 834,810 |   |
|                                                                                     |       |                                                               |       |   |   |
| **Cash  Flows From Investing Activities**                                                |       |                                                               |       |   |   |
| Capital  expenditures                                                                    |       | (261,959                                                           | )          | (110,557 | ) |
| Change in other  assets                                                                  |       | (7,226                                                             | )          | (3,520 | ) |
| Net cash used in  investing activities                                                   |       | (269,185                                                           | )          | (114,077 | ) |
|                                                                                     |       |                                                               |       |   |   |
| **Cash  Flows From Financing Activities**                                                |       |                                                               |       |   |   |
| Proceeds from issuance  of stock and warrants                                            |       | 2,373,851                                                          |       | — |   |
| Net payments  under revolving loan facility                                              |       | (2,765,473                                                         | )          | (535,550 | ) |
| Payments on term  loan facility                                                          |       | (287,221                                                           | )          | (193,503 | ) |
| Net cash used in  financing activities                                                   |       | (678,843                                                           | )          | (729,053 | ) |
| Net increase  (decrease) in cash                                                         |       | 32,957                                                             |       | (8,320 | ) |
|                                                                                     |       |                                                               |       |   |   |
| Cash, at  beginning of period                                                            |       | 25,133                                                             |       | 55,968 |   |
| Cash, at end of  period                                                                  |       | $                                                                  | 58,090     |   | $ | 47,648 |   |
|                                                                                     |       |                                                               |       |   |   |
| Supplemental  Disclosure of Cash Flow Information                                        |       |                                                               |       |   |   |
| Cash paid for  interest                                                                  |       | $                                                                  | 337,000    |   | $ | 202,000 |   |
| Income taxes  (received) paid                                                            |       | $                                                                  | (268,427   | ) | $ | 3,292 |   |

 

See accompanying notes to consolidated financialstatements.

 

5

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**Vita Food Products, Inc. andSubsidiary**

** **

**Notes to ConsolidatedFinancial Statements**

 

**(Unaudited)**

 

**Basis of Presentation**

** **

In the opinion of management, the accompanying balancesheets and related interim statements of operations, cash flows, andshareholders’ equity include all adjustments, consisting only of normalrecurring items necessary for their fair presentation in conformity with U.S.generally accepted accounting principles. Preparing financial statementsrequires management to make estimates and assumptions that affect the reportedamounts of assets, liabilities, revenue, and expenses. Examples includeprovisions for returns, deductions, bad debts, and length of building andequipment lives. Actual results may differ from these estimates. Interimresults are not necessarily indicative of results for a full year. Theinformation included in this Form 10-Q should be read in conjunction withManagement’s Discussion and Analysis of Financial Condition and Results ofOperations and financial statements and notes thereto included in the Form 10-Kfor the fiscal year ended December 31, 2005 of Vita Food Products, Inc. (“VitaSeafood”) together with its wholly owned subsidiary, Vita Specialty Foods, Inc.(“VSF”), hereinafter collectively referred to as the “Company”.

 

For the first quarters ended March 31, 2006 and 2005,diluted earnings (loss) per share computations exclude 1,277,600 and 260,100shares, respectively, issuable upon exercise of stock options and warrantsbecause the assumed exercise of these options and warrants would beanti-dilutive.

 

Starting on January 1, 2006, the Company changed theclassification of “Slotting” expense, which had previously been included in theSelling, Marketing and Distribution category of operating expenses, to betreated as a sales deduction and thus classify these expenses as a reduction toarrive at the Net Sales total. These expenses are fees charged by customers toplace the Company’s new items into the customers’ distribution system. Additionally,the 2005 operating results, as presented above, have been adjusted to considerthis change and thus make these results more comparable with the 2006 results. Theresult of this reclassification, which had no affect on Operating Profit (Loss)or Net Income (Loss), was to reduce both Net Sales and Selling, Marketing andDistribution expenses, in an offsetting fashion, for the three months endedMarch 31, 2006 and 2005 by $42,000 and $122,000, respectively.

 

**Principles of Consolidation**

 

The consolidated financial statements include the accountsof Vita Seafood and VSF. VSF includes the now integrated results of Virginia HoneyCompany, Inc. (“Virginia Honey”) acquired in 2001 and The Halifax Group, Inc. (“Halifax”),acquired in 2002. All significant intercompany transactions and balances havebeen eliminated.

 

##### **Revenue Recognition**

##### ** **

Revenue isrecognized upon the passing of title to the customers, which occurs uponshipment of product to customers, including brokers, in fulfillment of customerorders. In accordance with industry practices, inventory is sold to customersoften with the right to return or dispose if the merchandise is not resoldprior to the expiration of its shelf life. In order to support the Company’sproducts, various marketing programs are offered to customers, which reimbursethem for a portion, or all, of their promotional activities related to theCompany’s products. The Company regularly reviews and revises, when it deemsnecessary, estimates of costs to the Company for these marketing andmerchandising programs based on estimates of what has been incurred bycustomers. Actual costs incurred by the Company may differ significantly iffactors such as the level and success of the customers’ programs or otherconditions differ from expectations. Sales are reduced by a provision forestimated future returns, disposals and promotional expense.

