**UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549**

**FORM 10-Q**
| **x**      | **QUARTERLY REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE   SECURITIES EXCHANGE ACT OF 1934**                                                                                                                             |
|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** ** | ** **                                                                                                                                                                                                                 |
| ** ** | **For the  Quarterly Period Ended June 30, 2007**                                                                                                                                                                          |
| ** ** | ** **                                                                                                                                                                                                                 |
| **o**      | **TRANSITION  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE   SECURITIES EXCHANGE ACT OF 1934**                                                                                                                            |
| ** ** | ** **                                                                                                                                                                                                                 |
| ** ** | **For the  Transition Period  From               to               ** |

 

**Commission File Number 1-12599**

**VITA FOOD PRODUCTS, INC.**(Exact name of registrant 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 of  principal executive offices)     | (Zip Code) |

 

Registrant’s telephone number, 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  x No  o

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer o                Accelerated filer o               Non-accelerated filer x

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes o  No x

The number ofshares outstanding of registrant’s common stock as of July 31, 2007 was7,367,198.

 

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**VITA FOOD PRODUCTS, INC.**

**FORM 10-Q**

## **For the Quarter Ended June 30, 2007**

## **INDEX**

|              | ** ** | ** **                                                                                  | ** **                                                                                               | **Page** |
|--------------|------------|---------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|----------|
| **PART I.**  | ** ** | **FINANCIAL INFORMATION**                                                                   |                                                                                                     |     |
| ** **   | ** ** | ** **                                                                                  |                                                                                                     |     |
| Item 1.      |       | Financial Statements                                                                        |                                                                                                     |     |
|         |       |                                                                                        |                                                                                                     |     |
|         |       | a)                                                                                          | Consolidated Balance  Sheets as of June 30, 2007 and December 31, 2006                                   |     | 3 |
|         |       |                                                                                        |                                                                                                     |     |   |
|         |       | b)                                                                                          | Consolidated  Statements of Operations for the Three Months and Six Months Ended June 30,  2007 and 2006 |     | 4 |
|         |       |                                                                                        |                                                                                                     |     |   |
|         |       | c)                                                                                          | Consolidated  Statement of Shareholders’ Equity for the Six Months Ended June 30, 2007              |     | 4 |
|         |       |                                                                                        |                                                                                                     |     |   |
|         |       | d)                                                                                          | Consolidated  Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006                   |     | 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                                 |                                                                                                     | 15       |
|         |       |                                                                                        |                                                                                                     |     |   |
| Item 4.      |       | Controls and  Procedures                                                                    |                                                                                                     | 15       |
|         |       |                                                                                        |                                                                                                     |     |   |
| **PART II.** | ** ** | **OTHER INFORMATION**                                                                       |                                                                                                     |     |
| ** **   | ** ** | ** **                                                                                  |                                                                                                     |     |
| Item  1A.    |       | Risk  Factors                                                                               |                                                                                                     | 16       |
|         |       |                                                                                        |                                                                                                     |     |
| Item 2.      |       | Unregistered  Sales of Equity Securities and Use of Proceeds                                |                                                                                                     | 16       |
|         |       |                                                                                        |                                                                                                     |     |
| Item 4.      |       | Submission of  Matters to a Vote of Security Holders                                        |                                                                                                     | 17       |
|         |       |                                                                                        |                                                                                                     |     |
| Item  6.     |       | Exhibits                                                                                    |                                                                                                     | 18       |
|         |       |                                                                                        |                                                                                                     |     |
| SIGNATURES   |       | 19                                                                                          |
|              |            |                                                                                             |                                                                                                          |          |  |  |  |

 

2

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**PART 1. FINANCIAL STATEMENTS**
| **Item 1. Financial Statements** |       |                          |
|----------------------------------|------------|-------------------------------|
| **Consolidated Balance Sheets**  | ** ** | **Vita  Food Products, Inc.** |
| ** **                       |       | **And  Subsidiary**           |

 
| ** **                                                                                                                                                                                            | ** ** | **June 30,** | ** ** | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|-----------------------|------------|
| ** **                                                                                                                                                                                            | ** ** | **2007**          | ** ** | **2006**              | ** ** |
|                                                                                                                                                                                                  |       |              |       |                  |       |
| **ASSETS**                                                                                                                                                                                            |       |              |       |                  |       |
| Current Assets                                                                                                                                                                                        |       |              |       |                  |       |
| Cash                                                                                                                                                                                                  |       | $                 | 9,046      |                  | $          | 54,194 |   |
| Accounts  receivable-trade, net of allowance for discounts, returns, and doubtful accounts  of $825,685 in 2007 and $947,729 in 2006                                                                  |       | 3,837,466         |       | 6,468,669             |       |
| Inventories                                                                                                                                                                                           |       |              |       |                  |       |
| Raw material and  supplies                                                                                                                                                                            |       | 4,707,642         |       | 5,562,243             |       |
| Work in process                                                                                                                                                                                       |       | 49,840            |       | 170,167               |       |
| Finished goods                                                                                                                                                                                        |       | 4,511,545         |       | 2,178,575             |       |
| Prepaid expenses  and other current assets                                                                                                                                                            |       | 321,044           |       | 446,516               |       |
| Deferred income  taxes                                                                                                                                                                                |       | 471,034           |       | 610,714               |       |
| Total Current Assets                                                                                                                                                                                  |       | 13,907,617        |       | 15,491,078            |       |
|                                                                                                                                                                                                  |       |              |       |                  |       |
| Property, Plant and  Equipment                                                                                                                                                                        |       |              |       |                  |       |
| Land                                                                                                                                                                                                  |       | 35,000            |       | 35,000                |       |
| Building and  improvements                                                                                                                                                                            |       | 3,101,056         |       | 3,105,339             |       |
| Leasehold  improvements                                                                                                                                                                               |       | 445,774           |       | 582,620               |       |
| Machinery and  office equipment                                                                                                                                                                       |       | 11,741,567        |       | 11,970,640            |       |
|                                                                                                                                                                                                  |       | 15,323,397        |       | 15,693,599            |       |
| Less accumulated  depreciation and amortization                                                                                                                                                       |       | (9,916,911        | )          | (9,950,781            | )          |
| Net Property, Plant and  Equipment                                                                                                                                                                    |       | 5,406,486         |       | 5,742,818             |       |
|                                                                                                                                                                                                  |       |              |       |                  |       |
| Goodwill                                                                                                                                                                                              |       | 5,571,012         |       | 5,571,012             |       |
| Other assets                                                                                                                                                                                          |       | 202,000           |       | 403,572               |       |
| Deferred income taxes                                                                                                                                                                                 |       | 325,304           |       | 325,304               |       |
| Total Assets                                                                                                                                                                                          |       | $                 | 25,412,419 |                  | $          | 27,533,784 |   |
| **LIABILITIES AND SHAREHOLDERS’  EQUITY**                                                                                                                                                        |       |              |       |                  |       |
| Current Liabilities                                                                                                                                                                                   |       |              |       |                  |       |
| Current  maturities of long-term obligations                                                                                                                                                          |       | $                 | 6,497,880  |                  | $          | 1,513,783 |   |
| Accounts payable                                                                                                                                                                                      |       | 4,679,134         |       | 6,520,166             |       |
| Accrued expenses                                                                                                                                                                                      |       | 1,089,702         |       | 1,260,308             |       |
| Total Current  Liabilities                                                                                                                                                                            |       | 12,266,716        |       | 9,294,257             |       |
|                                                                                                                                                                                                  |       |              |       |                  |       |
| Long-term Obligations,  Less Current Maturities                                                                                                                                                       |       | 6,186,960         |       | 14,373,490            |       |
|                                                                                                                                                                                                  |       |              |       |                  |       |
| 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 7,373,714 shares in 2007 and  4,941,763 shares in 2006 |       | 73,737            |       | 49,417                |       |
| Treasury stock,  at cost 6,516 shares                                                                                                                                                                 |       | (50,043           | )          | (50,043               | )          |
| Additional  paid-in capital                                                                                                                                                                           |       | 9,211,755         |       | 6,357,093             |       |
| Accumulated  deficit                                                                                                                                                                                  |       | (2,276,706        | )          | (2,490,430            | )          |
|                                                                                                                                                                                                  |       |              |       |                  |       |
| Total Shareholders’  Equity                                                                                                                                                                      |       | 6,958,743         |       | 3,866,037             |       |
|                                                                                                                                                                                                  |       |              |       |                  |       |
| Total Liabilities and Shareholders’ Equity                                                                                                                                                       |       | $                 | 25,412,419 |                  | $          | 27,533,784 |   |

