SNAK Inventure Foods, Inc. (MM)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

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: 1-14556

INVENTURE FOODS, INC.

(Exact name of registrant as specified in its charter)

5415 East High Street, Suite 350

Phoenix, Arizona 85054

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code:  (623) 932-6200

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

Securities registered pursuant to Section 12(g) of the Act:  None

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   x

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   x

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   o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   x No   o

Indicate by check mark if disclosure of delinquent filers in response 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.   x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes   o No   x

The aggregate market value of the voting stock (Common Stock, $.01 par value) held by non-affiliates of the Registrant was approximately $53.0 million based upon the closing market price on June 25, 2011, the last business day of the Registrant’s most recently completed second fiscal quarter.

The number of issued and outstanding shares of Common Stock, $.01 par value, as of March 15, 2012 was 18,309,355.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant’s Annual Meeting of Shareholders to be held on May 16, 2012 are incorporated by reference into Part III of this Form 10-K.

EXCHANGE ACT REPORTS AVAILABLE ON COMPANY WEBSITE

Under “SEC Filings” on the “Investors Relations” page of the Company’s website located at www.inventurefoods.com, the following filings are made available as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”): the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A related to the Company’s Annual Shareholders Meeting, and any amendments to those reports or statements filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934.  You may also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549.  You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC also maintains an Internet website located at http://www.sec.gov that contains the information we file or furnish electronically with the SEC.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K, including all documents incorporated by reference, includes “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, and Inventure Foods, Inc. (the “Company”) desires to take advantage of the “safe harbor” provisions thereof.  Therefore, the Company is including this statement for the express purpose of availing itself of the protections of the safe harbor with respect to all of such forward-looking statements. In this Annual Report on Form 10-K, the words “anticipates,” “believes,” “expects,” “intends,” “estimates,” “projects,” “will likely result,” “will continue,” “future” and similar terms and expressions identify forward-looking statements. The forward-looking statements in this Annual Report on Form 10-K reflect the Company’s current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including without limitation general economic conditions, increases in cost or availability of ingredients, packaging, energy and employees, price competition and industry consolidation, ability to execute strategic initiatives, product recalls or safety concerns, disruptions of supply chain or information technology systems, customer acceptance of new products and changes in consumer preferences, food industry and regulatory factors, interest rate risks, dependence upon major customers, dependence upon existing and future license agreements, the possibility that we will need additional financing due to future operating losses or in order to implement the Company’s business strategy, acquisition-related risks, volatility of the market price of the Company’s common stock, par value $.01 per share (the “Common Stock”), and those other risks and uncertainties discussed herein, that could cause actual results to differ materially from historical results or those anticipated.  In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this Annual Report on Form 10-K will in fact transpire or prove to be accurate.  Readers are cautioned to consider the specific risk factors described herein and in “Risk Factors,” and not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. The Company undertakes no obligation to update or publicly revise any forward-looking statement whether as a result of new information, future developments or otherwise. All subsequent written or oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by this paragraph.

Item 1.  Business

General

Inventure Foods, Inc., a Delaware corporation (the “Company,” referred to as “we” “our” or “us”), is a $160+ million leading marketer and manufacturer of healthy/natural and indulgent specialty snack food brands. We are headquartered in Phoenix, Arizona with plants in Arizona, Indiana and Washington.  Our executive offices are located at 5415 East High Street, Suite 350, Phoenix, Arizona 85054, and our telephone number is (623) 932-6200.

The Company was formed in 1995 as a holding company to acquire a potato chip manufacturing and distribution business, which had been founded by Donald and James Poore in 1986.  In December 1996, we completed an initial public offering of our Common Stock.  In November 1998, we acquired the business and certain assets (including the Bob’s Texas Style® potato chip brand) of Tejas Snacks, L.P. (“Tejas”), a Texas-based potato chip manufacturer.  In October 1999, we acquired Wabash Foods, LLC (“Wabash”) including the Tato Skins®, O’Boisies®, and Pizzarias® trademarks and the Bluffton, Indiana manufacturing operation and assumed all of Wabash Foods’ liabilities.  In June 2000, we acquired Boulder Natural Foods, Inc. (“Boulder”) and the Boulder Canyon TM  brand of totally natural potato chips.  We changed our name from Poore Brothers, Inc. to The Inventure Group, Inc. on May 23, 2006.  In May 2007, we acquired Rader Farms, Inc., including a farming operation and a berry processing facility in Lynden, Washington.  In May 2010, we changed our name from The Inventure Group, Inc. to Inventure Foods, Inc.

Products

In our healthy/natural category, products include Rader Farms® frozen berries, Jamba® All Natural Smoothies and Boulder Canyon™ Natural Foods brand snack chips including kettle cooked potato chips, Rice & Bean snack chips, Hummus tortilla chips, All Natural Multi-Grain Puffs and Garden Select Vegetable Crisps. In our indulgent specialty category, products include T.G.I. Friday’s® brand snacks, Nathan’s Famous® brand snacks, BURGER KING™ brand snacks, Poore Brothers® kettle cooked potato chips, Bob’s Texas Style® kettle cooked chips, Tato Skins® brand potato snacks and O’Boises® potato snacks.

We also manufacture and distribute private label and co-branded fruit and snack chip products for several grocery chains and natural stores.  While extremely price competitive, we believe that such arrangements provide a profitable opportunity for us to improve the capacity utilization of our facilities.

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In addition to our own products, we purchase and resell throughout Arizona snack food products manufactured by others.  Such distributed products include, but are not limited to, pretzels, popcorn, dips, coffee and meat snacks.

During 2011, we launched a number of new items under our existing brands, including Boulder Canyon™ Natural Foods Garden Select Vegetable Crisps; Boulder Canyon™ Natural Foods Olive Oil kettle cooked potato chips; T.G.I. Friday’s® Onion Rings; and Nathan’s Famous® Crunchy Crinkle Fries.  We also launched in 2011 the Jamba® Caribbean Passion and Orange Dream Machine at home frozen smoothie kits.  These Jamba® branded blend-and-serve smoothie kits are all natural, and provide a full serving of fruit and 100% Daily Value of vitamin C.

For the fiscal years 2011 and 2010, net revenues totaled $162.2 million and $134.0 million, respectively, and T.G.I. Friday’s® brand salted snacks represented 28% of our total net revenues in 2011 and 29% of our total net revenues in 2010.

Business Strategy

Our business strategy is to continue building a diverse portfolio of high quality, competitively priced healthy/natural food brands (Rader Farms® , Boulder Canyon TM  Natural Foods, and Jamba®) and indulgent specialty food brands (T.G.I. Friday’s®, Nathan’s Famous®, BURGER KING TM , Poore Brothers®) through expansion of existing brands, licensing, acquisition and development.  The goals of our strategy are to (i) capitalize on healthy/natural and indulgent specialty food brand opportunities, (ii) deliver incremental category growth for retailers, (iii) provide product innovation targeted to a defined consumer segment, (iv) complement, rather than compete directly against, large national competitors with leading national brands, and (v) build relationships with major retailers in all channels of distribution by providing them higher margins, excellent customer service and constant innovation.  We plan to mitigate the financial impact of launching new products by introducing them in test markets prior to large scale regional or national introductions, and to continue to improve profit margins through increased operating efficiencies and manufacturing capacity utilization. The primary elements of our long-term business strategy are as follows:

Develop, Acquire or License Innovative Healthy/Natural and Indulgent Specialty Food Brands.  A significant element of our business strategy is to develop, acquire or license new innovative healthy/natural and indulgent specialty food brands that provide strategic fit with our existing business and possess strong national brand equity in order to expand, complement or diversify our existing business.

Broaden Distribution of Existing Brands.  We plan to increase distribution and build the market share of our existing branded products through selected trade activity in various existing or new markets and channels.  Marketing efforts may include, among other things, trade advertising and promotional programs with distributors and retailers, in-store advertisements, in-store displays and limited consumer advertising, public relations and coupon programs.

Develop New Products for Existing Brands.  We plan to continue our innovation activities to identify and develop (i) new line extensions for our brands, such as new flavors or products, and (ii) new food segments in which to expand the brand’s presence.

Leverage Infrastructure and Capacity.  Our Indiana, Arizona and Washington facilities are currently operating at approximately 60%, 80% and 60% of their respective manufacturing capacities.  We continue to expand upon our own branded product lines, as well as secure new manufacturing opportunities in private label and co-packing arrangements.  In addition, we plan to continue capital investment in our plants and drive operating efficiencies.

