VITA FOOD PRODUCTS INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

[X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From __________ to _________

Commission File Number 1-12599

VITA FOOD PRODUCTS, INC.
(Exact name of registrant as specified in its charter)

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

2222 WEST LAKE STREET, CHICAGO, ILLINOIS 60612
(Address of principal executive office) (Zip code)

Registrant's telephone number, including area code: (312) 738-4500

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 [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [ ] No [X]

The number of shares outstanding of registrant's common stock as of
April 30, 2003 was 3,777,895.

VITA FOOD PRODUCTS, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2003

INDEX

PAGE

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

a) Balance Sheets as of March 31, 2003 and December 31, 2002 3

b) Income Statements for the Three Months Ended March 31, 2003 and
2002 4

c) Shareholders' Equity Statements for the Three Months Ended
March 31, 2003 4

d) Cash Flows Statements for the Three Months Ended March 31, 2003
and 2002 5

e) Notes to Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 10

Item 3. Quantitative and Qualitative Disclosures About Market Risk 13

Item 4. Controls and Procedures 13

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K 14

SIGNATURES 15

CERTIFICATION OF PERIODIC REPORT 16 - 17

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS VITA FOOD PRODUCTS, INC.
AND SUBSIDIARY
- --------------------------------------------------------------------------------

March 31, December 31,
2003 2002
(unaudited) (audited)
- ------------------------------------------------------------------------------------------------------------------

ASSETS
Current Assets
Cash $ 335,272 $ 46,097
Accounts receivable-trade, net of allowance for discounts, returns, and
doubtful accounts of $359,000 in 2003 and $227,000 in 2002 4,493,900 5,325,254
Inventories
Raw material and supplies 4,486,124 4,570,782
Work in process 125,241 162,325
Finished goods 2,226,262 2,006,554
Prepaid expenses and other current assets 363,234 337,278
Income taxes receivable 0 174,318
------------ ------------
Total Current Assets 12,030,033 12,622,608

Property, Plant and Equipment
Land 35,000 35,000
Building and improvements 2,454,628 2,452,260
Leasehold improvements 712,688 706,181
Machinery and office equipment 8,940,644 8,674,011
------------ ------------
12,142,960 11,867,452
Less accumulated depreciation and amortization (6,244,984) (6,030,037)
------------ ------------
Net Property, Plant & Equipment 5,897,976 5,837,415

Other Assets
Goodwill 7,565,821 7,565,821
Other assets 297,541 303,648
Deferred income tax 212,648 212,696
------------ ------------
Total Other Assets 8,076,010 8,082,165
------------ ------------
Total Assets $ 26,004,018 $ 26,542,188
==================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current maturities of long-term obligations $ 1,361,473 $ 1,430,933
Accounts payable 2,763,147 3,583,391
Accrued other expenses 1,158,044 1,119,116
------------ ------------
Total Current Liabilities 5,282,665 6,133,440

Long-term Obligations, Less Current Maturities 14,407,652 14,415,776

Shareholders' Equity
Preferred stock, $.01 par value, authorized 1,000,000 shares; none issued
Common stock, $.01 par value; authorized 10,000,000 shares; issued and
outstanding 3,777,895 shares in 2003 and 3,773,895 shares in 2002 37,778 37,738
Additional paid in capital 3,510,443 3,496,483
Retained earnings 2,765,481 2,458,751
------------ ------------
Total Shareholders' Equity 6,313,702 5,992,972
------------ ------------
Total Liabilities and Shareholders' Equity $ 26,004,018 $ 26,542,188
==================================================================================================================

See accompanying notes to financial statements

3

For the three months ended
March 31,
2003 2002
(unaudited) (unaudited)
- ----------------------------------------------------------------------------------------

Net Sales $12,957,173 $10,067,489
Cost of Goods Sold 8,934,821 6,989,850
----------- -----------
Gross Margin 4,022,352 3,077,639

Selling and Administrative Expenses
Selling, Marketing & Distribution 2,039,590 1,516,247
Administrative 1,282,267 910,091
----------- -----------
Total 3,321,857 2,426,338
----------- -----------
Operating Profit 700,495 651,301

