U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
X Quarterly report under Section 13 or 15 (d) of the Securities Exchange
--- Act of 1934 for the quarterly period ended June 29, 1996.
Transition report under Section 13 or 15 (d) of the Exchange Act for the
--- transition period from ______ to ______
Commission file number: 1-9009
Tofutti Brands Inc.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Chapter)
Delaware 13-3094658
------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
50 Jackson Drive, Cranford, New Jersey 07016
--------------------------------------------
(Address of Principal Executive Offices)
(908) 272-2400
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(Issuer's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act during the past 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
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
As of August 8, 1996 the Issuer had 6,053,567 shares of Common Stock, par
value $.01, outstanding
Transitional Small Business Disclosure Format (check one):
Yes No
--- ---
<PAGE>
TOFUTTI BRANDS INC.
INDEX
Page
Part I - Financial Information:
Condensed Balance Sheets - June 29, 1996
(Unaudited) and December 30, 1995 (Audited) 3
Condensed Statements of Operations -
(Unaudited) - Thirteen and twenty-six week
periods ended June 29,1996 and thirteen and
twenty-six periods ended July 1, 1995 4
Condensed Statements of Cash Flows -
(Unaudited) - Twenty-six week period
ended June 29, 1996 and twenty-six week
period ended July 1, 1995 5
Notes to Condensed Financial Statements -
(Unaudited) 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operation 7-9
Part II - Other Information:
Item 4. Submission of Matters to a Vote
of Shareholders 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
2
<PAGE>
TOFUTTI BRANDS INC.
Condensed Balance Sheets
(000's omitted)
June 29, December 30,
1996 1995
(Unaudited) (Audited)
----------- ---------
Assets
Current assets:
Cash and cash equivalents $ 98 12
Accounts receivable (net of reserve of
$252 in 1996 and $242 in 1995) 1,060 1,006
Inventories 271 196
Prepaid expenses 6 11
----- -----
Total current assets 1,435 1,225
Deferred taxes 264 264
Other assets 56 56
----- -----
Total assets 1,755 1,545
===== =====
Liabilities and Stockholders' Equity
Current liabilities:
Legal settlement payable - current portion 13 13
Accounts payable 599 364
Accrued liabilities 92 186
---- -----
Total current liabilities 704 563
Long-term debt-legal settlement 75 81
----- -----
Total liabilities 779 644
Stockholders' equity:
Preferred stock - -
Common stock 61 61
Paid-in capital 3,503 3,503
Retained (deficit) (2,588) (2,663)
----- -----
Total stockholders' equity 976 901
----- -----
Total liabilities and stockholders'
equity 1,755 1,545
===== =====
See accompanying notes to condensed financial statements.
3
<PAGE>
TOFUTTI BRANDS INC.
Condensed Statement of Operations
(Unaudited)
(000's omitted)
Thirteen Thirteen Twenty-Six Twenty-Six
weeks weeks weeks weeks
ended ended ended ended
6/29/96 7/1/95 6/29/96 7/1/95
------- ------ ------- ------
Net sales $ 1,679 1,487 2,774 2,510
Cost of sales 1,055 896 1,709 1,479
----- ----- ----- -----
Gross profit 624 591 1,065 1,031
----- ----- ----- -----
Operating expenses:
Selling 238 228 398 400
Marketing and sales promotion 73 120 115 157
Research and development 57 40 99 82
General and administrative 190 155 370 328
----- ----- ----- -----
558 543 982 967
----- ----- ----- -----
Operating income 66 48 83 64
Interest expense 3 3 7 6
----- ----- ----- -----
Income before income
tax expense 63 45 76 58
Income tax expense - - 1 1
----- ----- ----- -----
Net income $ 63 45 75 57
Net income per share $ .01 .01 .01 .01
----- ----- ----- -----
Weighted average number of
shares outstanding 6,065 6,063 6,065 6,063
===== ===== ===== =====
See accompanying notes to condensed financial statements.
4
<PAGE>
TOFUTTI BRANDS INC.
Condensed Statements of Cash Flows
(Unaudited)
(000's omitted)
Twenty-six Twenty-six
weeks weeks
ended ended
6/29/96 7/1/95
------- ------
Cash flows from operating
activities, net $ 86 7
------ ------
Cash flows from investing activities: - -
Cash flows from financing activities - -
Net increase in cash
and cash equivalents 86 7
------ ------
Cash at beginning of period 12 7
------ ------
Cash at end of period 98 14
====== ======
Suplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest 7 6
Income taxes 1 1
See accompanying notes to condensed financial statements.