Pursue Acquisitions.  We continue to evaluate acquisition opportunities in the specialty food area where we can use our competencies in Operations, Sales, Marketing and Distribution in order to drive revenue and profit growth.

Improve Profit Margins.  We plan to increase gross profit margins through increased long-term revenue growth, improved operating efficiencies, and higher margin new products.  We believe that additional improvements to our manufactured products’ gross profit margins are possible with the achievement of the business strategies discussed above.

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Manufacturing

Our Company-owned manufacturing facility in Bluffton, Indiana produces snack products utilizing a sheeting and frying process with three fryer lines that can produce an aggregate of up to approximately 9,000 pounds per hour of Boulder Canyon™ Natural Foods, T.G.I. Friday’s®, BURGER KING™ and Tato Skins® brand products.  Previously introduced production capabilities at the Bluffton plant allow us to use existing equipment to make additional snacks, including pellet snacks, which are entirely different in appearance and taste from our other product lines.  We believe this technology will help expand our product lines and facilitate growth.  During 2010, we invested $3.4 million in equipment to produce extruded product previously produced by third parties and to develop innovative new products.  We also produce snacks for customers under private label agreements.  The Indiana facility is currently operating at approximately 60% of processing capacity.

Our Company-owned manufacturing facility in Goodyear, Arizona has the capacity to produce up to approximately 4,600 pounds of potato chips per hour, including 2,500 pounds of batch-fried potato chips per hour and 2,100 pounds of continuous-fried potato chips per hour.  Poore Brothers®, Bob’s Texas Style®, Boulder Canyon TM  Natural Foods, co-packing and private label branded potato chips are produced in a variety of flavors utilizing a batch-frying process.  While conventional continuous line cooking methods may produce higher production volume, we believe that our batch-frying process is superior and produces premium potato chip products with enhanced crispness and distinctive flavor.  During 2011, we spent approximately $4.9 million in capital at the Goodyear facility in order to increase capacity and improve efficiencies.  The investment included additional high capacity kettle cooking equipment, and increasing our high speed packaging machines.  The Arizona facility is currently operating at approximately 80% of processing capacity.

Our Company-owned Rader Farms farming facility in Lynden, Washington has the capacity to produce up to eight million pounds of grown raspberries and blueberries per year.  Rader Farms grows, processes and markets premium berry blends, raspberries, blueberries, and rhubarb and purchases marionberries, cherries, cranberries, strawberries and other fruits from a select network of fruit growers for resale.  The fruit is processed and packaged for sale and distribution nationally to wholesale customers under the Rader Farms® brand, as well as through store brands.  We also use third party processors for certain products.  The individually quick frozen (“IQF”) processing facilities located at the same location have the capacity to apply the IQF process to 40 million pounds of berries annually.  In 2011, we invested in new packaging equipment to accommodate our Jamba® smoothie launch.  The 2011 harvest at Rader Farms was of average yield for the season.  The Washington processing facility is operating at approximately 60% of capacity.

Marketing and Distribution

We sell our products nationally and internationally through a number of channels including: Grocery, Natural, Mass, Drug, Club, Vending, Food Service, Convenience Store (C-Store) and International.

Our licensed T.G.I. Friday’s® brand snack food products have achieved significant market presence across a number of sales channels.  We have retained various sales and marketing agencies with employees and offices nationwide to represent T.G.I. Friday’s® brand snacks on behalf of us in the grocery and convenience store channels.  Our own sales organization, as well as brokers, sells T.G.I. Friday’s® brand snacks in the mass, club, value and drug channels.  We also obtain significant sales on T.G.I. Friday’s® brand snacks in the vending channel nationwide through an independent network of brokers and distributors.

Our potato chip brands are distributed to grocery and other retailers directly, through brokers, and by a select group of independent distributors in Arizona. The Boulder Canyon TM  Natural Foods brand potato chip products have achieved market presence in natural food stores nationwide as well as other leading national grocery retailers.  We select brokers and distributors for our branded products primarily on the basis of quality of service, call frequency on customers, financial capability and relationships they have with all of the various channels in which we operate. We currently retain a Canadian sales and marketing agency to sell to Canadian customers. We have also retained an international broker to expand sales.

Our distribution network throughout Arizona includes approximately 44 independently operated service routes.  Each route is operated by an independent distributor who merchandises to major grocery store chains in Arizona, such as Albertson’s, Basha’s, Fry’s and Safeway stores.  The independent distributors also service many smaller independent grocery stores, club stores, and military facilities throughout Arizona.  In addition to Poore Brothers® branded and private label products, we distribute throughout Arizona a wide variety of snack food items manufactured by other companies, including, but not limited to, pretzels, popcorn, dips, coffee and meat snacks.

The marketing of our berry and smoothie products is essentially performed through company sales force and brokers with whom we have relationships.  Similar to our snack business, we select brokers primarily on the basis of quality of service, call frequency on customers, financial capability and relationships they have with supermarkets and club stores, including access to freezer space for our frozen products.

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Successful marketing of our products depends, in part, upon obtaining adequate shelf or freezer space for such products, particularly in supermarkets, discount stores and the club channel for snacks, berry products and smoothies and C-Stores and vending machines for snacks.  Frequently, we incur additional marketing costs in order to obtain additional shelf space.  Whether or not we will continue to incur such costs in the future will depend upon a number of factors including, demand for our products, relative availability of shelf space and general competitive conditions.  We may incur significant shelf space, consumer marketing or other promotional costs as a necessary condition of entering into competition or maintaining market share in particular markets or channels.  Any such costs may materially affect our financial performance.

Our marketing programs are designed to increase product trial and build brand awareness in core markets.  Most of our marketing spending has traditionally been focused on trade advertising and trade promotions designed to attract new consumers to the products at a reduced retail price.  Our marketing programs also include selective event sponsorship designed to increase brand awareness and to provide opportunities to mass sample branded products.  We also invest marketing dollars in brand and category research, coupons, customer consumer programs, Facebook, Twitter, and other social media.

We continue to focus on expanding the distribution of our Boulder Canyon TM  Natural Foods brand nationally through the natural channel and in the grocery channel, as well as club stores, vending machines, drug, and C-stores.  We continue to pursue expansion of our Rader Farms® and Jamba ® branded fruit products in our Frozen segment.  We continue to evaluate new private label customer expansion.  We also continue to evaluate international opportunities with the T.G.I. Friday’s®, Boulder Canyon TM  Natural Foods, Jamba®, Rader Farms® and BURGER KING™ brands.

Suppliers

The principal raw materials we utilize are potatoes, potato flakes, potato starch, corn, oils and berries.  We believe that the raw materials we need to produce our products are readily available from numerous suppliers on commercially reasonable terms.  Potatoes, potato flakes and corn are widely available year-round, although they are subject to seasonal price fluctuations.  We use a variety of oils and seasonings in the production of our snack products and believe that alternative sources for such oils and seasonings, as well as alternative oils and seasonings, are readily abundant and available.  We may lock in prices for raw materials, such as oils, as we deem appropriate.  We produce an average of 20% to 25% of our total annual berry requirements in our own farms, and augment that production by purchasing additional berries to meet customer demand.  We purchase both fresh berries from local farmers and already frozen berries for our repackaging business, and purchase yogurt in cube form from a third party company for use in our at home smoothie kits.  We use packaging materials in our snack manufacturing and frozen distribution business.

We choose our suppliers based primarily on price, quality, availability, and service.  Although we believe that our required products and ingredients are readily available, and that our business success is not dependent on any single supplier, the failure of certain suppliers to meet our performance specifications, quality standards or delivery schedules could have a material adverse effect on our operations.  In particular, a sudden scarcity, a substantial price increase, or an unavailability of product ingredients could materially adversely affect our operations.  In such circumstances, alternative ingredients may not be available when needed and on commercially attractive terms, if at all.

Customers

Costco accounted for 30% and 23% of the Company’s 2011 and 2010 net revenues, respectively.   The remainder of our revenues was derived from sales to customers, grocery chains, club stores or regional distributors, none of which individually accounted for more than 10% of our net revenues in 2011.  A decision by any of our major customers to cease or substantially reduce their purchases could have a material adverse effect on our business.

The majority of our revenues are attributable to external customers in the United States.  We do sell to Canadian and international customers as well, however, the revenues attributable to these customers are immaterial.  All of our assets are located in the United States.

