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Place candy canes in food processor and pulse until they are completely crushed.
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Combine powdered sugar, butter, extracts and egg in large bowl.
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Beat wet ingredients until light & fluffy at medium speed.
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Combine flour, crushed candy canes, baking powder and salt in a separate mixing bowl.
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Add dry mixture to wet mixture and beat until well blended (mixture will be kind of dry).
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Stir in chopped Candy Cane Kisses.
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Shape dough into 1 inch balls; roll in granulated sugar.
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Place dough balls 1-inch apart on cookie sheet.
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Bake for 10-12 minutes in 350 degree oven until firm.
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Remove from oven and immediately press a Candy Cane Kiss in the center of each cookie.
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Place cookie sheet in refrigerator until ready to serve (keeps kisses from melting).