10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2005
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 incorporation or organization)	(I.R.S. Employer 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

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, par value $.01 per share	American Stock Exchange & Chicago Stock Exchange

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o   No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o   No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).

Yes o   No ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes o   No ý

The aggregate market value of common stock held by non-affiliates of the registrant as of June 30, 2005 was $5,222,772.

The number of shares outstanding of the registrant’s common stock as of February 28, 2006 was 3,872,822.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement to be delivered to stockholders in connection with the Annual Meeting of Stockholders to be held on May 18, 2006 are incorporated by reference in Part III.

PART I

Item 1. Business.

Introduction

Vita Food Products, Inc. (the “Company”) has been engaged in the sale of specialty food products under the Vita brand name for over 70 years. The Company believes that its long history of producing and marketing quality products has created a strong recognition of the Vita brand name among consumers and has enabled the Company to build an extensive national distribution network of established food brokers for the sale of its products to supermarket chains and wholesale clubs (collectively “Supermarkets”) and to institutional/food service operations, such as restaurant chains, hotels, country clubs, cruise lines and other bulk purchasers (collectively “Institutional Purchasers”). The Company believes that “Vita”, with its accompanying logo, is the most widely recognized brand name in herring products and cured and smoked salmon products. The Company is the leading processor of herring products and cured and smoked salmon products in the United States and has been producing and selling herring products for over 70 years and cured and smoked salmon products for over 30 years. The Company’s products include a variety of cuts of pickled herring in cream and wine based sauces, and lox and nova salmon. The Company markets other complementary specialty food products, such as cream cheese with salmon, shrimp cocktail, horseradish, cocktail, tartar sauces and salad dressings, all of which it purchases from third party food producers and markets under the Vita brand name pursuant to co-packing arrangements, with the exception of the salad dressing products, which are now produced by the Company’s subsidiary. Historically, the Company has increased its sales through acquisitions that have enabled the Company to add new product lines and expand its existing product lines. The Company markets and, in some cases, also produces related specialty food products under other brand names, some of which are recognized regional brand names, in certain regions of the country, that have been licensed to the Company.

The Company significantly expanded its line of specialty food products in 2002 and 2001 with the acquisitions of The Halifax Group, Inc. (“Halifax”) and the Virginia Honey Company, Inc. (“Virginia Honey”), respectively. The Company has formed Vita Specialty Foods, Inc. (“VSF”) as a wholly owned subsidiary and a separate business unit (the “Vita Specialty Foods Segment”) to consolidate the operations of Virginia Honey and Halifax (the Company’s operations conducted separately from the operations of the Vita Specialty Foods Segment are referred to herein as the “Vita Seafood Segment” and references to the Company include the acquired operations subsequent to their respective acquisition dates). The Vita Specialty Foods Segment specializes in processing and marketing, (i) under the Virginia Brand name, honey, salad dressings, sauces, jams and jellies and gift basket products; (ii) under its Oak Hill Farms® brand name, a line of salad dressings, gourmet sauces, and beverages; and (iii) under its Scorned Woman® brand name, a line of hot sauce based products. In addition, the Vita Specialty Foods Segment has brand name product licensing agreements with Jim Beam®, Allied Domecq for the brand names Kahlúa® and Courvoisier®, and certain colleges and universities under which the Company produces and markets various cooking sauces, steak sauces, marinades and other gourmet related products. As a result of the acquisitions of Halifax and Virginia Honey, the Company is leveraging its sales and distribution network to provide national exposure to the products of the Vita Specialty Foods Segment. The Company also expects to introduce new products with a goal of enhancing the aforementioned brand names under the Vita Seafood Segment and the Vita Specialty Foods Segment.

Company Background

The Company was originally incorporated as Vita Food Products, Inc. in 1928. In 1968, Brown and Williamson Tobacco Company, a British company, purchased the Company. The Company was then acquired by Dean Foods Company in 1978. In 1982, Mr. Stephen D. Rubin and Mr. Clark L. Feldman, on behalf of an investor group (the “Investors”), negotiated the acquisition of the Company from Dean Foods Company and became the Company’s largest shareholders. On September 20, 1996, the Company reincorporated in the State of Nevada through a merger of Vita Food Products, Inc., an Illinois corporation (“Vita-Illinois”), and V-F Acquisition, Inc., an Illinois corporation that was the largest shareholder of Vita-Illinois, into the Company, a Nevada corporation formed for the purpose of effecting the reincorporation. On

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January 23, 1997, the Company completed an initial public offering of shares of its common stock, par value $.01 per share (“Common Stock”), and redeemable common stock purchase warrants, which expired in 2002, resulting in net proceeds before expenses of approximately $4.1 million.

Effective July 1, 2001, the Company acquired 100% of the outstanding shares of capital stock of Virginia Honey. The results of Virginia Honey have been included in the Company’s consolidated financial statements since the effective date of the acquisition as part of the Vita Specialty Foods Segment. Virginia Honey was established in 1962 as a small beekeeping business. Since then, Virginia Honey has expanded its product offerings to include salad dressings and by 1998 the company had grown to include two production facilities, with one used to pack honey products and the second to process and pack salad dressings, sauces and marinades.

Effective November 1, 2002, the Company acquired 100% of the outstanding shares of capital stock of Halifax. The results of Halifax have been included in the Company’s consolidated financial statements since the effective date of the acquisition as part of the Vita Specialty Foods Segment. Halifax specialized in product development and marketing of its wide range of food products. The product list includes salad dressings, barbeque sauce, steak sauce, gourmet sauces, hot sauces and gift basket related items. In addition, Halifax developed and marketed food products through licensing agreements with well-recognized brands such as Jim Beam®, HBO® (based on the restaurateur Artie Bucco™ in The Sopranos®), and Drambuie®. During 2005, the licensing agreements for both HBO® and Drambuie® expired. Halifax operations were run in a production facility and warehouse in Georgia, until late in 2003 when operations were moved to the Company’s Martinsburg, West Virginia plant.

Strategy

The Company’s long-term strategy is to (i) focus on acquisitions; (ii) continue to strengthen its brands; and (iii) capitalize on the strength of the Company’s national distribution network to increase its market share for its existing products and introduce and market new products sold under the Vita, Elf, Grand Isle, Virginia Brand, Oak Hill Farms, Jim Beam Gourmet Foods, Scorned Woman and other brand names owned, purchased or licensed from third parties. The Company intends to implement its growth strategy through acquiring, or entering into joint ventures with, companies producing complementary specialty food products, introducing and developing new products and increasing its marketing efforts.

Products

The Company’s products include: herring, cured and smoked salmon, honey, salad dressings, meat enhancements and a variety of related specialty food products. The Company’s refrigerated products can be located in the dairy, meat and fish or deli department of Supermarkets. The Company also sells products in the grocery sections of Supermarkets. Many of the Company’s products are also sold in bulk to Institutional Purchasers. The Company believes that, although the market for herring products has been and is expected to remain constant, the market for salmon products and certain other specialty products is increasing. Consumption of fresh and frozen seafood in the United States continues to increase, especially consumption of salmon. All of the Company’s salmon, herring and honey products, and most of its salad dressings, complementary and other specialty food products are kosher and receive the symbol of certification from the Orthodox Union. The Company also receives the symbol of certification for the use of many of its products for Passover from the Orthodox Union. The Company believes that the market for kosher foods will continue to grow and that this represents a significant opportunity for the Company. The increase in consumption of kosher food products is at least partially the result of (i) the perception by certain consumers who are not bound by Judaism’s religious dietary restrictions that kosher certification indicates a superior product, and (ii) an increase in the U.S. population of members of other religious groups that observe dietary restrictions similar to many Jewish people.

Certain Financial Information

See Note 12 in “Item 8. Financial Statements” for information regarding revenues from external customers, profit and total assets of each of the Company’s business segments.

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Vita Seafood Segment Products

Herring

Vita & Elf brand herring are made from the best available grade of ocean herring. The herring is cured and mixed with a variety of high quality spices, wines and other ingredients according to the Company’s proprietary formulations to produce a number of products. These products are then either packaged in vacuum-sealed glass jars to preserve flavor for sale to Supermarkets or packaged in bulk containers for sale to Institutional Purchasers. Herring is a traditional Eastern European and Scandinavian staple, being one of the most widely consumed fish in the world. In the United States, herring is more of a specialty product that is served at parties or holiday gatherings. Herring products are often served as appetizers, part of a buffet, between-meal snacks or an ingredient in salads. The Company’s most popular herring products are its “Vita Herring in Wine Sauce” and “Vita Herring in Real Sour Cream.”  The Company also sells a variety of other herring products under the Vita and Elf brand names. Sales of herring products represented 29%, 29% and 28% of total consolidated sales for the years ended December 31, 2005, 2004 and 2003, respectively.

Salmon

Vita uses only premium and quality grades of salmon from Southeastern Alaska, Canada, Chile, and other regions of the world. The salmon is cured, smoked, and sliced for most of its salmon products. The Company’s retail salmon products are packaged and sold either refrigerated or frozen to Supermarkets. The institutional cured and smoked salmon products are packaged in bulk containers, including three-pound trays, and sold refrigerated or frozen to Institutional Purchasers. The Company introduced a new line of “No Preservative” premium smoked Atlantic Salmon products, under the “Grand Isle” brand name in the fourth quarter of 2004. Salmon consumption has been increasing over the past five years and salmon now represents one of the most popular types of seafood consumed in the United States. The Company’s salmon products are generally served as part of buffets at parties, particularly during the Christmas holiday season, or as a traditional brunch item with bagels. The salmon products are also served as appetizers at formal parties and are being more frequently used as light meals.The Company’s salmon products include “Vita Lox Salmon,” “Vita Nova Salmon,” and “Vita Classic Salmon,” “Grand Isle Salmon,” “Vita Salmon Burger,” “Vita Marinated Salmon,” and “Vita Salmon Spread”. Sales of salmon products represented 25%, 24% and 24% of total consolidated sales for the years ended December 31, 2005, 2004 and 2003, respectively.

Complementary Products

The Company sells a number of spreads and condiments, including horseradish, cream cheese with smoked salmon, cocktail and tartar sauces, and shrimp cocktail products. These products are used as appetizers and condiments to accompany light meals and holiday trays. These products are marketed by the Company under the Vita brand name, but produced by third parties pursuant to co-packing arrangements. Sales of complementary products represented 2%, of total consolidated sales for each of the years ended December 31, 2005, 2004 and 2003, respectively.

Vita Specialty Foods Segment Products

Salad Dressings

The Company manufactures and markets three premium lines of salad dressings. Two lines are under the Virginia Brand and Oak Hill Farms names and are sold in the grocery section. The third line, which has been developed since the acquisition of Virginia Honey, is under the Vita brand name and is sold refrigerated. All salad dressing flavors feature the finest ingredients available and most contain the Vidalia® Onion ingredient. While all of the dressings boast premium quality and taste, some also feature no cholesterol, low fat, low carbohydrates, and low calories. The Company’s salad dressing customers are mainly Supermarkets. Sales of salad dressings represented 25%, 25% and 21% of total consolidated sales for the years ended December 31, 2005, 2004 and 2003, respectively.

Honey

Virginia Honey, followed by the Vita Specialty Foods segment, has been packing and marketing Pure, Grade “A” honey under the Virginia Brand name since 1962. The honey is available in several varieties and blends, including Clover, Wildflower, Orange Blossom, and Acacia. Each variety is available in

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many sizes ranging from 6oz mugs to 55-gallon drums used for food service. The Company’s customers include Supermarkets, Institutional Purchasers, bakeries and major food processors. Sales of honey products represented 12%, 13% and 15% of total consolidated sales for the years ended December 31, 2005, 2004 and 2003, respectively.

Specialty Products

The Company manufactures and sells BBQ sauces, marinades, steak sauce, hot sauces, wing sauce, gourmet cooking sauces and other specialty items. These products are marketed by the Company under the Oak Hill Farms and Scorned Woman brand names and under licensing agreements from Jim Beam®, Kahlúa® and Courvoisier®.

In addition, the Company sells a wide array of other products including molasses, baking mixes, syrups, condiments, cider, mustard, jams, jellies, and preserves. These products are marketed by the Company under the Virginia Brand name, but produced by third parties pursuant to co-packing arrangements. Sales of specialty products represented 7%, 7% and 10% of total consolidated sales for the years ended December 31, 2005, 2004 and 2003, respectively.

Newer Products

The Company’s newer products are those being introduced currently and during the past year and are developed by the Company or marketed under co-packing arrangements or distribution agreements.

The Company has expanded the Jim Beam Gourmet Food line of products with the addition of Mild and Medium Salsas and Honey Bourbon and Savory Bourbon Glazes and Grilling Sauces.

In addition, the Company has expanded its Virginia Brand salad dressing line of products with Chipotle Ranch and Cilantro and Green Chili Ranch varieties.

Next,the Company has expanded its Oak Hill Farm Food line of products with the addition of a Southwest Chipotle salad dressing and Sugar Free Green Tea with Ginseng and Honey and Roobis Tea concentrates.

The Vita Seafood Segment is introducing two new sub lines under the Vita brand in 2006. Vita Gold is Vita’s new Wild Salmon smoked salmon product line. The line is “all natural” & has “no preservatives”. The line consists of Wild Sockeye, Coho, King and Nova items.

Vita’s second new sub line is Vita Simply Salmon. The product line consists of ready to cook pre-marinated portions of salmon that reduces the difficulty of preparing fish. The product line consists of three products: Lemon Pepper Wild Salmon, Cracked Peppercorn Wild Salmon and Lightly Seasoned Wild Sockeye Salmon.

Lastly, Vita has introduced a new 8 oz. line of seafood sauces that is packaged in a jar with a mouth wide enough to allow consumers to get all the condiments out of the jar. Vita’s new 8 oz. condiment line includes: Beet & Cream Style Horseradish, Cocktail Sauce, Tangy Tartar Sauce and Chesapeake Style Seafood Sauce.

Product Distribution and Sales

The Company’s products, under both segments, are currently sold through a national distribution network of approximately 60 established retail and institutional/food service brokers. The Company believes that it is the only processor of herring products and cured and smoked salmon products that has established such an extensive national distribution network. The Company believes it has been successful in developing this network for a number of reasons, including the recognition of the Vita brand name and the Company’s reputation for producing quality products. The Company has also been able to develop and strengthen its distribution network by providing adequate shelf space for its products. The Company’s current marketing efforts and its long-term relationship with many of the food brokers has also contributed to the strength of this network. The Company, through its marketing efforts, attempts to maintain good relationships with the Supermarkets and Institutional Purchasers that purchase its products. The Company believes that its national distribution network has, in turn, helped strengthen the Vita brand name and has been an important

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factor in the Company’s ability to introduce new products into the marketplace and is an important component of its acquisition strategy.

The Company’s regional sales managers oversee its national distribution network. The Company employs full-time regional sales managers who maintain contact with the food brokers in their region and monitor their performance. The regional sales managers also assist the food brokers in their selling efforts by, among other things, accompanying the food brokers on local sales calls. The Company believes that it is one of the few companies in its market niche to employ regional sales managers and that the presence of the regional sales managers has solidified the Company’s relationship with its national distribution network.

The Company enters into an agreement with each food broker, which grants the food broker an exclusive territory in which to sell its products and sets forth the amount of commissions to be paid on such sales by the Company. Such agreements do not permit the Company to make sales directly to Supermarkets located in a food broker’s exclusive territory unless the Company pays the food broker the commission, which the food broker would have earned. The agreements are terminable by either party upon 30 days’ notice. The Company believes such terms are standard in the Company’s industry. The food brokers sell the Company’s products in both the retail and institutional/food service markets. The retail market, consisting of Supermarkets, has generally accounted for approximately 93% of the Company’s net sales while Institutional Purchasers have accounted for the remaining 7% of net sales.

In addition to the Company’s three facilities, the Company also stores and distributes its products through over 15 warehouse facilities owned by third parties, which are located throughout the United States.

Customers

The Company’s customers include large regional supermarket chains, wholesale clubs and gourmet shops throughout the country and in Canada and Mexico. The Company’s products sold under the Vita and Virginia Brand names are particularly well known on the eastern seaboard.

The Company’s two largest customers represented 20% and 12% of its net sales in 2005, 21% and 14% in 2004 and 19% and 13% in 2003, respectively. The Company does not have a long-term contractual relationship with either customer. The Company believes the loss of either of these customers would have a material adverse affect on the Company’s business, financial condition and results of operations. To this point, during 2003, the Vita Seafood Segment’s largest customer discontinued a Vita Seafood Segment product resulting in a material impact to the Company’s financial results for 2004. However, in 2004 the Company replaced much of this business through sales to other customers. The Company believes that its present working relationships with these customers that have been built up over time are likely to continue.

The Company is aware that its customers are continually reviewing their purchasing decisions which may result in such customers changing their current orders from higher margin to lower margin products or reducing the amount of a product or products purchased. Any material change in orders or reduction in the amount of a product or products purchased by one or more significant customers could adversely affect the Company’s business, financial condition and results of operations.

Foreign Sales

The Company had sales to foreign countries totaling $1,471,000, $2,076,000 and $1,658,000 during 2005, 2004 and 2003, respectively.

Product Return Policy

The Vita Seafood Segment guarantees the sale of most of its products sold in Supermarkets, excluding warehouse clubs, which sales represent approximately 76% of that segment’s sales. This guarantee helps ensure that consumers receive fresh products. Under the guarantee, products not sold before the expiration date are either returned to the Company through its food brokers or are disposed of by the Supermarkets or food distributor. A credit is then issued to the Supermarket or food distributor. The Company provides a reserve that is recorded concurrently with the sale. The Company believes, based on its historical return rates, which have been fairly consistent over the past several years, that this reserve is adequate to recognize the cost of all foreseeable future product return credits associated with previously recognized revenues.

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Production

Suppliers

The Company relies on outside suppliers for its requirements in producing its herring, salmon, honey, salad dressings, cooking sauces and other products. The Company previously purchased most of its herring from one specialty herring harvester and processor (the “Supplier”) located in Canada, pursuant to a supply agreement. Under the agreement, the Supplier had the option to supply 90% of the Company’s annual requirements for herring, provided it sold the herring at the same prices which the Company would pay if it purchased herring elsewhere. The Supplier guaranteed the first priority of supply of herring to the Company, in an amount necessary to satisfy the Company’s requirements. The agreement was terminated in 2002, but has not changed the Company’s decades-long relationship with the Supplier, as the Company has been purchasing herring from the Supplier since the Company began operations over 70 years ago. The absence of an agreement has not impacted the Company, since the Company continues to buy from the Supplier at competitive prices and the Company has established other sources of supply it believes will be adequate in the event the Supplier ceases to offer herring at competitive prices. The Company currently purchases its other raw materials and co-packed products from a number of sources and the Company believes that there are other suppliers from which the Company could meet its requirements, if necessary.