Competition

Our snack products generally compete against other snack foods, including potato chips and tortilla chips.  The snack food industry is large and highly competitive and is dominated by large food companies, including Frito-Lay, Inc., a subsidiary of PepsiCo, Inc., Procter and Gamble, Diamond Foods and General Mills.  These companies possess substantially greater financial, production, marketing, distribution and other resources than us, and their brands are more widely recognized than our products.  Numerous other companies that are actual or potential competitors offer products similar to ours, and some of these have greater

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financial and other resources (including more employees and more extensive facilities) than us.  In addition, many competitors offer a wider range of products than we offer.  Local or regional markets often have significant smaller competitors, many of whom offer products similar to ours.  Expansion of our operations into new markets has and will continue to encounter significant competition from national, regional and local competitors that may be greater than that encountered by us in our existing markets.  In addition, such competitors may challenge our position in our existing markets.  While we believe that we have innovative products and methods of operation that will enable us to compete successfully, we may not be able to do so.

Our frozen berry products generally compete against other packaged berries on the basis of quality and price.  Key competitors include Townsend Farms, Sunopta, and Dole.  Obtaining freezer space at supermarkets and club stores is critical to successfully compete with other berry products, as supermarkets and club stores will frequently only carry one brand of frozen berry products, contrasted to snack products where multiple brands are carried.

Our smoothie kits generally compete against other packaged smoothie kits on the basis of quality and price.  Key competitors include Yoplait, a General Mills brand, Dole smoothies and a number of smaller brands.  Obtaining freezer space at supermarkets and club stores is critical to successfully compete with other smoothie products, as supermarkets and club stores will frequently only carry one to two brands of frozen smoothie products, contrasted to snack products where multiple brands are carried.

The principal competitive factors affecting the markets of our products include product quality and taste, brand awareness among consumers, access to shelf or freezer space, price, advertising and promotion, varieties offered, nutritional content, product packaging and package design.  We compete in our markets principally on the basis of product quality and taste.  Frozen products are produced at our Lynden, Washington facility utilizing an individually quick frozen (IQF) technology which we do not have exclusive rights for.  While products produced at our Bluffton, Indiana facility involve the use of certain licensed technology and unique manufacturing processes, the taste and quality of products produced at our Goodyear, Arizona facility are largely due to two elements of our manufacturing process: our use of batch-frying and our use of distinctive seasonings to produce a variety of flavors.  We do not have exclusive rights to the use of either element; consequently, competitors may incorporate such elements into their own processes.

Government Regulation

The manufacture, labeling and distribution of our products are subject to the rules and regulations of a variety of federal, state, and other governmental agencies.  There can be no assurance that new laws or regulations will not be passed that could require us to alter the taste or composition of our products or impose other obligations on us.  New or increased government regulation of the food industry, including but not limited to areas related to food safety, chemical composition, production processes, traceability, product quality, packaging, labeling, and product recalls, could adversely impact our results of operations by increasing production costs, restricting our methods of operation and distribution. Such changes could also affect sales of our products and have a material adverse effect on us.  These regulations may address food industry or society factors, such as obesity, nutritional and environmental concerns and diet trends.  In addition to laws relating to food products, our operations are governed by laws relating to environmental matters, workplace safety and worker health. We believe that we presently comply in all material respects with such laws and regulations.

Employees

As of December 31, 2011, we had 448 total employees.  There are 379 employees in manufacturing and distribution, composed of 353 full-time, 5 part-time, and 21 in temporary positions.  There are 28 employees in sales and marketing, and 41 in administration and finance.  Our employees are not represented by any collective bargaining organization and we have never experienced a work stoppage.  We believe that our relations with our employees are good.

Patents, Trademarks and Licenses

We own the following trademarks in the United States: Boulder Canyon®, Canyon Cut®, Rader Farms®, Poore Brothers®, Intensely Different®, Texas Style®, Tato Skins®, O’Boisies®, Pizzarias®, and Braids®.  We consider our trademarks to be of significant importance in our business.  We are not aware of any circumstances that would have a material adverse effect on our ability to use our trademarks.

From time to time, we enter into licenses with owners of distinctive brands to produce branded snack food products.  Generally, the licenses require us to make royalty payments on sales and to achieve certain minimum sales levels by certain dates during the contract term.  Any termination of any of our license agreements, whether at the expiration of its term or prior thereto, could have a material adverse effect on our financial condition and results of operations.

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In 2000, we launched our T.G.I. Friday’s® brand snacks pursuant to a license agreement with T.G.I. Friday’s Inc., which expires in May, 2014.  In 2007, we launched our BURGER KING™ snack products pursuant to a license agreement with Burger King Corporation, which expires in December 2012.  In 2009, we entered into a license agreement with Jamba Juice Company, which expires in 2035, and launched in 2010 a line of Jamba® branded blend-and-serve smoothie kits.  In 2011, we entered into a license agreement with Nathan’s Famous Corporation, which expires in 2031, and launched a line of Crunchy Crinkle Fries.

We produce T.G.I. Friday’s® brand snacks, BURGER KING™ brand potato snack products, Tato Skins® brand potato crisps and Boulder Canyon™ Natural Foods Rice and Bean snacks utilizing a sheeting and frying process that includes technology that we license from a third party.  Pursuant to the license agreement, we have a royalty-bearing, exclusive right license to use the technology in the United States, Canada, and Mexico until such time the parties mutually agree to terminate the agreement.  Even though the patents for this technology expired December 26, 2006, in consideration for the use of this technology, we are required to make royalty payments on sales of products manufactured utilizing the technology until such termination date.  However, should products substantially similar to Tato Skins®, O’Boisies® and Pizzarias® become available for any reason in the marketplace by any manufacturer other than us which results in a sales decline of 10% or more, any royalty obligation for the respective product(s) shall cease.

Seasonality

The food products industry is seasonal.  Consumers tend to purchase our snack products at higher levels during the major summer holidays and also at times surrounding major sporting events throughout the year.  Consumers also tend to purchase fresh berries while in season and therefore we see a decline in frozen berry revenue in the summer months.  Additionally, we may face seasonal price increases for raw materials.

Item 1A.  Risk Factors

In addition to the other information in this report, any one of the following factors could materially adversely affect our business, financial condition or operating results.  You should read and carefully consider these risk factors, and the entirety of this report, before you invest in our securities.

Risks Related to Our Business

Our performance may be impacted by general economic conditions and an economic downturn.

Recessionary pressures from an overall decline in U.S. economic activity could adversely impact our results of operations. Economic uncertainty may reduce consumer spending and could result in increased pressure from competitors or customers to reduce the prices of our products and/or limit our ability to increase or maintain prices, which could lower revenues and profitability. Instability in the financial markets may impact our ability or increase the cost to enter into new credit agreements in the future. Additionally, it may weaken the ability of customers, suppliers, distributors, banks, insurance companies and other business partners to perform in the normal course of business, which could expose us to losses or disrupt supply of inputs used to conduct our business. If one or more key business partners fail to perform as expected or contracted, our operating results could be negatively impacted.

We may incur significant future expenses due to the implementation of our business strategy.

We strive to achieve our long-term vision of being a leading marketer and manufacturer of healthy/natural and indulgent specialty snack food brands.  Such action is subject to the substantial risks, expenses and difficulties frequently encountered in the implementation of a business strategy.  If we are unsuccessful in developing, acquiring and/or licensing new brands, and increasing distribution and sales volume of our existing products, our operating results could be negatively impacted.  Even if we are successful, this business strategy may require us to incur substantial additional expenses, including advertising and promotional costs, “slotting” expenses (i.e., the cost of obtaining shelf or freezer space in certain grocery stores), and integration costs of any future acquisitions.  We also may be unsuccessful at integrating any future acquisitions.

We may not be able to obtain the additional financing we need to implement our business strategy.

A significant element of our business strategy is the development, acquisition and/or licensing of innovative specialty food brands, for the purpose of expanding, complementing and/or diversifying our business. In connection with our previous acquisitions, we borrowed funds or assumed additional indebtedness in order to satisfy a substantial portion of the consideration required to be paid by us.  We may, in the future, require additional third party financing (debt or equity) as a result of any future operating losses, in connection with the expansion of our business through non-acquisition means, in connection with any additional acquisitions

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completed by us, or to provide working capital for general corporate purposes.  Third party financing may not be available when required or, if available, may not be on terms attractive to us.  Any third party financing obtained by us may result in dilution of the equity interests of our shareholders.

We expect some of our future growth to be derived in part, from acquisitions, but our acquisition strategy may not be successful, or we may not be successful integrating acquisitions.