 

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** | ** ** | **For the six months ended** | ** ** |
|---------------------------------------------|------------|----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                  | ** ** | **June 30,**                                  | ** ** | **June 30,**                                | ** ** |
| ** **                                  | ** ** | **2007**                                           | ** ** | **2006**                                         | ** ** | **2007** | ** ** | **2006** | ** ** |
|                                        |       |                                               |       |                                             |       |   |   |   |   |
| Net Sales                                   |       | $                                                  | 11,744,141 |                                             | $          | 11,828,461 |   | $ | 24,518,160 |   | $ | 24,616,910 |   |
| Cost of Goods Sold                          |       | 8,145,744                                          |       | 8,456,243                                        |       | 16,958,453 |   | 17,348,249 |   |
| Gross Margin                                |       | 3,598,397                                          |       | 3,372,218                                        |       | 7,559,707 |   | 7,268,661 |   |
|                                        |       |                                               |       |                                             |       |   |   |   |   |
| Selling and  Administrative Expenses        |       |                                               |       |                                             |       |   |   |   |   |
| Selling,  Marketing and Distribution        |       | 2,327,244                                          |       | 2,097,383                                        |       | 4,530,640 |   | 4,422,746 |   |
| Administrative                              |       | 927,067                                            |       | 933,662                                          |       | 2,056,145 |   | 2,085,232 |   |
| Total Selling  and Administrative Expenses  |       | 3,254,311                                          |       | 3,031,045                                        |       | 6,586,785 |   | 6,507,978 |   |
| Operating Income                            |       | 344,086                                            |       | 341,173                                          |       | 972,922 |   | 760,683 |   |
|                                        |       |                                               |       |                                             |       |   |   |   |   |
| Interest Expense                            |       | 295,122                                            |       | 313,941                                          |       | 618,198 |   | 639,656 |   |
| Income Before Income  Taxes                 |       | 48,964                                             |       | 27,232                                           |       | 354,724 |   | 121,027 |   |
| Income Tax                                  |       | 20,000                                             |       | 12,000                                           |       | 141,000 |   | 49,000 |   |
| Net Income                                  |       | $                                                  | 28,964     |                                             | $          | 15,232 |   | $ | 213,724 |   | $ | 72,027 |   |
|                                        |       |                                               |       |                                             |       |   |   |   |   |
| Basic Earnings Per  Share                   |       | $                                                  | 0.01       |                                             | $          | 0.00 |   | $ | 0.04 |   | $ | 0.02 |   |
| Weighted Average Common  Shares Outstanding |       | 4,970,309                                          |       | 4,884,778                                        |       | 4,952,875 |   | 4,442,369 |   |
|                                        |       |                                               |       |                                             |       |   |   |   |   |
| Diluted Earnings Per  Share                 |       | $                                                  | 0.01       |                                             | $          | 0.00 |   | $ | 0.04 |   | $ | 0.02 |   |
| Weighted Average Common Shares Outstanding  |       | 4,974,420                                          |       | 4,938,816                                        |       | 4,955,995 |   | 4,479,336 |   |

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

 
| ** **                                           | ** ** | ** **            | ** ** | ** **   | ** ** | ** **  | ** ** | **Additional** | ** ** | ** **   | ** ** | ** ** | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|--------------|------------|-------------|------------|----------------|------------|--------------|------------|------------|------------|
| ** **                                           | ** ** | **Common Stock** | ** ** | **Treasury** | ** ** | **Paid-in** | ** ** | **Retained**   | ** ** | ** **   | ** ** |
| ** **                                           | ** ** | **Shares**            | ** ** | **Amount**   | ** ** | **Stock**   | ** ** | **Capital**    | ** ** | **Earnings** | ** ** | **Total**  | ** ** |
|                                                 |       |                  |       |         |       |        |       |           |       |         |       |       |       |
| Balance, at January 1,  2007                         |       | 4,941,763             |       | $            | 49,417     |        | $          | (50,043        | )          | $            | 6,357,093  |       | $          | (2,490,430 | ) | $ | 3,866,037 |   |
|                                                 |       |                  |       |         |       |        |       |           |       |         |       |       |       |
| Common stock and  warrant issuance                   |       | 2,400,000             |       | 24,000       |       | —      |       | 2,976,000      |       | —       |       | 3,000,000  |       |
|                                                 |       |                  |       |         |       |        |       |           |       |         |       |       |       |
| Stock - based  compensation expense                  |       | 21,369                |       | 214          |       | —      |       | 2,044          |       | —       |       | 2,258      |       |
|                                                 |       |                  |       |         |       |        |       |           |       |         |       |       |       |
| Proceeds from stock  purchase and stock option plans |       | 10,582                |       | 106          |       | —      |       | 16,547         |       | —       |       | 16,653     |       |
|                                                 |       |                  |       |         |       |        |       |           |       |         |       |       |       |
| Cost of capital  infusion                            |       | —                |       | —       |       | —      |       | (139,929       | )          | —       |       | (139,929   | )          |
|                                                 |       |                  |       |         |       |        |       |           |       |         |       |       |       |
| Net income                                           |       | —                |       | —       |       | —      |       | —         |       | 213,724      |       | 213,724    |       |
|                                                 |       |                  |       |         |       |        |       |           |       |         |       |       |       |
| Balance, at June 30, 2007                            |       | 7,373,714             |       | $            | 73,737     |        | $          | (50,043        | )          | $            | 9,211,755  |       | $          | (2,276,706 | ) | $ | 6,958,743 |   |

 

See accompanying notes to consolidated financial statements.

4

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

 
| ** **                                                                        | ** ** | **For the six months ended** | ** ** |
|-----------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                        | ** ** | **June 30,**                                | ** ** |
| ** **                                                                        | ** ** | **2007**                                         | ** ** | **2006** | ** ** |
|                                                                              |       |                                             |       |   |   |
| **Cash Flows From Operating  Activities**                                         |       |                                             |       |   |   |
| Net Income                                                                        |       | $                                                | 213,724    |   | $ | 72,027 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities |       |                                             |       |   |   |
| Depreciation and  amortization                                                    |       | 490,939                                          |       | 470,707 |   |
| Loss on sale of  fixed assets                                                     |       | 637                                              |       | — |   |
| Deferred income  tax provision                                                    |       | 141,000                                          |       | 49,000 |   |
| Non-cash  stock-based compensation expense                                        |       | 18,911                                           |       | 9,600 |   |
| Changes in  assets and liabilities:                                               |       |                                             |       |   |   |
| Accounts  receivable                                                              |       | 2,631,203                                        |       | 157,072 |   |
| Inventories                                                                       |       | (1,358,042                                       | )          | (617,018 | ) |
| Prepaid expenses  and other current assets                                        |       | 124,154                                          |       | 28,424 |   |
| Income taxes  receivable                                                          |       | 0                                                |       | 332,691 |   |
| Accounts payable                                                                  |       | (1,841,032                                       | )          | 1,035,030 |   |
| Accrued expenses  and other long term obligations                                 |       | (393,862                                         | )          | (108,618 | ) |
| Net cash  provided by operating activities                                        |       | 27,632                                           |       | 1,428,915 |   |
|                                                                              |       |                                             |       |   |   |
| **Cash Flows From Investing  Activities**                                         |       |                                             |       |   |   |
|                                                                              |       |                                             |       |   |   |
| Capital  expenditures                                                             |       | (160,630                                         | )          | (527,910 | ) |
| Proceeds from  sale of fixed asset                                                |       | 34,000                                           |       | — |   |
| Change in other  assets                                                           |       | 172,954                                          |       | (34,826 | ) |
| Net cash  provided by (used by) investing activities                              |       | 46,324                                           |       | (562,736 | ) |
| **Cash Flows From Financing  Activities**                                         |       |                                             |       |   |   |
| Proceeds from  issuance of stock and warrants                                     |       | 3,000,000                                        |       | 2,409,833 |   |
| Net payments  under revolving loan facility                                       |       | (3,322,145                                       | )          | (2,080,677 | ) |
| Payments on term  loan facility                                                   |       | (657,030                                         | )          | (489,672 | ) |
| Payments on  other debt                                                           |       | —                                           |       | (700,000 | ) |
| Proceeds from  new term loan                                                      |       | 1,000,000                                        |       | — |   |
| Cost of capital  infusion                                                         |       | (139,929                                         | )          | — |   |
| Net cash used by  financing activities                                            |       | (119,104                                         | )          | (860,516 | ) |
|                                                                              |       |                                             |       |   |   |
| Net increase (decrease)  in cash                                                  |       | (45,148                                          | )          | 5,663 |   |
|                                                                              |       |                                             |       |   |   |
| Cash, at beginning of  period                                                     |       | 54,194                                           |       | 25,133 |   |
| Cash, at end of period                                                            |       | $                                                | 9,046      |   | $ | 30,796 |   |
|                                                                              |       |                                             |       |   |   |
| Supplemental Disclosure  of Cash Flow Information                                 |       |                                             |       |   |   |
| Cash paid for  interest                                                           |       | $                                                | 631,373    |   | $ | 639,000 |   |
| Income taxes paid  (received)                                                     |       | $                                                | 1,133      |   | $ | (332,691 | ) |

 

See accompanying notes toconsolidated financial statements.