Interest Expense 186,765 144,492
----------- -----------
Income Before Income Tax Expense 513,730 506,809
Income Tax Expense 207,000 202,723
----------- -----------
Net Income $ 306,730 $ 304,086

Basic Earnings Per Share $ 0.08 $ 0.08
Weighted Average Common Shares Outstanding 3,776,562 3,729,683

Diluted Earnings Per Share $ 0.08 $ 0.08
Weighted Average Common Shares Outstanding 3,846,987 3,815,393

Common Stock Additional
------------------- Paid-in Retained
Shares Amount Capital Earnings Total
- ----------------------------------------------------------------------------------------

Balance, at January 1, 2003 3,773,895 $37,738 $3,496,483 $2,458,751 $5,992,972

Proceeds from stock purchase
and stock option plans 4,000 40 13,960 14,000

Net income 306,730 306,730
--------- ------- ---------- ---------- ----------
Balance, at March 31, 2003 3,777,895 $37,778 $3,510,443 $2,765,481 $6,313,702
- ----------------------------------------------------------------------------------------

See accompanying notes to financial statements

4

FOR THE THREE MONTHS ENDED
MARCH 31,
2003 2002
(UNAUDITED) (UNAUDITED)
- --------------------------------------------------------------------------------------------------------

Cash Flows From Operating Activities
Net income $ 306,730 $ 304,086
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 223,166 185,502
Changes in assets and liabilities:
Decrease in accounts receivable 831,354 1,506,201
(Increase) decrease in inventories (97,966) 90,526
Increase in prepaid expenses and other current assets (25,956) (160,184)
Decrease in accounts payable (820,245) (662,326)
Decrease in income tax receivable 174,318 0
Increase (decrease) in accrued expenses 38,978 (4,208)
----------- -----------
Net cash provided by operating activities 630,380 1,259,597

Cash Flows From Investing Activities
Capital expenditures (275,507) (294,206)
Payments for subsidiary net of cash acquired 0 (5,807)
Other assets 583 (2,981)
----------- -----------
Net cash used in investing activities (274,924) (302,994)

Cash Flows From Financing Activities
Proceeds from stock purchase and stock options 14,000 0
Net borrowing (payments) under revolving loan facility 307,166 (1,058,511)
Net payments on term loan facility (321,253) (288,813)
Net payments under capital lease obligations (66,195) (25,364)
----------- -----------
Net cash used in financing activities (66,281) (1,372,688)
----------- -----------
Net increase (decrease) in cash 289,175 (416,085)

Cash, at beginning of period 46,097 529,354
----------- -----------
Cash, at end of period $ 335,272 $ 113,269
=======================================================================================================

Supplemental Disclosure of Cash Flow Information
Cash paid for interest $ 184,000 $ 155,000
Income taxes paid $ 6,000 $ 105,000

See accompanying notes to financial statements

5

NOTES TO FINANCIAL STATEMENTS

(UNAUDITED)

BASIS OF PRESENTATION

In the opinion of management, the accompanying balance sheets and
related interim statements of income, cash flows, and shareholders' equity
include all adjustments, consisting only of normal recurring items necessary for
their fair presentation in conformity with U.S. generally accepted accounting
principles. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenue, and expenses. Examples include provisions for returns, deductions, bad
debts, and length of building and equipment lives. Actual results may differ
from these estimates. Interim results are not necessarily indicative of results
for a full year. The information included in this Form 10-Q should be read in
conjunction with Management's Discussion and Analysis of Financial Condition and
Results of Operations and financial statements and notes thereto included in the
2002 Form 10-K of Vita Food Products, Inc. (Vita Food Products, Inc., together
with its wholly owned subsidiary, Vita Specialty Foods, Inc., hereinafter
referred to as the "Company")

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of Vita Food
Products, Inc. and its wholly owned subsidiary, Vita Specialty Foods, Inc.
("Vita Specialty Foods"). Vita Specialty Foods includes Virginia Honey Company,
Inc. ("Virginia Honey") and The Halifax Group, Inc. ("Halifax"), commencing on
November 1, 2002, the effective date of Halifax acquisition (see "Acquisitions"
below). All significant intercompany transactions and balances have been
eliminated.