Quality Control

The Company believes that it was one of the first processors of herring products and cured and smoked salmon products to institute quality control procedures and that its quality control procedures are among the most stringent in this market. The Company has six full-time employees in its Quality Control Departments. The primary responsibility of these employees is to ensure the quality of all its products by overseeing the production process and by frequently testing the consistency of the products as they are produced. In addition, the Company is using certain high-tech equipment in its production process dedicated solely to quality control purposes that the Company believes gives it a competitive advantage. The products produced through co-packing arrangements are subject to both the quality control procedures of the co-packing company and the same frequent product testing that is required of the Company’s products under its quality control procedures.

Competition

The market for the Company’s products is highly competitive. The Company believes that consumers choose herring products, salmon products, honey products, salad dressing products as well as its other specialty products based primarily on product quality and price. Although the Company’s competitors for herring and salmon products are generally small regional food processors and producers, certain of the Company’s competitors may have greater financial and other resources than the Company and may offer lower prices on comparable products. Since a key competitive factor among producers of cured and smoked salmon products and herring products is price, even smaller regional companies may be able to compete effectively against the Company due to reduced shipping costs. While the Company believes its prices are competitive for the quality level of its products, the Company relies primarily on the recognition of the Vita brand name, its reputation for selling quality products, and the strength of its distribution network. The Company’s main competitors in the herring product and cured and smoked salmon product market are Lascco, Mama’s and Nathan’s, among others. The Company believes it is the only independent company with national distribution capabilities in this market. In the honey products market, the Company’s main competitors are Dutch Gold Honey and Sioux Bee Honey. The Company recognizes that the salad dressing market is very competitive and there are large companies such as Kraft Foods, Inc. in this market. However, the Company believes that there is a niche with the salad dressing products the Company offers. Most of the salad dressings are based on the Vidalia® Onion as an ingredient. The Vidalia® Onion ingredient, coupled with the Company’s proprietary formulations, have created what the Company believes are unique products.

Environmental Matters

In the ordinary course of the Company’s production process, at the Chicago Illinois facility, spillage and cleaning results in a high concentration of sugars and vinegars, which create Biological Oxygen Demands (“BODs”) as well as fats, oils and greases (“FOGs”), both of which enter the waste water treatment system. The Company is assessed a user charge by the Metropolitan Water Reclamation District (the “District”), based in part on the costs of treating this waste water. If the level of FOGs entering the wastewater treatment system exceeds a specified level over a specified period of time, the District, following certain procedural requirements, has the authority to fine the Company or to temporarily close the Company’s

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production facility. The District has not initiated or threatened to initiate proceedings against the Company for violating specified levels for FOGs.

Intellectual Property

Trademarks and trade names are of critical importance to producers of food products. A recognized trademark or trade name allows the consumer to immediately identify the source of a product, even if the product is new to the marketplace.

Vita Seafood Segment

The Company owns the federally registered trademark “Vita” (with accompanying design). The Company believes that this mark is widely recognized, and provides immediate identification of the source of its products to consumers. This recognition is the basis for the Company’s ability to maintain a significant share of the national market for refrigerated herring products and cured and smoked salmon products. The Company believes the “Vita” brand name and trademark has a substantial amount of goodwill associated with it. The Company believes the Vita trademark and its accompanying design are critical to its ability to market new products and to its marketing strategy in general.

The Company has also licensed the “Elf” brand name, of herring products, which the Company believes has widespread consumer recognition in the Midwest region of the country. The Company obtained all of Lyon Food Product Inc.’s rights to the “Elf” trademark in connection with herring products from Food Marketing Corp. pursuant to a letter agreement (the “Letter Agreement”). Ownership of the “Elf” trademark originally belonged to Food Marketing Corp. and was transferred to SuperValu, Inc., which affirmed Lyon Food’s right to use the mark as set forth in the Letter Agreement and consented to the Company’s right to use the trademark in connection with smoked fish products. The Letter Agreement is terminable upon six months notice to the Company. The Company also sells, under a new product line of premium smoked Atlantic Salmon, “Grand Isle.”  The Company applied for and received a registered federal trademark for “Grand Isle.”  In addition, the Company plans to sell, under a new product line of marinated salmon, “Simply Salmon.”  The Company has applied for and is awaiting approval of a registered federal trademark for “Simply Salmon.”

Vita Specialty Foods Segment

Through its acquisitions of Virginia Honey and Halifax, the Company also acquired the federally registered trademarks “Virginia Brand”, “Oak Hill Farms” and “Scorned Woman”. In addition, the Company is now producing and marketing products under various third-party licensing agreements. The Company believes that the brand names of Jim Beam®, Kahlúa®, Courvoisier® and certain colleges and universities can attract consumer attention in a highly competitive marketplace. The Company believes these licensing agreements can provide opportunities within the Company’s national sales and distribution network to add significant sales growth. The Company plans to explore the use of additional brand names through third-party licensing agreements as part of its overall strategy. The Company is not aware of any names or marks which infringe on any of those the Company uses. Although the Company sells products under a number of other brand and trade names, such other brand or trade names are not material to the Company’s marketing strategy. The Company also uses various recipes and proprietary formulations in its products, which it maintains as trade secrets. The Company does not believe its business is otherwise dependent upon any patent, license, trademark, service mark or copyright.

Product Liability Insurance

The Company currently maintains product liability insurance for its products with limits of $10,000,000 per occurrence and $11,000,000 in the aggregate, per annum for its operations. There can be no assurance that the Company’s insurance will be adequate to cover future product liability claims, or that the Company will be able to maintain adequate product liability insurance at commercially reasonable rates.

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Employees

At December 31, 2005, the Company had 159 full-time employees. Additionally, up to 40 workers are hired on a temporary basis each year to meet seasonal production demands. At the Chicago Illinois plant, except for supervisors, all production employees are represented by the Local 546 United Food & Commercial Workers, International Union and maintenance employees are represented by the Local 399 International Union of Operating Engineers. The Company has not experienced any work stoppages since the Company was acquired by the Investors in 1982. The Company considers its relations with its employees to be good.

Government Regulation

The manufacture, processing, packaging, storage, distribution and labeling of food products are subject to extensive federal and state laws and regulations. In the United States, the Company’s business is subject to regulation by the Food and Drug Administration (the “FDA”). Applicable statutes and regulations governing food products include “standards of identity” for the content of specific types of foods, nutritional labeling and serving size requirements. The Company believes that its current products satisfy, and its new products will satisfy, all applicable regulations and that all of the ingredients used in its products are “generally recognized as safe” by the FDA for the intended purposes for which they will be used.

Vita Specialty Food Segment’s operations and the production facility from which such operations are conducted are under license by the Department of Alcohol, Tobacco and Firearms (the “ATF”), subject to extensive federal laws and regulations based on the Vita Specialty Food Segment’s use of alcohol as an ingredient in a number of its food products. The Company believes that its current products and processes and reporting requirements satisfy all applicable regulations set forth by the ATF and its licensing provisions.

Seasonality

See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Seasonality; Quarterly Results.”

Item 1A. Risk Factors.

The Company is subject to a number of important risks and uncertainties. The accompanying risk factors should be read in conjunction with the information included in this Annual Report on Form 10-K.

We have incurred substantial indebtedness.  Amounts outstanding under the revolving facility, the Term A and Term B facilities at December 31, 2005 were $8,588,000; $6,242,000 and $49,000 respectively. The ratio of long term debt to total capitalization was 74% at December 31, 2005. This substantial indebtedness represents an element of risk in the event that our operating proceeds are insufficient to meet the principal and interest payments on our indebtedness. If our cash flow is insufficient to service our debt, the value of our equity could be reduced or eliminated through foreclosure.

Restrictions imposed by the terms of our Loan Agreement may limit our operating and financial flexibility. All of our assets have been pledged as security for any borrowings under the Loan Agreement (as hereinafter defined). The Loan Agreement contains various business and financial covenants including among other things, a debt service ratio, a net worth covenant and a ratio of total liabilities to tangible net worth. Our failure to comply with our obligations under the Loan Agreement may result in an event of default, which, if not cured or waived, may permit acceleration of the indebtedness under the Loan Agreement. We most likely would not have sufficient funds available to pay any accelerated indebtedness and cannot be certain that we would even have the ability to refinance accelerated indebtedness on favorable terms should an event of default occur.

Changes in interest rates affect the interest rate payable under our Loan Agreement. We are exposed to interest rate fluctuations, primarily as a result of its Loan Agreement with rates which are based on a factor of the prime rate and thus subject to market fluctuations. We do not currently use derivative instruments to alter the interest rate characteristics of any debt.

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General economic conditions and conditions in the retail environment could adversely affect our customers.  Our largest customers are in the retail grocery business and we guarantee the sales to the majority of these customers. Accordingly, a slow down in the economy, especially in the retail market could directly affect the Company’s revenues and profitability.

We are dependent on a few large customers.  During 2005, our two largest customers represented 20% and 12% of its net sales. We do not have a long term contract with either of these customers and the loss of either customer would have a material adverse affect on the Company’s business.

Reduced spending by customers could significantly impact our operating results, financial condition and cash flows. While we enjoy very good relationships with our customers, there can be no assurance that our principal customers will continue to purchase products from us at the current levels. Orders from our customers are affected by factors such as new product introductions, product life cycles, inventory levels, manufacturing strategies, contract awards, competitive conditions and general economic conditions. The reduction, delay or cancellation of orders or a delay in shipment of products to such customers could have a material adverse effect on our operating results, financial condition and cash flows.

Prices of our raw materials regularly fluctuate.  The cost of our raw materials, especially herring, salmon and honey, represents a large portion of the cost to customers of our products. Customers may be unwilling to pay cost increases resulting from increases in raw material prices. A significant increase in the cost of our products which cannot be passed on to the customers could have an adverse affect on our revenues and profits.

We have numerous competitors with financial and other resources greater than ours.  We encounter competition from a number of competitors in the sale of our products. Many of our competitors have financial, product development and other resources greater than ours. Our inability to compete with our competitors effectively by developing and introducing innovative new products on a timely basis could have an adverse affect on our results of operations.

Our business is seasonal in nature.  Many of our products are seasonal in nature causing a concentration of annual revenue generation to occur in a relatively short time span. Consequently, a loss of business during the peak business season, for any reason, may result in reduced full year revenues.

We may be unable to execute our acquisition strategy.  Our long term strategy includes a focus on acquisitions. We anticipate that significant future growth, if any, will be the result of the acquisition strategy and the successful integration of the acquired businesses into the existing operations. Currently, we have no agreements or understandings with respect to any acquisitions and there can be no assurance that we will be successful in pursuing other potential acquisitions. Moreover, no assurances can be given that any completed acquisition will be beneficial to us or that the operations of an acquired entity will be successfully integrated into our operations. In addition, the costs associated with this strategy, means of financing any potential acquisitions, and consummation and integration of any potential acquisitions could significantly impact our financial and operating performance.

We may experience significant volatility in our stock price which may negatively impact our ability to finance future growth.  The trading price of our Common Stock is subject to wide fluctuations in response to quarter-to-quarter fluctuations in operating results and other events or factors. In addition, stock markets have experienced extreme price and trading volume volatility in recent years. Our Common Stock has historically had relatively small trading volumes. As a result, small transactions in our Common Stock can have a disproportionately large impact on the quoted price of the Common Stock. We believe that our future growth through either current operations or any future acquisitions may be at least partially financed through the capital markets. Thus, fluctuations in our stock price will have an affect on the financing available.

We are dependent on attracting and retaining key personnel. The Company believes the success of the organization is dependant upon the continued success of attracting and retaining talented personnel.

The terms of our relationships with our suppliers could change. We do not have long term purchase agreements with any supplier. Our ability to continue to procure key materials at a competitive price is critical to future success. There can be no assurance that our current suppliers will not consolidate, go out of business, terminate their relationship with us or negatively change the terms upon which they service us. We purchase herring from one supplier. Other raw materials and co-packed products, such

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as salmon, are purchased from a number of sources, allowing us to negotiate competitive prices. A consolidation of such suppliers could have an adverse affect on the price of our key materials.

Trade accounts receivable potentially subject us to significant concentrations of credit risk.  We primarily provide credit in the normal course of business. We perform ongoing credit evaluations of our customers and maintain allowances for potential credit losses, if necessary. However, actual write-offs could exceed those recorded allowances for doubtful accounts.

Promotional programs offered to our customers may result in excessive cost.  In accordance with industry practices, inventory is sold to customers often with the right to return or dispose if the merchandise is not resold prior to the expiration of its shelf life. In order to support our products, various marketing programs are offered to customers, which reimburse them for a portion, or all of their promotional activities related to our products. We regularly review and revise, when we deem necessary, estimates of costs to us for these marketing and merchandising programs based on estimates of what has been incurred by customers. Actual costs incurred by us may differ significantly if factors such as the level and success of the customers’ programs or other conditions differ from expectations.

We could experience a material goodwill impairment.  Our assets include a substantial amount of goodwill. This is a result of the acquisition of VSF. The value of this goodwill is assessed at least annually. If future operating performance at this business unit were to fall significantly below current levels, a non-cash charge to operating earnings for goodwill impairment could result.

Government regulations including any future claims could have a negative impact.  Local authorities measure and assess the amount of certain pollutants discharged from the Chicago facility and entering the wastewater treatment system. These authorities have the power to fine or temporarily close that production facility. Furthermore, the quality of our products is regulated by the FDA and failure to comply with regulations could result in a product recall or temporary closure of a facility.

Certain of our employees are covered under a collective bargaining agreement.  Our production employees at the Chicago facility, other than supervisors, are represented by the Local 546 United Food & Commercial Workers, International Union and maintenance employees are represented by the Local 399 International Union of Operating Engineers. Although we consider our labor relations to be good, a strike, walkout or lockout occurred for a significant period of time could have an adverse affect on results of operations.

We could be exposed to increased costs and risks associated with complying with increasing and new regulations of corporate governance and disclosure standards.  The SEC has postponed, for one year, the compliance date for reporting on internal controls by non-accelerated filers. Despite this postponement, we expect to continue to spend an increased amount of management time and internal and external resources to comply with changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, new SEC regulations and American Stock Exchange rules. In particular, Section 404 of the Sarbanes-Oxley Act of 2002 requires management’s annual review and evaluation of our internal control system and attestations of the effectiveness of these systems by our independent auditors. We will be documenting and testing internal control systems and procedures and considering improvements that could be necessary in order for us to comply with the requirements of Section 404 by the end of 2007. This process may require us to hire outside advisory services and has resulted in additional accounting and legal expenses. While we believe that we currently have adequate internal controls over financial reporting, in the event that the chief executive officer, chief financial officer or independent auditors determine that the controls over financial reporting are not effective as defined under Section 404, investors’ perceptions of us could be adversely affected and could cause a decline in the market price of our stock.

Item 1B. Unresolved Staff Comments.

Not applicable

Item 2. Properties.

The Company produces, packages, stores, and distributes its Vita and Elf Brand of herring and Vita and Grand Isle Brand of salmon products at the Company-owned facility located in Chicago, Illinois. The Company’s facility is located on 125,600 square feet of land. The facility contains approximately

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82,200 square feet of space, including approximately 65,000 square feet of production space, approximately 13,900 square feet of refrigerated storage space, and approximately 3,300 square feet of office space. LaSalle National Bank of Chicago has a mortgage on this facility.

The Company produces, packages, stores, and distributes its Vita and Virginia Brand salad dressing products and its Oak Hill Farms, Jim Beam® Brand, and Scorned Woman Brand of products ranging from salad dressing, cooking sauces, pasta sauces, hot sauces and beverage products and its Virginia Brand honey products at a leased facility located in Martinsburg, West Virginia. The Company’s facility is located on 8.75 acres of land. The facility contains approximately 68,000 square feet of space, including approximately 62,300 square feet of production space, and approximately 5,700 square feet of office space.

The Company manufactures and stores, for its own use, plastic bottles at a leased facility located in Berryville, Virginia. The Company’s facility is located on 6.25 acres of land. The facility contains approximately 24,000 square feet of space, including approximately 23,250 square feet of production space, and approximately 750 square feet of office space.

The Company believes that its current facilities provide sufficient capacity for its needs.

Item 3. Legal Proceedings.

The Company is not currently involved in any material pending legal proceedings and is not aware of any material legal proceedings threatened against it.

Item 4. Submission of Matters to a Vote of Security Holders.

No matters were submitted to a vote of security holders during the fourth quarter 2005.

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters Securities.

The Company’s Common Stock began trading on the Chicago Stock Exchange on January 17, 1997, and on the American Stock Exchange on May 12, 1997, under the symbol “VSF”. The Company believes that as of February 28, 2006 there were approximately 800 beneficial holders of the Company’s Common Stock.

The Company has never paid a cash dividend on its Common Stock and currently anticipates that all of its earnings will be retained for use in the operation and expansion of its business. The Company’s revolving and term loan facilities restrict the Company’s ability to pay dividends through requiring approval from the lender.

There were no treasury stock repurchases in the fourth quarter 2005.

The following table sets forth the high and low sales prices per share for the Common Stock of the Company for each quarter within fiscal years 2005 and 2004.

Quarter	High		Low
1st – 2005	$	3.81	$	2.90
2nd – 2005	2.94		2.01
3rd – 2005	2.99		2.30
4th – 2005	2.32		1.63
1st – 2004	9.50		5.55
2nd – 2004	5.64		4.37
3rd – 2004	4.74		3.10
4th – 2004	3.95		3.06

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Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders	349,600	$	3.84	321,062
Equity compensation plans not approved by security holders	0	0		0
Total	349,600	$	3.84	321,062

Item 6. Selected Financial Data.

In thousands, except per share data

Year Ended December 31,	2005(4)			2004(3)			2003			2002(2)			2001(1)
Net Sales	$	46,856		$	48,756		$	50,930		$	42,863		$	31,982
Operating (Loss) Profit	(358		)	(2,219		)	2,502			2,915			2,099
Operating Margin	(0.80		)%	(4.60		)%	4.90		%	6.80		%	6.56		%
Net (Loss) Income	(889		)	(2,717		)	1,048			1,446			1,156
Basic Earnings (Loss) per Share	(0.23		)	(0.71		)	0.28			0.39			0.31
Diluted Earnings (Loss) per Share	(0.23		)	(0.71		)	0.27			0.38			0.31
Cash	25			56			125			46			529
Total Assets	27,023			25,300			29,084			26,542			20,068
Long-Term Debt (less current maturities)	16,653			15,498			17,685			14,416			7,112
Shareholders’ Equity	3,702			4,564			7,192			5,993			4,430

(1)Includes the results of Virginia Honey since the effective acquisition date of July 1, 2001.