5

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## **Vita Food Products, Inc. and Subsidiary**

## **Notes to Consolidated Financial Statements**

**(Unaudited)**

#### **Basis of Presentation**

In the opinion of management, theaccompanying balance sheets and related interim statements of operations, cashflows, and shareholders’ equity include all adjustments, consisting only ofnormal recurring items necessary for their fair presentation in conformity withU.S. generally accepted accounting principles. Preparing financial statements requires management to make estimates andassumptions that affect the reported amounts of assets, liabilities, revenue,and expenses.  Examples includeprovisions for returns, deductions, bad debts, and length of building andequipment lives.  Actual results maydiffer from these estimates.  Interim resultsare not necessarily indicative of results for a full year. The informationincluded in this Form 10-Q should be read in conjunction with Management’sDiscussion and Analysis of Financial Condition and Results of Operations andfinancial statements and notes thereto included in the Form 10-K for the fiscalyear ended December 31, 2006 of Vita Food Products, Inc.  (“Vita Seafood”) together with its whollyowned subsidiary, Vita Specialty Foods, Inc. (“Vita Specialty Foods”),hereinafter collectively referred to as the “Company”.

For the second quarter and six monthperiods ended June 30, 2007 and 2006, diluted earnings per share computationsexclude 3,226,100 and 3,331,600 shares for 2007 and 1,175,000 and 1,225,100shares for 2006, respectively, issuable upon exercise of stock options andwarrants because the assumed exercise of these options and warrants would beanti-dilutive.

**Principles of Consolidation**

The consolidated financial statements include theaccounts of Vita Seafood and Vita Specialty Foods.  Vita Specialty Foods includes the integratedresults of its two subsidiaries, Virginia Honey Company, Inc. (“Virginia Honey”)acquired in 2001 and The Halifax Group, Inc. (“Halifax”), acquired in2002.  All significant inter-companytransactions and balances have been eliminated.

##### **RevenueRecognition**

# Revenueis recognized upon the passing of title to the customers, which occurs uponshipment of product to customers, including brokers, in fulfillment of customerorders.  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 Companyregularly reviews and revises, when it deems necessary, estimates of costs tothe Company for these marketing and merchandising programs based on estimatesof what has been incurred by customers. Actual costs incurred by the Company may differ significantly if factorssuch as the level and success of the customers’ programs or other conditionsdiffer from expectations.  Sales arereduced by a provision for estimated future returns, disposals and promotionalexpense.

TheVita Seafood business segment guarantees the sale of most of its products soldin supermarket chains and wholesale clubs (“Supermarkets”), excluding warehouseclubs, which sales represent approximately 76% of that segment’s total sales.This guarantee helps ensure that consumers receive fresh products. Under theguarantee, the majority of customers are issued an allowance off-invoice tocover products not sold before the expiration date. Other  customers with product not sold before theexpiration date have the right to return unsold product to the Company throughits food brokers or dispose of the unsold product themselves or through a fooddistributor. A credit is then issued to the Supermarket or food distributor.The Company provides a reserve that is recorded concurrently with thesale.  The Company believes, based on itshistorical return rates, which have been fairly consistent over the pastseveral years, that this reserve is adequate to recognize the cost of allforeseeable future product return credits associated with previously recognizedrevenues.

On February 16,2007, the Company voluntarily recalled certain products because the labels didnot disclose that the products contained a flavor ingredient derived frommilk.  No illnesses or adverse reactionshave been reported to date 

6

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in connection with thislabel disclosure issue.  Existingprocedures have been reviewed and corrected where necessary.  The recall resulted in the establishment of areserve of approximately $444,000 in the fourth quarter of 2006, all of whichwas paid by June 30, 2007.

**Earnout Provisions Under Acquisition Agreement**

Pursuant to theCompany’s acquisition of Virginia Honey in 2001, Terry Hess, the previous ownerof Virginia Honey (“Hess”), was subject to earnout provisions that resulted inadditional payments by the Company for Virginia Honey.  As amended, the earnout provisions for Hessresulted in an additional amount of $840,000 paid to Mr. Hess in April 2005based on specific Vita Specialty Foods operating results from January 1, 2001to December 31, 2002.  In addition, asecond earnout payment to Mr. Hess in the amount of $700,000 was paid in April2006 based on the operating results of Vita Specialty Foods for the period fromJanuary 1, 2003 to December 31, 2005. Provisions for a third earnout payment were cancelled as describedbelow.

Effective December2006, the Company entered into certain agreements (the “Hess Agreements”) withMr. Hess, who had resigned as Vice Chairman and a member of the Company’s Boardof Directors effective November 20, 2006 and retired from his position as ChiefExecutive Officer of Vita Specialty Foods effective August 25, 2006.  The Hess Agreements include (i) an EarnoutAgreement, (ii) a Termination Agreement and (iii) first amendments to theleases between Virginia Honey and an affiliate of Mr. Hess with respect to theKiller Bee Packaging Plant located in Martinsburg, West Virginia and thefacility located in Berryville, Virginia (the “Lease Amendments”).

The EarnoutAgreement provides that all earnouts under the Stock Purchase Agreement datedJune 29, 2001, as amended, between the parties (the “Stock Purchase Agreement”)pursuant to which the Company purchased the stock of Virginia Honey from Mr.Hess are satisfied in full and that no further amounts are owed by the Companyto Mr. Hess.  The Earnout Agreement alsoprovides for the release of the shares of Virginia Honey’s capital stock fromthe Company’s pledge to Mr. Hess to secure the earnout payments under the StockPurchase Agreement.  The EarnoutAgreement includes mutual non-disparagement provisions and releases between theCompany and Virginia Honey, on the one hand, and Mr. Hess, on the other, exceptfor the performance of obligations under the Hess Agreements and the StockPurchase Agreement.

The TerminationAgreement formalizes the termination of Mr. Hess’ Employment Agreement with theCompany, including reaffirming Mr. Hess’ five-year non-competition agreementwith the Company.   Pursuant to the LeaseAmendments, the Company has given up its option to purchase the Berryville,Virginia and Martinsburg, West Virginia properties owned by Mr. Hess’affiliate.  In addition, the LeaseAmendments provided the Company with an option to terminate the Berryvillelease upon 60 days notice until December 31, 2007, which the Company exercisedon February 26, 2007 effective April 30, 2007, and an option to terminate theMartinsburg lease upon 12 months notice at the end of five and nine years fromthe date of the applicable Amendment.  Inconnection with these agreements, Mr. Hess also resigned as a director and officerof the Company and each of its subsidiaries.

#### **Bank Loan Agreement**

On September 8,2003, the Company entered into a loan agreement with a bank (the “LoanAgreement”) and paid off its existing credit facility with initial borrowingsunder this new Loan Agreement.  The LoanAgreement was subsequently amended several times to, among other things, extendthe maturity dates of the revolver, change available borrowings and amendfinancial covenants.  As of the April 13,2007 amendment, the Loan Agreement provides for a $9,500,000 revolver which is scheduledto terminate April 1, 2008; a $7,750,000 Term A Loan due in monthlyinstallments of $80,000 through July 31, 2008 with a balloon payment of$3,682,000 due on August 31, 2008; a $150,000 capital expenditure Term B Loandue in monthly installments of $2,500 from August 2006 through May 31, 2010 andthe remainder due on June 30, 2010; and a $1,000,000 Term C Loan due April 1,2008.  Outstanding borrowings under theLoan Agreement are secured by substantially all assets of the Company.

Interest under eachpiece of the amended Loan Agreement is at a floating rate per annum equal tothe prime rate plus 0.5%, other than the $1,000,000 Term C Loan which bears aninterest rate of prime plus 2.0%.  Theprime rate was 8.25% as of June 30, 2007.