An element of our business strategy is the pursuit of selected strategic acquisition opportunities for the purpose of expanding, complementing and/or diversifying our business.  We may not be able to identify, finance and complete successful acquisitions on acceptable terms.  Any future acquisitions could divert management’s attention from our daily operations and otherwise require additional management, operational and financial resources.  Moreover, we may not be able to successfully integrate acquired companies or their management teams into our operating structure, retain management teams of acquired companies on a long-term basis, or operate acquired companies profitably. Acquisitions may also involve a number of other risks, including adverse short-term effects on our operating results, dependence on retaining key personnel and customers, and risks associated with unanticipated liabilities or contingencies.

We are subject to ongoing financial covenants under our main credit facility, and if we fail to meet those covenants or otherwise default on our credit facility, our lender may accelerate all unpaid amounts, including interest.

At December 31, 2011, we had outstanding indebtedness in the aggregate principal amount of $26.8 million.

Our credit agreement with U.S. Bank National Association (“U.S. Bank”) is secured by substantially all of our assets.  Our obligations under the Credit Agreement are guaranteed by our subsidiaries.  We are required to comply with certain financial covenants pursuant to the U.S. Bank Credit Agreement so long as borrowings from U.S. Bank remain outstanding.  Should we be in default under any of such covenants, U.S. Bank shall have the right, upon written notice and after the expiration of any applicable period during which such default may be cured, to demand immediate payment of all of the then unpaid principal and accrued but unpaid interest under the Credit Agreement.  At December 31, 2011, we were in compliance with all covenants of the Credit Agreement.

As we execute our business strategy, we may not be able to remain in compliance with our financial covenants. Any acceleration of the borrowings under the Credit Agreement prior to the applicable maturity dates could have a material adverse effect upon our operating results. See “ Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources .”

We may incur losses and costs as a result of product liability claims that may be brought against us or any product recalls we have to make .

The sale of food products for human consumption involves the risk of injury to consumers. Such hazards could result from: tampering by unauthorized third parties; product contamination (such as listeria, e-coli, and salmonella) or spoilage; the presence of foreign objects, substances, chemicals, and other agents; residues introduced during the growing, storage, handling or transportation phases; or improperly formulated products. As a manufacturer and marketer of food products, we may be subjected to various product liability claims.  The product liability and product recall insurance maintained by us may not be adequate to cover any loss or exposure for product liability, and such insurance may not continue to be available on terms acceptable to us.  Any product liability claim not fully covered by insurance, as well as any adverse publicity from a product liability claim or product recall, could have a material adverse effect on our operating results.

Newly adopted governmental regulations could increase our costs or liabilities or impact the sale of our products.

The food industry is highly regulated and subject to change.  New or increased government regulation of the food industry, including areas related to production processes, product quality, packaging, labeling, marketing, storage and distribution, and labor unions, could adversely impact our operating results by increasing production costs or restricting methods of operation and distribution. These regulations may address food industry or society factors, such as obesity, nutritional concerns and diet trends.  Sales of our products could be materially and adversely affected if new laws or regulations are passed that require us to alter the taste or composition of our products or impose other obligations on us.

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Concerns with the safety and quality of certain food products or ingredients could cause customers to avoid our products .

We could be adversely affected if customers in our principal markets lose confidence in the safety and quality of certain products or ingredients.  Negative publicity about these concerns, whether or not valid, may discourage customers from buying our products or cause disruptions in production or distribution of our products.

A significant portion of our revenues are derived from one product and one customer.

In 2011, 41% of our net revenues were attributable to our frozen products segment, the majority of which is attributable to Rader Farms®/Kirkland® co-branded frozen berry product sales to Costco.  Overall, Costco accounted for 30% of our 2011 net revenues.  The remainder of our net revenues are derived from sales to a limited number of additional customers, either grocery chains or regional distributors, none of which individually accounted for more than 10% of our net revenues for 2011.  A decision by any major customer to cease or substantially reduce its purchases, or a decrease in the popularity of frozen berries during any year, could have a material adverse effect on our operating results.

We depend on a license agreement for the right to sell our T.G.I. Friday’s® brand.

For the year ended December 31, 2011, 28% of our net revenues were attributable to the T.G.I. Friday’s® brand products, which are manufactured and sold by us pursuant to a license agreement with T.G.I. Friday’s Inc. that expires in May, 2014.  Pursuant to the license agreement, we are subject to various requirements and conditions (including, without limitation, minimum sales targets).  Our failure to comply with certain of such requirements and conditions could result in the early termination of the license agreement by T.G.I. Friday’s Inc.  Any termination of the T.G.I. Friday’s license agreement, whether at the expiration of its term or prior thereto, could have a material adverse effect on our operating results.

Our business may be adversely affected by oversupply of snack and frozen products at the wholesale and retail levels and seasonal fluctuations.

Profitability in the food product industry is subject to oversupply of certain snack and frozen products at the wholesale and retail levels, which can result in our products going out of date before they are sold.  The snack and frozen products industry is also seasonal.  Consumers tend to purchase our snack products at higher levels during the major summer holidays and also at times surrounding the major sporting events throughout the year.  Consumers tend to purchase fresh berries while in season and therefore we see a decline in frozen berry revenue in the summer months.  Any of these seasonal effects may result in an oversupply or undersupply of our products.  Additionally, we may face seasonal price increases for raw materials.  Such seasonal costs could materially and adversely affect our operating results in any given quarter.

We may incur substantial costs in order to market our products.

Successful marketing of our products generally depends upon obtaining adequate retail shelf space for product display, particularly in supermarkets. Frequently, food manufacturers and distributors such as us, incur additional costs in order to obtain additional shelf space. Whether or not we incur such costs in a particular market is dependent upon a number of factors, including demand for our products, relative availability of shelf space and general competitive conditions. We may incur significant shelf space or other promotional costs as a necessary condition of entering into competition or maintaining market share in particular markets or stores. If incurred, such costs may have a material adverse effect on our operating results.

We may not be able to respond successfully to shifting consumer tastes.

Consumer preferences are continually changing and are extremely difficult to predict.  Our success depends in part on timely responding to current market trends and anticipating changing consumer tastes and dietary habits by developing and licensing new products and entering new markets.  The failure to adequately address changing consumer preferences could result in reduced demand for our products and have a material adverse affect our operating results.

The loss of certain key employees could adversely affect our business .

Our success is dependent in large part upon the abilities of our executive officers, including Terry McDaniel, Chief Executive Officer, and Steve Weinberger, Chief Financial Officer.  Our business strategy will challenge our executive officers, and the inability of such officers to perform their duties or our inability to attract and retain other highly qualified personnel could have a material adverse effect upon our operating results.

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We may not be able to successfully implement our strategy to expand our business internationally.

We plan to expand sales to Canadian customers and are exploring other international market opportunities for our brands.  Such expansion may require significant management attention and financial resources and may not produce desired levels of revenue.  International business is subject to inherent risks, including longer accounts receivable collection cycles, difficulties in managing operations across disparate geographical areas, difficulties enforcing agreements and intellectual property rights, fluctuations in local economic, market and political conditions, compliance requirements with U.S. and foreign export regulations, potential adverse tax consequences and currency exchange rate fluctuations.

Risks Related to the Snack Product Segment

We may not be able to compete successfully in our highly competitive industry.

The market for snack foods, such as those sold by us, is large and intensely competitive. Competitive factors in the snack food industry include product quality and taste, brand awareness among consumers, access to supermarket shelf space, price, advertising and promotion, variety of snacks offered, nutritional content, product packaging and package design. We compete in that market principally on the basis of product taste and quality.

The snack food industry is dominated by large food companies, including Frito-Lay, Inc., a subsidiary of PepsiCo, Inc., Procter and Gamble, Diamond Foods, General Mills and others which have substantially greater financial and other resources than us and sell brands that are more widely recognized than our products. Numerous other companies that are actual or potential competitors of ours, many with greater financial and other resources (including more employees and more extensive facilities) than us, offer products similar to ours. In addition, many of such competitors offer a wider range of products than that offered by us. Local or regional markets often have significant smaller competitors, many of whom offer products similar to ours. With expansion of our operations into new markets, we have and will continue to encounter significant competition from national, regional and local competitors that may be greater than that encountered by us in our existing markets. In addition, such competitors may challenge our position in our existing markets.

Unavailability of our necessary supplies, at reasonable prices, could adversely affect our operations.