5
<PAGE>
TOFUTTI BRANDS INC.
Notes to Condensed Financial Statements
(Unaudited)
(000's omitted)
(1) Basis of Presentation
The accompanying financial information is unaudited, but, in the opinion of
management, reflects all adjustments (which include only normally recurring
adjustments) necessary to present fairly the Company's financial position,
operating results and cash flows for the periods presented. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. The financial information should be read in conjunction with the
audited financial statements and notes thereto for the year ended December 30,
1995 included in the Company's Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission. The results of operations for the twenty-six
week period ended June 29, 1996 are not necessarily indicative of the results to
be expected for the full year.
(2) Inventories
The composition of inventories is as follows:
June 29, Dec. 30,
1996 1995
---- ----
Raw materials and packaging
supplies $ 116 108
Finished goods 155 88
---- ----
271 196
6
<PAGE>
TOFUTTI BRANDS INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying condensed financial
statements. The discussion and analysis contains trend analysis and other
forward-looking statements. Actual results could differ materially from those
projected in the forward-looking statements as a result of changes in the
economy, changes in the Company's product sales mix and other factors which may
be beyond the Company's control.
Results of Operations
Thirteen Weeks Ended June 29, 1996 Compared with Thirteen Weeks Ended
July 1, 1995
Net sales for the thirteen weeks ended June 29, 1996 were $1,679,000, an
increase of $192,000, or 13% from the sales level realized for the thirteen
weeks ended July 1, 1995. The Company's frozen dessert line (principally novelty
items), and food product line, both showed increases during this period. The
Company's gross profit for the current quarter increased by $33,000, while its
gross profit percentage decreased to 37% compared to 40% for the same period
last year. The decrease in the gross profit percentage was due to an increase in
novelty and food product sales during the 1996 period. The Company's gross
profit on novelties and food products is less than on pints.
The Company anticipates a continuing increase in sales during the third and
fourth quarters of the current fiscal year due to the introduction of new
products and expanded distribution. Such increases are dependent upon market
acceptance of these products, for which no assurance can be given.
Selling expenses increased slightly to $238,000 for the current fiscal quarter
compared with $228,000 for the comparable period last year, due to an increase
in freight and commission expenses related to the higher sales level. This
decrease was due to a reduction of payroll costs. Marketing and sales promotion
expenses decreased to $73,000 in 1996 from $120,000 in 1995. This decrease was
due principally to the costs associated with a radio advertising campaign in
northern California during the 1995 period which was not repeated in 1996.
7
<PAGE>
Research and development expenses increased to $57,000 for the thirteen weeks
ended June 29, 1996 from $40,000 in the comparable 1995 period, reflecting an
increase in related research and development costs incurred in the development
of the Company's new products.
General and administrative expenses were $190,000 for the current quarter
compared with $155,000 for the comparable period in 1995, reflecting increased
building maintenance costs, professional fees and outside services.
Twenty-Six Weeks Ended June 29, 1996 Compared with Twenty-Six Weeks Ended
July 1, 1995
Net sales for the twenty-six weeks ended June 29, 1996 were $2,774,000, an
increase of $264,000, or 11% from the sales level realized for the twenty-six
weeks ended July 1, 1995. The Company's frozen dessert line (principally novelty
items) and food product line both showed increases during this period. The
Company's gross profit for the current period increased by $34,000, while its
gross profit percentage decreased to 38% as compared to 41% for the same period
last year. The decrease in the gross profit percentage was due to an increase in
novelty and food product sales during the 1996 period. The Company's gross
profit on novelties and food products is less than on pints.
Selling expenses decreased slightly to $398,000 for the current fiscal period
compared with $400,000 for the comparable period last year. The increase in
freight, commission and warehouse expenses associated with the increased sales
level was offset by a reduction in payroll costs. Marketing and sales promotion
expenses decreased to $115,000 from $157,000 in 1995. This increase was due
principally to the costs associated with a radio advertising campaign in
northern California during 1995, which was not repeated in 1996.
Research and development expenses were $99,000 for the twenty-six weeks ended
June 29, 1996, compared with $82,00 for the comparable period last year,
reflecting an increase in related research and development costs incurred in the
development of the Company's new products.