 

**Earn OutProvisions Under Acquisition Agreement**

 

Pursuant to the Company’sacquisition of Virginia Honey in 2001, the previous owner of that business, whois an employee and director of the Company, is subject to earn out provisionsthat have resulted in additional payments and may continue for one more periodto result in an additional payment by the Company for the acquired business. As

 

6

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amended, the earn outprovisions for Terry Hess, the previous owner of Virginia Honey, have resultedin an additional amount of $840,000 paid to Mr. Hess in April 2005. This firstearn out payment was based on the operating results of Virginia Honey for theperiod from January 1, 2001 to December 31, 2002. In addition, a second earnout payment to Mr. Hess in the amount of $700,000 has been paid in April 2006. Thesecond earn out payment was based on the operating results of the VSF for theperiod from January 1, 2003 to December 31, 2005. A potential remaining earnout payment to Mr. Hess will be based on the earnings of VSF, as computed by apredefined allocation formula, for the period January 1, 2006 to December 31,2007. Should VSF maintain its current profitability level throughout thisperiod, management estimates that an additional payment with a net presentvalue as of March 31, 2006 of approximately $220,000 would be due to Mr. Hessin April 2008. Previous earn out payments have been recorded as goodwill. Anyfuture payment will be recorded as additional goodwill, and be subject toimpairment analysis, when and if such payment is finally determined at the endof the period described above.

 

**Bank Loan Agreement**

** **

On September 8, 2003, the Company entered into a loanagreement with a bank (the “Loan Agreement”) and paid off its existing creditfacility with initial borrowings under this new Loan Agreement. The originalLoan Agreement provided for a two-year $8,500,000 revolving line of credit (the“revolver”), a five-year $6,500,000 term loan (the “Term A Loan”) and asix-year $3,000,000 term loan (the “Term B Loan”). The Term B Loan was neverutilized. During 2004 and 2005, the Loan Agreement was amended several timesto, among other things, extend the maturity dates of the revolver and changethe available borrowings under the revolver (which most recently had been$10,500,000), and the Term Loans and an over-advance loan of $1,000,000 whichwas terminated on February 28, 2006. On March 24, 2006, the Loan Agreement wasfurther amended. Pursuant to this latest amendment, the Loan Agreement nowprovides for a $9,500,000 revolver which terminates on April 1, 2007; a$7,750,000 Term A Loan due in monthly installments of $80,000 through July 31,2008 with a balloon payment of $3,682,000 due on August 31, 2008; a $150,000capital expenditure Term Loan B due in monthly installments of 1/60thof the outstanding balance as of August 2006 from that date through May 31,2010 and the remainder due on June 30, 2010. The revolver is now limited to aborrowing base equal to 80% of eligible accounts receivable and 60% of eligibleinventories, as defined. No borrowing was outstanding under the over-advanceline as of December 31, 2005. Outstanding borrowings under the Loan Agreementare secured by substantially all assets of the Company.

 

Interest under each piece of the amended Loan Agreement is at afloating rate per annum equal to the prime rate plus 0.5%. This rate was 8.25percent as of March 31, 2006.

 

The Loan Agreement imposes certain restrictions on the Company,including its ability to complete significant asset sales, merge or acquirebusinesses and pay dividends. Additionally, the Company must meet certainfinancial covenants at each quarter end during the term of the Loan Agreement,including a Minimum Tangible Net Worth, a Minimum EBITDA and a Minimum CashFlow Coverage Leverage ratio, all as defined in the Loan Agreement. During 2004and 2005, the Company had violated certain of these covenants and had obtainedpermanent waivers from the bank for such violations. The March 24, 2006amendment to the Loan Agreement retroactively amended these financialcovenants, and, as amended, the Company was in compliance with those covenants.Management believes that the Company will maintain compliance with the amendedcovenants.

 

7

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**Business Segments**

** **

The Company reports twooperating business segments in the same format as reviewed by the Company’ssenior management. Segment one, Vita Seafood, processes and sells variousherring, and cured and smoked salmon products throughout the United States andMexico. Segment two, VSF, combines the products of Virginia Honey and Halifaxand manufactures and distributes honey, salad dressings, sauces, marinades,jams and jellies and gift baskets throughout North America. Managementpredominately uses operating profit as the measure of profit or loss bybusiness segment.

 

**Business segment information is as follows ($000’s):**

** **
| **Three months ended March 31,** | ** ** | **2006**   | ** ** | **2005**   | ** ** |
|------------------------------------------------------|------------|------------|------------|------------|------------|
|                                                 |       |       |       |       |       |
| **Net  Sales**                                       |       |       |       |       |       |
| Vita Seafood                                         | ** ** | **$**      | **7,401**  | ** ** | $          | 5,980 |   |
| VSF                                                  | ** ** | **5,387**  | ** ** | 4,917      |       |
|                                                 |       | ** ** | ** ** |       |       |
| Total Net Sales                                      | ** ** | **$**      | **12,788** | ** ** | $          | 10,897 |   |
|                                                 |       | ** ** | ** ** |       |       |
| **Operating  Profit (Loss)**                         |       | ** ** | ** ** |       |       |
| Vita Seafood                                         | ** ** | **$**      | **202**    | ** ** | $          | (371 | ) |
| VSF                                                  | ** ** | **218**    | ** ** | 153        |       |
|                                                 |       | ** ** | ** ** |       |       |
| Total Operating  Profit (Loss)                       | ** ** | **$**      | **420**    | ** ** | $          | (218 | ) |
|                                                 |       | ** ** | ** ** |       |       |
| **Net  Income (Loss)**                               |       | ** ** | ** ** |       |       |
| Vita Seafood                                         | ** ** | **$**      | **9**      | ** ** | $          | (295 | ) |
| VSF                                                  | ** ** | **48**     | ** ** | 38         |       |
|                                                 |       | ** ** | ** ** |       |       |
| Total Net Income  (Loss)                             | ** ** | **$**      | **57**     | ** ** | $          | (257 | ) |
|                                                 |       | ** ** | ** ** |       |       |
| **Depreciation  and Amortization**                   |       | ** ** | ** ** |       |       |
| Vita Seafood                                         | ** ** | **$**      | **121**    | ** ** | $          | 123 |   |
| VSF                                                  | ** ** | **106**    | ** ** | 111        |       |
|                                                 |       | ** ** | ** ** |       |       |
| Total Depreciation  and Amortization                 | ** ** | **$**      | **227**    | ** ** | $          | 234 |   |
|                                                 | ** ** | ** ** | ** ** |       |       |
| **Capital  Expenditures**                            |       | ** ** | ** ** |       |       |
| Vita Seafood                                         | ** ** | **$**      | **160**    | ** ** | $          | 5 |   |
| VSF                                                  | ** ** | **102**    | ** ** | 106        |       |
|                                                 |       | ** ** | ** ** |       |       |
| Total Capital  Expenditures                          | ** ** | **$**      | **262**    | ** ** | $          | 111 |   |
|                                                 |       | ** ** | ** ** |       |       |
| **Goodwill**                                         |       | ** ** | ** ** |       |       |
| Vita Seafood                                         | ** ** | **$**      | **—** | ** ** | $          | — |   |
| VSF                                                  | ** ** | **6,697**  | ** ** | 5,997      |       |
|                                                 |       | ** ** | ** ** |       |       |
| Total Goodwill                                       | ** ** | **$**      | **6,697**  | ** ** | $          | 5,997 |   |
|                                                 |       | ** ** | ** ** |       |       |
| **Total  Assets**                                    |       | ** ** | ** ** |       |       |
| Vita Seafood                                         | ** ** | **$**      | **18,176** | ** ** | $          | 15,867 |   |
| VSF                                                  | ** ** | **8,341**  | ** ** | 7,888      |       |
|                                                 |       | ** ** | ** ** |       |       |
| Total Assets                                         | ** ** | **$**      | **26,517** | ** ** | $          | 23,755 |   |

 

8

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**StockBased Compensation**

 

EffectiveJanuary 1, 2006, the Company adopted Statement of Financial AccountingStandards No. 123 (revised 2004), “Share Based Payment” (SFAS 123 (R)),applying the modified prospective method. Prior to the adoption of SFAS 123(R),the Company applied the provisions of APB Opinion No. 25, “Accounting for StockIssued to Employees,” in accounting for its stock-based awards, andaccordingly, recognized no compensation cost for its stock option plan awards.Under the modified prospective method, SFAS 123(R) applies to new awards and toawards that were outstanding as of December 31, 2005 that are subsequentlyvested, modified, repurchased or cancelled. Compensation expense recognizedduring the first quarter of 2006 includes the portion vesting during the periodfor (1) all share-based payments granted prior to, but not yet vested as ofDecember 31, 2005, based on the grant date fair value estimated in accordancewith the original provisions of Statement of Financial Accounting Standards No.123, “Accounting for Stock-Based Compensation” (SFAS 123) and (2) allshare-based payments granted subsequent to December 31, 2005, based on thegrant-date fair value estimated using the Black-Scholes option-pricing model.Due to the late 2005 acceleration of vesting for all outstanding stock optionsgranted prior to January 1, 2005, future compensation expense related tounvested stock options granted before such date is expected to be less than$50,000. Stock options to purchase 10,000 shares were granted to directorsduring the first quarter of 2006. Stock compensation expense of $4,900 wasrecognized during the first quarter of 2006 on existing stock options. As aresult of the Company’s decision to adopt the modified prospective method,prior period results have not been restated.