Our manufacturing costs are subject to fluctuations in the prices of potatoes, potato flakes, potato starch, corn and oil as well as other ingredients of our products.  Potatoes, potato flakes, potato starch and corn are widely available year-round, and we use a variety of oils in the production of our products.  Nonetheless, we are dependent on our suppliers to provide us with products and ingredients in adequate supply and on a timely basis.  The failure of certain suppliers to meet our performance specifications, quality standards or delivery schedules could have a material adverse effect on our operating results.  To the extent that product ingredients become scarce, substantially increase in price, or become unavailable or unavailable on commercially attractive terms, our operating results could be materially and adversely affected.  From time to time, we may lock in prices for raw materials, such as oils, as we deem appropriate, and such strategies may result in us paying prices for raw materials that are above market at the time of purchase.

We do not own the patents for the technology we use to manufacture certain T.G.I. Friday’s®, Boulder Canyon®, BURGER KING TM  and Tato Skins® brand products , as well as certain private label branded products.

We license technology from a third party in connection with the manufacture of certain T.G.I. Friday’s®, Boulder Canyon®, BURGER KING TM  and Tato Skins® brand products, as well as certain private label branded products and have a royalty-bearing, exclusive right license to use the technology necessary to produce these products in the United States, Canada, and Mexico until such time the parties mutually agree to terminate the agreement.  Even though the patents for this technology expired December 26, 2006, in consideration for the use of this technology, we are required to make royalty payments to the third party on sales of products manufactured utilizing the technology until such termination date.  Since these patents expired, we no longer have exclusive rights to this technology and, as a result, may face additional competition that could adversely affect our revenues.  Moreover, our competitors, certain of which may have significantly greater resources than us, may utilize different technology in the manufacture of products that are similar to those currently manufactured, or that may in the future be manufactured, by us.  The entry of any such products into the marketplace could have a material adverse effect on our sales of certain T.G.I. Friday’s®, Boulder Canyon®, BURGER KING TM  and Tato Skins® brand products, certain private label branded products, as well as any such future products.

Risks Related to the Frozen Products Segment

Farming is subject to numerous inherent risks including changes in weather conditions or natural disasters that can have an adverse impact on crop production and materially affect our results of operations.

We are subject to the risks that generally relate to the agricultural industry. Adverse changes in weather conditions and

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natural disasters, such as earthquakes, droughts, extreme cold or pestilence, may affect the planting, growing and delivery of crops, reduce sales stock, interrupt distribution, and have a material adverse impact on our business, financial condition and results of operations. Our competitors may be affected differently by such weather conditions and natural disasters depending on the location of their supplies or operations.

Unavailability of purchased berries, at reasonable prices, could adversely affect operations.

Our manufacturing costs are subject to fluctuations in the prices of certain commodity prices. Berries are not readily available year-round, therefore, we use an individual quick frozen (IQF) technique to freeze the berries harvested for use during the year to meet processing demands. In addition to freezing our own home-grown berries, we also purchase a significant amount of berries from outside suppliers to meet customer demands. We are dependent on our suppliers to provide us with adequate supply and on a timely basis. The failure of certain suppliers to meet our performance specifications, quality standards or delivery schedules could have a material adverse effect on our operating results. To the extent that certain types of berries become scarce, substantially increase in price, or become unavailable or unavailable on commercially attractive terms, our operating results could be materially and adversely affected.

Risks Related to Our Securities

The market price of our Common Stock is volatile.

The market price of our Common Stock has experienced a high level of volatility.  During fiscal 2011, the market price of our Common Stock (based on last reported sale price of the Common Stock on the Nasdaq Global Market) ranged from a high of $4.76 per share to a low of $3.33 per share.  The last reported sales price of the Common Stock on the Nasdaq Global Market on December 31, 2011 was $3.74 per share.

A significant amount of our Common Stock is controlled by a small number of shareholders, and the interests of such shareholders may conflict with those of other shareholders.

As of December 31, 2011, Larry Polhill, a member of our Board of Directors, beneficially owned 23.2% of our outstanding shares.  As a result, Mr. Polhill may be able to exercise significant influence over the Company and certain matters requiring approval of its stockholders, including the approval of significant corporate transactions, such as a merger or other sale of the Company or its assets.  This could limit the ability of other stockholders of the Company to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control of the Company.  Apart from transfer restrictions arising under applicable provisions of the securities laws, there are no restrictions on the ability of Mr. Polhill to transfer any or all of his beneficial ownership at any time.  One or more of such transfers could have the effect of transferring effective control of the Company, including to one or more parties not currently known to us.

Our Certificate of Incorporation authorizes us to issue preferred stock, and the rights of holders of Common Stock may be adversely affected by the rights of holders of any such preferred stock .

Our Certificate of Incorporation authorizes the issuance of up to 50,000 shares of “blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by our Board of Directors.  We may issue such shares of preferred stock in the future without shareholder approval.  The rights of the holders of Common Stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future.  The issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of discouraging, delaying or preventing a change of control of the Company, and preventing holders of Common Stock from realizing a premium on their shares.  In addition, under Section 203 of the Delaware General Corporation Law (the “DGCL”), we are prohibited from engaging in any business combination (as defined in the DGCL) with any interested shareholder (as defined in the DGCL) unless certain conditions are met.  This statutory provision could also have an anti-takeover effect.

Item 1B.  Unresolved Staff Comments

                Not Applicable

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Item 2.  Properties

We own a 140,000 square foot manufacturing facility located on 15 acres of land in Bluffton, Indiana, approximately 20 miles south of Ft. Wayne, Indiana.  The facility is financed by a mortgage with U.S. Bank National Association that matures in December, 2016.

We own a 60,000 square foot manufacturing facility located on 7.7 acres of land in Goodyear, Arizona, approximately 15 miles west of Phoenix, Arizona.  The facility is financed by a mortgage with Morgan Guaranty Trust Company of New York that matures in July 2012.

We own a farming, processing and storage facility located on 696 acres of land in Lynden, Washington, which is leased from the Uptrails Group LLC, owned by three members of the Rader family.  One of the three, Brad Rader, is a current employee of ours and one of the others, Sue Rader, was a former owner of Rader Farms.  This lease commenced on the acquisition date and is effective until May 17, 2017.  Lease payments are $43,500 per month throughout the term of the lease.

We lease one-half of a 200,000 square foot facility in Bluffton, Indiana which is used as a distribution center.  We entered into a lease, the initial term expiring in November 2006, with respect to the facility and have entered into the second of two three-year renewal options.  Current lease payments are approximately $32,500 per month.

We lease approximately 15,500 square feet of warehouse space in Phoenix, Arizona, which is used as a distribution center.  The lease expires March 31, 2013 and current lease payments are approximately $7,700 per month.

We also lease approximately 13,865 square feet of office space in Phoenix, Arizona, which is used as our corporate headquarters.  The lease expires April 1, 2017 and current lease payments are approximately $13,500 per month.

We are responsible for all insurance costs, utilities and real estate taxes in connection with our facilities. We believe that our facilities are adequately covered by insurance.

Item 3.  Legal Proceedings

We are periodically a party to various lawsuits arising in the ordinary course of business.  Management believes, based on discussions with legal counsel, that the resolution of such lawsuits, individually and in the aggregate, will not have a material adverse effect on our financial position or results of operations.

In March 2012, we learned that the Jamba Juice Company was named as a defendant in a putative class action filed in the Federal Court for the North District of California and captioned Kevin Anderson v. Jamba Juice Company which claims that the use of the words “all natural” to describe the Smoothie Kits is misleading and deceptive to consumers and violates various California consumer protection statutes and unfair competition statutes.  The suit is one of several “all natural” lawsuits recently brought against various food manufacturers and distributors in California.  Under our license agreement with the Jamba Juice Company, we are obligated and have agreed to indemnify and defend Jamba Juice in the suit.  We expect that we will be added as a party to the suit as the actual manufacturer and distributor of the Smoothie Kits.  While we currently believe the “all natural” claims on the Smoothie Kits are in full compliance with FDA guidelines, we are investigating the claims asserted in the action, and intend to vigorously defend against them.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Effective February 18, 2011, our Common Stock is traded on the Nasdaq Global Market tier of the Nasdaq Stock Market under the symbol “SNAK.”  There were approximately 200 shareholders of record on March 26, 2012.  Prior to February 18, 2011, our Common Stock was traded on the Nasdaq Capital Market tier of the Nasdaq Stock Market under the symbol “SNAK.”  We believe the number of beneficial owners is substantially greater than the number of record holders because a large portion of the Common Stock is held of record in broker “street names.”

We have never declared or paid any dividends on the shares of Common Stock.  Management intends to retain any future earnings for the operation and expansion of our business and does not anticipate paying any dividends at any time in the foreseeable future.  Additionally, certain debt agreements of ours limit our ability to declare and pay dividends.