The Loan Agreementimposes certain restrictions on the Company, including its ability to completesignificant asset sales, merge or acquire businesses and pay dividends.  Additionally, the Company had been requiredto meet 

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certain financialcovenants at each quarter end during the term of the Loan Agreement, includinga Minimum Tangible Net Worth, a Minimum EBITDA and a Minimum Cash Flow CoverageLeverage ratio, all as defined in the Loan Agreement.  During 2005 and 2006, the Company hadviolated certain of these covenants and had obtained permanent waivers from thebank for such violations.  The March 24,2006 amendment to the Loan Agreement retroactively amended these financialcovenants, and, as amended, the Company was in compliance with those covenantsas of December 31, 2005 and June 30, 2006. During the third and fourth quarter of 2006, the Company was not incompliance with certain of the revised covenants.  The March 30, 2007 amendment to the LoanAgreement waived these 2006 covenant violations and the April 13, 2007amendment reset the covenants to start with the six months ending June 30, 2007and to only include a Minimum EBITDA and a Minimum Cash Flow Coverage LeverageRatio.   At June 30, 2007, the Companywas in compliance with the new covenants.

#### **Business Segments**

The Companyreports two operating business segments in the same format as reviewed by theCompany’s senior management. Segment one, Vita Seafood, processes and sellsvarious herring, and cured and smoked salmon products throughout the UnitedStates and Mexico.  Segment two, VitaSpecialty Foods, combines the products of Virginia Honey and Halifax andmanufactures and distributes honey, salad dressings, sauces, marinades, jamsand jellies and gift baskets throughout North America.  Management predominately uses operatingprofit as the measure of profit or loss by business segment.

**Business segment information isas follows ($000’s):**
| Three months ended June 30, | ** ** | **2007**   | ** ** | **2006** | ** ** |
|-------------------------------------------------|------------|------------|------------|----------|------------|
|                                            |       |       |       |     |       |
| **Net  Sales**                                  |       |       |       |     |       |
| Vita Seafood                                    |       | **$**      | **5,269**  |     | $          | 5,873 |   |
| Vita Specialty Foods                            |       | **6,475**  |       | 5,955    |       |
|                                            |       | ** ** |       |     |       |
| Total Net Sales                                 |       | **$**      | **11,744** |     | $          | 11,828 |   |
|                                            |       | ** ** |       |     |       |
| **Operating  Profit (Loss)**                    |       | ** ** |       |     |       |
| Vita Seafood                                    |       | **$**      | **(30**    | **)**    | $          | (136 | ) |
| Vita Specialty Foods                            |       | **374**    |       | 477      |       |
|                                            |       | ** ** |       |     |       |
| Total Operating  Profit                         |       | **$**      | **344**    |     | $          | 341 |   |
|                                            |       | ** ** |       |     |       |
| **Net  Income (Loss)**                          |       | ** ** |       |     |       |
| Vita Seafood                                    |       | **$**      | **(123**   | **)**    | $          | (198 | ) |
| Vita Specialty Foods                            |       | **152**    |       | 213      |       |
|                                            |       | ** ** |       |     |       |
| Total Net Income                                |       | **$**      | **29**     |     | $          | 15 |   |
|                                            |       | ** ** |       |     |       |
| **Depreciation  and Amortization**              |       | ** ** |       |     |       |
| Vita Seafood                                    |       | **$**      | **141**    |     | $          | 126 |   |
| Vita Specialty Foods                            |       | **116**    |       | 118      |       |
|                                            |       | ** ** |       |     |       |
| Total  Depreciation and Amortization            |       | **$**      | **257**    |     | $          | 244 |   |
| ** **                                      |       | ** ** |       |     |       |
| **Capital  Expenditures**                       |       | ** ** |       |     |       |
| Vita Seafood                                    |       | **$**      | **45**     |     | $          | 116 |   |
| Vita Specialty Foods                            |       | **55**     |       | 150      |       |
|                                            |       | ** ** |       |     |       |
| Total Capital  Expenditures                     |       | **$**      | **100**    |     | $          | 266 |   |

 

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| Six months ended June 30, | ** ** | **2007**   | ** ** | **2006** | ** ** |
|-----------------------------------------------|------------|------------|------------|----------|------------|
|                                          |       |       |       |     |       |
| **Goodwill**                                  |       | ** ** |       |     |       |
| Vita Seafood                                  |       | **$**      | **—** |     | $          | — |   |
| Vita Specialty Foods                          |       | **5,571**  |       | 6,697    |       |
|                                          |       | ** ** |       |     |       |
| Total Goodwill                                |       | **$**      | **5,571**  |     | $          | 6,697 |   |
|                                          |       | ** ** |       |     |       |
| **Total  Assets**                             |       | ** ** |       |     |       |
| Vita Seafood                                  |       | **$**      | **16,278** |     | $          | 17,407 |   |
| Vita Specialty Foods                          |       | **9,134**  |       | 9,813    |       |
|                                          |       | ** ** |       |     |       |
| Total Assets                                  |       | **$**      | **25,412** |     | $          | 27,220 |   |
|                                          |       | ** ** |       |     |       |
| **Net Sales**                                 |       | ** ** |       |     |       |
| Vita Seafood                                  |       | **$**      | **11,960** |     | $          | 13,274 |   |
| Vita Specialty Foods                          |       | **12,558** |       | 11,343   |       |
|                                          |       | ** ** |       |     |       |
| Total Net Sales                               |       | **$**      | **24,518** |     | $          | 24,617 |   |
|                                          |       | ** ** |       |     |       |
| **Operating  Profit (Loss)**                  |       | ** ** |       |     |       |
| Vita Seafood                                  |       | **$**      | **413**    |     | $          | 66 |   |
| Vita Specialty Foods                          |       | **560**    |       | 695      |       |
|                                          |       | ** ** |       |     |       |
| Total Operating  Profit                       |       | **$**      | **973**    |     | $          | 761 |   |
|                                          |       | ** ** |       |     |       |
| **Net  Income (Loss)**                        |       | ** ** |       |     |       |
| Vita Seafood                                  |       | **$**      | **20**     |     | $          | (190 | ) |
| Vita Specialty Foods                          |       | **194**    |       | 262      |       |
|                                          |       | ** ** |       |     |       |
| Total Net Income  (Loss)                      |       | **$**      | **214**    |     | $          | 72 |   |
|                                          |       | ** ** |       |     |       |
| **Depreciation  and Amortization**            |       | ** ** |       |     |       |
| Vita Seafood                                  |       | **$**      | **266**    |     | $          | 247 |   |
| Vita Specialty Foods                          |       | **225**    |       | 224      |       |
|                                          |       | ** ** |       |     |       |
| Total  Depreciation and Amortization          |       | **$**      | **491**    |     | $          | 471 |   |
|                                          |       | ** ** |       |     |       |
| **Capital  Expenditures**                     |       | ** ** |       |     |       |
| Vita Seafood                                  |       | **$**      | **68**     |     | $          | 276 |   |
| Vita Specialty Foods                          |       | **93**     |       | 252      |       |
|                                          |       | ** ** |       |     |       |
| Total Capital  Expenditures                   |       | **$**      | **161**    |     | $          | 528 |   |

 

**Equity Issuance**

OnJune 29, 2007, the Company issued to MDB Alternative Investments L.L.C. (“MDB”),an entity controlled by Howard Bedford, a member of the Company’s Board ofDirectors (“Bedford”), 2,400,000 shares of its common stock, par value $.01 pershare (“Common Stock”), and warrants to purchase a total of 2,000,000additional shares of Common Stock in consideration for an initial $1,000,000advance and subsequent $2,000,000 loan to the Company pursuant to theSecurities Purchase Agreement between the Company and Bedford dated May 14,2007.  The warrants issued to MDB consistof the following:  two year warrants to purchase 500,000 sharesof Common Stock at an exercise price of $1.25 per share; three-year warrants topurchase 500,000 shares of Common Stock at an exercise price of $1.50 pershare; four-year warrants to purchase 500,000 shares of Common Stock at anexercise price of $1.50 per share; and five-year 

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warrants to purchase 500,000 shares of Common Stock at an exerciseprice of $1.75 per share.  Thistransaction cancelled the 6% promissory note, dated June 15, 2007, issued toMDB by the Company and secured by a second mortgage on the Company’s facilityin Chicago, Illinois.  All of the shares issued to MDB, as well asthe shares underlying the warrants issued to MDB, have been approved forlisting on the American Stock Exchange, and the waiting period imposed by theFederal securities laws to follow the Company’s distribution of Schedule 14CInformation Statement to its stockholders has expired.