(2)Includes the results of Halifax since the effective acquisition date of November 1, 2002.

(3)Operating results for 2004 include a $2,314,000 goodwill impairment charge.

(4)Operating results for 2005 include a $301,000 charge, net of tax benefit, to recognize the future costs associated with a senior executive officer, whose duties have been materially reduced.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

Comparison of Year Ended December 31, 2005 and Year Ended December 31, 2004

Revenues. Net sales for the year ended December 31, 2005 were $46,856,000 compared to $48,756,000 for 2004, a decrease of $1,900,000 or 3.9%. Of this decrease, $1,325,000 is attributable to the Vita Specialty Foods Segment, which had 2005 revenues of $20,549,000, representing a reduction of 6.1% and $575,000 is attributable to the Vita Seafood Segment, which had 2005 revenues of $26,397,000, representing a decrease of 2.1%. The decrease for the Vita Specialty Food Segment is largely a reflection of the sales of honey products, which were down $1,178,000 and salad dressing products which were down $640,000. The decrease in honey sales is a result of a 25% decrease in average selling price, since there was actually more pounds of honey sold in 2005 than in 2004. These lower prices followed the open market pricing for this commodity. Salad dressing sales decreased primarily as a result of sales broker transition issues which affected one key regional market. Partially offsetting the decline in sales of these Vita Specialty Food product lines was an improvement of returns and allowances for this business unit of $527,000, primarily due to reduced sales promotional programs. In addition to the decrease from the Vita Specialty Foods Segment

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was a decline of $575,000, or 2.1% for the Vita Seafood Segment, which was primarily the result of an $833,000 decrease in gross sales of herring products reflecting both the loss of a significant co-pack customer which is no longer in business and reduced volume with a major wholesale club. This decrease in the herring product line was partially offset by a $114,000 increase for salmon products, primarily reflecting the success of marketing for both colored and natural products and an improvement of $139,000 for sales returns and allowances resulting from reduced promotional costs.

Gross Margin. Gross margin for the year ended December 31, 2005 was $14,223,000 compared to $14,348,000 for 2004, a decrease of $125,000 or 0.9%. The Vita Seafood Segment accounted for a $84,000 increase but the Vita Specialty Foods Segment, following the large sales decline, incurred a $209,000 decrease. The increased gross margin for the Vita Seafood Segment, in the face of lower sales, was a result of both this segment’s ability to pass along a portion of the cost increases by focusing on product pricing and on the reduction of sales return and allowance costs. As a percentage of net sales, gross margin totaled 30.4%, which was 1.0 percentage point above the 29.4% prior year result. Gross margin for the Vita Specialty Foods Segment, as a percentage of net sales rose to 35.3%, compared to the 34.1% prior year result, as the sales decrease occurred largely in the lower margin honey product line. The Vita Seafood Segment’s gross margin, as a percentage of net sales, also increased, rising to 26.5% in 2005 from 25.6% in 2004; this was primarily due to a combination of strategic pricing decisions, reduced sales returns and allowances and a sales mix shift away from the lower margin resale salmon product and in favor of the higher margin colored and natural lines.

Operating Expenses. Selling, marketing, distribution and administrative expenses for the year ended December 31, 2005 were $14,080,000 compared to $14,253,000 for 2004, a decrease of $173,000 or 1.2%. As a percentage of net sales, however, these expenses rose to 30.0% from 29.2% for 2004. The Vita Specialty Foods Segment accounted for a decrease of $474,000 with an increase of $301,000 attributable to the Vita Seafood Segment. The total reduction reflects a $478,000 decrease for selling, marketing and distribution and a $305,000 increase in administrative expenses. The Vita Specialty Foods Segment is primarily responsible for the improvement in selling, marketing and distribution expenses. This improvement primarily reflects lower total salespersons’ compensation expenses of $265,000, largely as a result of the Budd settlement and additional reductions in proportion with the volume decrease plus a reduction of freight out and other distribution related expenses totaling $178,000, which results from both the overall lower sales volume and from a greater portion of the current year sales being concentrated in large volume transactions. The decrease in selling, marketing and distribution was partially offset by a $305,000 increase in administrative spending. This can be explained by increased professional fees totaling $323,000 reflecting, among other things, the cost of work performed for the stockholders’ rights plan, acquisition investigations and the Sarbanes Oxley initiative.

Employment Contract Charge. During the fourth quarter of 2005 a $502,000, non cash charge was recognized to account for the future costs associated with a senior executive officer, pursuant to a 2005 amendment to his employment contract, which significantly reduced his duties during 2006 and committed the Company to terminate the agreement in 2007. The Company expects to pay $294,000 in 2006 without the benefit of any services from the officer and $208,000 in 2007 as severance.

Goodwill Impairment Charge. During the fourth quarter of 2004, the Company completed its annual assessment of impairment regarding the goodwill recorded as a result of the Virginia Honey acquisition ($6,004,000) and the Halifax acquisition ($2,307,000). This assessment, supported by an independent appraisal of the fair value of VSF was made using customary valuation methodologies including discounted cash flows and fundamental analysis, did reveal impairment issues. The appraisal reflected a decreased fair value of VSF, principally caused by the decline in operating income of VSF during 2004. That decline was primarily a result of a substantial decline in the sales of Halifax products – which were down $1,600,000 or 21% in 2004. Based on the appraised value of VSF, the resulting impairment charge of approximately $2,314,000 was recorded in the fourth quarter of 2004. The 2005 appraisal did not result in additional impairment.

Interest Expense. Interest expense for the year ended December 31, 2005 was $1,082,000 compared to $767,000 for the same period in 2004, an increase of $315,000 or 41.1%. This increase was primarily attributable to higher interest rates on the Company’s bank loan facilities as detailed under “Liquidity and Capital Resources – Third Party Financing” and in Note 4 of “Item 8. Financial Statements”.

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Income Taxes. A tax credit for the year ended December 31, 2005 of $552,000 or 38% of pretax loss, was recognized, compared to a credit of $269,000 or 40% of pretax income, excluding the goodwill impairment, during 2004.

Net Income. As a result of the operating results described above, net loss for the year ended December 31, 2005 was $(889,000) or $(0.23) per share on both a basic and diluted per share basis. This compares to a net loss of $(2,717,000) or $(0.71) per share on both a basic and diluted basis for 2004, a 67% reduction of the loss which totaled $1,882,000 or $0.49 per share, on both a basic and a diluted basis.

Comparison of Year Ended December 31, 2004 and Year Ended December 31, 2003

Revenues. Net sales for the year ended December 31, 2004 were $48,756,000 compared to $50,930,000 for 2003, a decrease of $2,174,000 or 4.3%. Of this decrease, $1,931,000 is attributable to Vita Specialty Foods representing a reduction of 8.1% and $243,000 is attributable to Vita Seafood, representing a decrease of 0.9%. The decrease for the Vita Specialty Foods business unit is a reflection, in part, of the sales of sauce products, which were down $1,376,000. Sales decreases were also reflected in the business unit’s honey product line of $977,000 and resale products of $407,000. All decreases were primarily due to certain 2003 sales that unexpectedly proved to be one-time transactions and thus were not repeated in 2004. In addition, returns and allowances increased by $353,000, primarily due to augmented sales promotions. The decrease in sales of certain Vita Specialty Foods product lines was partially offset by a $1,182,000 increase in the line of salad dressing products due to increased customer demand. Added to the decrease from Vita Specialty Foods was a decline of $243,000, or 0.9% for the Vita seafood business, which was primarily the result of a $592,000 decrease in gross sales of salmon products and a $146,000 decrease in specialty products. The salmon sales decrease is primarily the result of Vita seafood’s largest customer discontinuing sales of a Vita salmon product starting in the fourth quarter of 2003. The decrease in sales of certain Vita seafood product lines was partially offset by a $488,000 increase in the herring product line due to increased customer demand.

 Gross Margin. Gross margin for the year ended December 31, 2004 was $14,348,000 compared to $15,831,000 for 2003, a decrease of $1,483,000 or 9.4%. The Vita seafood business accounted for $771,000 of this decrease and $712,000 of the decline was attributable to the Vita Specialty Foods business. As a percentage of net sales, gross margin totaled 29.4%, which was 1.7 percentage points below the 31.1% prior year result. Gross margin for the Vita Specialty Foods business, as a percentage of net sales was 34.1%, compared to the 34.3% prior year result, as volume efficiencies subsided. Vita seafood’s gross margin, as a percentage of net sales, decreased to 25.6% in 2004 from 28.2% in 2003; this was primarily due to the higher costs of raw salmon and higher factory expenses.

Operating Expenses. Selling, marketing, distribution and administrative expenses for the year ended December 31, 2004 were $14,253,000 compared to $13,328,000 for 2003, an increase of $925,000 or 6.9%. As a percentage of net sales, these expenses increased to 29.2% from 26.2% for 2003. Vita Specialty Foods accounted for $601,000 of the increase with the remaining $324,000 attributable to Vita seafood. Of the total increase, $1,233,000 was attributable to selling, marketing and distribution, reflecting higher freight out and other distribution related expenses of $687,000, higher salespersons’ compensation of $357,000, largely as a result of hiring additional sales staff, and higher commission and royalties of $224,000. The increase in selling, marketing and distribution was partially offset by a $308,000 decrease in administrative spending. This improvement in administrative spending was largely a result of savings realized by combining the administrative function previously performed in Atlanta into the Martinsburg office.

Goodwill Impairment Charge. During the fourth quarter of 2003, the Company completed its annual assessment of impairment regarding the goodwill recorded as a result of the Virginia Honey acquisition ($6,004,000) and the Halifax acquisition ($2,307,000). This assessment, supported by independent appraisals of the fair value of VSF, did not identify any impairment. However, the 2004 independent appraisal – made using customary valuation methodologies including discounted cash flows and fundamental analysis, did reveal impairment issues. The revised appraisal reflects a decreased fair value of VSF, principally caused by the decline in operating income of VSF during 2004. That decline was primarily a result of a substantial decline in the sales of Halifax products – which were down $1,600,000 or 21% in 2004. Based on the appraised value of VSF, the resulting impairment charge of approximately $2,314,000 was recorded in the fourth quarter of 2004.

Interest Expense. Interest expense for the year ended December 31, 2004 was $767,000 compared to $753,000 for the same period in 2003, an increase of $14,000 or 1.9%. This increase was primarily

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attributable to additional borrowing as detailed in Note 4 of “Item 8. Financial Statements”, partially offset by lower effective interest rates.

Income Taxes. A tax credit for the year ended December 31, 2004 of $269,000 or 40% of pretax loss, excluding the goodwill impairment, was recognized, compared to an expense of $702,000 or 40% of pretax income during 2003.

Net Income. As a result of the operating results described above, net loss for the year ended December 31, 2004 was $(2,717,000) or $(0.71) per share on both a basic and diluted per share basis; this compares to net income of $1,048,000 or $0.28 per basic share and $0.27 per diluted share for 2003, a 359% decrease totaling $3,765,000 or $(0.99) per share, on a basic and $(0.98) on a diluted basis.

Seasonality; Quarterly Results

The Company has in the past and expects in the future to experience significant fluctuation in quarterly operating results. Historically, the Company’s net sales and net income, absent unusual charges, have typically been the highest in the fourth quarter of each year. The Company’s business is seasonal because its sales volume increases significantly during the Christmas holiday season and, to a lesser extent, during other holidays in the fall and spring and periods of colder weather in certain sections of the country. Certain of these holidays, including Passover, Easter, Yom Kippur and Rosh Hashanah, may fall in different quarters in different years and could cause the quarterly operating results to fluctuate in the future. However, through the Vita Specialty Food Segment acquisitions and the introduction of new non-seasonal or counter-seasonal products, the variability in the Company’s quarterly operating results have been less pronounced

Liquidity and Capital Resources

Working Capital

At December 31, 2005, the Company had $7,887,000 in working capital, compared to $8,288,000 at December 31, 2004, a decrease of $401,000 or 4.8%. As a result, the current ratio fell to 2.3 to 1.0 from 2.8 to 1.0. Primary factors contributing to the working capital reduction include a $900,000 increase in accounts payable and other current liabilities due to the timing of payments at both business segments plus a $598,000 increase in the current portion of debt, primarily reflecting the increased term loan balance and the amounts due in 2006 under a revised employment contract. This decrease is net of an inventory increase of $554,000; a $20,000 combined net increase in accounts receivable, prepaid expenses and cash and plus an additional $524,000 increase in current income tax net assets. The Vita Specialty Foods Segment accounted for a $906,000 increase in inventories partially offset by lower balances at the Vita Seafood Segment. The increase of the current income tax assets is a reflection of both increased amounts anticipated to be received as refunds and increased current deferred taxes.

Third Party Financing

On September 8, 2003, the Company entered into a loan agreement with a bank (the “Loan Agreement”) and paid off its existing credit facility with initial borrowings under this new Loan Agreement. The original Loan Agreement provided for a two-year $8,500,000 revolving line of credit (the ‘revolver’), a five-year $6,500,000 term loan (the ‘Term A Loan”) and a six-year $3,000,000 term loan (the “Term B Loan”). The Term B Loan was never utilized. During 2004 and 2005, the Loan Agreement was amended several times to, among other things, extend the maturity dates of the revolver and change the available borrowings under the revolver (which most recently had been $10,500,000), the Term Loans and an over-advance loan of $1,000,000 which was terminated on February 28, 2006. On March 24, 2006, the Loan Agreement was further amended. Pursuant to this latest amendment, the Loan Agreement now provides for a $9,500,000 revolver which terminates on April 1, 2007; a $7,750,000 Term A Loan due in monthly installments of $80,000 through July 31, 2008 with a balloon payment of $3,682,000 due on August 31, 2008; a $150,000 capital expenditure Term Loan B due in monthly installments of 1/60^th of the outstanding balance as of August 2006 from that date through May 31, 2010 and the remainder due on June 30, 2010. The revolver is now limited to a borrowing base equal to 80% of eligible accounts receivable and 60% of eligible inventories, as defined. No borrowing was outstanding under the over-advance line as of December 31, 2005. Outstanding borrowings under the Loan Agreement are secured by substantially all assets of the Company.

Interest under each piece of the amended Loan Agreement is at a floating rate per annum equal to the prime rate plus 0.5%. This rate was 7.75 percent as of December 31, 2005.

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

Amounts Owed Pursuant to Acquisitions

Pursuant to the Company’s acquisitions of Virginia Honey and Halifax in 2001 and 2002, respectively, the previous owners of those businesses, both of whom are employees; one of whom is a director of the Company, and is subject to earn out provisions that have resulted in additional payments and may continue for one more period to result in an additional payment by the Company for the acquired businesses. As amended, the earn out provisions for Terry Hess, the previous owner of Virginia Honey, have resulted in an additional amount of $840,000 paid to Mr. Hess in April 2005. This first earn out payment was based on the operating results of Virginia Honey for the period from January 1, 2001 to December 31, 2002. In addition, a second earn out payment to be made to Mr. Hess in the amount of $700,000 will be paid in April 2006. The second earn out payment was based on the operating results of the VSF for the period from January 1, 2003 to December 31, 2005. A potential remaining earn out payment to Mr. Hess will be based on the earnings of VSF, as computed by a predefined allocation formula, for the period January 1, 2006 to December 31, 2007. Should VSF maintain its current profitability level throughout this period, management estimates that an additional payment with a net present value as of December 31, 2005 of approximately $550,000 would be due to Mr. Hess in April 2008. Any future payment will be recorded as additional goodwill, and be subject to impairment analysis, when and if such payment is finally determined at the end of the period described above. Accordingly, the $700,000 due to Mr. Hess in April 2006 has been recorded as an addition to goodwill in the December 31, 2005 balance sheet.

Similarly, Robert Budd, the previous owner of Halifax, had two separate earn out periods — January 1, 2003 to December 31, 2005 and January 1, 2006 to December 31, 2007. Potential remaining earn out payments to Mr. Budd were to be based on earnings of the Vita Specialty Foods Segment, as computed by a pre-defined allocation formula. On January 7, 2005, the Company terminated Mr. Budd’s Employment Agreement, made as of November 1, 2002 between Halifax and Mr. Budd in connection with the Company’s acquisition of Halifax. The Company alleged a for “cause” termination as defined in the Employment Agreement, and, in connection therewith, filed suit against Mr. Budd which was settled in accordance with the terms and conditions of the Settlement Agreement entered into on March 28, 2005. Pursuant to the Settlement Agreement, the remaining potential earn out payments to Mr. Budd have been eliminated entirely. See Note 2 to “Item 8. Financial Statements.”

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Contractual Obligations

The aggregate amount of long-term obligations maturing by year is presented in the table below.

During 2005, the Company incurred rental expense of approximately $676,000, primarily due to operating leases for the facilities in Martinsburg, West Virginia; Berryville, Virginia and Atlanta, Georgia and for equipment at the herring and salmon product processing facility in Chicago, Illinois. Future commitments under all operating leases are presented in the table below.

In connection with the Halifax acquisition, the Company acquired the licensing rights to various brand names. Along with these rights, the Company has assumed the commitment to make minimum royalty payments under the terms of these licensing agreements.

The Company intends to refinance the bank debt coming due during years 1 through 3.

	Payments due by period
	(in thousands)
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Obligations including interest	$	19,860	$	2,664	$	15,092	$	359	$	1,745
Capital Lease Obligations	—		—		—		—		—
Operating Lease Obligations	6,033		676		1,142		825		3,390
Purchase Obligations	—		—		—		—		—
Licensing Royalties	780		238		542		—		—
Total Contractual Obligations	$	26,673	$	3,578	$	16,776	$	1,184	$	5,135

The ratio of long-term debt-to-total capitalization was 74% at December 31, 2005 and 71% at December 31, 2004. The Company believes its financial resources are adequate to fund its needs for at least the next twelve months.

Cash Flow

Cash flows from operating activities. Net cash provided by operating activities was $300,000 for the year ended December 31, 2005, compared to $2,420,000 for the year ended December 31, 2004. Since net non cash income was relatively flat between years, this $2,120,000 decrease was largely due to changes in non cash working capital items. Most noteworthy, was an increase of inventories of which $1,160,000 is raw materials purchased in anticipation of strong first quarter 2006 sales.

Cash flows from investing activities. Net cash used in investing activities was $863,000 and $1,196,000 for the years ended December 31, 2005 and 2004, respectively. During both years, this cash was used primarily for capital additions totaling $841,000 during 2005 and $1,178,000 during 2004. The capital expenditures for both years primarily reflect investment in production equipment at the Chicago and the Martinsburg facilities. The reduction between years is primarily due to the largest single piece of production equipment having been obtained during 2005 through an operational lease agreement which thus had minimal effect on cash flow. Similar cash usage is anticipated for the year ending December 31, 2006.