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The following table sets forth the range of high and low sale prices of our Common Stock as reported on the Nasdaq Global Market for each quarter of the fiscal year ended December 31, 2011 and as reported on the Nasdaq Capital Market for each quarter of the fiscal year ended December 25, 2010.

The information appearing under the heading “Securities Authorized for Issuance under Equity Compensation Plans” in our 2012 Proxy Statement is incorporated by reference in this section.

See Note 8 to our Financial Statements in this annual report for a summary of treasury stock repurchases and retirements.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the other sections of this Annual Report on Form 10-K, including “Item 1.:  Business” and “Item 8.:  Financial Statements and Supplementary Data.”  The various sections of this MD&A contain a number of forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this filing and particularly in “Item 1A.: Risk Factors.”  Accordingly, the Company’s actual future results may differ materially from historical results or those currently anticipated.

Executive Overview

Inventure Foods, Inc. is a leading specialty food marketer and manufacturer of healthy/natural and indulgent specialty snack food brands.  Our products are marketed under a strong portfolio of brands, including T.G.I. Friday’s®, Rader Farms®, Boulder Canyon TM , Poore Brothers®, BURGER KING TM , Nathan’s Famous ®, Jamba®, Bob’s Texas Style® and Tato Skins®.  T.G.I. Friday’s®, BURGER KING TM , Nathan’s Famous® and Jamba® are licensed brand names.  In 2011, T.G.I. Friday’s® revenues comprised 28% of total net revenues, compared to 29% of total net revenues in 2010.  We complement our branded product retail sales with private label sales.  The majority of our revenues are attributable to external customers in the United States.  We sell to external customers internationally, however the revenues attributable to those customers are immaterial.

All of our assets are located in the United States and include manufacturing facilities in Arizona, Indiana and Washington.  The farming and processing and storage facility is located on 696 acres of land in Lynden, Washington, which is leased from the Uptrails Group, LLC, partially owned by one of our current employees and a former owner of Rader Farms.

2011 was a record volume year for the Company with net revenues of $162.2 million, a 21.1% increase over the prior year.  Key focus areas are product innovation, including the launch of a number of new items under our existing brands, including Boulder Canyon™ Natural Foods Garden Select Vegetable Crisps; Olive Oil kettle cooked potato chips; T.G.I. Friday’s® Onion Rings; and Nathan’s Famous® Crunchy Crinkle Fries.  We also launched in 2011 the Jamba® Caribbean Passion and Orange Dream Machine at home frozen smoothie kits.

Key Trends

Consumer Trends

The snack industry has been heavily influenced by a proliferation of new flavors and health focused snacks, with a rapid increase in the number of low-fat, low-carb, all-natural and organic products.  Mainstream retailers such as Safeway have now created standalone natural and organic sections in their stores.  We believe the trend for healthier snacks will continue and will provide revenue growth opportunities for our Rader Farms®, Boulder Canyon® and premium private label products.  During the year, we

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invested heavily in the Jamba® and Boulder Canyon® brands.  We expect to continue brand investments in 2012 to drive continued sales and earnings growth in the long term.  Also, given the current economic environment, more consumers are moving towards the discount channel, which continues to provide revenue growth opportunities for certain of our snack food brands.

Fluctuations in Commodity Prices and Distribution Costs

During 2012, we expect cost increases for raw materials and transportation.  We attempt to manage cost inflation risks by locking in prices through short-term supply contracts and advance commodity purchase agreements and by implementing cost savings measures.

Retailer Consolidation

The retail food environment continues to be influenced by consolidation as fewer large retailers, including Kroger, Safeway and Wal*Mart, are gaining a larger share of the grocery retail environment.  These retailers are also consolidating their regional buying operations into singular national operations to improve efficiency and increasing their emphasis on private label products. These actions create opportunities for us because brands like T.G.I. Friday’s® and Boulder Canyon TM  brand snack products are brands that can be sold effectively on a national basis and may provide us with additional private label manufacturing opportunities.

Results of Operations

The following discussion summarizes the significant factors affecting our consolidated operating results, financial condition, liquidity and capital resources.  This discussion should be read in conjunction with “Item 8.: Financial Statements and Supplementary Data” and the “Cautionary Statement Regarding Forward-Looking Statements” on page 3.  Our operations consist of two reportable segments:  snack products and frozen products.  The snack products segment includes manufactured potato chips, kettle chips, potato crisps, potato skins, pellet snacks and extruded product for sale primarily to snack food distributors and retailers.  This segment includes a limited number of snack food products purchased and sold through our local distribution network.  The frozen segment produces frozen fruit products, such as berries and smoothies for sale primarily to groceries, club stores and mass merchandisers.

Our fiscal year ends on the last Saturday occurring in the month of December of each calendar year.  Accordingly, fiscal 2011 commenced December 26, 2010 and ended December 31, 2011.  The fiscal year end dates result in an additional week of results every five or six years.  There are 53 weeks in the 2011 fiscal year.

Year ended December 31, 2011 compared to the year ended December 25, 2010

In 2011, net revenues increased 21.1%, or $28.2 million, to $162.2 million compared with net revenues of $134.0 million for the previous fiscal year.  Excluding the extra reporting week, net revenues were $158.9 million, an increase of 18.6% versus the previous fiscal year.  Snack segment revenue was $95.1 million, up $9.6 million and 11.2% from prior year.  The snack segment revenue growth was primarily driven by both pricing and volume increases, including Boulder Canyon®, up 23%, T.G.I.Friday’s ® up 17%, and private label up 37%.  These increases were partially offset by declines in our smaller non-strategic brands.  Total snack segment pounds sold were up 12.8% for the year.  Frozen segment net revenues were $67.2 million, an increase of $18.7 million or 38.5%.  This increase was a result of strong volume growth in both existing and new customers, including the national expansion of our Jamba® All Natural Smoothies, and price increases taken during the year.  Jamba® totaled $14.0 million of net revenues in 2011, compared to $3.4 million in the previous year.  Excluding Jamba ® net revenues, frozen segment net revenues were up 17.9% compared to prior year.  Total frozen segment pounds sold were up 18.9% for the year.  Overall, net revenues for the year include an increase of 45.6% in trade and promotional spending versus prior year, primarily supporting the Jamba® expansion.

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Gross profit for 2011 was $30.1 million, or 18.6% of net revenues, compared to $29.0 million, or 21.7% of net revenues, for the prior year.  Snack products segment gross profit of $18.2 million increased $1.6 million or 9.9% and was down as a percentage of net revenues to 19.1%  in 2011 from 19.3% in 2010.  Snack products segment gross profit was composed primarily of strong volumes in our more profitable brands and channels, and offset by our effort to work through capacity constraints at the Goodyear plant during the facility’s ongoing capital improvements program during the year.  This included higher outsourced production costs and increased labor costs primarily due to overtime.  The frozen products segment gross profit of $12.0 million was down $0.5 million or 4.3%, and decreased as a percentage of net revenues to 17.8% from 25.8%.  The decrease in gross profit dollars and margin for the year are primarily attributable to our increased spending on trade promotion, slotting fees and coupon expense supporting the Jamba® national rollout.  The frozen products segment was also impacted by the higher cost of berries relative to the prior year, which benefited from the exceptional 2009 berry harvest.

Selling, general and administrative (“SG&A”) expenses were $24.9 million or 15.4% of net revenues for the year, an increase of $3.2 million versus 2010 and down 0.8 percentage points from 16.2% of net revenue last year.  In 2010, we wrote off $0.6 million in old trademarks.  Excluding the write off, SG&A in 2010 was $21.1 million, or 15.7% of net revenues.  The increase in SG&A expense dollars was primarily attributable to the ongoing additional promotional support of our Jamba® and Boulder Canyon™ products, including demonstration and marketing expenses, as well as increased additional sales and marketing personnel supporting the Jamba® and Boulder Canyon™ brands.

The income tax provision of $1.5 million is $0.5 million less than the $2.0 million of tax provision in the prior year.  Our effective income tax expense rate was 34.9% in 2011 compared to 31.0% in 2010.  The change in the effective rate is primarily due to the impact of a $0.2 million decrease in research and development tax credits, incurred as a result of additional credits from prior periods being claimed in 2010.  This reduction represents a 2.5% increase in the effective tax rate for the year.  Additional increases to the effective tax rate include a $0.3 million increase in tax-effected equity compensation costs and other items, representing a 1.1% increase in the effective rate, and a reduction of domestic production activity credits of $0.08 million, representing an increase of 0.3% in the effective rate.

