The following is management's discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the accompanying financial statements.

The discussion and analysis which follows in this Quarterly Report and in other reports and documents and in oral statements made on our behalf by our management and others may contain trend analysis and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to future events and financial results. These include statements regarding our earnings, projected growth and forecasts, and similar matters which are not historical facts. We remind stockholders that forward-looking statements are merely predictions and therefore are inherently subject to uncertainties and other factors which could cause the actual future events or results to differ materially from those described in the forward-looking statements. These uncertainties and other factors include, among other things, business conditions in the food industry and general economic conditions, both domestic and international; lower than expected customer orders; competitive factors; changes in product mix or distribution channels; and resource constraints encountered in developing new products. The forward-looking statements contained in this Quarterly Report and made elsewhere by or on our behalf should be considered in light of these factors.

Critical Accounting Policies

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The policies discussed below are considered by management to be critical to an understanding of our financial statements because their application places the most significant demands on management's judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Revenue Recognition. We recognize revenue when goods are shipped from our production facilities or outside warehouses and the following four criteria have been met: (i) the product has been shipped and we have no significant remaining obligations; (ii) persuasive evidence of an arrangement exists; (iii) the price to the buyer is fixed or determinable; and (iv) collection is probable.
We record as deductions against sales all trade discounts, returns and allowances that occur in the ordinary course of business, when the sale occurs. To the extent we charge our customers for freight expense, it is included in revenues. The amount of freight costs charged to customers has not been material to date.

Accounts Receivable. The majority of our accounts receivables are due from distributors (domestic and international) and retailers. Credit is extended based on evaluation of a customer's financial condition and, generally, collateral is not required. Accounts receivable are most often due within 30 to 90 days and are stated at amounts due from customers net of an allowance for doubtful accounts. Accounts outstanding longer than the contractual payment terms are considered past due. We determine whether an allowance is necessary by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, the customer's current ability to pay its obligation, and the condition of the general economy and the industry as a whole. We write-off accounts receivable when they become

uncollectible, and payments subsequently received on such receivables are credited to the allowance for doubtful accounts. We do not accrue interest on accounts receivable past due. We provide various promotional allowances to our customers which are included in our reserves based on our estimated expense for the period.

Allowance for Inventory Obsolescence. We are required to state our inventories at the lower of cost or market price. We maintain an allowance for inventory obsolescence for losses resulting from inventory items becoming unsaleable due to expiration of product shelf life, loss of specific customers or changes in customers' requirements. Based on historical and projected sales information, we believe our allowance is adequate. However, changes in general economic, business and market conditions could cause our customers' purchasing requirements to change. These changes could affect our ability to sell our inventory; therefore, the allowance for inventory obsolescence is reviewed regularly and changes to the allowance are updated as new information is received.

Income Taxes. The carrying value of deferred tax assets assumes that we will be able to generate sufficient future taxable income to realize the deferred tax assets based on estimates and assumptions. If these estimates and assumptions change in the future, we may be required to record a valuation allowance against deferred tax assets which could result in additional income tax expense. Our federal and state tax returns are open to examination for the years 2006, 2007 and 2008.

Product Recall

At the beginning of the second quarter of 2009, we were notified by the FDA that several consumers filed complaints claiming that they had experienced skin rash symptoms after eating vanilla Cuties that were produced at an ancillary production facility during July 2008. The suspect product was identified as having been produced by our smaller ice cream novelty facility that only produced vanilla Cuties. No illness or serious injury was reported and no further reports have been received since early April 2009. While we were investigating the complaints, 12 pallets shipped from the suspect lots were recalled. The bulk of these 12 pallets were recalled from the New York City metro area as well as from the Midwest, New England, the Mid Atlantic region and California. No complaints from consumers were received from the Midwest or New England regions. Investigation and reports from distributors and store visits indicate that none of the suspect product remains in distribution, and it is not currently being offered for sale. However, to make certain that there would be no further issues with product made at this facility, we put on hold any vanilla Cuties that were produced by them. Due to the decrease in sales, we stopped making product at this facility in January 2009. We have reviewed our quality control procedures at our remaining co-packing facilities to ensure compliance with all food-processing safety rules and regulations.