Cash flows from financing activities.Net cash provided by financing activities was $532,000 for the year ended December 31, 2005, compared to cash used of $1,293,000 for the year ended December 31, 2004. The most recent year activity included $840,000 used to make the scheduled installment payment under the terms of the Virginia Honey acquisition agreement. During 2005, $1,383,000 of net bank borrowing was provided to cover both the cash used for this installment payment and the investing activities, net of cash

18

provided from operations, as described above. Outflows in 2004 primarily include $1,382,000 of net debt payments.

Inflation

Inflation has historically not had a material effect on the Company’s operations.

Impact of Recently Issued Accounting Standards

In December 2004, the FASB issued Statement of Financial Accounting Standards 123 (revised 2004) “Share-Based Payment” (“SFAS 123R”). Among other things, SFAS 123R requires expensing the fair value of stock options, which was previously optional. SFAS 123R is effective as of January 1, 2006. The Company expects the impact of adopting SFAS 123R in 2006 would result in a pre-tax expense of $14,000, assuming no further grants are made in 2006.

In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs — An Amendment of ARB No. 43, Chapter 4” (“SFAS 151”) which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). The Company is required to adopt the provisions of SFAS 151 for inventory costs incurred in 2006. The Company does not expect the adoption of this statement to have a material impact on its financial condition or results of operations.

Critical Accounting Policies and Estimates

The Company’s financial statements reflect the selection and application of accounting policies that require management to make significant estimates and assumptions. The Company believes that the following are some of the more critical judgment areas in the application of its accounting policies that currently affect the Company’s financial condition and results of operations.

Preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues and expenses and related contingent liabilities. On an on-going basis, the Company evaluates its estimates, including those related to revenues, returns, bad debts, income taxes and contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition and Merchandise Returns

Revenue is recognized upon the passing of title to the customers, which occurs upon shipment of product to customers, including brokers, in fulfillment of customer orders. In accordance with industry practices, inventory is sold to customers often with the right to return or dispose if the merchandise is not resold prior to the expiration of its shelf life. In order to support the Company’s products, various marketing programs are offered to customers, which reimburse them for a portion, or all of their promotional activities related to the Company’s products. The Company regularly reviews and revises, when it deems necessary, estimates of costs to the Company for these marketing and merchandising programs based on estimates of what has been incurred by customers. Actual costs incurred by the Company may differ significantly if factors such as the level and success of the customers’ programs or other conditions differ from expectations. Sales are reduced by a provision for estimated future returns, disposals and promotional expense.

Income Tax Assets and Liabilities

The Company recognizes deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the tax basis and financial reporting basis of certain assets and liabilities and certain income tax credit carryforwards. In estimating future tax consequences, the Company generally considers all expected future events other than enactments of changes in tax laws or rates. A valuation reserve is recognized based on the evidence available; if it is more likely than not that some portion or all of the deferred income tax asset will not be realized. See Note 5 of “Item 8. Financial Statements” for a further description of income taxes.

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Goodwill Carrying Value

The Company assesses the impairment of goodwill, at least, whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Factors the Company considers important, which could trigger an impairment review include the following:

•Significant underperformance relative to expected historical or projected future operating results;

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

•Significant negative industry or economic trends;

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

•The Company’s market capitalization relative to net book value.

When the Company determines that the carrying value of goodwill may not be recoverable based upon the existence of one or more of the above indicators of impairment, the Company will review for impairment under the provisions of SFAS 142. The Company uses an independent appraisal in its assessments.

The provisions of SFAS 142 also required an annual impairment test for goodwill. See Note 1 of “Item 8. Financial Statements” for a further description of the annual goodwill impairment assessment.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to interest rate fluctuations, primarily as a result of its Loan Agreement with interest rates subject to market fluctuations. The Company does not currently use derivative instruments to alter the interest rate characteristics of any of its debt. The Loan Agreement (as amended) includes a revolving line of credit and two term loan facilities with a bank, all of which bear interest at a floating per annum rate equal to the prime rate plus one-half of one percent. At December 31, 2005 this resulted in a 7.75% rate for the revolving and the term loan facilities. A 10% fluctuation in interest rates would not have a material impact on the Company’s financial statements.

Forward-Looking Statements

This annual report on Form 10-K, including “Description of Business,” “Description of Property,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Financial Statements and Supplementary Data” and Quantitative and Qualitative Disclosures About Market Risk,” contains forward-looking statements within the meaning of the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management’s current expectations and are subject to a number of factors and uncertainties which could cause actual results to differ materially from those described in the forward-looking statements. Such factors and uncertainties include: (i) the impact of the level of the Company’s indebtedness; (ii) restrictive covenants contained in the Company’s various debt documents; (iii) general economic conditions and conditions in the retail environment; (iv) the Company’s dependence on a few large customers; (v) relationships with retailers; (vi) price fluctuations in the raw materials used by the Company, particularly herring and salmon; (vii) whether the Company will be capable of increasing sales of Halifax products; (viii) its ability to sell Vita Seafood Segment products for higher prices to take account of increased costs incurred by the Company; (ix) competitive conditions in the Company’s markets; (x) the seasonal nature of the Company’s business; (xi) the Company’s ability to execute its acquisition strategy; (xii) fluctuations in the stock market; (xiii) the extent to which the Company is able to retain and attract key personnel; (xiv) relationships with key vendors; (xv) consolidation of the Company’s supplier base and (xvi) the impact of federal, state and local environmental requirements (including the impact of current or future environmental claims against the Company). As a result, the Company’s operating results may fluctuate, especially when measured on a quarterly basis.

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Item 8. Financial Statements and Supplementary Data.

Listed below are the financial statements included in this part of the Annual Report on Form 10-K:

(a)	Consolidated Financial Statements
	Report of Independent Registered Public Accounting Firm
	Consolidated Balance Sheets at December 31, 2005 and December 31, 2004
	Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003
	Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003
	Consolidated Statements of Cash Flow for the years ended December 31, 2005, 2004 and 2003
	Notes to Consolidated Financial Statements

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Report of Independent Registered Public Accounting Firm

To the Board of Directors of

Vita Food Products, Inc.

Chicago, Illinois

We have audited the accompanying consolidated balance sheets of Vita Food Products, Inc. and Subsidiary, as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audits included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal controls over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Vita Food Products, Inc. and Subsidiary, as of December 31, 2005 and 2004, and the results of their operations and cash flows for each of the three years in the period ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.

	/s/ BDO Seidman, LLP
Chicago, Illinois
February 15, 2006, except for certain matters described in Note 4, as to which the date is March 24, 2006

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Consolidated Balance Sheets	Vita Food Products, Inc.
	And Subsidiary

December 31,	2005			2004
ASSETS
Current Assets
Cash	$	25,133		$	55,968
Accounts receivable-trade, net of allowance for discounts, returns, and doubtful accounts of $563,000 in 2005 and $569,000 in 2004	5,215,912			5,118,517
Inventories
Raw material and supplies	5,503,048			4,342,754
Work in process	192,630			235,504
Finished goods	1,827,245			2,390,924
Prepaid expenses and other current assets	400,679			447,602
Income taxes receivable	381,312			35,441
Deferred income taxes	519,578			377,115
Total Current Assets	14,065,537			13,003,825
Property, Plant and Equipment
Land	35,000			35,000
Building and improvements	2,660,975			2,626,097
Leasehold improvements	549,926			425,336
Machinery and office equipment	11,302,648			10,636,716
	14,548,549			13,723,149
Less accumulated depreciation and amortization	(8,710,072		)	(7,797,581		)
Net Property, Plant and Equipment	5,838,477			5,925,568
Goodwill	6,696,705			5,996,705
Other Assets	422,661			373,695
Total Assets	$	27,023,380		$	25,299,793
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Current maturities of long-term obligations	$	2,217,840		$	1,619,430
Accounts payable	3,142,406			2,278,696
Accrued expenses	853,982			817,919
Total Current Liabilities	6,214,228			4,716,045
Long-term Obligations, Less Current Maturities	16,653,369			15,497,900
Deferred income taxes	453,728			522,039
Shareholders’ Equity
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued
Common stock, $.01 par value; authorized 10,000,000 shares;
outstanding 3,879,338 shares in 2005 and 3,865,254 shares in 2004	38,793			38,652
Treasury stock, at cost 6,516 shares	(50,043		)	(50,043		)
Additional paid-in capital	3,812,397			3,785,596
Retained earnings	(99,092		)	789,604
Total Shareholders’ Equity	3,702,055			4,563,809
Total Liabilities and Shareholders’ Equity	$	27,023,380		$	25,299,793

See accompanying notes to consolidated financial statements.

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

Year Ended December 31,	2005				2004				2003
Net Sales	$	46,856,130			$	48,756,128			$	50,930,474
Cost of Goods Sold	32,633,126				34,408,406				35,099,833
Gross Margin	14,223,004				14,347,722				15,830,641
Selling and Administrative Expenses
Selling, Marketing & Distribution	9,493,225				9,971,794				8,738,409
Administrative	4,586,282				4,281,352				4,590,003
Employment Contract Charge	501,709				—				—
Goodwill Impairment Charge	—				2,313,954				—
Total Selling and Administrative Expenses	14,581,216				16,567,100				13,328,412
Operating (Loss) Profit	(358,212			)	(2,219,378			)	2,502,229
Interest Expense	1,082,484				766,823				752,175
(Loss) Income Before Income Tax (Benefit) Expense	(1,440,696			)	(2,986,201			)	1,750,054
Income Tax (Benefit) Expense	(552,000			)	(269,000			)	702,000
Net (Loss) Income	$	(888,696		)	$	(2,717,201		)	$	1,048,054
Basic (Loss) Earnings Per Share	$		(0.23	)	$		(0.71	)	$	0.28
Weighted Average Common Shares Outstanding	3,862,430				3,840,017				3,789,428
Diluted (Loss) Earnings Per Share	$		(0.23	)	$		(0.71	)	$	0.27
Weighted Average Common Shares Outstanding	3,862,430				3,840,017				3,925,681

Consolidated Statements of Shareholders’ Equity

								Additional
	Common Stock			Treasury				Paid-in		Retained
	Shares	Amount		Stock				Capital		Earnings				Total
Balance, at January 1, 2003	3,773,895	$	37,739	$	0			$	3,496,482	$	2,458,751			$	5,992,972
Proceeds from stock purchase and stock option plans	45,221	452		—				150,780		—				151,232
Net Income	—	—		—				—		1,048,054				1,048,054
Balance, at December 31, 2003	3,819,116	38,191		0				3,647,262		3,506,805				7,192,258
Proceeds from stock purchase and stock option plans	46,138	461		—				138,334		—				138,795
Treasury stock purchases	—	—		(50,043			)	—		—				(50,043		)
Net loss	—	—		—				—		(2,717,201			)	(2,717,201		)
Balance, at December 31, 2004	3,865,254	38,652		(50,043			)	3,785,596		789,604				4,563,809
Proceeds from stock purchase and stock option plans	14,084	141		—				26,801		—				26,942
Net loss	—	—		—				—		(888,696			)	(888,696		)
Balance, at December 31, 2005	3,879,338	$	38,793	$		(50,043	)	$	3,812,397	$		(99,092	)	$	3,702,055

See accompanying notes to consolidated financial statements.

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

Year Ended December 31,	2005			2004				2003
Cash Flows From Operating Activities
Net (loss) income	$	(888,696	)	$		(2,717,201	)	$	1,048,054
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	961,927			983,366				956,461
Deferred income tax (benefit) provision	(458,000		)	(288,000			)	488,000
Employment contract charge	501,709			—				—
Goodwill impairment charge	—			2,313,954				—
Changes in assets and liabilities
Accounts receivable	(97,395		)	1,426,004				(1,248,331		)
Inventories	(553,741		)	249,330				(528,851		)
Prepaid expenses and other current assets	32,857			33,767				(144,632		)
Income taxes receivable	(98,645		)	518,863				(173,366		)
Accounts payable	863,710			(20,884			)	(1,283,811		)
Accrued expenses	36,060			(79,094			)	(501,364		)
Net cash provided by (used in) operating activities	299,786			2,420,105				(1,387,840		)
Cash Flows From Investing Activities
Capital expenditures	(840,865		)	(1,177,642			)	(1,135,894		)
Change in other assets	(22,064		)	(18,567			)	(37,286		)
Net cash used in investing activities	(862,929		)	(1,196,209			)	(1,173,180		)
Cash Flows From Financing Activities
Proceeds from issuance of stock and exercise of stock options	26,942			138,795				151,232
Net borrowings (payments) under revolving loan facility	910,472			(613,625			)	2,931,791
Payments on term loan facility	(825,489		)	(768,512			)	(6,714,886		)
Proceeds from term loan	1,298,846			—				6,500,000
Payments on other debt	(840,422		)	—				—
Purchase of treasury stock	—			(50,043			)	—
Payments under capital lease obligations	—			—				(131,038		)
Deferred loan costs paid	(38,041		)	—				(96,719		)
Net cash provided by (used in) financing activities	532,308			(1,293,385			)	2,640,380
Net (decrease) increase in cash	(30,835		)	(69,489			)	79,360
Cash, at beginning of year	55,968			125,457				46,097
Cash, at end of year	$	25,133		$	55,968			$	125,457
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	990,682		$	682,398			$	737,316
Income taxes paid (received)	$	4,646		$		(499,506	)	$	387,366

See accompanying notes to consolidated financial statements.

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Vita Food Products, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1.Summary of Significant Accounting Policies

Industry

Vita Food Products, Inc. (“Vita Seafood”) processes and sells various herring, cured and smoked salmon products and other complementary specialty food products throughout the United States. Vita Seafood has one processing plant located in Chicago, Illinois. Vita Specialty Foods, Inc. (“VSF”), a wholly owned subsidiary of Vita Seafood, manufactures and distributes salad dressings, gourmet sauces, honey, jams and jellies. VSF has two manufacturing plants located in Martinsburg, West Virginia and Berryville, Virginia. Management considers Vita Seafood and VSF as separate business segments which are collectively referred to herein as the “Company”.

A summary of the significant accounting policies utilized in the preparation of the accompanying financial statements follows.

Principles of Consolidation

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

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of trade accounts receivable. The Company primarily provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses, if necessary.

Revenue Recognition and Merchandise Returns

Revenue is recognized upon the passing of title to the customers, which occurs upon shipment of product to customers, including brokers, in fulfillment of customer orders. In accordance with industry practices, inventory is sold to customers often with the right to return or dispose if the merchandise is not resold prior to the expiration of its shelf life. In order to support the Company’s products, various marketing programs are offered to customers, which reimburse them for a portion, or all, of their promotional activities related to the Company’s products. The Company regularly reviews and revises, when it deems necessary, estimates of costs to the Company for these marketing and merchandising programs based on estimates of what has been incurred by customers. Actual costs incurred by the Company may differ significantly if factors such as the level and success of the customers’ programs or other conditions differ from expectations. Sales are reduced by a provision for estimated future returns, disposals and promotional expense.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are customer obligations due under normal trade terms. The Company sells products to distributors and retailers throughout the food industry. The Company performs continuing credit evaluations of its customers’ financial condition.

Senior management reviews accounts receivable on a regular basis to determine if any receivables will potentially be uncollectible. The Company provides an allowance sufficient to cover any accounts

26

receivable balances that are potentially uncollectible, along with a general reserve based on historic experience. After attempts to collect the receivable have failed and it is considered to be uncollectible, it is written off against the allowance. Based on the information available, the Company believes the allowance for doubtful accounts as of December 31, 2005 to be adequate and not excessive. However, it is still possible that in the future, actual write offs may exceed the recorded balance.

The allowance for discounts, returns and doubtful accounts has fluctuated as follows over the last three years:

Allowance for Discounts, Returns and Doubtful Accounts

(in thousands)

Calendar Year	Balance at Beginning of Year		Charged to Expense	Write-offs & Collections		Balance at End of Year
2003	$	277	74	(50	)	$	301
2004	$	301	306	(38	)	$	569
2005	$	569	99	(105	)	$	563

Inventories

Inventories are stated at the lower of cost or market. Costs are determined by the first-in, first-out method and include raw materials, labor and plant overhead.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Depreciation and amortization are being provided, on straight-line methods, over the estimated useful lives of the assets as follows:

Buildings	31.5 years
Buildings improvements	15 years
Machinery and equipment	5 to 15 years
Office and transportation equipment	3 to 7 years

Leasehold improvements are being amortized on a straight-line basis over the lives of the respective leases or the service lives of the improvements whichever is shorter. Amortization of assets under capital lease is included in depreciation and amortization. Repair and maintenance items are expensed as incurred.

Long-Lived Assets

The Company reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Any long-lived assets held for disposal are reported at the lower of their carrying amounts or fair value less cost to sell. As of December 31, 2005, there has been no impairment of plant, property and equipment.

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Goodwill

The changes in the carrying amount of goodwill related to the VSF acquisitions for the years ended December 31, 2005 and 2004 were as follows:

Balance as of December 31, 2003	$	8,310,659
Goodwill impairment charge	(2,313,954		)
Balance as of December 31, 2004	5,996,705
Additional purchase price payable related to the Virginia Honey acquisition	700,000
Balance as of December 31, 2005	$	6,696,705

On January 1, 2002, the Company adopted SFAS No. 142 “Goodwill and Other Intangible Assets” (“SFAS 142”), which addresses the financial accounting and reporting standards for goodwill and other intangible assets subsequent to their acquisition.  This accounting standard requires that goodwill no longer be amortized, and instead be tested for impairment on at least an annual basis.

During the fourth quarter of 2003, the Company completed its annual assessment of impairment regarding the goodwill recorded as a result of the Virginia Honey acquisition ($6,004,000) and the Halifax acquisition ($2,307,000).  Those assessments, supported by independent appraisals of the fair value of VSF, did not identify any impairment.  However, the 2004 independent appraisal — made using customary valuation methodologies including discounted cash flows and fundamental analysis, did reveal impairment issues.  The appraisal reflected a decreased fair value of VSF, principally caused by the decline in operating income of VSF during 2004.  That decline was primarily a result of a substantial decline in the sales of Halifax products – which were down $1,600,000 or 21% in 2004.  Based on the appraised value of VSF, the resulting impairment charge of approximately $2,314,000 was recorded in the fourth quarter of 2004.  The 2005 assessment and independent appraisal did not indicate any further impairment.

The additional purchase price payable at December 31, 2005 is more fully described in Note 2.

Estimates

The accompanying financial statements include estimated amounts and disclosures based on management’s assumptions about future events.  Actual results may differ from those estimates.