REVENUE RECOGNITION

Revenue is recognized upon shipment of product to customers in
fulfillment of customer orders.

RECENT ACCOUNTING PRONOUNCEMENTS

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 ("FIN 46"), Consolidation of Variable Interest Entities,
an interpretation of ARB 51. The primary objectives of FIN 46 are to provide
guidance on the identification of entities for which control is achieved through
means other than through voting rights ("variable interest entities" or "VIEs")
and how to determine when and which business enterprise should consolidate the
VIE (the "primary beneficiary"). This new model for consolidation applies to an
entity in which either (1) the equity investors (if any) do not have a
controlling financial interest or (2) the equity investment at risk is
insufficient to finance that entity's activities without receiving additional
subordinated financial support from other parties. In addition, FIN 46 requires
that both the primary beneficiary and all other enterprises with a significant
variable interest in a VIE make additional disclosures. The adoption of this
Interpretation did not have an effect on the Company's financial statements.

ACQUISITIONS

VIRGINIA HONEY COMPANY, INC.
Effective July 1, 2001 Vita 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. Virginia Honey is a manufacturer and distributor
of honey, salad dressings, sauces, jams and jellies and gift baskets. As a
result of the acquisition, the Company is leveraging its sales and
distribution network to provide national exposure to the products of
Virginia Honey. The Company also expects to introduce products that will be
jointly developed, thereby increasing the market presence of Vita and
Virginia Brand products.

6

The aggregate purchase price, including direct costs of the acquisition, of
$4,884,437 was paid in cash. The Stock Purchase Agreement, including its
Amendments, for Virginia Honey provides for future payments to Mr. Hess, the
former owner, based upon 20% of five times the average quarterly EBITDA less
certain debt obligations of Virginia Honey, for the period from January 2001
through December 31, 2002. The present value of this calculation resulted in
$772,823 and has been recorded as a liability at March 31, 2003 and is
payable on April 1, 2005. The remaining payments under the Stock Purchase
Agreement to the former owner of Virginia Honey and the payments per the
merger agreement to the former owner of Halifax (see below) will be based on
the earnings of Vita Specialty Foods, reflecting the combined earnings of
Halifax and Virginia Honey. There are two periods of measurement remaining,
the first covering January 1, 2003 until December 31, 2005 and the second
covering January 1, 2006 until December 31, 2007.

As a result of the Halifax merger agreement discussed below, the operations
of Virginia Honey and Halifax have been merged effective November 1, 2002.
Accordingly, EBITDA applicable to the future contingent payments due to Mr.
Hess will be determined based upon a formula included as part of that merger
agreement. Should Vita Specialty Foods maintain its current profitability
levels, the Company estimates that total remaining payments, with a net
present value of approximately $900,000, would be due and payable as
contingent consideration in accordance with the provisions of the Stock
Purchase Agreement.

THE HALIFAX GROUP, INC.
Effective November 1, 2002, the Company 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 in a new subsidiary named Vita Specialty Foods.
Halifax is a manufacturer and distributor of licensed brand-named sauces,
marinades, salad dressings, various gourmet products and branded gift items,
many of which are similar to those of Virginia Honey. The Company expects to
enjoy both market synergies and production efficiencies as a result of this
merger.

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 discounted value of
the remaining debt has been recorded by the Company as a long-term
obligation. The Company also assigned to Mr. Budd any potential rights or
exposure associated with an unresolved legal case involving Halifax, the
actual dollar amount of which is indeterminable at this time. The merger
agreement further provides for two future contingent payments to Mr. Budd.
The first will be based upon 45% of five times the Halifax portion of Vita
Specialty Food's average quarterly EBITDA. The agreement includes a formula
that allocates EBITDA between Halifax and Virginia Honey, based on the
proportion of each unit's products sold.