In February 2006,the Company entered into agreements pursuant to which five individuals or theiraffiliated entities invested a total of $2,500,000 in the Company.  Substantially all of these funds were used toreduce funded debt.  The investorsreceived units consisting of an aggregate of 1,000,000 shares of common stock;three-year warrants to purchase 500,000 shares of common stock at an exerciseprice of $5.00 per share; and five-year warrants to purchase an additional500,000 shares of common stock at an exercise price of $7.50 per share.  The investors include the following: (i)Stephen D. Rubin, then president and Chairman of the Board of Directors of theCompany, and as of May 24, 2007, Chairman Emeritus of the Board of Directors,(ii)  Clifford K. Bolen, then Senior VicePresident, Chief Operating Officer and Chief Financial Officer of the Company,and, as of August 18, 2006, President and Chief Executive Officer, (iii) DelphiCasualty Co., of which Glen S. Morris, then a director of the Company, owns a44% equity interest, (iv) a trust of which John C. Seramur, a director of theCompany, serves as trustee, as well as (v) Howard Bedford, then an unrelatedthird-party investor and, as of May 18, 2006, a director of the Company.

**Financial Accounting StandardsBoard Interpretation No. 48**

The Companyadopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”as of January 1, 2007.  The Company hasreviewed the status of possible tax uncertainties through the second quarter of2007.  The Company’s review did notresult in any uncertain tax positions requiring disclosure.  The last Federal Tax examination wascompleted in February 2006 for the year 2003. The result of the examination was a no change letter.  Should the Company need to record interestand/or penalties related to uncertain tax positions or other tax authorityassessments, it would classify such expenses as part of the income taxprovision.  The Company has not changedany of its tax policies nor adopted any new tax positions during the first sixmonths of 2007 and believes it has filed appropriate tax returns in alljurisdictions for which it has nexus. This review included the Company’s net deferred income tax assets whichmanagement believes will be realized over future profitable years.

**Item2.  Management’s Discussion and Analysisof Financial Condition and Results of Operations**

**Comparison of the Three MonthsEnded June 30, 2007 and June 30, 2006**

***Revenues.***  Net sales for the three months ended June 30,2007 were approximately $11,744,000, compared to approximately $11,828,000 forthe same period in 2006, a decrease of approximately $(84,000) or approximately(0.7)%.  Vita Seafood experienced adecrease of approximately $(604,000), or approximately (10.3)% which was mainlyattributable to the decline in salmon gross sales of approximately $(414,000)or (11.6)%, and specialty gross sales of approximately $(114,000) or (46.4)%,from the second quarter of 2006.  Herringgross sales experienced a slight decrease of approximately $(6,000) or (0.2)%as compared to the second quarter of 2006. Salmon sales were adversely impacted by the discontinuation of twoproducts in 2007 by one customer and the loss of another customer.  The distribution of the two products waspartially regained in the last month of the second quarter of 2007.  Specialty sales were negatively impacted bythe lost distribution of certain items with three customers.  Vita Specialty Foods sales increased in the2007 second quarter by approximately $519,000 or 8.7% as compared to the 2006second quarter.  This improvement wasmainly the result of increased sauces gross sales of approximately $1,660,000or 148.0%.  This favorable performance isthe result of a sauce product line introduced in June 2006.  The increase was partially offset by reducedsalad dressing gross sales of approximately $(612,000) or (16.5)% and honeysales of approximately $(409,000) or (28.1)% as compared to the 2006 secondquarter.   Both of these product lineswere negatively impacted by price increases that reduced sales volume as comparedto the 2006 second quarter.  Salesallowances grew in the second quarter 2007 by approximately $70,000 or 17.9%for Vita Seafood and by approximately $88,000 or 22.9% for Vita Specialty Foodsas compared to the second quarter of 2006. The increase was the result of additional allowance and coupon programsdesigned to support volume at both businesses. Herring, salmon, and specialty product sales represented approximately43%, 55% and 2%, respectively, of Vita Seafood’s total gross sales during the2007 second quarter as compared to approximately 39%, 57%, and 4%,respectively, during the 2006 second quarter. Salad dressings, sauces, honey products and specialty items representedapproximately 45%, 40%, 15% and  lessthan 1%, respectively, of Vita Specialty Foods 2007 second quarter 

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total gross salescompared to approximately 58%, 18%, 23% and 1%, respectively, during the 2006second quarter.

***Gross Margin.*** Gross margin for the second quarter ended June 30, 2007 wasapproximately $3,598,000, compared to $3,372,000 for the 2006 second quarter,an increase of approximately $226,000 or approximately 6.7%.  This increase was attributed to VitaSpecialty Foods’ gross margin, which increased approximately $435,000 or 22.8%.The Vita Seafood gross margin decreased approximately $(209,000) or(14.2)%.  As a percent of net sales, the2007 second quarter gross margin was approximately 30.6%, an increase fromapproximately 28.5% for the 2006 second quarter.  Gross margin for the Vita Seafood business,as a percentage of net sales, decreased to approximately 23.9% for the 2007second quarter from approximately 25.0% for the 2006 second quarter.  The decreased margin is the result of lowerproduction activity reflecting reduced sales levels mostly in the salmon productline.  As a percent of net sales, VitaSpecialty Foods, 2007 second quarter gross margin percentage was approximately36.1% compared to approximately 32.0% for the 2006 second quarter.  The significant increase in production wasprimarily responsible for the improved gross margin performance.

***OperatingExpenses****.*  Selling, marketing, distribution andadministrative expenses for the three months ended June 30, 2007 wereapproximately $3,254,000, compared to approximately $3,031,000 for the sameperiod in 2006, an increase of approximately $223,000 or approximately7.4%.  These expenses representedapproximately 27.7% of net sales for the quarter ended June 30, 2007 comparedto 25.6% for the 2006 second quarter. This increase resulted from a decrease of approximately $7,000 inadministration expenses and an increase in selling, marketing and distributionexpenses of approximately $230,000*. *The sales, marketing anddistribution increase was a result of increased free****standinginserts, royalty expenses and marketing promotions, primarily in the VitaSpecialty Foods segment.

***Interest Expense.*** Interest expense for the three months ended June 30, 2007 wasapproximately $295,000, compared to approximately $314,000 for the 2006 secondquarter, a decrease of approximately $19,000 or 6.0%.

***IncomeTaxes.*** The Companyhad an income tax expense of approximately $20,000 for the 2007 second quarteras compared to an income tax expense of approximately $12,000 for the 2006second quarter.  Both representedapproximately 40% of the pretax income for those periods.

***Net Income.***  Reflecting the operating results describedabove, net income for the quarter ended June 30, 2007 was approximately $29,000or approximately $0.01 per share on both a basic and fully diluted basis.  This compares to a net income of approximately$15,000 for the quarter ended June 30, 2006, or less than $0.01 per share onboth bases.  Weighted average outstandingshares increased due to the Company’s June 29, 2007 issuance of 2,400,000shares of common stock.

***Comparisonof the Six Months Ended June 30, 2007 and June 30, 2006***

***Revenues.***  Net sales for the six months ended June 30,2007 were approximately $24,518,000, compared to approximately $24,617,000 forthe comparable period in 2006, a decrease of approximately $(99,000) or(0.4)%.  Vita Seafood’s net salesdecreased by approximately $(1,314,000), or (9.9)%.  Salmon gross sales for the six months endedJune 30, 2007 were lower than the 2006 comparable six month period byapproximately $(1,023,000) or (13.5)%. Specialty gross sales were lower in the six month period of 2007 byapproximately $(218,000) or (41.0)% as compared to the same six month period in2006.  Herring gross sales increased byapproximately $19,000 or 0.3% for the first six months of 2007 as compared tothe first six months in 2006.  Thedecline in salmon sales is mainly attributable to the influx of newdistribution in 2006 that was not repeated in 2007 coupled with lostdistribution in 2007 to two customers. Distribution to one customer was partially regained in June 2007.  Specialty gross sales declined due to lostitem distribution with certain customers and the discontinuance of slow movingitems.  Vita Specialty Foods net salesincreased for the first six months of 2007 by approximately $1,215,000 or 10.7%as compared to the first six months of 2006. This increase was driven by the introduction of a new sauce product linein 2006 that generated an expansion in sauces gross sales of approximately $2,473,000 or 152.4% for the first six months of 2007 as compared to the firstsix months of 2006.  Offsetting thisincrease was a decline in salad dressing gross sales for the first six monthperiod of 2007 of approximately $(878,000) or (12.3)% compared to the first sixmonth period of 2006.  The salad dressinggross sales decline was attributable to lack of acceptance of a price increasewith a major customer that resulted in reduced sales volume. Sales allowancesincreased for the six months ended June 30, 2007 by approximately $91,000 or9.4% for Vita Seafood and approximately $347,000 or 50.8% for Vita SpecialtyFoods as compared to the six months ended June 30, 2006.  The increases in both businesses were drivenby additional coupons and promotional activity with customers and consumers. 

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Herring, salmon, andspecialty product sales represented approximately 47%, 50% and 3%,respectively, of Vita Seafood’s total gross sales during the first six monthperiod of 2007 compared to approximately 43%, 53%, and 4%, respectively, duringthe first six month period of 2006. Salad dressings, sauces, honey products and specialty items, representedapproximately 46%, 30%, 23% and 1%, respectively, of Vita Specialty Foods’ 2007first six month period’s total gross sales compared to approximately 60%, 13%,26% and 1%, respectively, during the 2006 comparable six month period.

***Gross Margin.*** Gross margin for the six months ended June 30, 2007 was approximately$7,560,000, compared to $7,269,000 for the six months ended June 30, 2006,representing an increase of approximately $291,000 or 4.0%.  This increase was attributed to the VitaSpecialty Foods’ gross margin, which increased approximately $579,000 or15.9%.  The Vita Seafood gross marginresults declined approximately $(288,000) or (7.9)%.  As a percent of net sales, gross margintotaled approximately 30.8%, an increase from approximately 29.5% for the sameperiod in 2006. The gross margin, as a percentage of net sales, for VitaSpecialty Foods increased to approximately 33.5% for the six months ended June30, 2007 from approximately 32.0% for the comparable six month period in 2006.The gross margin for the Vita Seafood business, as a percentage of net sales,increased slightly to approximately 28.0% for the first six months in 2007compared to approximately 27.4% for the first six months of 2006.  This improvement as a percent of sales waslargely the result of price increases, manufacturing cost control and increasedvolume at Vita Specialty Foods.

***Operating Expenses****.*  Selling, marketing, distribution andadministrative expenses for the six months ended June 30, 2007 wereapproximately $6,587,000, compared to approximately $6,508,000 for the sameperiod in 2006, an increase of approximately $79,000 or 1.2%.  As a percentage of net sales, these expenseswere approximately 26.9% for the first six months of 2007 compared withapproximately 26.4% for the first six months of 2006.  This increase in 2007 is mainly attributableto rising marketing expenses for free standing inserts related to the new sauceproduct line and corresponding promotional spending.

***InterestExpense.***  Interestexpense for the six months ended June 30, 2007 was approximately $618,000,compared to approximately $640,000 for the six months ended June 30, 2006, adecrease of approximately $22,000 or 3.4%.

***Income Taxes.*** The Company provided expense of approximately$141,000 for the six months ended June 30, 2007 and approximately $49,000 forthe six months ended ending June 30, 2005. Both represented approximately 40% of the pretax results for thoseperiods.

***Net Income.***  Reflecting the operating results describedabove, the net income for the six months ended June 30, 2007 was approximately$214,000 or $0.04 per share on both a basic and fully diluted basis.  This compares to net income of approximately$72,000 for the six months ended June 30, 2006 or $0.02 per share on bothbases.

#### **Financial Condition**

On June 29, 2007,the Company issued to MDB Alternative Investments L.L.C. (“MDB”), an entitycontrolled by Howard Bedford, a member of the Company’s Board of Directors (“Bedford”),2,400,000 shares of its Common Stock and warrants to purchase a total of2,000,000 additional shares of Common Stock in consideration for an initial$1,000,000 advance and subsequent $2,000,000 loan to the Company pursuant tothe Securities Purchase Agreement, dated May 14, 2007, between the Company andBedford.  This transaction cancelled the6% promissory note, dated June 15, 2007, issued by the Company to MDB and securedby a second mortgage on the Company’s facility in Chicago, Illinois.  All of the shares issued to MDB, as well as the shares underlying thewarrants issued to MDB, have been approved for listing on the American StockExchange, and the waiting period imposed by the Federal securities laws to followthe Company’s distribution of Schedule 14C Information Statement to itsstockholders has expired.  These fundswere primarily used for working capital requirements.

In February 2006,the Company entered into agreements pursuant to which five individuals or theiraffiliated entities invested a total of $2,500,000 in the Company.  Substantially all of these funds were used toreduce funded debt.  The investorsreceived units consisting of an aggregate of 1,000,000 shares of common stock;three-year warrants to purchase 500,000 shares of common stock at an exerciseprice of $5.00 per share; and five-year warrants to purchase an additional500,000 shares of common stock at an exercise price of $7.50 per share.  The investors include the following: (i) StephenD. Rubin, then president and Chairman of the Board of Directors of the Company,and as of May 24, 2007, Chairman Emeritus of the Board of Directors, (ii)  Clifford K. Bolen, then Senior VicePresident, Chief Operating Officer and Chief Financial Officer of the Company,and, as of August 18, 2006, President and Chief Executive Officer, (iii) Delphi

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Casualty Co., of whichGlen S. Morris, then a director of the Company, owns a 44% equity interest,(iv) a trust of which John C. Seramur, a director of the Company, serves astrustee, as well as (v) Howard Bedford, then an unrelated third-party investorand, as of May 18, 2006, a director of the Company.

At June 30, 2007, the Company had approximately$1,641,000 in working capital, versus approximately $6,197,000 at December 31,2006, and approximately $984,000 at June 30, 2006.  The current ratio at June 30, 2007 was 1.1 to1.0 compared to 1.7 to 1.0 at December 31, 2006 and 1.1 to 1.0 at June 30,2006.  Current assets decreased fromDecember 31, 2006 approximately $1,583,000 mainly as a result of collectedaccounts receivable partially offset by an increase of inventory levels.  Current liabilities increased from December31, 2006 by approximately $2,972,000 as a result of the reclassification of thebank revolving facility and Term Loan C from long term debt to currentdebt.  The bank revolving facility andTerm Loan C mature on April 1, 2008 requiring classification as a currentobligation.

On September 8,2003, the Company entered into a loan agreement with a bank (the “LoanAgreement”) and paid off its existing credit facility with initial borrowingsunder this new Loan Agreement.  The LoanAgreement was subsequently amended several times to, among other things, extendthe maturity dates of the revolver, change available borrowings and amendfinancial covenants.  As of the April 13,2007 amendment, the Loan Agreement provides for a $9,500,000 revolver which isscheduled to terminate April 1, 2008; a $7,750,000 Term A Loan due in monthlyinstallments of $80,000 through July 31, 2008 with a balloon payment of$3,682,000 due on August 31, 2008; a $150,000 capital expenditure Term B Loandue in monthly installments of $2,500 from August 2006 through May 31, 2010 andthe remainder due on June 30, 2010; and a $1,000,000 Term C Loan due April 1,2008.  Outstanding borrowings under theLoan Agreement are secured by substantially all assets of the Company.

Interest undereach piece of the amended Loan Agreement is at a floating rate per annum equalto the prime rate plus 0.5%, other than the $1,000,000 Term C Loan which bearsan interest rate of prime plus 2.0%.  Theprime rate was 8.25% as of June 30, 2007.

The Loan Agreementimposes certain restrictions on the Company, including its ability to completesignificant asset sales, merge or acquire businesses and pay dividends.  Additionally, the Company had been requiredto meet certain financial covenants at each quarter end during the term of theLoan Agreement, including a Minimum Tangible Net Worth, a Minimum EBITDA and aMinimum Cash Flow Coverage Leverage ratio, all as defined in the LoanAgreement.  During 2005 and 2006, theCompany had violated certain of these covenants and had obtained permanentwaivers from the bank for such violations. The March 24, 2006 amendment to the Loan Agreement retroactively amendedthese financial covenants, and, as amended, the Company was in compliance withthose covenants as of December 31, 2005 and June 30, 2006.  During the third and fourth quarter of 2006,the Company was not in compliance with certain of the revised covenants.  The March 30, 2007 amendment to the LoanAgreement waived these 2006 covenant violations and the April 13, 2007amendment reset the covenants to start with the six months ending June 30, 2007and to only include a Minimum EBITDA and a Minimum Cash Flow Coverage LeverageRatio.  The Company was in compliancewith the new covenants at June 30, 2007.

Primarily due tothe approximately $3,000,000 capital infusion in the second quarter, the ratioof long-term debt to total capitalization totaled 47% at March 31, 2007 downfrom 79% at December 31, 2006.  TheCompany believes its financial resources are adequate to fund its needs for thenext 12 months.

***Cash flows from operatingactivities.*** Net cash provided by operating activities wasapproximately $28,000 for the six months ended June 30, 2007, primarilyreflecting the reduction of approximately $1,841,000 in accounts payable, plusan increase in inventory of approximately $1,358,000 partially offset by areduction in accounts receivable of approximately $2,631,000 since December 31,2006.  The cash provided by operatingactivities as of the six months ended June 30, 2007 was approximately$(1,401,000) lower than that provided as of the six months ended June 30, 2006.  This decrease was primarily the result of agreater increase in 2007 inventories compared to the 2006 increase ofapproximately $(741,000) and a 2007 reduction of accounts payable byapproximately $(2,876,000) compared to an increase in 2006 partially offset bya reduction in 2007 of accounts receivable of approximately $2,474,000 greaterthan 2006.

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***Cash flows from investingactivities.*** Net cash provided by investing activities wasapproximately $46,000 for the six months ended June 30, 2007, which wasapproximately $609,000 less than the $563,000 used during the same period ofthe prior year primarily for capital expenditures.  The major contributor in 2007 was therealization of approximately $183,000, representing the cash surrender valueunder certain key man life insurance policies.

***Cashflows from financing activities.*** Net cash used infinancing activities was approximately $119,000 for the six months ended June30, 2007.  This net usage is the excessof approximately $3,979,000 of net cash used to pay down the loan facilitiesincluding approximately $3,322,000 of net revolver payments, approximately$657,000 of term loan payments, less cash received of approximately $2,860,000representing the June 2007 equity investment, net of associated transactioncosts and less the proceeds from the bank Term Loan C of approximately$1,000,000.  The cash used in the currentyear compares to the approximately $861,000 used during the first six months of2006.

#### **Seasonality**

The Vita Seafood segmentof the Company’s business is seasonal in nature, primarily resulting from theeffect of the timing of certain holidays on the demand for certain products.Historically, the segment’s sales and profits have been substantially higher inthe fourth quarter of each year.

**CriticalAccounting Policies and Estimates**

The Company’s financial statements reflect the selection andapplication of accounting policies that require management to make significantestimates and assumptions.  The Companybelieves that the following are some of the more critical judgment areas in theapplication of its accounting policies that currently affect the Company’sfinancial condition and results of operations.

Preparation of the consolidated financial statements in accordance withaccounting principles generally accepted in the United States requiresmanagement to make estimates and assumptions affecting the reported amounts ofassets, liabilities, revenues and expenses and related contingentliabilities.  On an on-going basis, theCompany evaluates its estimates, including those related to revenues, returns,bad debts, income taxes and contingencies and litigation.  The Company bases its estimates on historicalexperience and on various other assumptions that are believed to be reasonableunder the circumstances.  Actual resultsmay differ from these estimates under different assumptions or conditions.

# Revenueis recognized upon the passing of title to the customers, which occurs uponshipment of product to customers, including brokers, in fulfillment of customerorders.  In accordance with industrypractices, inventory is sold to customers often with the right to return ordispose if the merchandise is not resold prior to the expiration of its shelflife.  In order to support the Company’sproducts, various marketing programs are offered to customers, who reimbursethem for a portion, or all of their promotional activities related to theCompany’s products.  The Companyregularly reviews and revises, when it deems necessary, estimates of costs tothe Company for these marketing and merchandising programs based on estimatesof what has been incurred by customers. Actual costs incurred by the Company may differ significantly if factorssuch as the level and success of the customers’ programs or other conditionsdiffer from expectations.  Sales arereduced by a provision for estimated future returns, disposals and promotionalexpense.

VitaSeafood guarantees the sale of most of its products sold in Supermarkets,excluding warehouse clubs, which sales represent approximately 76% of thatsegment’s sales. This guarantee helps ensure that consumers receive freshproducts. Under the guarantee, the majority of customers are issued anallowance off-invoice to cover products not sold before the expiration date.Other  customers with product not soldbefore the expiration date have the right to return unsold product to theCompany through its food brokers or dispose of the unsold product themselves orthrough a food distributor. A credit is then issued to the Supermarket or fooddistributor. The Company provides a reserve that is recorded concurrently withthe sale.  The Company believes, based onits historical return rates, which have been fairly consistent over the pastseveral years, that this reserve is adequate to recognize the cost of allforeseeable future product return credits associated with previously recognizedrevenues.

The Company recognizes deferred income tax assets and liabilities forthe expected future tax consequences of temporary differences between the taxbasis and financial reporting basis of certain assets and liabilities andcertain income tax credit carry-forwards. In estimating future tax consequences, the Company considers expectedfuture events other than enactments of changes in tax laws or rates.  A valuation reserve is recognized based onthe evidence available if it is more likely than not that some portion or theentire deferred income tax asset will not be realized.

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The Company assesses the impairment of its identifiable intangibles andgoodwill whenever events or changes in circumstances indicate that the carryingvalue may not be recoverable and at least annually.  Factors the Company considers important,which could trigger an impairment review include the following:

·                  Significant underperformance relative toexpected historical or projected future operating results;

·                  Significant changes in the manner of theCompany’s use of the acquired assets or the strategy for the Company’s overallbusiness;

·                  Significant negative industry or economictrends;

·                  Significant decline in the Company’sstock price for a sustained period; and

·                  The Company’s market capitalizationrelative to net book value.

When the Company determines that the carrying value of its intangibleassets may not be recoverable based upon the existence of one or more of theabove indicators of impairment, the Company will review for impairment underthe provisions of SFAS 142.

The Company’s goodwill resulted from theacquisitions of Virginia Honey and Halifax. Annually, effective as of December 31, the Company engages anindependent appraiser to assist in management’s assessment as to whether therecorded goodwill is impaired.  Theindependent appraisals are made using customary valuation methodologies,including discounted cash flow and other fundamental analysis andcomparisons.  In its 2004 and 2006assessments, management determined that the Company’s recorded goodwill was inexcess of its fair value and accordingly, the Company recorded goodwillimpairment charges of $2,313,954 and $1,125,693 in 2004 and 2006,respectively.  The impairments wereprincipally due to the decline in the sales volume of Halifax products in 2004and overall performance issues in 2006.

#### **Forward-LookingStatements**

Certain statements inthis report, including statements in “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations,” are “forward-looking statements”as defined by the Federal securities laws. Such statements are based onmanagement’s current expectations and involve known and unknown risks anduncertainties which may cause the Company’s actual results, performance orachievements to differ materially from any results, performance or achievementsexpressed or implied in this report. By way of example and not limitation andin no particular order, known risks and uncertainties include the Company’sfuture growth and profitability, the potential loss of large customers oraccounts, downward product price movements, availability of raw materials,changes in raw material procurement costs, fluctuations in the market cost ofmajor commodities such as honey, changes in energy costs, the introduction andsuccess of new products, changes in economic and market conditions, integrationand management of acquired businesses, the seasonality of Vita Seafood’sbusiness, the Company’s ability to attract and retain key personnel, theCompany’s ability to maintain its relationships with key vendors and retailers,consolidation of the Company’s customer and supplier base, the potential impactof claims and litigation, the effects of competition in the Company’s markets,the success of the Company’s quality control procedures, the impact of theCompany’s substantial indebtedness, the adequacy of the Company’s reserves andthe dietary habits and trends of the general public.  In light of these and other risks anduncertainties, the Company makes no representation that any future results,performance or achievements expressed or implied in this report will beattained. The Company’s actual results may differ materially from any resultsexpressed or implied by the forward-looking statements, especially whenmeasured on a quarterly basis.

**Item 3. Quantitative and Qualitative Disclosures About Market Risk**

TheCompany is exposed to interest rate fluctuations, primarily as a result of its$18.4 million Loan Agreement with interest rates based on prime rate plus 0.5%,or 8.75% as of June 30, 2007 for all loans covered by the Loan Agreement otherthan the new $1,000,000 term loan which bears interest at the prime rate plus2.0%.  The Company does not currently usederivative instruments to alter the interest rate characteristics of any of thedebt.  A 10% fluctuation in interestrates would not have a material impact on the Company’s financial statements.

**Item 4.  Controls and Procedures**

Under the supervision and withthe participation of the Company’s management team, the principal executiveofficer and principal financial officer have evaluated the effectiveness of thedesign and operation of the Company’s disclosure controls and procedures asdefined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Actof 1934, as amended (the “Exchange Act”), as of June 30, 2007 and, based ontheir evaluation, have concluded that these controls and procedures areeffective.  There were no changes in theCompany’s internal control over financial reporting 

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during the fiscal quarter endedJune 30, 2007 that have materially affected, or are reasonable likely tomaterially affect, the Company’s internal control over financial reporting.

Disclosurecontrols and procedures are designed to ensure that information required to bedisclosed by the Company in the reports that it files or submits under theExchange Act is recorded, processed, summarized and reported, within the timeperiods specified in the Securities and Exchange Commission’s rules andforms.  Disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by the Company in the reportsthat it files under the Exchange Act is accumulated and communicated to theCompany’s management, including its principal executive officer and principalfinancial officer, as appropriate to allow timely decisions regarding requireddisclosure.

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 potential futureconditions, regardless of how remote.

## **PART II - OTHER INFORMATION**

#### **Item 1A.  Risk Factors**

The risk factorsincluded in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-Kfor the fiscal year ended December 31, 2006 have not materially changed

**Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.**

**DirectorsShares**

On May 24, 2007,the Company issued shares of Common Stock to each of its non-employee directorsin lieu of fees for attending meetings of the Board that took place on each ofDecember 6, 2006, February 15, 2007, March 20, 2007, March 24, 2007, April 1,2007, April 6, 2007, April 8, 2007, April 27, 2007 and May 3, 2007; meetings ofthe Audit Committee of the Board that took place on February 15, 2007, April17, 2007, April 23, 2007 and May 11, 2007; and a meeting of the CompensationCommittee of the Board that took place February 15, 2007.  The number of shares to be issued wasdetermined based on the amount of fees payable to each director divided by theclosing price of the Common Stock on May 24, 2007, the date of the Company’s2007 Annual Meeting of Stockholders.  Thenumber of shares issued to each individual director for these meetings,respectively, were as follows:
| Glenn Morris:    |   | 3,869 |   |
|------------------|--------|-------|--------|
| John Seramur:    |   | 4,452 |   |
| Steve Rothstein: |   | 4,144 |   |
| Scott Levitt:    |   | 4,795 |   |
| Howard Bedford:  |   | 4,109 |   |

 

The Company reliedon the exemption provided by Section 4(2) of the Securities Act of 1933, asamended, and Regulation D promulgated thereunder, in connection with theunregistered issuance of Common Stock to the non-employee directors.

**EmployeeStock Purchase Plan Shares**

On December 31,2006 and June 30, 2007, the Company issued 14,135 and 10,582 shares of CommonStock, respectively, under the Vita Food Products, Inc. Employee Stock PurchasePlan to participants in such plan in accordance with their subscriptionagreements.  The shares were sold atprices of $1.68 on December 31, 2006 and $1.573 on June 30, 2007, representing85% of the closing sale price of the Company’s Common Stock on the AmericanStock Exchange 

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on the purchasedate.  The Company intends to file aRegistration Statement on Form S-8 covering such shares during the thirdquarter of 2007.

See, also, “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations-Financial Condition.”

No purchases were made by or on behalf of the Companyor any “affiliated purchaser” of shares of the Company’s Common Stock duringthe second quarter of fiscal year 2007

**Item 4. Submission of Matters to a Vote ofSecurity Holders**

(a)          The date of the Company’sAnnual Meeting of Stockholders was scheduled to be May 18, 2006.  However, the meeting was adjourned on thatdate to May 24, 2007.

(b)         and (c) At the AnnualMeeting of Stockholders, the following matters were submitted to a vote of thestockholders with the stated results:

(1)                                  Theelection of the following persons as directors of the Company:
| Director              | ** ** | **Votes For** | ** ** | **Votes Withheld** | ** ** | **Abstained** | ** ** | **Broker Non-Votes** | ** ** |
|-----------------------|------------|--------------------|------------|-------------------------|------------|---------------|------------|---------------------------|------------|
|                  |       |               |       |                    |       |          |       |                      |       |
| Stephen D. Rubin      |       | 2,771,781          |       | 639,814                 |       | —        |       | —                    |       |
| Howard Bedford        |       | 2,801,967          |       | 609,628                 |       | —        |       | —                    |       |
| Edward P.  Dolanski   |       | 2,801,667          |       | 609,928                 |       | —        |       | —                    |       |
| Robert C.  Douglas II |       | 2,797,967          |       | 613,628                 |       | —        |       | —                    |       |
| David S. Lipson       |       | 2,801,667          |       | 609,928                 |       | —        |       | —                    |       |
| John C. Seramur       |       | 2,784,601          |       | 627,434                 |       | —        |       | —                    |       |

 

(2)                                  Toadopt the Vita Food Products, Inc. 2006 Stock Option Plan.
| Votes For | ** ** | **Against** | ** ** | **Abstained** | ** ** | **Broker Non-Votes** | ** ** |
|----------------|------------|-------------|------------|---------------|------------|---------------------------|------------|
|           |       |        |       |          |       |                      |       |
| 3,246,140      |       | 165,055     |       | 400           |       | —                    |       |

 

(3)                                  Toadopt the Vita Food Products, Inc. 2006 Employee Stock Purchase Plan.
| Votes For | ** ** | **Against** | ** ** | **Abstained** | ** ** | **Broker Non-Votes** | ** ** |
|----------------|------------|-------------|------------|---------------|------------|---------------------------|------------|
|           |       |        |       |          |       |                      |       |
| 3,242,810      |       | 168,785     |       | 0             |       | —                    |       |

 

(4)                                  Toapprove the Company’s ability to issue shares of Common Stock to members of theBoard of Directors as fees for services rendered as directors of the Company.
| Votes For | ** ** | **Against** | ** ** | **Abstained** | ** ** | **Broker Non-Votes** | ** ** |
|----------------|------------|-------------|------------|---------------|------------|---------------------------|------------|
|           |       |        |       |          |       |                      |       |
| 3,243,675      |       | 167,920     |       | 0             |       | —                    |       |

 

(5)                                  Ratificationof the selection of BDO Seidman, LLP as independent accountants of the Companyfor the year ending December 31, 2007
| Votes For | ** ** | **Against** | ** ** | **Abstained** | ** ** | **Broker Non-Votes** | ** ** |
|----------------|------------|-------------|------------|---------------|------------|---------------------------|------------|
|           |       |        |       |          |       |                      |       |
| 3,271,940      |       | 139,155     |       | 500           |       | —                    |       |

 

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**Item6.  Exhibits**

| 31.1   |   | Principal Executive Officer Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002. |
|--------|--------|-------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                  |
| 31.2   |   | Principal Financial Officer Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |   |                                                                                                  |
| 32.1   |   | Principal Executive Officer Certification pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002. |
|   |   |                                                                                                  |
| 32.2   |   | Principal Financial Officer Certification pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

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## **SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf by theundersigned thereunto duly authorized.
|                             |   |   | **VITA  FOOD PRODUCTS, INC.** |                                          |
|-----------------------------|--------|--------|-------------------------------|-----------------------------------------------|
| ** **                  |   |   | ** **                    |                                          |
| Date:  August 14, 2007 |   |   | By:                           | /s/ Clifford K. Bolen                         |   |   |
|                        |   |   |                          |  Clifford K. Bolen                       |   |   |
|                        |   |   |                          | President and Chief  Executive Officer        |   |   |
|                        |   |   |                          | (Principal Executive  Officer)                |   |   |
|                        |   |   |                          |                                          |   |   |
|                        |   |   |                          |                                          |   |   |
| Date:  August 14, 2007 |   |   | By:                           | /s/ R. Anthony Nelson                         |   |   |
|                        |   |   |                          | R. Anthony Nelson                             |   |   |
|                        |   |   |                          | Chief Financial Officer                       |   |   |
|                        |   |   |                          | (Principal Financial  and Accounting Officer) |   |   |

 

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**Exhibit Index**
| Number | ** ** | **Exhibit Title**                                                                                     |
|--------|------------|-------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                  |
| 31.1   |       | Principal Executive Officer Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |       |                                                                                                  |
| 31.2   |       | Principal Financial Officer Certification pursuant  to Section 302 of the Sarbanes-Oxley Act of 2002. |
|   |       |                                                                                                  |
| 32.1   |       | Principal Executive Officer Certification pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002. |
|   |       |                                                                                                  |
| 32.2   |       | Principal Financial Officer Certification pursuant  to Section 906 of the Sarbanes-Oxley Act of 2002. |

 

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