Advertising

Advertising costs are expensed as incurred and included in selling, marketing and distribution expenses.  Advertising expenses amounted to approximately $280,000, $349,000 and $393,000 in 2005, 2004 and 2003, respectively.

Shipping and Handling Fees

The Company classifies shipping and handling costs billed to customers as revenue.  Costs related to shipping and handling are classified as part of selling, marketing and distribution expenses and were $3,339,000, $3,539,000 and $2,851,000 in 2005, 2004 and 2003, respectively.

Income Taxes

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

28

Basic and Diluted Earnings (Loss) Per Common Share

Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted earnings (loss) per share follows the computation of basic earnings (loss) per share but also gives effect to all dilutive potential common shares equivalents that were outstanding during the year.

The following is a reconciliation from basic earnings (loss) per share to diluted earnings (loss) per share for each of the last three years:

	Net Income (Loss)			Weighted Average Shares Outstanding	Earnings (Loss) Per Share
2005
Basic	$	(888,696	)	3,862,430	$	(0.23	)
Effect of dilutive stock options	—			—
Diluted	$	(888,696	)	3,862,430	$	(0.23	)
2004
Basic	$	(2,717,201	)	3,840,017	$	(0.71	)
Effect of dilutive stock options	—			—
Diluted	$	(2,717,201	)	3,840,017	$	(0.71	)
2003
Basic	$	1,048,054		3,789,428	$	0.28
Effect of dilutive stock options	—			136,253
Diluted	$	1,048,054		3,925,681	$	0.27

In 2005, 2004 and 2003 there were an additional 349,600, 330,400 and 29,000 common shares, respectively, issuable upon exercise of stock options that were not considered in the computation because they would have been anti-dilutive.

Accounting for Stock Based Compensation

The Company applies the intrinsic value method under Accounting Principals Board Opinion 25 and related interpretations in accounting for its stock based compensation plans. No compensation cost has been recognized for the Company’s stock compensation plans as the market price of the common stock underlying the grant did not exceed the exercise price of the grant on the measurement date.

The Company is required to provide pro forma disclosures of net income (loss) and earnings (loss) per share had the Company adopted the fair value method under Statement of Financial Accounting Standards No. 123. The weighted-average, grant date fair value of stock options granted to employees during the year and the weighted-average significant assumptions used to determine those fair values, using a modified Black-Scholes option pricing model, and the pro forma effect on earnings (loss) of the fair value accounting for stock options under Statement of Financial Accounting Standards No. 123, are as follows:

29

	2005			2004			2003
Weighted average fair value per options granted	$	2.67		$	4.42		$	2.71
Significant assumptions (weighted average)
Risk-free interest rate at grant date	4.3		%	4.1		%	3.7		%
Expected stock price volatility	0.43			0.68			0.72
Expected dividend payout	—			—			—
Expected option life (years)	5			5			5
Net (loss) Income
As reported	$	(888,696	)	$	(2,717,201	)	$	1,048,054
Deduct total stock based compensation expense (net of income taxes) determined under the fair value method	(303,911		)	(117,637		)	(92,199		)
Pro forma	$	(1,192,607	)	$	(2,834,838	)	$	955,855
Basic (loss) earnings per share
As reported	$	(0.23	)	$	(0.71	)	$	0.28
Pro forma	$	(0.31	)	$	(0.74	)	$	0.25
Diluted (loss) earnings per share
As reported	$	(0.23	)	$	(0.71	)	$	0.27
Pro forma	$	(0.31	)	$	(0.74	)	$	0.24

The accelerated vesting of certain stock options in 2005 (see note 9 for further description) increased the 2005 pro forma expense by $200,171.

Recent Accounting Pronouncements

In December 2004, the FASB issued Statement of Financial Accounting Standards 123 (revised 2004) “Share-Based Payment” (“SFAS 123R”). Among other things, SFAS 123R requires expensing the fair value of stock options, which was previously optional. SFAS 123R is effective as of January 1, 2006. The Company expects the impact of adopting SFAS 123R in 2006 would result in a pre-tax expense of $14,000, assuming no further grants are made in 2006.

In November 2004, the FASB issued Statement of Financial Accounting Standards No. 151, “Inventory Costs – An Amendment of ARB No. 43, Chapter 4” (“SFAS 151”) which clarifies the accounting for abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage). The Company is required to adopt the provisions of SFAS 151 for inventory costs incurred in 2006. The Company does not expect the adoption of this statement to have a material impact on its financial condition or results of operations.

2. Acquisitions

The Virginia Honey Company, Inc.

Effective July 1, 2001, Vita Seafood acquired 100% of the outstanding shares of capital stock of Virginia Honey from Terry W. Hess. The results of Virginia Honey have been included in the Company’s consolidated financial statements since the effective date. The aggregate purchase price, including direct costs of the acquisition, of $4,884,437 was paid in cash.

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The Halifax Group, Inc.

Effective November 1, 2002, Vita Seafood acquired all of the issued and outstanding shares of capital stock of Halifax, a Georgia corporation, from Robert J. Budd and certain affiliates or associates of Mr. Budd. Since the effective date, the results of Halifax have been fully integrated with the results of Virginia Honey to form the Company’s wholly owned subsidiary, VSF.

On the November 6, 2002 closing date, as a direct cost of the acquisition, the Company paid cash of $450,000 to Mr. Budd in partial payment of the $795,781 preexisting debt owed to him by Halifax. The Company has recorded the discounted value of the remaining debt as a long-term obligation as described in Note 4. The Company also assigned to Mr. Budd any potential rights or exposure associated with an unresolved legal case involving Halifax. The case was settled by all parties in 2005 and was dismissed with prejudice at an insignificant cost of legal fees to the Company.

Acquisition and Exit Costs

Shortly after the acquisition of Halifax, the Company’s management finalized plans to restructure the operations of pre-acquisition Halifax to eliminate redundant facilities and headcount, reduce cost structure and better align the operating expenses with existing economic conditions. Consequently, in 2003, the Company recorded $724,503 of costs relating to activities of pre-acquisition Halifax such as severance and related benefits, the cost of abandoned leasehold improvements, the cost to vacate the leased facilities and other pre-acquisition liabilities. These costs were accounted for under EITF 95-3, “Recognition of Liabilities in Connection with Purchase of Business Combinations”. These costs were recognized as a liability assumed in the acquisition and included in the allocation of the purchase price.

The acquisition and exit costs consisted of the following:

	Closedown		Employee
	of		Severance
	Facility		& Related		Other		Total
Exit costs incurred in acquisition	$	497,538	$	111,699	$	115,266	$	724,503
Payments made during the twelve months ending December 31, 2003	481,247		111,699		115,266		708,212
Acquisition cost accrual, December 31, 2003 (all paid in 2004)	$	16,291	$	—	$	—	$	16,291

Earn Out Provision under Acquisition Agreements

Pursuant to the Company’s acquisitions of Virginia Honey and Halifax in 2001 and 2002, respectively, the previous owners of those businesses, both of whom are employees; and one of whom is a director of the Company, and is subject to earn out provisions that have resulted in additional payments and may continue for one more period to result in an additional payment by the Company for the acquired businesses. As amended, the earn out provisions for Terry Hess, the previous owner of Virginia Honey, have resulted in an additional amount of $840,000 paid to Mr. Hess in April 2005. This first earn out payment was based on the operating results of Virginia Honey for the period from January 1, 2001 to December 31, 2002. In addition, a second earn out payment to be made to Mr. Hess in the amount of $700,000 will be paid in April 2006. The second earn out payment was based on the operating results of VSF for the period from January 1, 2003 to December 31, 2005. A potential remaining earn out payment to Mr. Hess will be based on the earnings of VSF, as computed by a predefined allocation formula, for the period January 1, 2006 to December 31, 2007. Should VSF maintain its current profitability level throughout this period, management estimates that an additional payment with a net present value as of December 31, 2005 of approximately $550,000 would be due to Mr. Hess in April 2008. Any future payment will be recorded as additional goodwill, and be subject to impairment analysis, when and if such payment is finally determined at the end of the period described above.

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Similarly, Mr. Budd, the previous owner of Halifax, had two separate earn out periods — January 1, 2003 to December 31, 2005 and January 1, 2006 to December 31, 2007. Potential remaining earn out payments to Mr. Budd were to be based on earnings of VSF, as computed by a pre-defined allocation formula. On January 7, 2005, Vita Food Products, Inc. terminated the Employment Agreement (the “Employment Agreement”) made as of November 1, 2002, between Halifax and Mr. Budd. The Company alleged a for “cause” termination and, accordingly, filed suit against Mr. Budd which was settled in accordance with the terms and conditions of the Confidential Settlement Agreement and Mutual Release entered into on March 28, 2005 (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the remaining potential earn out payments to Mr. Budd have been eliminated entirely.

The Settlement Agreement also amended the Non-Competition and Non-Solicitation Agreement entered into by Budd in connection with the Company’s acquisition of Halifax. Pursuant to the Non-Competition Agreement, as amended, Budd is prohibited from competing with the Company and soliciting its employees and customers until March 1, 2010, provided, that Mr. Budd may freely engage in any business that is not producing products competitive with the products of the Company as of February 28, 2005.

3.   Accrued Expenses

Accrued expenses consist of the following:

December 31,	2005		2004
Interest	$	111,069	$	41,159
Salaries and bonuses	302,882		284,901
Taxes other than income taxes	54,200		64,407
Utilities, freight and other	385,831		427,452
	$	853,982	$	817,919

4.   Long-Term Obligations

Long-term obligations consist of the following:

December 31,	2005		2004
Revolving loan facility (a)	$	8,588,089	$	7,677,617
Term loan facility (a)	6,242,000		5,636,000
Term loan - B facility (a)	48,846
Term loan payable (b)	2,480,948		2,599,846
Additional purchase price payable to Mr. Hess (c)	700,000		831,659
Robert J. Budd Note (d)	231,887		315,276
Employment contract (e)	501,709
Other notes payable	77,730		56,932
	18,871,209		17,117,330
Less current maturities	2,217,840		1,619,430
	$	16,653,369	$	15,497,900

(a) On September 8, 2003, the Company entered into a loan agreement with a bank (the “Loan Agreement”) and paid off its existing credit facility with initial borrowings under this new Loan Agreement. The original Loan Agreement provided for a two-year $8,500,000 revolving line of credit

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(the ‘revolver’), a five-year $6,500,000 term loan (the ‘Term A Loan”) and a six-year $3,000,000 term loan (the “Term B Loan”). The Term B Loan was never utilized. During 2004 and 2005, the Loan Agreement was amended several times to, among other things, extend the maturity dates of the revolver and change the available borrowings under the revolver (which most recently had been $10,500,000), the Term Loans and an over-advance loan of $1,000,000 which was terminated on February 28, 2006. On March 24, 2006, the Loan Agreement was further amended. Pursuant to this latest amendment, the Loan Agreement now provides for a $9,500,000 revolver which terminates on April 1, 2007; a $7,750,000 Term A Loan due in monthly installments of $80,000 through July 31, 2008 with a balloon payment of $3,682,000 due on August 31, 2008; a $150,000 capital expenditure Term Loan B due in monthly installments of 1/60^th of the outstanding balance as of August 2006 from that date through May 31, 2010 and the remainder due on June 30, 2010. The revolver is now limited to a borrowing base equal to 80% of eligible accounts receivable and 60% of eligible inventories, as defined. No borrowing were outstanding under the over-advance line as of December 31, 2005. Outstanding borrowings under the Loan Agreement are secured by substantially all assets of the Company.

Interest under each piece of the amended Loan Agreement is at a floating rate per annum equal to the prime rate plus 0.5%. This rate was 7.75 percent as of December 31, 2005.

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

(b) As part of the acquisition agreement for Virginia Honey, the Company assumed a 7.0% note payable to a former Virginia Honey shareholder. At December 31, 2005 the balance due was $2,480,948. This note is secured and is payable in monthly installments through 2018.

(c) As described in Note 2, Mr. Hess earned additional purchase price on his sale of Virginia Honey to the Company based on a measurement date of December 31, 2005. That obligation is payable in April 2006.

(d) The merger agreement with Halifax provided that, as part of the acquisition price, the Company would repay the balance of a note due to the former owner by Halifax, to that individual on April 1, 2006. The Settlement Agreement entered into between the Company and such former owner in connection with the Company’s institution of litigation against the former owner amended the terms of the note to provide for payment in 78 bi-weekly equal installments of $4,241. The principle amount did not change and no interest accrues on this debt. See Note 10 for further information regarding this obligation.

(e) During the fourth quarter of 2005, a $501,709 non cash charge was recognized to account for the future costs associated with a senior officer, pursuant to a 2005 amendment to his employment contract, which significantly reduced his duties during 2006 and committed the Company to terminate the agreement in 2007. The Company expects to pay $294,189 in 2006 without the benefit of any services from the officer and $207,520 in 2007 as severance.

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Scheduled annual maturities of long-term obligations as of December 31, 2005 are as follows:

Year ending December 31,
2006	$	2,217,840
2007	10,033,864
2008	4,515,872
2009	175,196
2010	184,019
2011 and subsequent	1,744,418
	$	18,871,209

5.   Income Taxes

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes as well as credit carryforwards. The effects of existing temporary differences, that give rise to significant portions of the net deferred income tax asset (liability), are as follows:

December 31,	2005			2004
Deferred income tax asset:
Uniform inventory capitalization	$	76,000		$	68,000
Accrued expenses and reserves	383,000			276,000
Contributions carryover	60,000			77,000
Net operating loss carryforwards	264,000			300,000
	747,000			721,000
Deferred income tax liability:
Depreciation	(849,000		)	(866,000		)
Net deferred income tax asset (liability)	$	66,000		$	(145,000	)

The Company has gross federal net operating loss carryforwards of $ 1.2 million, which expire, if unused, in 2022 – 2024.

Income tax (benefit) expense for the years ended December 31, 2005, 2004 and 2003 consist of the following:

December 31,	2005			2004			2003
Current	$	(94,000	)	$	19,000		$	214,000
Deferred	(458,000		)	(288,000		)	488,000
Income tax (benefit) expense	$	(552,000	)	$	(269,000	)	$	702,000

The reconciliation of income tax computed at the United States federal statutory tax rate of 34% to income tax (benefit) expense is as follows:

Year ended December 31,	2005			2004			2003
Tax at federal statutory rate	$	(495,000	)	$	(1,015,000	)	$	595,000
Impairment charge	—			787,000			—
Other (primarily state taxes)	(57,000		)	(41,000		)	107,000
Income tax (benefit) expense	$	(552,000	)	$	(269,000	)	$	702,000

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6.   Commitments and Contingencies

A.    In the ordinary course of business, the Company becomes involved in litigation as a defendant in various lawsuits. In the opinion of management, after considering the advice of counsel, the ultimate resolution of these legal proceedings will not have a material effect on the financial statements taken as a whole and thus no provision has been made in the financial statements for any loss contingencies.

B.    The Company leases two of its Virginia Honey facilities from a former owner of Virginia Honey, who is now an officer of Vita Seafood and VSF. During 2003, the Company renewed both of these leases, one through December 31, 2008 and the second through December 31, 2018. Additional renewal options are available. Future payments under these leases amount to approximately $512,000 for both of 2006 and 2007, $524,000 for 2008 and $412,000 each of the subsequent periods. Rent expense under these agreements totaled $519,000, $451,000 and $358,000 in 2005, 2004 and 2003, respectively.

C.    The Company leases its Atlanta office from an unrelated lessor. The lease expires on August 31, 2006. Future payments under the lease will amount to approximately $25,000 for 2006. Since November 1, 2002, the effective date of the lease, rent expense under this agreement totaled $89,000.

D.    See Note 2 for potential Company obligations related to an earn out provision under the acquisition agreements for Virginia Honey and Halifax.

E.     The Company has brand name product licensing agreements, which contain provisions for minimum future royalty payments, which currently expire in 2008. During 2005, 2004 and 2003, the Company paid $555,000, $535,000 and $271,000, respectively, in royalty payments under these licensing agreements. The minimum future royalty payments are $238,000, $258,000 and $285,000 for 2006, 2007 and 2008, respectively.

F.     The Company has an operating lease for production equipment at the Virginia Honey facility. This lease originated in 2004 and during 2005 and 2004 the Company paid $60,000 and $21,000 respectively. This lease expires in 2007. Future payments are $140,000 in 2006 and $105,000 in 2007.

7.   Employee Benefit Plans

The Company has established a qualified 401(k) profit sharing plan covering its non-union employees. Participants may elect to defer a portion of their annual compensation. The Company may contribute amounts at the discretion of the board of directors. The Company expensed 401(k) matching contributions of $43,000, $68,000 and $67,000 in 2005, 2004 and 2003, respectively.

Additionally, the Company participates in two multi-employer plans that provide benefits to the Company’s union employees. Contributions to the plans for the years ended December 31, 2005, 2004 and 2003 were $34,000, $35,000 and $33,000, respectively.

8.   Major Customers

In the year ended December 31, 2005, the Company had sales to one customer representing 20% and sales to another customer representing 12% of total annual net sales. At December 31, 2005, these customers had open accounts receivable balances of $767,000 and $554,000, respectively. During 2004, the Company had sales to one customer representing 21% and sales to another customer representing 14% of total annual net sales. At December 31, 2004, these customers had open accounts receivable balances of $705,000 and $941,000, respectively. During 2003, the Company had sales to one customer representing 19% and sales to another customer representing 13% of total annual net sales.

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9.Stock Option and Purchase Plans

On September 11, 1996, the Company adopted the Vita Food Products, Inc. 1996 Stock Option Plan for employees or other constituencies of the Company, including members of the board of directors who are employees. The plan was amended and restated in 2004 to provide for 525,000 shares of common stock to be reserved for issuance upon the exercise of options designated as either an “incentive stock option” or as a “nonqualified stock option.”  These options vest at 20% per year and may be granted to employees or other constituencies of the Company, including members of the board of directors who are employees. On September 11, 1996, the Company also adopted the Vita Food Products, Inc. 1996 Stock Option Plan for Non-Employee Directors. The plan was amended and restated in 2000 to provide for 175,000 shares of common stock to be reserved for issuance upon the exercise of options designated as a “nonqualified stock option.”  These options become fully vested six months after issuance and may be granted to directors who are not employees of the Company. Generally, all options are issued at exercise prices equal to market price and are exercisable for a period of ten years from the date of grant. Further, in September 1996, the Company adopted the 1996 Employee Stock Purchase Plan pursuant to which 150,000 shares of common stock have been reserved for issuance. In December 2005, the Company’s board of directors elected to fully vest all unvested employee stock options granted between 2001-2004. This election was made in order to reduce the complications of and potential compensation expense pursuant to adopting FASB 123(R) as of January 1, 2006. No additional compensation expense was recorded due to exercise prices of the accelerated unvested options exceeding the market value of the Company’s stock in December 2005.