Net income for 2011 was $2.8 million, representing a $1.7 million or 37.0% decrease when compared to $4.5 million for 2010 as a result of the factors discussed above.  The net income for 2011 equated to $0.16 per basic and $0.15 per diluted share, compared with $0.25 per basic and $0.24 per diluted share in 2010.

Liquidity and Capital Resources

Liquidity represents our ability to generate sufficient cash flows from operating activities to satisfy obligations as well as our ability to obtain appropriate financing.  Therefore, liquidity cannot be considered separately from capital resources that consist primarily of current and potentially available funds for use in achieving our objectives.  Currently, our liquidity needs arise primarily from working capital requirements, capital expenditures, and debt repayment.  Sufficient liquidity is expected to be available to enable us to meet these demands.  Net working capital was $22.9 million (a current ratio of 1.8:1) and $20.6 million (a current ratio of 2.3:1) at December 31, 2011 and December 25, 2010, respectively.

Operating Cash Flows

Net cash provided by operating activities was $4.7 million for the fiscal year ended December 31, 2011 and $7.1 million for the fiscal year ended December 25, 2010.  The overall decrease of $2.4 million was primarily driven by an increase in our working capital requirements of $2.3 million.  In 2011, our inventories increased $9.9 million during the year as a result of higher berry prices, increased sales volume, and anticipated demand.  We purchased higher quantities of lower cost fresh berries to freeze in order to reduce purchases of higher cost frozen berries.  Additionally, we incurred increases in accounts receivable of $4.2 million in 2011 compared to an increase of $0.8 million in 2010, attributable to our net revenue growth.  The $9.9 million year-over-year inventory increase is the primary driver of the $10.3 million year-over-year increase in accounts payable and accrued liabilities during 2011.  In 2010, we increased inventories by $4.4 million and accounts payable and accrued liabilities by $2.1 million, both primarily as a result of higher berry prices relative to prior year.  In 2010, accounts receivable also increased $0.8 million as a result of the increase in sales compared to the prior year.

Investing Cash Flows

Net cash used in investing activities, all representing capital expenditures, was $9.7 million in 2011 compared to $8.0 million in 2010.  Capital expenditures of $9.7 million in 2011 primarily relate to the purchase of manufacturing equipment of $6.4 million, primarily at our Goodyear facility for new kettles and packaging equipment, $0.9 million of capital expenditures related to the purchase and preproduction costs of berry plants, $1.5 million of building improvements, and $0.9 million in furniture and office equipment.  Capital expenditures of $8.0 million in 2010 primarily relate to the purchase of manufacturing equipment of $6.6 million,

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including the addition of extruder equipment in our Bluffton facility, $0.8 million of capital expenditures related to the purchase and preproduction costs of berry plants, and furniture and equipment of $0.6 million.  In 2012, we plan to spend $6.6 million in capital expenditures, primarily at our manufacturing facilities.  Capital expenditures are funded primarily by net cash flow from operating activities, cash on hand, and available credit from our credit facility.

Financing Cash Flows

Net cash provided by financing activities for fiscal year 2011 was $4.7 million compared to $0.8 million in 2010.  The $3.9 million increase in net cash provided by financing activities is driven by additional borrowings of $6.9 million on our revolving line of credit year over year, partially offset by the $2.8 million year over year decrease in proceeds from capital lease financing relating to the prior year’s extrusion equipment implementation in our Bluffton facility, and further offset by an increase of $0.3 million in capital lease obligation payments.  The increase of borrowings on our credit facility is driven by our planned capital expenditure initiatives in our Goodyear facility, our planned buildup of inventories relating to the national Jamba® Smoothies launch, and increased accounts receivables generated by higher net revenues.

Debt and Capital Resources

At December 31, 2011, there was $4.8 million of borrowing availability under the revolving line of credit in our Loan Agreement with U.S. Bank.  As is customary in such financings, U.S. Bank may terminate its commitments and accelerate the repayment of amounts outstanding and exercise other remedies upon the occurrence of an event of default (as defined in the Loan Agreement), subject, in certain instances, to the expiration of any applicable cure period.  The agreement requires us to maintain compliance with certain financial covenants, including a minimum fixed charge coverage ratio and a leverage ratio.  At December 31, 2011, we were in compliance with all of the financial covenants.  See Footnote 6 to our Financial Statements “Long Term Debt and Line of Credit.”

Outlook

We believe that our current financing arrangement with U.S. Bank will provide adequate ability to finance our working capital needs and future capital expenditures. We anticipate 2012 capital expenditures of approximately $6.6 million, funded through working capital and various purchase or leasing arrangements. Our plans are not expected to materially affect our financial ratios or liquidity.  In connection with the implementation of our business strategy, discussed in detail in “Item 1: Business,” we may incur operating losses in the future and may require future debt or equity financings (particularly in connection with future strategic acquisitions, new brand introductions or capital expenditures).  Expenditures relating to acquisition-related integration costs, market and territory expansion and new product development and introduction may adversely affect promotional and operating expenses and consequently may adversely affect operating and net income.  These types of expenditures are expensed for accounting purposes as incurred, while revenue generated from the result of such expansion or new products may benefit future periods.  We believe that we will generate positive cash flow from operations during the next twelve months, which, along with our existing working capital and borrowing facilities, will enable us to meet our operating cash requirements for the next twelve months.  The belief is based on current operating plans and certain assumptions, including those relating to our future revenue levels and expenditures, industry and general economic conditions and other conditions. For instance, if current general economic conditions continue or worsen, we believe that our sales forecasts may prove to be less reliable than they have in the past as consumers may change their buying habits with respect to snack food products. Unexpected price increases for commodities used in our snack products, or adverse weather conditions affecting our Rader Farms crop yield could also impact our financial condition.  If any of these factors change, we may require future debt or equity financings to meet our business requirements. Any required financings may not be available or, if available, may not be on terms attractive to us.

Off-Balance Sheet Arrangements

Under SEC regulations, in certain circumstances, we are required to make certain disclosures regarding the following off-balance sheet arrangements, if material:

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We do not have any off-balance sheet arrangements that are required to be disclosed pursuant to these regulations, other than those described in the Notes to Consolidated Financial Statements.  We do not have, nor do we engage in, transactions with any special purpose entities.  Other than an interest rate swap, we are not engaged in any derivative activities and had no forward exchange contracts outstanding at December 31, 2011.  In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations.  These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States, and are more fully discussed below.

Critical Accounting Policies and Estimates

The Securities and Exchange Commission indicated that a “critical accounting policy” is one which is both important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  We believe that the following accounting policies fit this definition:

Allowance for Doubtful Accounts.  We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.  If our financial condition were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.  We record specific allowances for receivable balances that are considered at higher risk due to known facts regarding the customer.

Inventories.  Our inventories are stated at the lower of cost (first-in, first-out) or market.  We identify slow moving or obsolete inventories and estimate appropriate loss provisions related thereto.  If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Goodwill and Trademarks.  Goodwill and trademarks are reviewed for impairment annually, or more frequently if impairment indicators arise.  Goodwill is required to be tested for impairment between the annual tests if an event occurs or circumstances change that more-likely-than-not reduce the fair value of a reporting unit below its carrying value.  We have concluded from our annual impairment testing performed in December that neither of our two reporting units were at risk of failing the impairment test in the near term, and we believe that there are no known risks for that conclusion to change at either of our reporting units.  Intangible assets with indefinite lives are required to be tested for impairment between the annual tests if an event occurs or circumstances change indicating that the asset might be impaired.  During 2010, we determined that our carrying values of two trademarks were fully impaired, and recorded a $0.6 million charge as a result.

We believe that each of our remaining trademarks has the continued ability to generate cash flows indefinitely, and therefore each of our trademarks has been determined to have an indefinite life.  Our determination that these trademarks have indefinite lives includes an evaluation of historical cash flows and projected cash flows for each of these trademarks. We continue to make investments to market and promote each of these brands, and management continues to believe that the market opportunities and brand extension opportunities will generate cash flows for an indefinite period of time. In addition, there are no legal, regulatory, contractual, economic or other factors to limit the useful life of these trademarks, and we intend to renew each of these trademarks, which can be accomplished at little cost.

Revenue Recognition.  In accordance with accounting principles generally accepted in the United States, we recognize operating revenues upon shipment of products to customers provided title and risk of loss pass to our customers. In those instances where title and risk of loss does not pass until delivery, revenue recognition is deferred until delivery has occurred.  In our snack products segment, revenue for products sold through our local distribution network is recognized when the product is received by the retailer.  Costs associated with obtaining shelf space (i.e., “slotting fees”) are accounted for as a reduction of revenue in the period in which we incur such costs.  Anytime we offer consideration (cash or credit) as a trade advertising or promotional allowance to a purchaser of products at any point along the distribution chain, the amount is accrued and recorded as a reduction in revenue.