This EBITDA will be averaged quarterly for calendar years 2003 through 2005.
This first contingent payment will be reduced by the remaining balance of
the preexisting debt discussed above. The second contingent payment will be
determined the same way except the percent will be reduced from 45% to 30%
and will be based upon the calendar years 2006 and 2007. If payable, the
first payment will be paid on or before April 1, 2006 and the second will be
paid on or before April 1, 2008 and both will be recorded as additional
acquisition costs. Should Vita Specialty Foods maintain its current
profitability levels, the Company estimates that there would be no remaining
payments due as contingent consideration in accordance with the provisions
of the merger agreement. The following table summarizes the fair values of
the assets acquired and the liabilities assumed at the date of acquisition:

7

AT NOVEMBER 1, 2002
(in 000's)
------------------------------------------------

Current assets $ 1,815
Property, plant and equipment 982
Other assets 560
Goodwill 1,562
------------------------------------------------
Total assets acquired 4,919
Current liabilities (3,670)
Long-term debt (1,005)
------------------------------------------------
Total liabilities assumed (4,675)
------------------------------------------------

Net assets acquired $ 244
================================================

None of the amount of goodwill is expected to be deductible for tax
purposes.

The Company's unaudited consolidated results of operation on a pro forma
basis as though Halifax had been acquired as of the beginning of 2002 are as
follows ($000's except earnings per share data):

Three months ended March 31, 2002
-------------------------------------------------------

Net sales $ 11,989
Net income $ 144

Basic earnings per share $ 0.04
Diluted earnings per share $ 0.04

The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the Halifax acquisition been
consummated as of the above dates, nor are they indicative of future
operating results.

BUSINESS SEGMENTS

The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 131, "Disclosures about Segments of an Enterprise and Related
Information." Following the provisions of SFAS No. 131, the Company is
reporting two operating business segments in the same format as reviewed by
the Company's senior management. Segment one, Vita, processes and sells
various herring, and cured and smoked salmon products throughout the United
States. Segment two, Vita Specialty Foods, combines the products of Virginia
Honey and Halifax and manufactures and distributes honey, salad dressings,
sauces, marinades, jams and jellies and gift baskets. Management uses
operating profit as the measure of profit or loss by business segment.

BUSINESS SEGMENT INFORMATION IS AS FOLLOWS ($000'S):

Three months ended March 31, 2003 2002
- -------------------------------------------------------------

GOODWILL
Vita $ -- $ --
Vita Specialty Foods 7,566 5,245
- -------------------------------------------------------------

Total Goodwill $ 7,566 $ 5,245
=============================================================

8

Three months ended March 31, 2003 2002
- -------------------------------------------------------------

TOTAL ASSETS
Vita $17,508 $13,874
Vita Specialty Foods 8,496 4,459
- -------------------------------------------------------------
Total Assets $26,004 $18,333
=============================================================

NET SALES
Vita $ 7,228 $ 6,779
Vita Specialty Foods 5,729 3,288
- -------------------------------------------------------------
Total Net Sales $12,957 $10,067
=============================================================

OPERATING PROFIT
Vita $ 395 $ 257
Vita Specialty Foods 305 394
- -------------------------------------------------------------
Total Operating Profit $ 700 $ 651
=============================================================

NET INCOME
Vita $ 184 $ 98
Vita Specialty Foods 123 206
- -------------------------------------------------------------
Total Net Income $ 307 $ 304
=============================================================

DEPRECIATION AND AMORTIZATION
Vita $ 119 $ 116
Vita Specialty Foods 104 70
- -------------------------------------------------------------
Total Depreciation and Amortization $ 223 $ 186
=============================================================

CAPITAL EXPENDITURES
Vita $ 98 $ 252
Vita Specialty Foods 178 42
- -------------------------------------------------------------
Total Capital Expenditures $ 276 $ 944
=============================================================

ACCOUNTING FOR STOCK BASED CONSIDERATION

The Company applies the intrinsic value method under APB Opinion 25 and
related interpretations in accounting for its plans. Accordingly, no
compensation cost has been recognized for its 1996 Stock Option Plan, 1996 Stock
Option Plan for Non-Employee Directors and 1996 Employee Stock Purchase Plan, as
the market price of the stock did not exceed the exercise price of the options
on the measurement date.