Information with respect to the stock option plans follows:

Year ended December 31,	2005		2004		2003
Options outstanding at beginning of year	330,400		314,400		328,500
Options granted	80,500		50,000		35,000
Options exercised	—		(23,500	)	(32,200	)
Options forfeited	(61,300	)	(10,500	)	(16,900	)
Options outstanding at end of year	349,600		330,400		314,400
Weighted average remaining contractual life	6.6 yrs.		6.8 yrs.		7.3 yrs.
Options exercisable	286,600		200,180		173,120
Exercise prices per option granted	$1.71-$3.41		$4.45-$7.52		$4.00-$5.15

Weighted Average Exercise Price	2005		2004		2003
January 1,	$	4.15	$	3.52	$	3.42
December 31,	3.84		4.15		3.52
Exercised	—		2.43		3.08
Exercisable	4.14		3.60		3.03
Forfeited	3.99		4.83		4.20

10.Employment Contracts

In 2002, the Company entered into employment agreements with two officers of the Company. Under the terms of these agreements, the officers were each entitled to be paid a salary of $240,030 annually (adjusted annually for increases of at least the cost of living index), plus bonuses, if any, and certain perquisites. During 2003, one of the officers had his employment agreement renewed on substantially

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the same terms and conditions through December 2006. In December 2005, the Company’s board of directors exercised its right to terminate his contract effective December 31, 2006 in accordance with the terms of that agreement and also decided to substantially reduce the duties to be provided by the officer in 2006. During 2004, the other officer had his agreement renewed on substantially the same terms and conditions through December 2006. The Company intends to amend this agreement to reflect a reduction in salary and duties, and extend the term to 2009. In addition, the Company has entered into an employment agreement with another one of its officers in 2006.

The Company also entered into an employment agreement with an officer of Virginia Honey in conjunction with the purchase of Virginia Honey. The agreement extends to December 31, 2007 (as amended) and calls for the officer to receive a salary of $300,000 per year with, at the sole discretion of Virginia Honey’s board of directors, a maximum raise equal to the percentage increase in the cost of living index.

In addition, in January 2005, the Company terminated an employment agreement with an officer of Halifax that was entered into in conjunction with the purchase of Halifax. The agreement had a term that extended to December 31, 2007 and called for the officer to receive a salary of $242,500 per year with a 3% per year increase starting January 1, 2004. See Note 2 for a further description of the termination of employment agreement and the settlement that was entered into between the parties in respect of the litigation commenced by the Company against the former Halifax officer.

11.Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable, accounts payable and short-term obligations approximate fair value due to the short-term nature of these instruments. The carrying value of the Company’s long-term obligations, based on rates currently available for instruments with similar terms and maturities, also approximates fair value.

12.Business Segments

The Company reports two operating business segments in the same format as reviewed by the Company’s senior management. Segment one, Vita Seafood, processes and sells various herring, and cured and smoked salmon products throughout the United States and Mexico. Segment two, VSF, combines the products of Virginia Honey and Halifax and manufactures and distributes honey, salad dressings, sauces, marinades, jams and jellies and gift baskets throughout North America. Management predominately uses operating profit as the measure of profit or loss by business segment. The significant accounting policies as described in Note 1 were utilized in the preparation of the financial statements for both segments.

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

Year ended December 31,	2005			2004			2003
Goodwill
Vita Seafood	$	—		$	—		$	—
VSF	6,697			5,997			8,311
Total Goodwill	$	6,697		$	5,997		$	8,311
Total Assets
Vita Seafood	$	18,523		$	17,934		$	20,056
VSF	8,500			7,366			9,028
Total Assets	$	27,023		$	25,300		$	29,084
Net Sales
Vita Seafood	$	26,397		$	26,972		$	27,216
VSF	20,459			21,784			23,714
Total Net Sales	$	46,856		$	48,756		$	50,930
Operating (Loss) Profit
Vita Seafood (b) (c)	$	(1,290	)	$	(483	)	$	612
VSF (a)	932			(1,736		)	1,890
Total Operating (Loss) Profit	$	(358	)	$	(2,219	)	$	2,502
Net (Loss) Income
Vita Seafood (b) (c)	$	(1,174	)	$	(521	)	$	148
VSF (a)	285			(2,196		)	900
Total Net (Loss) Income	$	(889	)	$	(2,717	)	$	1,048
Depreciation and Amortization
Vita Seafood	$	491		$	500		$	540
VSF	471			483			416
Total Depreciation and Amortization	$	962		$	983		$	956
Capital Expenditures
Vita Seafood	$	244		$	612		$	389
VSF	597			566			747
Total Capital Expenditures	$	841		$	1,178		$	1,136

(a)Includes the 2004 goodwill impairment charge of $2,314.

(b)Includes various unallocated corporate expenses that benefit both segments but are monitored as part of the Vita Seafood segment.

(c)Includes in 2005 a $502 charge, $301 net of tax benefit, to recognize the future costs associated with a senior executive officer, whose duties have been materially reduced.

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13.Selected Quarterly Financial Data (unaudited)

For The Three Month Periods Ended

(in thousands, except share and per share data)

	March 31, 2005			June 30, 2005		September 30, 2005			December 31, 2005
Revenues	$	11,020		$	10,232	$	11,418		$	14,186
Gross Profit	3,324			3,553		3,227			4,119
Net Income (Loss)	(257		)	51		(257		)	(a) (426		)
Basic Income (Loss) per Share	$	(0.07	)	$	0.01	$	(0.07	)	$	(0.11	)
Weighted Average Common Shares Outstanding	3,858,738			3,858,738		3,866,062			3,866,062
Diluted Income (Loss) per Share	$	(0.07	)	$	0.01	$	(0.07	)	$	(0.11	)
Weighted Average Common Shares Outstanding	3,858,738			3,884,002		3,866,062			3,866,062

(a)Includes a $301 charge, net of tax benefit, to recognize the future costs associated with a senior executive whose duties have been materially reduced.

For The Three Month Periods Ended

(in thousands, except share and per share data)

	March 31, 2004			June 30, 2004			September 30, 2004			December 31, 2004
Revenues	$	12,612		$	10,658		$	11,575		$	13,911
Gross Profit	3,835			3,109			3,060			4,343
Net Loss	(38		)	(340		)	(276		)	(a) (2,062		)
Basic Loss per Share	$	(0.01	)	$	(0.09	)	$	(0.07	)	$	(0.54	)
Weighted Average Common Shares Outstanding	3,833,319			3,836,100			3,847,214			3,847,214
Diluted Loss per Share	$	(0.01	)	$	(0.09	)	$	(0.07	)	$	(0.54	)
Weighted Average Common Shares Outstanding	3,833,319			3,836,100			3,847,214			3,847,214

(a)Includes goodwill impairment charge of $2,314.

14.Subsequent Event (unaudited)

In February 2006, the Company entered into agreements pursuant to which five individuals or their affiliated entities will invest a total of $2,500,000 in the Company. The investors will receive 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 exercise price of $5.00 per share; and five-year warrants to purchase an additional 500,000 shares of common stock at an exercise price of $7.50 per share. The investors include the following: (i) Stephen D. Rubin, the President and a director of the Company, (ii) Clifford K. Bolen, the Chief Operating Officer and Chief Financial Officer of the Company, together with certain of his affiliates, (iii) Delphi Casualty Co., of which Glenn S. Morris, a director of the Company, owns a 44% equity interest, (iv) a trust of which John C. Seramur, a director of the Company, serves as trustee, as well as (v) one unrelated third-party investor.

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The transactions were subject to the Board of Directors’ receipt of a fairness opinion from an investment banker or other acceptable party, and to approval by the American Stock Exchange, each of which has been received.

Upon the closing of the transactions, Messrs. Rubin and Bolen as well as Terry W. Hess, the President of VSF and a director of the Company, were appointed to a newly established Office of the Chief Executive. Mr. Rubin will also serve as the non-executive Chairman of the Board. In addition, Mr. Bolen has entered into an employment agreement with the Company.

The Company intends to use the funds to reduce debt, increase working capital and allow the Company to consider potential expansion, including through acquisitions.

On March 24, 2006, the Company entered into an Eighth Amendment to Loan and Security Agreement with LaSalle Bank National Association (the “Lender”) (the “Amendment”). Pursuant to the Amendment, the Lender and the Company have agreed to (i) extend the termination date of the revolving loans issued under the Loan and Security Agreement dated as of September 5, 2003, between the parties, as amended (the “Loan Agreement”), to April 1, 2007; (ii) decrease the principal amount of the revolving loans issued under the Loan Agreement which was temporarily at $10,500,000 to $9,500,000; (Iii) modify certain of the Company’s financial covenants under the Loan Agreement; and (iv) increase the frequency of certain reports provided by the Company to the Lender.

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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

No changes in accountants or disagreements with accountants on accounting and financial disclosure occurred.

Item 9A. Controls and Procedures.

Under the supervision and with the participation of the Company’s management team, the principal executive officer and principal financial officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of December 31, 2005 and, based on their evaluation, have concluded that these controls and procedures are effective. There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended December 31, 2005 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Item 9B. Other Information.

All information required to be disclosed in a report on Form 8-K during the fourth quarter of 2005 has been reported.

PART III

Item 10. Directors and Executive Officers of the Registrant.

The information required by this Item 10 is incorporated herein by reference to the information set forth under the captions “Election of Directors,” “Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.

Item 11. Executive Compensation.

The information required by this Item 11 is incorporated by reference to the information set forth under the caption “Compensation of Executive Officers” in the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item 12 is incorporated by reference to the information set forth under the caption “Security Ownership of Principal Holders and Management” in the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.

Item 13. Certain Relationships and Related Transactions.

The information required by this Item 13 is incorporated by reference to the information set forth under the caption “Certain Relationships and Related Transactions” in the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.

Item 14. Principal Accountant Fees and Services.

The information required by this Item 14 is incorporated by reference to the information set forth under the caption “Audit Committee Disclosure” in the Company’s definitive Proxy Statement for the 2006 Annual Meeting of Stockholders.

PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a)(1), (a)(2) and (c):             The Company has filed its consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.

(a)(3) and (b):        Listed below are the exhibits filed as part of this Annual Report on Form 10-K:

42

Number		Exhibit Title
(1)	2.1	Stock Purchase Agreement, dated as of June 29, 2001, between Vita Food Products, Inc., Virginia Honey Company, Inc. and Terry W. Hess (Ex. 2.1)
(2)	2.2	Merger Agreement, dated as of October 17, 2002, between the Company, Vita Holdings, Inc., Vita/Halifax Acquisition Company, Halifax, Robert J. Budd, Oak Hill Family LLC and Terry W. Hess (Ex 2.2)
(3)	3.1	Articles of Incorporation of the Company (Ex. 3.1)
(3)	3.2	By-laws of the Company (Ex. 3.2)
(3)	4.1	Form of Common Stock Certificate (Ex. 4.1)
(9)	4.2	Certificate of Designation of Series A Preferred Stock, as filed with the Secretary of State of Delaware on November 11, 2005 (Ex. 4.1)
(4)	10.1	Loan and Security Agreement dated as of September 5, 2003 by and between the Company and LaSalle National Bank, N.A. (Ex. 10.1)
(10)	10.1.1	First Amendment to Loan and Security Agreement dated November 5, 2004 (Ex. 10.1.1)
(5)	10.1.2	Second Amendment to Loan and Security Agreement dated December 21, 2004 (Ex. 10.1)
(11)	10.1.3	Third Amendment to Loan and Security Agreement dated January 31, 2005 (Ex. 10.1)
(12)	10.1.4	Fourth Amendment to Loan and Security Agreement dated April 4, 2005 (Ex. 10.1)
(13)	10.1.5	Fifth Amendment to Loan and Security Agreement dated June 30, 2005 (Ex. 10.1)
(14)	10.1.6	Sixth Amendment to Loan and Security Agreement dated August 4, 2005 (Ex. 10.1)
(15)	10.1.7	Seventh Amendment to Loan and Security Agreement dated August 30, 2005 (Ex. 10.1)
	10.1.8	Eighth Amendment to Loan and Security Agreement dated March 24, 2006 *
(3)	10.2	Form of 1996 Employee Stock Option Plan (Ex. 10.4)
(3)	10.3	Form of 1996 Stock Option Plan for Non-Employee Directors (Ex. 10.5) x

(1) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on August 30, 2001.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(2) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on November 6, 2002.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(3) Incorporated by reference to Form SB-2 Registration Statement (File No. 333 5738), filed with the Securities and Exchange Commission on September 23, 1996.  Form SB-2 Exhibit Number is included in parenthesis following the title of the exhibit.

(4) Incorporated by reference to Form 10-Q for the fiscal quarter ended September 30, 2003, filed with the Securities and Exchange Commission on November 14, 2003. Form 10-Q Exhibit Number is included in parenthesis following the title of the exhibit.

43

Number		Exhibit Title
(3)	10.4	Form of Employment Agreement between the Company and Stephen D. Rubin (Ex. 10.7) x
(6)	10.4.1	Amendment One to Employment Agreement between the Company and Stephen D. Rubin (Ex. 10.4.1) x
(10)	10.4.2	Amendment Two to Employment Agreement between the Company and Stephen D. Rubin (Ex. 10.4.2) x
(7)	10.5	Employment Agreement dated as of January 1, 2004 between the Company and Clark L. Feldman (Ex. 10.6) x
(3)	10.6	Long Term Supply/Purchase Agreement dated as of September 1, 1992 by and between the Company and Barry’s Limited (Ex. 10.9)
(3)	10.7	Gorenstein Agreement dated September 20, 1996 by and among the Company, Stephen D. Rubin, Clark L. Feldman, Sam Gorenstein, David Gorenstein and J.B.F. Enterprises (Ex. 10.26)
(1)	10.8	Form of Employment Agreement, dated as of July 1, 2001, between Virginia Honey Company, Inc. and Terry W. Hess (First Exhibit to Ex. 2.1) x
(10)	10.8.1	Amendment One to Employment Agreement between Virginia Honey Company, Inc. and Terry W. Hess (Ex. 10.8.1) x
(8)	10.9	Employment Agreement, made as of November 1, 2002 between The Halifax Group, Inc. and Robert J. Budd (Ex. 10.1) x
(8)	10.10	Amendment to Employment Agreement, made as of March, 2003 between The Halifax Group, Inc. and Robert J. Budd (Ex. 10.2)
(8)	10.11	Non-Competition and Non-Solicitation Agreement, made as of November 1, 2002 among Vita Food Products, Inc., Vita Holdings, Inc., The Halifax Group, Inc. and Robert J. Budd (Ex. 10.3)
(10)	10.12	Confidential Settlement Agreement and Mutual Release, entered into on March 28, 2005, among the Vita Food Products, Inc., Vita Specialty

(5) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on January 6, 2005.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(6) Incorporated by reference to Form 10-QSB for the fiscal quarter ended June 30, 1999, filed with the Securities and Exchange Commission on August 9, 1999.  Form 10-QSB Exhibit Number is included in parenthesis following the title of the exhibit.

(7) Incorporated by reference to Form 10-K for the fiscal year ended December 31, 2003, filed with the Securities and Exchange Commission on March 30, 2004.  Form 10-K Exhibit Number is included in parenthesis following the title of the exhibit.

(8) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on January 13, 2005.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(9) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on November 15, 2005.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(10) Incorporated by reference to Form 10-K for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 31, 2005.  Form 10-K Exhibit Number is included in parenthesis following the title of the exhibit.

(11) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on April 12, 2005.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

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Number		Exhibit Title
		Foods, Inc., Virginia Honey Company, Inc., The Halifax Group, Inc. and Robert J. Budd (Ex. 10.12) x
(9)	10.13	Form of Rights Agreement dated as of November 10, 2005, between Vita Food Products, Inc. and American Stock Transfer and Trust Company (Ex. 10.1)
(16)	10.14	Employment Agreement, made as of March 20, 2006 between Vita Food Products, Inc. and Clifford Bolen (Ex. 10.1) x
(7)	14.1	Code of Ethics (Ex. 14.1)
(7)	21.1	Subsidiary of the Company (Ex. 21.1)
	23.1	Consent of Independent Registered Public Accounting Firm *
	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 Executive Officer Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
	99.1	Press release dated March 27, 2006 *

(12) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on April 18, 2005. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(13) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on July 13, 2005. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(14) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on August 11, 2005. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(15) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 8, 2005. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(16) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on March 23, 2006. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

^x Indicates an employee benefit plan, management contract or compensatory plan or arrangement.

* Filed herewith.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

VITA FOOD PRODUCTS, INC.
By:	/s/ Stephen D. Rubin
		Stephen D. Rubin
		President
Date:		March 30, 2006

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the following capacities on March 30, 2006.

Signatures	Title
/s/ Stephen D. Rubin	Director and President
Stephen D. Rubin	(Principal Executive Officer)
/s/ Clark L. Feldman	Director, Executive Vice President and Secretary
Clark L. Feldman
	Senior Vice President, Chief Operating Officer, Chief Financial Officer
/s/ Clifford K. Bolen
Clifford K. Bolen	and Treasurer
	(Principal Financial and Accounting Officer)
/s/ Terry W. Hess	Director, Chief Executive Officer of Vita Specialty
Terry W. Hess	Foods, Inc.
/s/ Scott Levitt	Director
Scott Levitt
/s/ Glenn Morris	Director
Glenn Morris
/s/ Steven A. Rothstein	Director
Steven A. Rothstein
/s/ John C. Seramur	Director
John C. Seramur

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Exhibit Index

Number		Exhibit Title
(1)	2.1		Stock Purchase Agreement, dated as of June 29, 2001, between Vita Food Products, Inc., Virginia Honey Company, Inc. and Terry W. Hess (Ex. 2.1)
(2)	2.2		Merger Agreement, dated as of October 17, 2002, between the Company, Vita Holdings, Inc., Vita/Halifax Acquisition Company, Halifax, Robert J. Budd, Oak Hill Family LLC and Terry W. Hess (Ex 2.2)
(3)	3.1		Articles of Incorporation of the Company (Ex. 3.1)
(3)	3.2		By-laws of the Company (Ex. 3.2)
(3)	4.1		Form of Common Stock Certificate (Ex. 4.1)
(9)	4.2		Certificate of Series A Preferred Stock, as filed with the Secretary of State of Delaware on November 11, 2005 (Ex. 4.1)
(4)	10.1		Loan and Security Agreement dated as of September 5, 2003 by and between the Company and LaSalle National Bank, N.A. (Ex. 10.1)
(10)	10.1.1		First Amendment to Loan and Security Agreement dated November 5, 2004 (Ex. 10.1.1)
(5)	10.1.2		Second Amendment to Loan and Security Agreement dated December 21, 2004 (Ex. 10.1)
(11)	10.1.3		Third Amendment to Loan and Security Agreement dated January 31, 2005 (Ex. 10.1)
(12)	10.1.4		Fourth Amendment to Loan and Security Agreement dated April 4, 2005 (Ex. 10.1)
(13)	10.1.5		Fifth Amendment to Loan and Security Agreement dated June 30, 2005 (Ex. 10.1)
(14)	10.1.6		Sixth Amendment to Loan and Security Agreement dated August 4, 2005 (Ex. 10.1)
(15)	10.1.7		Seventh Amendment to Loan and Security Agreement dated August 30, 2005 (Ex. 10.1)
	10.1.8		Eighth Amendment to Loan and Security Agreement dated March 24, 2006 *
(3)	10.2		Form of 1996 Employee Stock Option Plan (Ex. 10.4) x

(1) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on August 30, 2001.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(2) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on November 6, 2002.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(3) Incorporated by reference to Form SB-2 Registration Statement (File No. 333 5738), filed with the Securities and Exchange Commission on September 23, 1996.  Form SB-2 Exhibit Number is included in parenthesis following the title of the exhibit.