On May 12, 2009, at the request of the FDA, we issued a recall notice for the suspected lots. During the last week of June, we disposed of all remaining product manufactured by this facility. The total cost of this recall was approximately $350,000 broken down as follows:

         Actual product destroyed           $291,000 (cost of sales)
         Cost of disposal                     10,000  (sales)
         Product returned                     26,000  (sales)
         Product testing                      20,000  (research & development)
         Freight                               1,000  (cost of sales)
         Legal                                 2,000  (general & administrative)

We have no insurance coverage for the actual product destroyed. However, there is coverage for all costs related to the analysis, collection and physical disposal of such product. We submitted a claim to our insurance carrier for $59,000, and our insurance carrier has as of this date indicated that we will receive

approximately $40,000 on our claim. However, we are holding the claim open until the end of November because we are continuing to receive additional final bills in from certain retail accounts, which may increase the amount to be reimbursed by our insurance carrier. We are also in discussions with our former co-packer regarding their repayment for the cost of the product that was destroyed. There is no guarantee that we will be successful in our discussions. All costs relating to this recall were expensed in the second quarter and we do not anticipate any further charges. Any subsequent reimbursements will be credited to the appropriate revenue and expense accounts referenced above if and when they are received.

Results of Operations

Thirteen Weeks Ended September 26, 2009
Compared with Thirteen Weeks Ended September 27, 2008

Net sales for the thirteen weeks ended September 26, 2009 were $4,730,000, a slight decrease of $71,000, or 1%, from the sales level realized for the thirteen weeks ended September 27, 2008. We do not believe that our sales were negatively impacted by the product recall in the 2009 period.

Our gross profit in the current period increased by $145,000 to $1,519,000. Our gross profit percentage for the period ending September 26, 2009 was 32%, compared to 29% for the period ending September 27, 2008. Freight out expense, a significant part of our cost of sales, decreased by $75,000, or 24%, to $242,000 for the thirteen weeks ended September 26, 2009 compared with $317,000 for the thirteen weeks ended September 27, 2008. The decrease in freight out expense was a result of the decrease in sales for the thirteen weeks ended September 26, 2009 compared to the 2008 period, lower fuel costs compared to the 2008 period and our arranging shipments in a more cost-effective manner by shipping our frozen dessert novelties from our plant in Indiana to the West Coast rather than shipping them from our third-party Pennsylvania warehouse.

Selling and warehouse expenses decreased to $369,000 for the current fiscal quarter compared with $497,000 for the comparable period in 2008. This decrease is due primarily to decreases in commission expense of $6,000, bad debt expense of $45,000, payroll expense of $38,000 and outside warehouse rental expense of $39,000.

Marketing expenses were $136,000 in the fiscal 2009 period compared to $137,000 in the fiscal 2008 period. An increase in newspaper advertising expense of $30,000 was offset by reductions in artwork and plate expense of $8,000 and promotion expense of $30,000. The reduction in promotion expense reflects the lower level of sales in the 2009 period.

Research and development costs, which consist principally of salary expenses and laboratory costs, increased slightly to $152,000 for the thirteen weeks ended September 26, 2009 compared to $145,000 for the comparable period in 2008. This increase was primarily due to an increase professional fees and outside services of $5,000.

General and administrative expenses increased to $546,000 for the current quarter compared with $498,000 for the comparable period in 2008, due primarily to an increase in travel and entertainment expense of $16,000, public relations expense of $16,000 and professional fees and outside services expense of $15,000. We anticipate that the current period's general and administrative expenses will continue on the same level, or increase slightly, for the balance of 2009.

Income tax expense was $116,000 in the third quarter of 2009 compared to income tax expense of $75,000 in the third quarter of 2008, reflecting the higher level of operating income in the 2009 period. The effective tax rate was 42% for the current period as compared to 77% for the 2008 period. The effective tax rate in the 2008 period was affected by GAAP to tax differences present in 2008.

Thirty-Nine Weeks Ended September 26, 2009 Compared with Thirty-Nine Weeks Ended September 27, 2008

Net sales for the thirty-nine weeks ended September 26, 2009 were $14,137,000, a decrease of $952,000 or 6%, from the sales level realized for the thirty-nine weeks ended September 27, 2008. Sales were negatively impacted due to the elimination of certain products that were sold in the 2008 period and the negative effects of the deteriorating economic climate. We do not believe that our sales were negatively impacted by the product recall in the 2009 period.
(See Product Recall above.)

Our gross profit in the current period decreased by $49,000, or 1%, to $4,325,000. Our gross profit percentage increased to 30% for the period ending September 26, 2009 compared to 29% for the period ending September 27, 2008. Our gross profit for the period ended September 26, 2009 was negatively impacted as a result of costs we incurred as the result of the product recall that occurred in the thirty-nine week period ended September 26, 2009. (See Product Recall above.) Freight out expense, part of our cost of sales, decreased by $298,000, or 28%, to $754,000 for the thirty-nine weeks ended September 26, 2009 compared with $1,052,000 for the thirty-nine weeks ended September 27, 2008. The decrease in freight out expense was a result of the decrease in sales for the thirty-nine weeks ended September 26, 2009 compared to the 2008 period, lower fuel costs compared to the 2008 period and our arranging shipments in a more cost-effective manner by shipping our frozen dessert novelties from our plant in Indiana to the West Coast rather than shipping them from our third-party Pennsylvania warehouse. The negative impact of the product recall on our cost of sales was mitigated by significant savings in freight out expense.

Selling and warehouse expenses decreased by 11% to $1,235,000 for the current thirty-nine week period compared with $1,391,000 for the comparable period in 2008. This decrease is due primarily to decreases in commission expense of $37,000, travel and entertainment expense of $23,000, bad debt expense of $45,000 and outside warehouse expense of $40,000.

Marketing expenses decreased by $104,000 to $328,000 in the current thirty-nine week period due principally to a decrease in expenses for television advertising of $33,000, artwork and plate expense of $10,000 and promotion expense of $99,000, which were partially offset by an increase in newspaper advertising expense of $50,000. The reduction in promotion expense reflects the lower level of sales in the 2009 period.

Research and development costs, which consist principally of salary expenses and laboratory costs, increased slightly to $444,000 for the thirty-nine weeks ended September 26, 2009 compared to $439,000 for the comparable period in 2008.

General and administrative expenses increased to $1,579,000 for the current thirty-nine week period compared with $1,462,000 for the comparable period in 2008 due primarily to an increase in payroll costs of $24,000, travel and entertainment expense of $88,000 and professional fees and outside services of $96,000.

Income tax expense in the 2009 thirty-nine week period decreased to $283,000 from $294,000 in the 2008 thirty-nine week period. The effective tax rate decreased slightly in the 2009 period to 39% from 40% in the 2008 period.

Liquidity and Capital Resources

As of September 26, 2009, we had approximately $819,000 in cash and cash equivalents and our working capital was approximately $4.0 million compared to approximately $238,000 in cash and cash equivalents

and working capital of approximately $3.6 million at December 27, 2008. We expect our cash and cash equivalents will increase during the remainder of 2009 as a result of suspending our stock repurchase program. We maintain a $1,000,000 line of credit with Wachovia Bank to support any short-term cash flow constraints. Any money borrowed under the line of credit will be at the prime rate of borrowing and any such loans will be secured by the assets of our company. This agreement was renewed for an additional one-year term with the consent of both parties on April 30, 2009. As of the date of this report, we have not used the line of credit. We believe that our cash flow from operations, working capital and borrowing capability will be sufficient to sustain our current level of operations for the next twelve months.

The following table summarizes our cash flows for the periods presented:

                                      Thirty-nine Weeks          Thirty-nine Weeks
                                   ended September 26, 2009   ended September 27, 2008
                                   ------------------------   ------------------------
Net cash provided by (used in)
operating activities...........         $595,000                  $(388,000)
Net cash (used in) financing
activities.....................          (14,000)                  (663,000)
                                         --------                  ---------
Net change in cash
  and cash equivalents.........         $581,000                $(1,051,000)
                                        ========                ============

Our net cash flows provided by operating activities of $595,000 was the result of our net income and the reduction in our inventory compared to the same period last year, which had been built up as a result a change in our production facilities. During the thirty-nine weeks ending September 26, 2009, we paid bonuses to management of $500,000.

Our net cash used in financing activities represents the funds used to repurchase shares of our common stock. During the thirty-nine weeks ending September 26, 2009, we repurchased 12,665 shares of our common stock for $14,000 as compared to the purchase of 235,600 shares for $663,000 in the thirty-nine weeks ended September 27, 2008. Our Board of Directors first instituted a share repurchase program in September 2000 which has to date authorized the repurchase of 1,850,000 shares of our common stock at prevailing market prices. We have not repurchased any additional shares since March 28, 2009 in order to conserve our cash position. From the institution of the share repurchase program through the date of this quarterly report, the total number of shares cumulatively purchased is 1,818,889 for a total cost of approximately $5,294,000, or an average price of $2.91 per share.

We believe that we will be able to fund our operations during the next twelve months with cash generated from operations and from borrowings on our line of credit, if necessary. We believe that these sources will be sufficient to meet our operating and capital requirements during the next twelve months.

Inflation and Seasonality

We do not believe that our operating results have been materially affected by inflation during the preceding two years. There can be no assurance, however, that our operating results will not be affected by inflation in the future. Our business is subject to minimal seasonal variations with slightly increased sales historically in the second and third quarters of the fiscal year. We expect to continue to experience slightly higher sales in the second and third quarters, and slightly lower sales in the fourth and first quarters, as a result of reduced sales of nondairy frozen desserts during those periods.

Off-balance Sheet Arrangements

None.

Contractual Obligations

As of September 26, 2009, we did not have any contractual obligations or commercial commitments, including obligations relating to discontinued operations.

Recent Accounting Pronouncements

In June 2009, the Financial Accounting Standards Board ("FASB") issued its final Statement of Financial Accounting Standards (SFAS) No. 168, "The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162." SFAS No. 168 made the FASB Accounting Standards Codification (the Codification) the single source of U.S. GAAP used by nongovernmental entities in the preparation of financial statements, except for rules and interpretive releases of the SEC under authority of federal securities laws, which are sources of authoritative accounting guidance for SEC registrants. The Codification is meant to simplify user access to all authoritative accounting guidance by reorganizing U.S. GAAP pronouncements into roughly 90 accounting topics within a consistent structure; its purpose is not to create new accounting and reporting guidance. The Codification supersedes all existing non-SEC accounting and reporting standards and was effective for us beginning September 26, 2009. Following SFAS No. 168, the Board will not issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead, it will issue Accounting Standards Updates. The FASB will not consider Accounting Standards Updates as authoritative in their own right; these updates will serve only to update the Codification, provide background information about the guidance, and provide the bases for conclusions on the change(s) in the Codification. In the description of Accounting Standards Updates that follows, references in "italics" relate to Codification Topics and Subtopics, and their descriptive titles, as appropriate.

In April 2009, the FASB issued "Interim Disclosures about Fair Value of Financial Instruments." This update amends "Disclosures about Fair Value of Financial Instruments," to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This update also amends Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This update became effective for the interim period ended June 27, 2009 and did not have a material impact on our consolidated financial statements.

In May 2009, the FASB issued "Subsequent Events." The objective of this update is to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this update sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures that an entity should make about the events or transactions that occurred after the balance sheet date. We adopted this update for the period ended June 27, 2009 and subsequent financial periods. We evaluated ours September 26, 2009 financial statements for subsequent events through November 10, 2009, the date the financial statements were filed. We are not aware of any subsequent events which would require recognition or disclosure in the financial statements.