The Company has elected to continue to utilize the accounting
provisions of APB 25 for stock options, and is required to provide pro forma
disclosures of net income and earnings per share had the Company adopted the
fair value method under SFAS 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-Sholes option pricing model, and the pro forma effect on
earnings of the fair value accounting for stock options under Statement of
Financial Accounting Standards No. 123, are as follows:

9

FOR THE THREE MONTHS ENDED MARCH 31, 2003
----------------------------------------------------------------------

Weighted average fair value per options granted $ 2.48

Significant assumptions (weighted average)
Risk-free interest rate at grant date 3.7%
Expected stock price volatility 0.73
Expected dividend payout --
Expected option life (years) 5

Net Income
As reported $ 306,730
Deduct total stock based compensation expense
determined under the fair value method (29,133)
---------
Pro forma $ 277,597
---------

Basic earnings per share
As reported $ 0.08
Pro forma $ 0.07

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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 is recognized upon shipment of product to customers 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 sold 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 expenses.

The Company recognizes deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the tax basis
and financial reporting basis of certain

10

assets and liabilities based upon currently enacted tax rates expected to be in
effect when such amounts are realized or settled.

In 2002, SFAS No. 142, "Goodwill and Other Intangible Assets" became
effective and as a result, the Company assesses the impairment of identifiable
intangibles, and related goodwill 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 intangibles,
long-lived assets and related 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 provisions of SFAS 142 also required the completion of transitional
impairment test for goodwill and indefinite lived assets within 12 months of
adoption, with any impairment treated as a cumulative effect of change in
accounting principle. During the second quarter of 2002, the Company completed
the transitional impairment test, which did not result in impairment of recorded
goodwill.

During the fourth quarter of 2002, the Company completed its annual
impairment test, which did not result in impairment of recorded goodwill.

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2003 AND MARCH 31, 2002

REVENUES. Net sales for the three months ended March 31, 2003 were $12,957,000,
compared to $10,067,000 for the same period in 2002, an increase of $2,890,000
or 28.7%. Of this increase, $2,441,000 is attributable to Vita Specialty Foods
and is largely due to the inclusion of sales for the newly acquired Halifax
business. The balance of the increase, totaling $449,000, represents a 6.6%
increase for the Vita business. This increase in Vita's net sales was the result
of an 8% increase in gross sales of herring products and a 7% increase for
salmon products, and a 2% increase for other specialty products, net of higher
sales allowances. Herring, salmon, and specialty product sales respectively,
represented 48%, 47%, and 5% of this business unit's total gross sales during
the period. Vita Specialty Food's salad dressings/sauces, honey products and
specialty items respectively, represented 60%, 35% and 5% of the Vita Specialty
Foods business unit's total gross sales.

GROSS MARGIN. Gross margin for the three months ended March 31, 2003 was
$4,022,000, compared to $3,077,000 for the same period in 2002, an increase of
$945,000 or 30.7%. The Vita Specialty Foods business accounted for $673,000 of
this increase with the remaining $272,000 attributable to Vita. As a percent of
net sales, gross margin totaled 31.0%, up from 30.6% for the same period in
2002. For the Vita business unit, gross margin was 30.7% for the current quarter
versus 28.7% for the same period in 2002. This change was primarily attributable
to a reduction of factory costs as a percentage of sales including material,
labor and overhead components. As a percentage of net sales, the gross margin of
Vita Specialty Foods fell to 31.5% versus 34.4% for the same period in 2002, due
largely to lower margins pertaining to the integration of the Halifax business.

OPERATING EXPENSES. Selling, marketing, distribution and administrative expenses
for the three months ended March 31, 2003 were $3,322,000, compared to
$2,426,000 for the same period in 2002, an increase of $896,000 or 36.9%. As a
percentage of net sales, these expenses increased to 25.6% from 24.1% in 2002.
Due largely to the inclusion of Halifax, the Vita Specialty Foods business
accounted for $762,000 of this increase. The remaining $134,000, representing a
7.9% increase versus the prior period, was attributable to Vita's operation. Of
this increase in Vita's expenses, $64,000 was attributable to higher

11

legal and professional expenses in connection with the Halifax acquisition and
$35,000 to higher administrative employment related expenses.

INTEREST EXPENSE. Interest expense for the three months ended March 31, 2003 was
$187,000, compared to $144,000 for the same period in 2002, an increase of
$43,000 or 29.9%. This increase was primarily attributable to the additional
borrowing largely related to the Halifax acquisition (the average debt)
increased to $13,759,000 from $11,183,000 or 23% compared to the first quarter
of the prior year.

INCOME TAXES. The Company provided $207,000 and $203,000 at March 31, 2003 and
2002 respectively. The income tax provided represents approximately 40% of
pretax income for both periods.

NET INCOME. As a result of the operating results discussed above, net income for
the three months ended March 31, 2003 was $307,000 compared to $304,000 for the
same period in 2002, an increase of $3,000. Net income for both the 2003 and the
2002 periods represents $0.08 per share on both an undiluted and a fully diluted
basis.

FINANCIAL CONDITION

At March 31, 2003, the Company had $6,747,000 in working capital, versus
$6,489,000 at December 31, 2002, an increase of $258,000 or 4.0%. As a result,
the current ratio improved to 2.2 to 1.0 from 2.1 to 1.0. Typically there is a
reduction in net working capital during the first quarter of each year
reflecting the liquidation in current assets following the busiest quarter of
the year. This was also the result for the first quarter of 2003 except for a
$289,000 increase in the cash balance. All non-cash items of net working capital
decreased $31,000 in the aggregate. This year, the net current asset reduction,
excluding cash, totaled $882,000 of which $831,000 reflected net collections of
accounts receivable. The net reduction in current liabilities was $851,000,
reflecting a $820,000 pay down of accounts payable.

At March 31, 2003, the Company had $335,000 in cash, a revolving credit facility
of $7,500,000 and a term facility of $7,855,000. The revolving loan facility
matures July 31, 2004 and the term loans are payable in monthly installments of
$98,375 through November 30, 2005, $40,042 from December 1, 2005 through July
31, 2006 and balloon payments of $258,333 due on November 11, 2005 and
$2,443,000 on July 31, 2006. Amounts outstanding under the revolving facility
and the term facilities at March 31, 2003 were $5,667,000 and $6,111,000
respectively. The interest rates fluctuate based on the Funded Debt to Adjusted
EBITDA ratio as each such term is defined in the loan agreement. The loan
agreement contains customary representations, warranties and covenants. At March
31, 2003 and December 31, 2002, the Company was in compliance with these
covenants.

The ratio of long-term debt to total capitalization improved slightly to 70% at
March 31, 2003 from 71% at December 31, 2002. The Company believes its financial
resources are adequate to fund its needs for the next twelve months.

CASH FLOWS FROM OPERATING ACTIVITIES. Net cash provided by operating activities
was $630,000 for the three months ended March 31, 2003. Of this total, $530,000
was provided through net income plus depreciation and amortization; another
$100,000 came as a result of a net reduction in net working capital items. Cash
flows from operating activities for the current period compare to $1,260,000 for
the same period in 2002, a decrease of $630,000 or 50%. This is largely
attributable to the fact that, due to timing, the amount by which proceeds from
collections on receivables exceeded the disbursement of payables for the first
quarter of the current year was $11,000 but for the same period during the prior
year that difference was $844,000.

CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing activities was
$275,000 for the three months ended March 31, 2003 which was $28,000 less than
the $303,000 total for the same period of the prior year. For both years these
funds were used primarily to purchase machinery and equipment for the Company's
manufacturing operations.

12

CASH FLOWS FROM FINANCING ACTIVITIES. Net cash used in financing activities was
$66,000 for the three months ended March 31, 2003, compared to $1,373,000 used
for the same period in 2002, a difference of $1,307,000. The majority of the
cash used in this category represents payment of debt. The reduced payment in
the current period primarily reflects the reduced cash provided through
operations plus the $705,000 difference between the $416,000 first quarter 2002
reduction in cash balances and the $289,000 first quarter 2003 increase in cash.