(4) Incorporated by reference to Form 10-Q for the fiscal quarter ended September 30, 2003, filed with the Securities and Exchange Commission on November 14, 2003. Form 10-Q Exhibit Number is included in parenthesis following the title of the exhibit.

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Number		Exhibit Title
(3)	10.3	Form of 1996 Stock Option Plan for Non-Employee Directors (Ex. 10.5) x
(3)	10.4	Form of Employment Agreement between the Company and Stephen D. Rubin (Ex. 10.7) x
(6)	10.4.1	Amendment One to Employment Agreement between the Company and Stephen D. Rubin  (Ex. 10.4.1) x
(10)	10.4.2	Amendment Two to Employment Agreement between the Company and Stephen D. Rubin (Ex. 10.4.2) x
(7)	10.5	Employment Agreement dated January 1, 2004 between the Company and Clark L. Feldman (Ex. 10.6) x
(3)	10.6	Long Term Supply/Purchase Agreement dated as of September 1, 1992 by and between the Company and Barry’s Limited (Ex. 10.9)
(3)	10.7	Gorenstein Agreement dated September 20, 1996 by and among the Company, Stephen D. Rubin, Clark L. Feldman, Sam Gorenstein, David Gorenstein and J.B.F. Enterprises (Ex. 10.26)
(1)	10.8	Form of Employment Agreement, dated as of July 1, 2001, between Virginia Honey Company, Inc. and Terry W. Hess (First Exhibit to Ex. 2.1) x
(10)	10.8.1	Amendment One to Employment Agreement between Virginia Honey Company, Inc. and Terry W. Hess (Ex. 10.8.1) x
(8)	10.9	Employment Agreement, made as of November 1, 2002, between The Halifax Group, Inc. and Robert J. Budd (Ex. 10.1) x
(8)	10.10	Amendment to Employment Agreement, made as of March, 2003 between The Halifax Group, Inc. and Robert J. Budd (Ex. 10.2)

(5) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on January 6, 2005.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(6) Incorporated by reference to Form 10-QSB for the fiscal quarter ended June 30, 1999, filed with the Securities and Exchange Commission on August 9, 1999.  Form 10-QSB Exhibit Number is included in parenthesis following the title of the exhibit.

(7) Incorporated by reference to Form 10-K for the fiscal year ended December 31, 2003, filed with the Securities and Exchange Commission on March 30, 2004.  Form 10-K Exhibit Number is included in parenthesis following the title of the exhibit.

(8) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on January 13, 2005.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(9) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on November 15, 2005.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(10) Incorporated by reference to Form 10-K for the fiscal year ended December 31, 2004, filed with the Securities and Exchange Commission on March 31, 2005.  Form 10-K Exhibit Number is included in parenthesis following the title of the exhibit.

(11) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on April 12, 2005.  Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

48

Number		Exhibit Title
(8)	10.11	Non-Competition and Non-Solicitation Agreement, made as of November 1, 2002 among Vita Food Products, Inc., Vita Holdings, Inc., The Halifax Group, Inc. and Robert J. Budd (Ex. 10.3)
(10)	10.12	Confidential Settlement Agreement and Mutual Release, entered into on March 28, 2005, among the Vita Food Products, Inc., Vita Specialty Foods, Inc., Virginia Honey Company, Inc., The Halifax Group, Inc. and Robert J. Budd (Ex. 10.12) x
(9)	10.13	Form of Rights Agreement dated as of November 10, 2005, between Vita Food Products, Inc. and American Stock Transfer and Trust Company (Ex. 10.1)
(16)	10.14	Employment Agreement, made as of March 20, 2006, between Vita Food Products, Inc. and Clifford Bolen (Ex. 10.1) x
(7)	14.1	Code of Ethics (Ex. 14.1)
(7)	21.1	Subsidiary of the Company (Ex. 21.1)
	23.1	Consent of Independent Registered Public Accounting Firm *
	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 *
	99.1	Press release dated March 27, 2006 *

(12) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on April 18, 2005. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(13) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on July 13, 2005. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(14) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on August 11, 2005. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(15) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on September 8, 2005. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

(16) Incorporated by reference to Form 8-K filed with the Securities and Exchange Commission on March 23, 2006. Form 8-K Exhibit Number is included in parenthesis following the title of the exhibit.

^x Indicates an employee benefit plan, management contract or compensatory plan or arrangement.

* Filed herewith.

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EX-10.1.8

Exhibit 10.1.8

EIGHTH AMENDMENT TO LOAN AND SECURITY AGREEMENT

This Eighth Amendment to Loan and Security Agreement (this “Eighth Amendment”) made and entered into as of the 24th day of March, 2006, is by and among LASALLE BANK NATIONAL ASSOCIATION, a national banking association (“LENDER”), having its principal place of business at 135 South LaSalle Street, Chicago, Illinois 60603-4105, and VITA FOOD PRODUCTS, INC., a Nevada corporation, with its chief executive office located at 2222 West Lake Street, Chicago, Illinois 60612 (“Vita Food”), VIRGINIA HONEY COMPANY, INC., a Virginia corporation, with its chief executive office located at 2222 West Lake Street, Chicago, Illinois 60612 (“Virginia Honey”), THE HALIFAX GROUP, INC., a Georgia corporation, with its chief executive office located at 2222 West Lake Street, Chicago, Illinois 60612 (“Halifax”), and VITA SPECIALTY FOODS, INC., a Delaware corporation, with its chief executive office located at 2222 West Lake Street, Chicago, Illinois 60612  (“Specialty Foods”) (Vita Food, Virginia Honey, Halifax and Specialty Foods are individually a “Borrower” and collectively the “Borrowers”).

W I T N E S S E T H:

WHEREAS, prior hereto, Lender provided certain loans, extensions of credit and other financial accommodations (the “Financial Accommodations”) to Borrowers pursuant to (a) that certain Loan and Security Agreement dated as of September 5, 2003, as amended by that certain First Amendment to Loan and Security Agreement dated as of November 5, 2004, that certain Second Amendment to Loan and Security Agreement dated as of December 21, 2004, that certain Third Amendment to Loan and Security Agreement dated as of January 31, 2005, that certain Fourth Amendment to Loan and Security Agreement dated as of April 4, 2005, that certain Fifth Amendment to Loan and Security Agreement dated as of  June 30, 2005, that certain Sixth Amendment to Loan and Security Agreement dated as of August 4, 2005, and that certain Seventh Amendment to Loan and Security Agreement dated as of August 30, 2005, each by and among Lender and Borrowers (collectively the “Loan Agreement”), and (b) the other documents, agreements and instruments referenced in the Loan Agreement or executed and delivered pursuant thereto;

WHEREAS, Borrowers have requested, among other things, (i) that Lender extend the Revolving Loan Termination Date, and (ii) modify certain financial covenants (collectively the “Additional Financial Accommodations”); and

WHEREAS, Lender is willing to provide the Additional Financial Accommodations, but solely on the terms and subject to the provisions set forth in this Eighth Amendment and the other agreements, documents and instruments referenced herein or executed and delivered pursuant hereto.

NOW, THEREFORE, in consideration of the foregoing, the mutual promises and understandings of the parties hereto set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrowers hereby agree as set forth in this Eighth Amendment.

I.Definitions.

A.Use of Defined Terms.  Except as expressly set forth in this Eighth Amendment, all terms which have an initial capital letter where not required by the rules of grammar are used herein as defined in the Loan Agreement.

B.Amended Definitions.  Effective as of the date of this Eighth Amendment, Section 1.1 of the Loan Agreement is hereby amended by deleting the definitions of “Liabilities” “Maximum Revolving Loan”, “Revolving Loan Termination Date”, “Revolving Note” and “Tangible Net Worth Benchmark” and substituting therefor the following, respectively:

“Liabilities”:  shall mean any and all obligations, liabilities, indebtedness, fees, costs and expenses, now or hereafter owed or owing by Borrowers or any Borrower to Lender, or to any parent, affiliate or subsidiary of Lender, of any and every kind and nature, including, but not limited to, all principal, interest, debts, claims and indebtedness of any and every kind and nature, howsoever created, arising or evidenced, whether primary or secondary, direct or indirect, absolute or contingent, insured or uninsured, liquidated or unliquidated, or otherwise, and whether arising or existing under written or oral agreement or by operation of law, together with all costs, fees and expenses of Lender arising hereunder, including, but not limited to, (1) the indebtedness evidenced by the Revolving Note, Term Note A and Term Note B, (2) reasonable attorneys’ and paralegals’ fees or charges relating to the preparation of this Loan Agreement and the Other Agreements and the enforcement of Lender’s rights and remedies pursuant to this Loan Agreement and the Other Agreements, and (3) all liabilities and obligations arising under or in connection with Rate Hedging Transactions.

“Maximum Revolving Loan”: shall mean Nine Million Five Hundred Thousand and no/100 Dollars ($9,500,000.00).

“Revolving Loan Termination Date”:  shall mean April 1, 2007.

“Revolving Note”:  shall mean that certain Revolving Note dated as of March 24, 2006, executed and delivered by Borrowers to Lender in a maximum aggregate principal amount not to exceed $9,500,000.00, as amended, renewed, restated or replaced from time to time.

“Tangible Net Worth Benchmark”:  shall mean: (i) negative Three Million Two Hundred Fifty Thousand and no/100 Dollars (-$3,250,000) as of December 31, 2005, (ii) negative Three Million Four Hundred Thousand  and no/100 Dollars (-$3,400,000.00) as of March 31, 2006, and June 30, 2006, (iii) negative Three Million and no/100 Dollars (-$3,000,000.00) as of September 30, 2006, and (iv) negative Two Million Five Hundred Thousand and no/100 Dollars (-$2,500,000.00) as of December 31, 2006, and at all times thereafter; provided, however, the 2005 Severance Expense shall be added back to Tangible Net Worth to determine Tangible Net Worth for each calculation from December 31, 2005, through December 31, 2006.

2

C.New Definitions.  Effective as of the date of this Eighth Amendment, Section 1.1 of the Loan Agreement is hereby amended by adding the following new definition thereto in the appropriate alphabetical order:

“2005 Severance Expense”  shall mean the non-cash expense booked by Vita Food in December, 2005 to account for salary owed to a terminated executive through 2007 pursuant to the terms of such employee’s employment contract.

II.Amendments to Loan Agreement.  Effective as of December 31, 2005, with respect to Paragraph II.E below, and as of the date of this Eighth Amendment with respect to each of the other modifications set forth below, the Loan Agreement is hereby amended as follows:

A.Inspections and Verifications.  Section 4.3 of the Loan Agreement is hereby amended by deleting Section 4.3 of the Loan Agreement in its entirety and substituting therefor the following:

“4.3Inspections and Verifications.  Borrowers shall permit Lender, or any Persons designated by Lender, to call at each Borrower’s places of business at any reasonable times, upon not less than one (1) Business Day’s prior written or oral notice, and, without hindrance or delay, to inspect the Collateral and to inspect, audit, check and make extracts from each Borrower’s books, records, journals, orders, receipts and any correspondence and other data relating to each Borrower’s business, the Collateral or any transactions between the parties hereto, and shall have the right to make such verification concerning each Borrower’s business as Lender may consider reasonable under the circumstances. Lender, at its discretion, will perform field audits twice per calendar year, or more frequently as determined by Lender. Borrowers shall furnish to Lender such information relevant to Lender’s rights under this Loan Agreement as Lender shall at any time and from time to time request. Lender, through its officers, employees or agents shall have the right, at any time and from time to time, in Lender’s name, to verify the validity, amount or any other matter relating to any of each Borrower’s Accounts, by mail, telephone, telegraph or otherwise. Each Borrower authorizes Lender to discuss the affairs, finances and business of Borrowers with any officers, employees or directors of any Borrower or with its Parent or any Affiliate or the officers, employees or directors of its Parent or any Affiliate, and to discuss the financial condition of Borrowers with Borrowers’ independent public accountants. Any such discussions shall be without liability to Lender or to Borrowers’ independent public accountants. Borrowers shall pay to Lender all fees and all costs and out-of-pocket expenses incurred by Lender in the exercise of its rights hereunder, and all of such fees, costs and expenses shall constitute Liabilities hereunder, shall be payable on demand and, until paid, shall bear interest at the Default Rate.”

B.Lockbox.  Section 4.5 of the Loan Agreement is hereby amended by deleting Section 4.5 of the Loan Agreement in its entirety and substituting therefor the following:

3

“4.5Lockbox

(A)Each Borrower shall direct all Account Debtors to make payments on Accounts directly into a lockbox established by Borrowers over which Lender shall have sole control and authority pursuant to a Lockbox Agreement between Borrowers or any Borrower and Lender (the “Lockbox”). Lender, now or at any time or times hereafter, may take control of and endorse any Borrower’s name to any of the items of payment or proceeds described in this Section 4.5. For the purposes of this Section, each Borrower irrevocably, hereby makes, constitutes and appoints Lender, and all persons designated by Lender for that purpose, as such Borrower’s true and lawful attorney and agent-in-fact to take any such actions. All such items of payment or proceeds received through the Lockbox or directly from Borrowers or otherwise received by Lender, shall, unless Lender shall otherwise elect, be deposited into a cash collateral account maintained with Lender (the “Cash Collateral Account”) over which Lender has sole authority and shall be applied by Lender to the Liabilities in accordance with the terms of this Agreement.

(B)Borrowers shall execute all documents requested by Lender with respect to the Cash Collateral Account and the Lockbox and agree to pay to Lender promptly upon demand for any and all fees, costs and expenses which Lender incurs or customarily charges in connection with the opening and maintaining of the Cash Collateral Account and the Lockbox and depositing for collection by the Bank any monies, checks, notes, drafts or other items of payment received and/or delivered on account of the Liabilities.

(C)In the event that a Borrower maintains a controlled disbursement account at Lender, each check presented for payment against such controlled disbursement account and any other charge or request for payment against such controlled disbursement account shall constitute a request for a Revolving Loan. As an accommodation to Borrowers, Lender may permit telephone requests for Revolving Loans and electronic transmittal of instructions, authorizations, agreements or reports to Lender by Borrowers. Unless a Borrower specifically directs Lender in writing not to accept or act upon telephonic or electronic communications from such Borrower, Lender shall have no liability to Borrowers for any loss or damage suffered by a Borrower as a result of Lender’s honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically and purporting to have been sent to Lender by a Borrower and Lender shall have no duty to verify the origin of any such communication or the authority of the Person sending it.”

C.Eligible Accounts.  Section 5.1 of the Loan Agreement is hereby amended by deleting the initial sentence of Section 5.1 and substituting therefor the following:

“5.1Eligible Accounts.  An “Eligible Account” is an Account owing to a Borrower which is acceptable to Lender in its sole discretion for lending purposes, and that, when scheduled to Lender and at all times thereafter, does not violate the negative covenants and other provisions of this Section 5 and does satisfy the positive covenants and other provisions of this Section 5.”

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D.Eligible Inventory.  Sections 6.1 and 6.2 of the Loan Agreement are hereby amended by deleting Sections 6.1 and 6.2 of the Loan Agreement in their entirety and substituting therefor the following:

“6.1Eligible Inventory.  “Eligible Inventory” means the portion of a Borrower’s Inventory which is acceptable to Lender in its sole discretion for lending purposes, and that: (A) consists of (i) raw materials, (ii) work-in-process, (iii) finished goods, or (iv) packaging materials; (B) is not more than three hundred sixty-five (365) days old; (C) is not consigned to or from any Person; (D) does not violate the negative covenants and similar provisions of this Section 6 and does satisfy the positive covenants and similar provisions of this Section 6; (E) Lender has in good faith determined, in accordance with its customary business practices, is not unacceptable due to age, type, category or quantity; (F) is subject to Lender’s first position priority perfected security interest and lien; and (G) is located at one of the locations specified on Schedule 4.4 and if located at a warehouse, other storage facility or a leased facility, Lender has (i) received an original Warehouse Agreement or Landlord Agreement in form and substance acceptable to Lender, (ii) filed its Uniform Commercial Code financing statements in accordance with applicable law with regard to the respective location of each such warehouse, leased facility or other storage facility, and (iii) as evidenced by then currently dated Uniform Commercial Code judgment and lien searches satisfactory to Lender, there are no security interests or liens in and to the Collateral located at such warehouse, other storage facility or leased facility other than Lender’ s first position priority security interest and lien.

6.2Additional Representations, Warranties and Covenants.  Borrowers represent and warrant to and covenant with Lender that:  (A) the Inventory shall be kept only at the locations specified on Schedule 4.4; (B) Borrowers now keep and hereafter at all times shall keep correct and accurate records itemizing and describing the age, kind, type and quantity of Inventory and Borrowers’ stated actual cost therefor, together with withdrawals therefrom and additions thereto for each month, all of which records shall be available, upon demand, to any of Lender’ s officers, employees or agents for inspection and copying thereof; (C) all Inventory is now and hereafter at all times shall be of good and merchantable quality, free from defects; (D) any of Lender’s officers, employees or agents shall, now and at any time or times hereafter, have the right, upon demand, to inspect and examine the Inventory and to check and test the same as to quality, quantity, value and condition; and (E) all Eligible Inventory set forth on the Borrowing Base Certificate (1) consists of (i) raw materials, (ii) work-in-process, (iii) finished goods, or (iv) packaging materials; (2) is not more than three hundred sixty-five (365) days old; (3) is not consigned to any Person; (4) does not violate the negative covenants and similar provisions of this Section 6 and does satisfy the positive covenants, and similar provisions of this Section 6; (5) is subject to Lender’s first position priority preferred security interest and lien; and (7) is located at one of the locations specified on Schedule 4.4, and, if located at a warehouse, other storage facility or leased facility, Lender has (i) received an original executed Warehouse Agreement or Landlord Agreement in form and substance acceptable to Lender, (ii) filed its Uniform Commercial Code financing statements in accordance with applicable law with regard to the respective location of each such warehouse, other storage facility or leased facility, and (iii) as evidenced by then currently dated Uniform Commercial Code judgment and lien searches satisfactory to Lender, there are no security interests or liens in

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and to the Collateral located at such warehouse, other storage facility or leased facility, other than Lender’s first position priority security interest and lien. All costs, fees and expenses incurred by Lender in connection with this Section 6, or which Lender becomes obligated to pay, shall be part of the Liabilities, secured by the Collateral and payable by Borrowers to Lender on demand.”

E.Financial Covenants.  Section 9.4 of the Loan Agreement is hereby amended by deleting Section 9.4 of the Loan Agreement in its entirety and substituting therefor the following:

“9.4Financial Covenants.  During the term of this Loan Agreement, and thereafter for so long as there are any outstanding Liabilities owed to Lender, Borrowers covenant that they shall:

(A)Tangible Net Worth.  Maintain a minimum Tangible Net Worth of not less than the Tangible Net Worth Benchmark tested as of the last day of each calendar quarter.

(B)Cash Flow Coverage Ratio.  Not permit Borrowers’ Cash Flow Coverage Ratio, calculated on a trailing twelve (12) month basis, to be less than: (i) .35 to 1.00 as of March 31, 2006, (ii) ..35 to 1.00 as of June 30, 2006, (iii) .80 to 1.00 as of September 30, 2006, and (iv) 1.00 to 1.00 as of December 31, 2006, or as of the last day of any calendar quarter thereafter. The Cash Flow Coverage Ratio will not be tested as of December 31, 2005. Thereafter, commencing March 31, 2006, the 2005 Severance Expense shall be added back to EBITDA for all calculations of the Cash Flow Coverage Ratio through and including December 31, 2006.

(C)Minimum EBITDA.  Borrowers shall maintain EBITDA, calculated on a trailing twelve (12) month basis, of not less than (i) One Million One Hundred Thousand and no/100 Dollars ($1,100,000.00) as of December 31, 2005, (ii) One Million Three Hundred Thousand and no/100 Dollars ($1,300,000.00) as of March 31, 2006, (iii) One Million Four Hundred Thousand and no/100 Dollars ($1,400,000.00) as of June 30, 2006, (iv) Two Million Four Hundred Thousand and no/100 Dollars ($2,400,000.00) as of September 30, 2006, and (v) Three Million Six Hundred Thousand and no/100 Dollars ($3,600,000.00) as of December 31, 2006, and as of the last day of each calendar quarter thereafter; provided, however, the 2005 Severance Expense shall be added back to EBITDA for all calculations of EBITDA from December 31, 2005, through and including December 31, 2006.”

F.Financial Reporting.  Section 9.5(F) of the Loan Agreement is hereby amended by deleting Section 9.5(F) of the Loan Agreement in its entirety and substituting therefor the following:

“(F)(1) an executed daily loan report and certificate in Lender’s then current form on each day on which Borrower requests a Revolving Loan, and in any event at least once each week, which shall be accompanied by copies of Borrower’s sales journal, cash receipts journal and credit memo journal for the relevant period, and (2) on the first Business Day of each week, a cash flow forecast for such week. The report specified in subparagraph (1) of this paragraph (F) shall reflect the activity of Borrowers with respect to Accounts for the immediately preceding week, and shall be in a form and with such specificity as is

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satisfactory to Lender and shall contain such additional information concerning Accounts and Inventory as may be requested by Lender including, without limitation, but only if specifically requested by Lender, copies of all invoices prepared in connection with such Accounts.”

G.Events of Default.  Section 11.1(A) of the Loan Agreement is hereby amended by deleting Section 11.1(A) of the Loan Agreement in its entirety and substituting therefor the following:

“(A)Borrowers fail to fully and timely pay the Liabilities, when due and payable or declared due and payable;”

H.Notice.  The Lender’s address set forth in Section 12.14 of the Loan Agreement is hereby amended by deleting said address in its entirety and substituting therefor the following:

“If to Lender, then to:

LaSalle Bank National Association

135 South LaSalle Street

Suite 425

Chicago, Illinois 60603

Attention: Mr. Steven Buford

Facsimile No.:  (312) 904-6450”

I.Consignor Letter.  On or before March 31, 2006, or such later date as Lender may determine in its sole discretion, Borrowers shall deliver to Lender a consignor letter in the form of Exhibit “A” attached to this Eighth Amendment (the “Consignor Letter”) executed by any party that currently consigns Inventory to any Borrower. From time to time hereafter, prior to accepting any Inventory on consignment, Borrowers shall obtain an executed Consignor Letter from the applicable consignor in the form of Exhibit “A” attached hereto.

III.Conditions Precedent.  Lender’s obligation to provide the Additional Financial Accommodations to Borrowers is subject to the full and timely performance of the following covenants prior to or contemporaneously with the execution of this Eighth Amendment:

A.Borrowers executing and delivering, or causing to be executed and delivered to Lender, the following documents, each of which shall be in form and substance acceptable to Lender:

(i)An original Revolving Note of even date herewith executed by the Borrowers to Lender;

(ii)An original Company General Certificate of even date herewith executed by the Secretary of each Borrower to Lender; and

(iii)such other agreements, documents and instruments as Lender may reasonably request;

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B.No Unmatured Event of Default or Event of Default exists under the Loan Agreement, as amended by this Eighth Amendment, or the Other Agreements;

C.No claims, litigation, arbitration proceedings or governmental proceedings not disclosed in writing to Lender prior to the date of hereof shall be pending or known to be threatened against Borrowers and no known material development not so disclosed shall have occurred in any claims, litigation, arbitration proceedings or governmental proceedings so disclosed which in the opinion of Lender is likely to materially or adversely affect the financial position or business of any Borrower or the capability of any Borrower to pay its obligations and liabilities to Lender; and

D.There shall have been no material or adverse change in the business, financial condition or results of operations since the date of each Borrower’s most recently delivered financial statements to Lender.

IV.Conflict. If, and to the extent, the terms and provisions of this Eighth Amendment contradict or conflict with the terms and provisions of the Loan Agreement, the terms and provisions of this Eighth Amendment shall govern and control; provided, however, to the extent the terms and provisions of this Eighth Amendment do not contradict or conflict with the terms and provisions of the Loan Agreement, the Loan Agreement, as amended by this Eighth Amendment, shall remain in and have its intended full force and effect, and Lender and Borrowers hereby affirm, confirm and ratify the same.

V.Severability.  Wherever possible, each provision of this Eighth Amendment shall be interpreted in such manner as to be valid and enforceable under applicable law, but if any provision of this Eighth Amendment is held to be invalid or unenforceable by a court of competent jurisdiction, such provision shall be severed herefrom and such invalidity or unenforceability shall not affect any other provision of this Eighth Amendment, the balance of which shall remain in and have its intended full force and effect. Provided, however, if such provision may be modified so as to be valid and enforceable as a matter of law, such provision shall be deemed to be modified so as to be valid and enforceable to the maximum extent permitted by law.

VI.Reaffirmation.  Borrowers hereby reaffirm and remake all of the representations, warranties, covenants, duties, obligations and liabilities contained in the Loan Agreement, as amended hereby.

VII.Fees, Costs and Expenses.

(A)Contemporaneously herewith, Borrowers shall pay to Lender a fully-earned, non-refundable amendment fee in the amount of $10,000.00.

(B)Borrowers agree to pay, upon demand, all fees, costs and expenses of Lender, including, but not limited to, reasonable attorneys’ fees, in connection with the preparation, execution, delivery and administration of this Eighth Amendment and the other agreements, documents and instruments executed and delivered in connection herewith or pursuant hereto.

VIII.Choice of Law.  This Eighth Amendment has been delivered and accepted in Chicago, Illinois, and shall be governed by and construed in accordance with the laws of the State of Illinois,

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regardless of the laws that might otherwise govern under applicable principles of conflicts of law as to all matters, including matters of validity, construction, effect, performance and remedies.

IX.Counterpart.  This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

X.Waiver of Jury Trial.  BORROWERS AND LENDER EACH HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRIAL BY JURY.

[signature page follows]

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IN WITNESS WHEREOF, Lender and Borrowers have caused this Eighth Amendment to be executed and delivered by their duly authorized officers as of the date first set forth above.

LASALLE BANK NATIONAL ASSOCIATION,		VITA FOOD PRODUCTS, INC.,
a national banking association		a Nevada corporation
By:	/s/ Sara H. DeKuiper	By:	/s/ Stephen D. Rubin
Name:	Sara H. DeKuiper	Name:	Stephen D. Rubin
Title:	Vice President	Title:	President
		VIRGINIA HONEY COMPANY, INC.,
		a Virginia corporation
		By:	/s/ Clifford Bolen
		Name:	Clifford Bolen
		Title:	Assistant Secretary
		THE HALIFAX GROUP, INC.,
		a Georgia corporation
		By:	/s/ Clifford Bolen
		Name:	Clifford Bolen
		Title:	Treasurer & Secretary
		VITA SPECIALTY FOODS, INC.,
		a Delaware corporation
		By:	/s/ Clifford Bolen
		Name:	Clifford Bolen
		Title:	Assistant Secretary

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EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

Vita Food Products, Inc.

Chicago, Illinois

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-52261 and 333-116465) of Vita Food Products, Inc. and Subsidiary of our report dated February 15, 2006, except for certain matters described in Note 4, as to which the date is March 24, 2006, relating to the consolidated financial statements which appear in this Form 10-K.

Chicago, Illinois	/s/ BDO Seidman, LLP
March 29, 2006

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Stephen D. Rubin, the President of Vita Food Products, Inc., certify that:

1.I have reviewed this annual report on Form 10-K of Vita Food Products, Inc.;

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a)Designed such disclosure controls and procedures, or caused such controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

c)Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:March 30, 2006

By:	/s/ Stephen D. Rubin
	Stephen D. Rubin
	President
	(Principal Executive Officer)

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EX-31.2

Exhibit 31.2

CERTIFICATION

I, Clifford K. Bolen, the Senior Vice President and Chief Financial Officer of Vita Food Products, Inc., certify that:

1.I have reviewed this annual report on Form 10-K of Vita Food Products, Inc.;

2.Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have:

a)Designed such disclosure controls and procedures, or caused such controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

b)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

c)Disclosed in this annual report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:March 30, 2006

By:	/s/  Clifford K. Bolen
	Clifford K. Bolen
Senior Vice President, Chief Operating Officer,
Chief Financial Officer
(Principal Financial and Accounting Officer)

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EX-32.1

Exhibit 32.1

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Vita Food Products, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 30, 2006	By:	/s/   Stephen D. Rubin
		Stephen D. Rubin,
		President
		(Principal Executive Officer)

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EX-32.2

Exhibit 32.2

PRINCIPAL EXECUTIVE OFFICER CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Vita Food Products, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacity and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 30, 2006			By:		/s/  Clifford K. Bolen
					Clifford K. Bolen,
	Senior Vice President, Chief Operating Officer,
				Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-99.1

Exhibit 99.1

AT THE COMPANY

Clifford Bolen

Senior Vice President, COO, CFO

(312) 738-4500, cbolen@vitafoodproducts.com

FOR IMMEDIATE RELEASE

MONDAY, MARCH 27, 2006

Vita Foods Reports Fourth-Quarter 2005 Results

Chicago, IL, MARCH 27, 2006 – For the fourth quarter ended December 31, 2005, Vita Food Products, Inc. (AMEX: VSF) today announced a consolidated net loss of $426,000, or $0.11 per share, compared to a net loss of $2,062,000 or $0.54 per share in the fourth quarter of 2004. The net losses for the fourth quarters of both years include certain unusual corporate level transactions. For the 2005 quarter a $502,000 pre-tax charge was recognized to account for the future costs associated with the material reduction in the duties of a senior executive officer and the December 31, 2006 termination of his employment agreement. In addition, pre-tax costs associated with the implementation of a Shareholders Rights Plan and abandoned acquisition efforts totaling $197,000 were also recognized in the fourth quarter of 2005. For the 2004 quarter, a non cash goodwill impairment charge of $2,314,000 was recognized. The impairment charge was the result of a decline in the value of the Company’s wholly owned subsidiary, Vita Specialty Foods (“VSF”).

Absent the unusual corporate level transactions described above, the Vita Seafood segment, which is engaged in the processing and sale of herring, salmon and complementary products had net income of $137,000 for the fourth quarter of 2005 compared to net income of $396,000 in the fourth quarter of 2004. This reduction is primarily the result of higher selling and administrative expenses. The Company’s other business segment, VSF, which is engaged in the processing and sale of salad dressings, marinara sauces, cooking sauces, honey and other specialty food products, experienced a net loss of $143,000 in the fourth quarter of 2005 compared to a net loss of $145,000 in the fourth quarter of 2004.

Consolidated net sales for the fourth quarter of 2005 were $14.2 million, compared with $13.9 million in the fourth quarter of 2004. Vita Seafood’s net sales for the fourth quarter of 2005 were $9.8 million compared to $9.6 million from the prior year quarter, representing a 2% increase. VSF net sales for the fourth quarter were $4.4 million compared to $4.3 million from the prior year quarter, also representing a 2% increase.

Gross margin for the fourth quarter decreased to 29.0% from 31.2% in the prior year fourth quarter as margins for both business segments contracted as a result of higher conversion costs for both segments and higher raw material costs for the VSF segment.

“2005 was a year full of changes for Vita,” said Steve Rubin, the Company’s chairman and chief executive officer. “We built up our future management team, overhauled many production processes, laid out a plan to compete more effectively and set the stage for a return to profitability in 2006. In addition, the equity investment of $2.5 million that we recently announced should provide the Company with the capital resources necessary to take advantage of the opportunities we have identified. We remain comfortable with our earlier guidance of between $0.20 and $0.24 per share for 2006.”

Full-Year Results

For the twelve months ended December 31, 2005, the Company had a consolidated net loss of $889,000 or $0.23 per share, compared to a net loss of $2,717,000, or $0.71 per share for 2004. Both losses include the unusual corporate level transactions described above. Absent those unusual corporate level transactions, the Vita Seafood segment had a net loss of $755,000 in 2005 compared to a net loss of $521,000 in 2004. VSF net income was $285,000 in 2005 compared to net income of $118,000 in 2004. The Company was in compliance with its amended debt covenants at December 31, 2005.

Consolidated net sales for the year 2005 decreased 4% to $46.9 million from $48.8 million in 2004. Vita Seafood’s net sales declined 2% to $26.4 million in 2005 from $27.0 million in 2004. VSF’s net sales for the year 2005 declined 6% to $20.5 million from $21.8 million in 2004.

Gross margin for the year improved to 30.4% from 29.4% in the prior year as both business segments contributed to improved margins.

The Vita Seafood division is a U.S. leader in the herring and retail packaged salmon markets, and is engaged in several other food segments, including cream cheese, cocktail sauce, tartar sauce and horseradish. The Company markets and sells these items under the Vita®, Elf® and Grand Isle® brands. More than 95% of Vita Seafood’s sales are in kosher foods.

Vita Specialty Foods, Inc., the Company’s wholly owned subsidiary, combines the products of former entities The Virginia Honey Company and The Halifax Group, Inc. Virginia Honey was a manufacturer and distributor of honey, salad dressings, including its’ award-winning Virginia Brand Vidalia® Onion Vinegarette salad dressing, cooking sauces, jams & jellies, and gift baskets. Halifax was a manufacturer and distributor of licensed brand-named products including the world-renowned Jim Beam® brand of steak sauce, barbeque sauce, marinades, salsas and Kahlua®, and Courvoisier® Gourmet Collections. Halifax also marketed, manufactured and distributed the award-winning Scorned Woman® gourmet food line, the Oak Hill Farms® line of salad dressings and various gourmet products and branded gift items.

The common stock of Vita Food Products, Inc. is currently traded on the American Stock Exchange and Chicago Stock Exchange under the ticker symbol VSF.

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This release contains forward-looking statements about the Company’s future growth, profitability, customers and competitive position. Any such statements are subject to risks and uncertainties, including but not limited to:

•changes in economic and market conditions;

•industry competition;

•raw material availability and prices;

•the success of new product introductions;

•the potential loss of large customers or accounts;

•downward product price movements;

•changes in energy costs;

•integration and management of acquired businesses;

•the seasonality of Vita’s business;

•the Company’s ability to attract and retain key personnel;

•the potential impact of claims and litigation; and

•the dietary habits and trends of the general public.

In light of these and other risks and uncertainties, the Company makes no representation that any future results, performance or achievements expressed or implied in this release will be attained. The Company’s actual results may differ materially from any results expressed or implied by the forward-looking statements.

— TABLES FOLLOW —

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VITA FOOD PRODUCTS, INC.

Condensed Consolidated Statement of Operations

(in thousands, except per share data)

(unaudited)

	Three Months								Twelve Months
	Ended								Ended
	Dec 31,			Dec 31,					Dec 31,			Dec 31,
	2005			2004			Change		2005			2004			Change
Net sales	$	14,186		$	13,911		2	%	$	46,856		$	48,756		(4	)%
Cost of goods sold	10,067			9,568			5	%	32,633			34,408			(5	)%
Gross margin	4,119			4,343			(5	)%	14,223			14,348			(1	)%
Selling and administrative expenses
Selling, marketing & distribution	2,680			2,672			0	%	9,493			9,972			(5	)%
Administrative	1,265			1,034			22	%	4,586			4,281			7	%
Employment contract	502						N/A		502						N/A
Goodwill impairment				2,314			N/A					2,314			N/A
Total	4,447			6,020			(26	)%	14,581			16,567			(12	)%
Operating loss	(328		)	(1,677		)	80	%	(358		)	(2,219		)	84	%
Interest expense	341			218			56	%	1,083			767			41	%
Loss before income taxes	(669		)	(1,895		)	65	%	(1,441		)	(2,986		)	52	%
Income tax expense (benefit)	(243		)	167			(246	)%	(552		)	(269		)	(105	)%
Net loss	$	(426	)	$	(2,062	)	79	%	$	(889	)	$	(2,717	)	67	%
Loss per common share:
Basic	$	(0.11	)	$	(0.54	)	80	%	$	(0.23	)	$	(0.71	)	68	%
Diluted	$	(0.11	)	$	(0.54	)	80	%	$	(0.23	)	$	(0.71	)	68	%
Weighted average shares outstanding:
Basic	3,866			3,847					3,862			3,840
Diluted	3,866			3,847					3,862			3,840

##

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