 

**Before adoption of SFAS 123(R), pro forma disclosuresreflected the fair value of each option grant estimated on the date of grant usingthe Black-Scholes option-pricing model with the following weighted-averageassumptions for stock options granted during the three months ended March 31,2005. The following table also shows similar information for the optionsgranted during the first quarter of 2006.**

** **
| **Three months ended March 31,** | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------------------------|------------|----------|------------|----------|------------|
| Expected option  life in years                       |       | 5        |       | 5        |       |
| Risk-free  interest rate                             |       | 4.6      | %          | 4.2      | %          |
| Dividend yield                                       |       | —   |       | —   |       |
| Expected  volatility                                 |       | 51.5     | %          | 48.1     | %          |
| Per share fair  value                                |       | $        | 1.15       |     | $          | 1.61 |   |
|                                                      |            |          |            |          |            |  |  |

 

The following table illustrates the effect on netincome and earnings per share if the Company had applied the fair valuerecognition provisions of SFAS 123 for the three months ended March 31, 2005:

 
| **Three months ended March 31, 2005**              | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------|------------|------------|------------|
| Net Loss – as reported                                                 |       | $          | (257,056   | ) |
| Deduct: Total  stock based compensation expense, net of related tax effects |       | (21,735    | )          |
| Pro forma net  income                                                       |       |       |       | $ | (278,791 | ) |
| Basic and  diluted loss per share:                                          |       |       |       |   |   |
| As reported                                                                 |       |       |       | $ | (0.07 | ) |
| Pro forma                                                                   |       |       |       | $ | (0.07 | ) |

 

The aggregate intrinsic value (defined as the difference between themarket value of the Company’s stock as of the end of the period and theexercise price of the stock options) for stock options outstanding andexercisable at March 31, 2006 is $186,328 and $112,488, respectively. No stockoptions were exercised during the first quarter of 2006.

 

9

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The following is a summary of non vested stock option activity:

 
| ** **                       | ** ** | **Number of Shares** | ** ** | **Weighted Average  Grant-Date Fair Value** | ** ** |
|----------------------------------|------------|--------------------------------|------------|------------------------------------------------------------|------------|
| Non vested at  December 31, 2005 |       | 63,000                         |       | $                                                          | 2.47       |   |
| Granted                          |       | 10,000                         |       | 2.30                                                       |       |
| Vested                           |       | (1000                          | )          | (3.41                                                      | )          |
| Cancelled                        |       | (4,000                         | )          | (3.41                                                      | )          |
| Non-vested at  March 31, 2006    |       | 68,000                         |       | $                                                          | 2.37       |   |

 

At March 31, 2006, there was $47,075 of total unrecognized cost relatedto non-vested stock options which will be recognized over the next 4.75 years.

 

**Equity Issuance**

 

In February 2006, the Company entered into agreements pursuant to whichfive individuals or their affiliated entities invested a total of $2,500,000 inthe Company. Substantially all of these funds were used to reduce funded debt. Theinvestors received units consisting of an aggregate of 1,000,000 shares ofcommon stock; three-year warrants to purchase 500,000 shares of common stock atan exercise price of $5.00 per share; and five-year warrants to purchase anadditional 500,000 shares of common stock at an exercise price of $7.50 pershare. The investors included the following: (i) Stephen D. Rubin, Office ofthe Chief Executive, President and a director of the Company, (ii) Clifford K.Bolen, Office of the Chief Executive, Senior Vice President, Chief OperatingOfficer and Chief Financial Officer of the Company, together with certain ofhis affiliates, (iii) Delphi Casualty Co., of which Glenn S. Morris, a directorof the Company, owns a 44% equity interest, (iv) a trust of which John C.Seramur, a director of the Company, serves as trustee, as well as (v) oneunrelated third-party investor. The warrants were valued at $0.37 and $0.44 pershare for the three year and five year warrants, respectively, based on theBlack Scholes option pricing model with an expected life assumption of 3 yearsand 5 years respectively, a risk free interest rate of 4.59%, a dividend rateof 0% and a volatility rate of 51.5%. The aggregate value of the warrants isincluded in additional paid-in-capital. Based on the stock price on the datethe employees and directors committed to acquire the units, the aggregate valueof the securities received was not greater than the consideration paid; andaccordingly, no compensation expense was received.

 

**Item 2. Management’s Discussionand Analysis of Financial Condition and Results of Operations**

** **

***Comparison of the Three Months Ended March 31,2006 and March 31, 2005***

*** ***

***Revenues.***Net sales for the three months ended March 31, 2006 were$12,788,000, compared to $10,897,000 for the same period in 2005, an increaseof $1,891,000 or 17.4%. This increase is primarily attributable to VitaSeafood, which experienced an increase of $1,420,000, or 23.7%, led by growthof $1,280,000 in its line of salmon products. An additional gain was reflectedin the Vita Seafood herring product line of $256,000, but the specialty productline sales were flat with the prior year. These results were partially offsetby higher returns and allowances of $116,000. Of the substantial increase insalmon sales, approximately $900,000 is a result of a volume increase with thebalance of $380,000 arising primarily from pricing gains. Furthermore, althoughthis increase in salmon sales was applicable to most major customers of thisproduct line, two major customers contributed about half of this gain. Theincrease in herring sales was primarily the result of pricing increases which providedapproximately $156,000 of the increase with approximately $100,000 resultingfrom increased volume, most of which was derived from two major customers. Addingto the increase in net sales from Vita Seafood was an increase of $471,000, or9.6%, for the VSF business, which was primarily the result of a $306,000 or10.6% improvement in sales of the Vidalia Onion Vinegarette branded saladdressings, almost all of which was driven by demand from two large customers. Herring,salmon, and specialty product sales represented 46%, 50% and 4%, respectively,of Vita Seafood’s total gross sales during the current period compared to 53%,43%, and 4%, respectively, during the prior year quarter. Saladdressings/sauces, honey products and specialty items, represented 69%, 30% and1%, respectively, of VSF current quarter total gross sales compared to 70%, 29%and 1%, respectively, during the prior year quarter.

 

***GrossMargin.***Gross margin for the three months ended March 31,2006 was $3,896,000, compared to $3,201,000 for the same period in 2005, anincrease of $695,000 or 21.7%. The majority of this increase, $679,000, wasattributed to the

 

10

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Vita Seafood results withan additional $16,000 attributable to the VSF business. As a percent of net sales,gross margin totaled 30.5%, up from 29.4% for the same period in 2005. Grossmargin for the Vita Seafood business, as a percentage of net sales, increasedto 29.3% from 24.9% for the same period in 2005. This improvement arose largelyfrom a combination of the selling price changes described above and factory efficiencieswhich resulted at least partially from the significant volume increase. For theVSF business, gross margin as a percent of net sales decreased to 32.1% for thecurrent quarter versus 34.8% for the same period in 2005. This decrease was primarilya result of competitive factors limiting the ability to pass along risingmaterial and production costs with pricing changes.

 

***OperatingExpenses****.*Selling,marketing, distribution and administrative expenses for the three months ended March31, 2006 were $3,477,000, compared to $3,420,000 for the same period in 2005,an increase of $57,000 or 1.7%. These expenses represented 27.2% of sales forthe quarter ended March 31, 2006 compared to 31.4% for the same period in 2005.The increased dollar amount of these expenses resulted from a $140,000 increasein selling, marketing and distribution expenses net of an $83,000 decrease in administrationexpenses. The increase in selling, marketing and distribution expense arose atthe Vita Seafood business as a result of both higher variable expenses, such asbrokerage fees, resulting from the higher sales and from employment relatedexpenses which reflect a significant staff upgrade, including the addition oftwo key members to the sales and marketing team, made since the 2005 quarterend. The reduction in administrative expense is also primarily attributable tothe results of the Vita Seafood business which, in a large part, reflects thesalary expense decline arising from the fourth quarter 2005 amendment to thecontract of a senior officer which included a significant reduction in his duties.

 

***InterestExpense.***Interest expense for the three months ended March31, 2006 was $326,000, compared to $211,000 for the same period in 2005, anincrease of $115,000 or 54.4%. During the 2006 period, average debt increasedto $16,900,000 from $15,500,000 or 9.0% compared to the same quarter of theprior year. Thus the increase in interest expense was primarily attributable tohigher average interest rates under the Company’s Loan Agreement which rose to7.7% in the 2006 period from 5.5% in the 2005 period.

 

***IncomeTaxes.***The Company provided expense of $37,000 and recognizeda benefit of $(172,000) for the quarters ended March 31, 2006 and 2005,respectively. Both represented approximately 40% of the pretax results forthose periods.

 

***NetIncome (Loss).***Reflecting the operating results describedabove, net income for the three months ended March 31, 2006 totaled $57,000 or$0.01 per share on both a basic and fully diluted basis. This compares to a netloss of $(257,000) for the same period in 2005, or $(0.07) per share on bothbases. Weighted average outstanding shares increased due to the February 2006issuance of 1,000,000 shares of common stock.

 

**Financial Condition**

** **

In February 2006, the Company entered into agreements pursuant to whichfive individuals or their affiliated entities invested a total of $2,500,000 inthe Company. Substantially all of these funds were used to reduce funded debt. Theinvestors received units consisting of an aggregate of 1,000,000 shares ofcommon stock; three-year warrants to purchase 500,000 shares of common stock atan exercise price of $5.00 per share; and five-year warrants to purchase anadditional 500,000 shares of common stock at an exercise price of $7.50 pershare. The investors included the following: (i) Stephen D. Rubin, Office ofthe Chief Executive, President and a director of the Company, (ii) Clifford K.Bolen, Office of the Chief Executive, Senior Vice President, Chief OperatingOfficer and Chief Financial Officer of the Company, together with certain ofhis affiliates, (iii) Delphi Casualty Co., of which Glenn S. Morris, a directorof the Company, owns a 44% equity interest, (iv) a trust of which John C.Seramur, a director of the Company, serves as trustee, as well as (v) oneunrelated third-party investor.

 

At March 31, 2006, the Company had $7,015,000 in working capital,versus $7,851,000 at December 31, 2005, and $6,765,000 at March 31, 2005. Thecurrent ratio at March 31, 2006 was 2.1 to 1.0 compared to 2.3 to 1.0 at December31, 2005 and 2.4 to 1.0 at March 31, 2005. Due to the seasonality of thebusiness, it is typical for a reduction in the Company’s current assets tooccur during the first three months of each year since this period follows thefourth quarter peak of the annual business cycle. This year, the current assetsdecreased $548,000 of which $268,000 and $256,000 represented decreases resultingfrom net collections of income taxes receivable and trade accounts receivable,respectively.

 

11

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At March 31, 2006, the Company had $58,000 in cash, a revolving creditfacility of $9,500,000 and term facilities totaling $7,900,000, consisting of a$7,750,000 facility that represents the Company’s long term borrowing, TermLoan A and a $150,000 capital expenditure line of credit, Term Loan B. Therevolving loan facility matures April 1, 2007 (as amended in March 2006) andTerm Loan A is payable in monthly installments of $80,000 through July 31,2008, with a balloon payment of $3,682,000 due on August 31, 2008. Term Loan Bis payable in monthly installments of 1/60th of the total principal, beginningon the last business day of August, 2006 and continuing monthly through May 31,2010 with any remaining amount payable on June 30, 2010. Amounts outstandingunder the revolving facility, the Term A and Term B facilities at March 31,2006 were $5,823,000, $6,003,000 and $48,000, respectively.

 

Interest under each piece of the amended Loan Agreement is at afloating rate per annum equal to the prime rate plus 0.5%. This rate was 8.25% asof March 31, 2006.

 

The Loan Agreement imposes certain restrictions on the Company,including its ability to complete significant asset sales, merge or acquirebusinesses and pay dividends. Additionally, the Company must meet certainfinancial covenants at each quarter end during the term of the Loan Agreement,including a Minimum Tangible Net Worth, a Minimum EBITDA and a Minimum CashFlow Coverage Leverage ratio, all as defined in the Loan Agreement. During 2004and 2005, the Company had violated certain of these covenants and had obtainedpermanent waiver from the bank for such violations. The March 24, 2006amendment to the Loan Agreement retroactively amended these financialcovenants, and, as amended, the Company was in compliance with the covenants. Managementbelieves that the Company will maintain compliance with the amended covenants.

 

The ratio of long-term debt to total capitalization totaled 61% at March31, 2006 down from 74% at December 31, 2005. This improvement was the result ofthe $2,500,000 equity investment and use of the proceeds to reduce debt. TheCompany believes its financial resources are adequate to fund its needs for thenext 12 months.

 

***Cashflows from operating activities.*** Net cash provided byoperating activities was $981,000 for the three months ended March 31, 2006,primarily reflecting the $548,000 reduction in current assets since December31, 2005 plus the $326,000 total of net income plus depreciation, amortizationand the other items necessary to reconcile net income to cash provided byoperating activities. The net cash provided by operating activities for thecurrent three month period was $146,000 more than the $835,000 provided duringthe same period in 2005. This increase occurred despite less net collections ofaccounts receivable during the period of $876,000 since this was offset by anadditional $521,000 which was provided from higher net income plus theadjustments necessary to reconcile net income to cash flow, an additional $291,000provided by reducing inventory in the current quarter compared to the prioryear increase and an additional $272,000 provided from collection of incometaxes receivable. The reduced collections of accounts receivable is primarilydue to a combination of higher sales in the current year quarter and acollection delay due to changed invoicing specifications for two customers.

 

***Cashflows from investing activities.*** Net cash used ininvesting activities was $269,000 for the three months ended March 31, 2006,which was $155,000 more than the $114,000 used during the same period of theprior year. During both periods, these funds primarily represent investment inthe production facilities. The increased cash usage for the current period primarilyrepresents the costs associated with the roof renovation at the Vita Seafoodfacility which totaled approximately $107,000 during the current quarter.

 

***Cashflows from financing activities.*** Net cash used infinancing activities was $679,000 for the three months ended March 31, 2006. Thisnet usage is the excess of $3,053,000 of cash used to pay down the loanfacilities including $2,766,000 of net revolver payments and $287,000 of termloan payments less $2,374,000 representing the cash received from the February2006 equity investment, net of associated transaction costs. The cash thus usedin the current year compares to the $729,000 used to pay down debt during thesame period in 2005.

 

**Seasonality**

** **

The Vita segment of the Company’s business is seasonal in nature,primarily resulting from the effect of the timing of certain holidays on thedemand for certain products. Historically, the Company’s sales and profits havebeen substantially higher in the fourth quarter of each year.

 

12

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**CriticalAccounting Policies and Estimates**

 

The Company’s financial statements reflect theselection and application of accounting policies that require management tomake significant estimates and assumptions. The Company believes that thefollowing are some of the more critical judgment areas in the application ofits accounting policies that currently affect the Company’s financial conditionand results of operations.

 

Preparation of the consolidated financial statementsin accordance with accounting principles generally accepted in the UnitedStates requires management to make estimates and assumptions affecting thereported amounts of assets, liabilities, revenues and expenses and relatedcontingent liabilities. On an on-going basis, the Company evaluates itsestimates, including those related to revenues, returns, bad debts, incometaxes and contingencies and litigation. The Company bases its estimates onhistorical experience and on various other assumptions that are believed to bereasonable under the circumstances. Actual results may differ from these estimatesunder different assumptions or conditions.

 

Revenue is recognized upon shipment of product tocustomers in fulfillment of customer orders. In accordance with industrypractices, inventory is sold to customers often with the right to return ordispose if the merchandise is not sold prior to the expiration of its shelflife. In order to support the Company’s products, various marketing programsare offered to customers which reimburse them for a portion or all of theirpromotional activities related to the Company’s products. The Company regularlyreviews and revises, when it deems necessary, estimates of costs to the Companyfor these marketing and merchandising programs based on estimates of what hasbeen incurred by customers. Actual costs incurred by the Company may differsignificantly if factors such as the level and success of the customers’programs or other conditions differ from expectations. Sales are reduced by aprovision for estimated future returns, disposals and promotional expenses.

 

The Company recognizes deferred income tax assets andliabilities for the expected future tax consequences of temporary differencesbetween the tax basis and financial reporting basis of certain assets andliabilities and certain income tax credit carryforwards. In estimating futuretax consequences, the Company considers expected future events other thanenactments of changes in tax laws or rates. A valuation reserve is recognizedbased on the evidence available; if it is more likely than not that someportion or the entire deferred income tax asset will not be realized.

 

The Company assesses the impairment of itsidentifiable intangibles and goodwill whenever events or changes incircumstances indicate that the carrying value may not be recoverable and atleast annually. Factors the Company considers important, which could trigger animpairment review include the following:

 

•                  Significant underperformance relative to expectedhistorical or projected future operating results;

•                  Significant changes in the manner of the Company’s useof the acquired assets or the strategy for the Company’s overall business;

•                  Significant negative industry or economic trends;

•                  Significant decline in the Company’s stock price for asustained period; and

•                  The Company’s market capitalization relative to netbook value.

 

When the Company determines that the carrying value ofits intangible assets may not be recoverable based upon the existence of one ormore of the above indicators of impairment, the Company will review forimpairment under the provisions of SFAS 142.

 

During the fourth quarter of 2003, the Companycompleted its annual assessment of impairment regarding the goodwill recordedas a result of the Virginia Honey acquisition ($6,004,000) and the Halifaxacquisition ($2,307,000). Those assessments, supported by independentappraisals of the fair value of VSF, did not identify any impairment. However,the 2004 independent appraisal – made using customary valuation methodologiesincluding discounted cash flows and fundamental analysis, did reveal impairmentissues. The appraisal reflected a decreased fair value of VSF, principallycaused by the decline in operating income of VSF during 2004. That decline wasprimarily a result of a substantial decline in the sales of Halifax products –which were down $1,600,000 or 21% in 2004. Based on the appraised value of VSF,the resulting impairment charge of approximately $2,314,000 was recorded in thefourth quarter of 2004. The 2005 assessment and independent appraisal did notindicate any further impairment.

 

**Forward-Looking Statements**

** **

Certain statements in this report, including statements in “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” are “forward-lookingstatements” as defined by the Federal securities laws. Such statements

 

13

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are based on management’s current expectations and involve known andunknown risks and uncertainties which may cause the Company’s actual results,performance or achievements to differ materially from any results, performanceor achievements expressed or implied in this report. By way of example and notlimitation and in no particular order, known risks and uncertainties includethe Company’s future growth and profitability, the potential loss of largecustomers or accounts, downward product price movements, availability of rawmaterials, changes in raw material procurement costs, fluctuations in themarket cost of major commodities such as honey, changes in energy costs, theintroduction and success of new products, changes in economic and marketconditions, integration and management of acquired businesses, the seasonalityof Vita’s business, the Company’s ability to attract and retain key personnel,the Company’s ability to maintain its relationships with key vendors andretailers, consolidation of the Company’s customer and supplier base, thepotential impact of claims and litigation, the effects of competition in theCompany’s markets and the dietary habits and trends of the general public. Inlight of these and other risks and uncertainties, the Company makes norepresentation that any future results, performance or achievements expressedor implied in this report will be attained. The Company’s actual results maydiffer materially from any results expressed or implied by the forward-lookingstatements, especially when measured on a quarterly basis.