SEASONALITY

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

FORWARD-LOOKING STATEMENTS

Certain statements in this report, including statements in "Management's
Discussion and Analysis of Financial Condition and Results of Operations," are
"forward-looking statements" as defined by the Federal securities laws. Such
statements are based on management's current expectations and involve known and
unknown risks and uncertainties which may cause the Company's actual results,
performance or achievements to differ materially from any results, performance
or achievements expressed or implied in this report. By way of example and not
limitation and in no particular order, known risks and uncertainties include the
Company's future growth and profitability, the introduction and success of new
products, the potential loss of large customers or accounts, changes in economic
and market conditions, integration and management of acquired businesses, the
seasonality of Vita's business, the Company's ability to attract and retain key
personnel, the Company's ability to maintain its relationships with key vendors
and retailers, consolidation of the Company's supplier base, the potential
impact of claims and litigation, changes in raw material costs, downward product
price movements, and the effects of competition in the Company's markets. 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 report will be attained. The Company's actual results may differ
materially from any results expressed or implied by the forward-looking
statements, especially when measured on a quarterly basis.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has a revolving line of credit with a bank, which bore
interest during the first quarter of 2003 at the prime rate minus 0.35% (3.90%
at March 31, 2003) or LIBOR plus 2.40% (3.63% at March 31, 2003). This rate
adjustment remained constant from July 31, 2002, the date of the First Amendment
to the Amended and Restated Loan and Security Agreement, until April 1, 2003.
Commencing on April 1, 2003 the interest rates increased, based upon certain
financial ratios, to prime minus 0.10% (4.15% on April 1, 2003) or LIBOR plus
2.65% (3.88% on April 1, 2003). In addition, the Company has two term loan
facilities, which bore interest during the first quarter of 2003 at the prime
rate minus 0.05% (4.20% at March 31, 2003) or LIBOR plus 2.75% (loan 1 - 4.01%
and loan 2 - 3.92% at March 31, 2003) until April 1, 2003. Commencing on April
1, 2003 the interest rates increased, based on certain financial ratios, to
prime plus 0.20% (4.45% on April 1, 2003) or LIBOR plus 3.10% (loan 1 - 4.36%
and loan 2 - 4.27% on April 1, 2003). A 10% fluctuation in interest rates would
not have a material impact on the Company's financial statements.

ITEM 4. 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 - 14(c) and 15d -
14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), within 90 days of the filing date of this quarterly report, and, based on
their evaluation, have concluded that these controls and procedures are
effective. There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation and up to the

13

date of this Quarterly Report on Form 10-Q. There were no significant
deficiencies or material weaknesses, and therefore there were no corrective
actions taken.

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.

PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

99.1 Principal Executive Officer Certification pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.

99.2 Principal Financial Officer Certification pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.

(b) REPORTS ON FORM 8-K

The Company filed no reports on Form 8-K during the quarter ended March 31,
2003.

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SIGNATURES

Pursuant to the requirements 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.

Date: May 15, 2003 By: /s/ Stephen D. Rubin
-------------------------------
Stephen D. Rubin
President
(Principal Executive Officer)

Date: May 15, 2003 By: /s/ Clifford K. Bolen
-------------------------------
Clifford K. Bolen
Senior Vice President;
Chief Financial Officer
(Principal Financial and
Accounting Officer)

15

CERTIFICATION

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

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

2. Based on my knowledge, this quarterly 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 quarterly
report.

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures 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 quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

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

16

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 quarterly report on Form 10-Q of Vita Food Products,
Inc.;

2. Based on my knowledge, this quarterly 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 quarterly
report.

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly 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-14 and 15d-14) for the registrant and we have:

a) Designed such disclosure controls and procedures 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 quarterly report is being prepared;

b) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) Presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):

a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

By /s/ Clifford K. Bolen
----------------------------------
Clifford K. Bolen
Senior Vice President;
Chief Financial Officer
(Principal Financial and
Accounting Officer)

17