Provisions and allowances for sales returns, promotional allowances, coupon redemption and discounts are also recorded as a reduction of revenues in our consolidated financial statements.  These allowances are estimated based on a percentage of sales returns using historical and current market information.  We record certain reductions to revenue for promotional allowances. There are several different types of promotional allowances such as off-invoice allowances, rebates and shelf space allowances. An off-invoice allowance is a reduction of the sales price that is directly deducted from the invoice amount. We record the amount of the deduction as a reduction to revenue when the transaction occurs.  We record certain allowances for coupon redemptions, scan-back promotions and other promotional activities as a reduction to revenue. The accrued liabilities for these allowances are monitored throughout the time period covered by the coupon or promotion.

Marketing Costs.  These costs include various sponsorships, coupon administration and consumer advertising programs that we enter into throughout the year, and are expensed as incurred.  We are a national co-sponsor of American Rivers, a leading

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conservation organization protecting and restoring America’s rivers.  We are allowed to use the American Rivers mark on packaging and printed materials as well as directly promote products to members and river cleanup volunteers.  Our marketing programs also include selective event sponsorship designed to increase brand awareness and to provide opportunities to mass sample branded products.

Also included in selling, general and administrative expense are costs and fees relating to the execution of in-store product demonstrations with club stores or grocery retailers.  The cost of product used in the demonstrations, which is insignificant, and the fee we pay to the independent third party providers who conduct the in-store demonstrations, are recorded as expense when the event occurs. Product demonstrations are conducted by independent third party providers designated by the various retailer or club chains.  During the in-store demonstrations the consumers in the stores receive small samples of our products, and consumers are not required to purchase our product in order to receive the sample.

Income Taxes.  We estimate valuation allowances on deferred tax assets for the portions that we do not believe will be fully utilized based on projected earnings and usage.  Our effective tax rate is based on the level of income of our separate legal entities. Significant judgment is required in evaluating tax positions that affect the annual tax rate.  Unrecognized tax benefits for uncertain tax positions are established when, despite the fact that the tax return positions are supportable, we believe these positions may be challenged and the results are uncertain.  We adjust these liabilities in light of changing facts and circumstances.

Stock-Based Compensation .  We account for our stock options under the fair value method of accounting using a Black-Scholes valuation model to measure stock option fair values at the date of grant. Prior to May 2008, all stock option grants had a five year term. The fair value of these stock option grants is amortized to expense over the vesting period, generally three years for employees and one year for the Board of Directors.  In May 2008, our Board of Directors approved a ten year term for all future stock option grants.  The stock option grants have vesting periods of five years and one year for employees and Board of Director members, respectively.

Self-Insurance Reserves.   We are partially self-insured for the purposes of providing health care benefits to employees covered by our insurance plan.  The plan covers all of full-time employees of the Company on the first day of the month after hiring date for salaried employees, and the first day of the month following the ninetieth day of service for hourly employees. The plan covers the employee’s dependents, if elected by the employee.  We have contracted with an insurance carrier for stop loss coverage that commences when $75,000 in claims is paid annually for a covered participant.  In addition, we have contracted for aggregate stop loss insurance which provides coverage after the maximum amount paid by us exceeds approximately $1.5 million.  Estimated unpaid claims are included in accrued liabilities, and represent management’s best estimate of amounts that have not been paid prior to the year-end dates.  It is reasonably possible that the expense we will ultimately incur could differ.

The above listing is not intended to be a comprehensive list of all of our accounting policies.  In many cases the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment in their application.  See our audited financial statements and notes thereto included in this Annual Report on Form 10-K which contain accounting policies and other disclosures required by accounting principles generally accepted in the United States.

Item 8.                                                            Financial Statements and Supplementary Data

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

None.

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Item 9A.                                                   Controls and Procedures.

Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures.  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at December 31, 2011 for the purpose of providing reasonable assurance that the information required to be disclosed in the reports we file or submit under the Exchange Act of 1934 (1) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (2) is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements or instances of fraud.  As such, a control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of internal control over financial reporting as of December 31, 2011. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, management believes that we maintained effective internal control over financial reporting as of December 31, 2011.

This Annual Report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm because the Company qualifies as a smaller reporting company.

Changes in Internal Control Over Financial Reporting

No change occurred in our internal controls over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the three months ended December 31, 2011 that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting.

Item 9B.                                                   Other Information.

None.

PART III

Item 10.                                                     Directors, Executive Officers and Corporate Governance

Code of Ethics

Each of our directors, officers and employees are required to comply with the Inventure Foods, Inc. Code of Business

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Conduct and Ethics adopted by the Company.  The Code of Business Conduct and Ethics sets forth policies covering a broad range of subjects and requires strict adherence to laws and regulations applicable to our business.  We have also adopted a Financial Code of Ethics for our Chief Executive Officer, Chief Financial Officer and all other finance managers.  The Financial Code of Ethics supplements the Code of Business Conduct and Ethics and is intended to emphasize the importance of honest and ethical conduct in connection with our financial reporting obligations.  The Code of Business Conduct and Ethics and the Financial Code of Ethics are available on our website at www.inventurefoods.com, under the “Investors Relations” section’s “Governance Documents” caption. Copies of these Codes may also be obtained, without charge, by any shareholder upon written request directed to the Secretary of the Company at 5415 East High Street, Suite 350, Phoenix, Arizona 85054.  We will post to our website any amendments to these Codes, or waiver from the provisions thereof, applicable to our directors or any principal executive officer, principal financial officer principal accounting officer or controller, or any person performing similar functions under an “Investors-Governance-Code of Business Conduct-Waivers” caption.

The information regarding Directors and Executive Officers appearing under the headings “Proposal 1: Election of Directors,” “Executive Officers,” “Meetings and Committees of the Board of Directors” and “Section 16(a) Beneficial Ownership Reporting Compliance” of our 2012 Proxy Statement is incorporated by reference in this section.

Item 11.                                                     Executive Compensation

The information appearing under the headings “Director Compensation,” “Employment Agreements,” “Compensation Committee Report on Executive Compensation” and “Executive Officer Compensation” of our 2012 Proxy Statement is incorporated by reference in this section.

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

The information appearing under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Securities Authorized for Issuance Under Equity Compensation Plans” of our 2012 Proxy Statement is incorporated by reference in this section.

Item 13.                                                     Certain Relationships and Related Transactions, and Director Independence

The information appearing under the heading “Meetings and Committees of the Board of Directors” and “Certain Relationships and Related Transactions” of our 2012 Proxy Statement is incorporated by reference in this section.

Item 14.                                                     Principal Accounting Fees and Services

Information appearing under the heading “Independent Auditors” of our 2012 Proxy Statement is incorporated by reference in this section.

PART IV

Item 15.                                                     Exhibits and Financial Statement Schedules:

The following documents are filed as part of this Annual Report on Form 10-K

1.               Financial Statements

Reports of Independent Registered Public Accounting Firms

Consolidated balance sheets as of December 31, 2011 and December 25, 2010

Consolidated statements of operations for the years ended December 31, 2011 and December 25, 2010

Consolidated statements of shareholders’ equity and comprehensive income for the years ended December 31, 2011 and December 25, 2010

Consolidated statements of cash flows for the years ended December 31, 2011 and December 25, 2010

Notes to consolidated financial statements

2.               Financial Schedules

Schedules have been omitted because of the absence of conditions under which they are required or because the information required is included in our consolidated financial statements or notes thereto.

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3.               Exhibits required by Item 601 of Regulation S-K:

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*                            Management compensatory plan or arrangement.

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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.

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, in the capacities and on the dates indicated.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Inventure Foods, Inc.
Phoenix, Arizona

We have audited the accompanying consolidated balance sheets of Inventure Foods, Inc. and subsidiaries (the “Company”) as of December 31, 2011 and December 25, 2010 and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for each of the years in the two-year period ended December 31, 2011. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the 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 audit to obtain reasonable assurance about whether the consolidated 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 control over financial reporting.  Our audit included consideration of internal control 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 control 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 consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Inventure Foods, Inc. and subsidiaries as of December 31, 2011 and December 25, 2010, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

/s/ MOSS ADAMS LLP

Scottsdale, Arizona
March 27, 2012

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INVENTURE FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

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INVENTURE FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these consolidated financial statements.

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INVENTURE FOODS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME