On November 4, 2010, the Company entered into an exclusive license agreement with Boston Market Corporation (“Boston Market”), whereby the Company has the right to manufacture, sell and distribute Boston Market frozen food products. The license agreement was effective July 1, 2011. The then existing Boston Market business was predominately located in the Eastern half of the United States. The Company's initial plan was to develop an internal sales and administrative staff to handle the Boston Market business. Based on a previous relationship with Bellisio Foods, Inc. (“Bellisio”), the Company held discussions and determined that initially the most cost-effective way to maintain distributions to existing Boston Market accounts was to enter into a Co-Manufacturing, Sales, and Distribution Agreement with Bellisio. Bellisio operates a manufacturing and storage facility in Ohio, and has an existing sales force in place to manage consumer brands, and currently sells into approximately 25,000 retail locations.

The initial term of the agreement was two years, commencing on July 1, 2011, and was subsequently extended through November 30, 2013. The agreement automatically renews for one year periods, unless either party provides a six month notice of termination date prior to the renewal period. The Company continues to evaluate the overall cost-effectiveness of its agreement with Bellisio and to consider other viable alternatives for the future.

The agreement is considered a collaborative arrangement between the Company and Bellisio regarding the co-manufacture, sale and distribution of Boston Market products. The agreement provides that the Company and Bellisio will each manufacture approximately 50% of the total production volume of current and future Boston Market products during the term of the agreement. The Company began its manufacturing in June 2011, and Bellisio began its manufacturing in August 2011 at its Jackson, Ohio facility.

In addition to its co-manufacturing responsibilities during the term of the agreement, Bellisio will be responsible for all sales and distribution responsibilities for all Boston Market products produced by both the Company and Bellisio. These responsibilities include marketing, sales, warehousing and handling, product distribution and all billing and collection activities. The Company has final approval rights for all sales and marketing promotion plans and expenses. Pursuant to the agreement, the Company will be responsible for development of all new items for the Boston Market line as well as maintaining the quality and consistency of all products produced. In addition, the Company maintains exclusive control and rights of the license.

The Company and Bellisio shared equally in the first $2 million of aggregate profits from the co-manufactured products, with the percentage shifting to 60% to the Company and 40% to Bellisio for profits in excess of $2 million. Profits are calculated after deducting from gross revenues: pre-established labor, material and overhead costs relating to manufacturing of the products, all pre-approved sales and promotion expenses including a fixed sales and administrative fee charged by Bellisio as a percentage of sales; pre-negotiated warehouse charges; actual freight costs; interest expense on working capital; and any legitimate invoice deduction from retailers for spoilage, cash discounts, if any, or defective products. The Company has elected to recognize any settlements of profit or loss from this arrangement as net revenue in the statement of comprehensive income.

The Company recognizes revenue and expenses related to the collaborative arrangement in accordance with authoritative guidance, which directs participants in collaborative arrangements to report costs incurred and revenue generated from transactions with third parties (that is, parties that do not participate in the arrangement) in each entity's respective income statement line items for revenues and expenses. Revenues from the collaborative arrangement consist of sales to third party supermarkets.

The following tables illustrate the Company's portion of the statement of comprehensive income, classification and activities attributable to transactions arising from the agreement for each period presented:


		For the Quarter Ended
		(unaudited)
		March 31, 2013		April 1, 2012

Net Revenues	$	11,713,867	$	8,745,332

Cost of Sales		9,907,749		7,758,297

Gross Profit		1,806,118		987,035

Selling, general and administrative expenses		1,396,928		856,572

Net income	$	409,190	$	130,463

In addition to the expenses noted above, during the second quarter of fiscal years 2013 and 2012, the Company incurred costs related to managing the Boston Market brand of $54,000 and $43,000, respectively.

		For the Six Months Ended
		(unaudited)
		March 31, 2013		April 1, 2012

Net Revenues	$	20,520,522	$	15,166,491

Cost of Sales		17,347,151		13,701,389

Gross Profit		3,173,371		1,465,102

Selling, general and administrative expenses		2,416,501		1,495,127

Net income (loss)	$	756,870	$	(30,025)

In addition to the expenses noted above, during the first six months of fiscal years 2013 and 2012, the Company incurred costs related to managing the Boston Market brand of $80,000 and $122,000, respectively.