 

**Item 3. Quantitativeand Qualitative Disclosures About Market Risk**

 

The Company is exposed to interest rate fluctuations, primarilyas a result of its $17.4 million Loan Agreement with interest rates based onprime rate plus 0.5%, or 8.25% as of March 31, 2006. The Company does notcurrently use derivative instruments to alter the interest rate characteristicsof any of the debt. A 10% fluctuation in interest rates would not have amaterial impact on the Company’s financial statements.

 

**Item 4. Controlsand Procedures**

 

Under the supervision and with the participation ofthe Company’s management team, the principal executive officers and principalfinancial officer have evaluated the effectiveness of the design and operationof the Company’s disclosure controls and procedures as defined in Rules 13a –15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the“Exchange Act”), as of March 31, 2006 and, based on their evaluation, haveconcluded that these controls and procedures are effective. There were nochanges in the Company’s internal control over financial reporting during thefiscal quarter ended March 31, 2006 that have materially affected, or arereasonable likely to materially affect, the Company’s internal control overfinancial reporting.

 

Disclosure controls andprocedures are designed to ensure that information required to be disclosed bythe Company in the reports that it files or submits under the Exchange Act isrecorded, processed, summarized and reported, within the time periods specifiedin the Securities and Exchange Commission’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and proceduresdesigned to ensure that information required to be disclosed by the Company inthe reports that it files under the Exchange Act is accumulated andcommunicated to the Company’s management, including its principal executiveofficer and principal financial officer, as appropriate to allow timelydecisions regarding required disclosure.

 

It should be noted thatany system of controls, however well designed and operated, can provide onlyreasonable, and not absolute, assurance that the objectives of the system aremet. In addition, the design of any control system is based in part uponcertain assumptions about the likelihood of future events. Because of these andother inherent limitations of control systems, there can be no assurance thatany design will succeed in achieving its stated goals under all potentialfuture conditions, regardless of how remote.

 

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**PART II -OTHER INFORMATION**

** **

**Item 1A. RiskFactors**

** **

The risk factors included in Part I, “Item 1A. RiskFactors” in our Annual Report on Form 10-K for the fiscal year ended December31, 2005 have not materially changed other than as set forth below.

 

**The cost and potentially reduced availability ofpetroleum based products and services, including freight, utilities and rawmaterial surcharges, could impact our profitability.**Anysignificant increases in the prevailing price levels or any change in thesupply availability of petroleum based products and services could have asignificant affect on our costs. A significant increase in costs which cannotbe passed on to our customers will have an adverse affect on our profitability.

 

**Item 6. Exhibits**

 
| 31.1   | Principal Executive  Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.               |
|--------|----------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                 |
| 31.2   | Principal Executive and  Financial Officer Certification pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002. |
|   |                                                                                                                 |
| 31.3   | Principal Executive  Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.               |
|   |                                                                                                                 |
| 32.1   | Principal Executive and  Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley  Act of 2002. |

 

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**SIGNATURES**

 

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 

 
|   |         | **VITA FOOD PRODUCTS, INC.**                              |
|--------|--------------|-----------------------------------------------------------|
|   |         |                                                      |   |
|   |         |                                                      |   |
| Date:  | May 15, 2006 |                                                      | By: | /s/  Stephen D. Rubin |   |
|   |         |                                                      |   | Stephen D. Rubin |   |
|   |         |                                                      | Office  of the Chief Executive; *President* |
|   |         |                                                      |   (*Principal Executive  Officer*) |
|   |         |                                                      |   |
|   |         |                                                      |   |
| Date:  | May 15, 2006 |                                                      | By: | /s/  Clifford K. Bolen |   |
|   |         |                                                      | Clifford  K. Bolen |
|   |         | Office of the Chief  Executive; *Senior**Vice President;* |
|   |         | *Chief Operating Officer; Chief Financial Officer*        |
|   |         | (*Principal Financial and Accounting Officer*)            |
|        |              |                                                           |  |  |  |  |

 

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**ExhibitIndex**

 
| **Number** | ** ** | **Exhibit Title**                                                                                              |
|------------|------------|---------------------------------------------------------------------------------------------------------------------|
| 31.1       |       | Principal Executive  Officer Certification pursuant to Section 302 of the Sarbanes-Oxley Act of  2002.              |
|       |       |                                                                                                                |
| 31.2       |       | Principal Executive and Financial Officer  Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|       |       |                                                                                                                |
| 31.3       |       | Principal  Executive Officer Certification pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002.              |
|       |       |                                                                                                                |
| 32.1       |       | Principal Executive and Financial Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.  |

 

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