General and administrative expenses were $370,000 for the current period
compared with $328,000 for the comparable period in 1995, reflecting increased
building maintenance costs, professional fees and outside services.
The Company's imputed interest expense was $7,000 for the twenty-six weeks ended
June 29, 1996 compared with $6,000 for the twenty-six weeks ended July 1, 1995.
8
<PAGE>
Liquidity and Capital Resources
The Company's working capital was $731,000 at June 29, 1996, an increase of
$69,000 from December 30, 1995. Accounts receivable increased slightly to
$1,060,000 at June 29, 1996, an increase of $54,000 from December 30, 1995.
Inventories increased by $75,000 due principally to an increase in finished
goods inventory reflecting the higher sales level and new product introductions.
Prepaid expenses decreased by $5,000 to $6,000 at June 29, 1996, due primarily
to the amortization of the Company's business insurance which renews in August.
Deferred taxes and other assets were unchanged from December 30, 1995 at
$264,000 and $56,000 respectively.
Accounts payable increased by $235,000 to $599,000 at June 29, 1996, reflecting
the higher sales level and increase in inventory, while accrued liabilities
declined from December 30, 1995 by $94,000 to $92,000 at June 29, 1996.
As a result of the Company's inability to secure additional financing or equity
capital, it has not had sufficient funds to fully implement the marketing of its
new products. This has hindered the Company in its efforts to increase the sales
of its products. The Company continues to fund its operations from current
resources. Based on recent sales trends and the planned introduction of new
products in the third and fourth quarters of this year, the Company believes
that its revenues will improve in 1996. Management believes that it will have
sufficient financial resources to continue its operations through the coming
year.
The Company does not have any material capital commitments.
9
<PAGE>
PART II - OTHER INFORMATION
TOFUTTI BRANDS INC.
Item 4. Submission of Matters to a Vote of Shareholders
During the thirteen week period ended June 29, 1996, the Company held
its Annual Meeting of Shareholders.
At the meeting, held on June 4, 1996, the Company's shareholders
voted for:
1. The election of the following directors to hold office for a
term until their successors are duly elected and qualified at
the Company's 1996 Annual Meeting of Shareholders
For Against Abstained Unvoted
--- ------- --------- -------
David Mintz 5,443,195 115,077 - -
Bernard Koster 5,443,534 114,738 - -
Reuben Rapoport 5,442,594 115,678 - -
Franklin Snitow 5,443,534 114,738 - -
2. The ratification of the appointment of KPMG Peat Markwick to
examine the Company's acounts for 1996.
For Against Abstained Unvoted
--- ------- --------- -------
5,443,195 18,980 11,863 -
3. The approval of a proposal to amend the Company's 1993 Stock
Option Plan and increase by 1,000,000 shares the number of
shares of the Company's Common Stock available for the grant of
options.
For Against Abstained Unvoted
--- ------- --------- -------
3,463,647 244,801 31,592 1,726,755
10
<PAGE>
Item. 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
3.1* Certificate of Incorporation, as ammended through February 1986
3.1.1** March 1986 Amendment to Certificate of Incorporation
3.2* By-laws
4.1*** Copy of the Company's 1993 Stock Option Plan
10.1**** Copy of Legal Settlement between the Company and the NEMP Corporation
(b) Reports on Form 8-K filed during the last quarter of the period
covered by this report:
None
- -----------------------------
* Filed as an exhibit to the Registrant's Form 10-K for the fiscal year
ended July 31, 1985 and hereby incorporated by reference thereto.
** Filed as an exhibit to the Registrant's Form 10-K for the fiscal year
ended August 2, 1986 and hereby incorporated by reference thereto.
*** Filed as an exhibit to the Company's Form 10-KSB for the fiscal year
ended January 1, 1994 and hereby incorporated by reference thereto.
**** Filed as an exhibit to the Registrant's Form 10-K for the fiscal year
ended December 28, 1991 and hereby incorporated by reference thereto.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 9134, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TOFUTTI BRANDS INC.
(Registrant)
/s/David Mintz
----------------------
David Mintz
President
/s/Steven Kass
---------------------
Steven Kass
Chief Financial Officer
Date: August 12, 1996
12
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Dec-28-1996
<PERIOD-END> Jun-29-1996
<CASH> 98,000
<SECURITIES> 0
<RECEIVABLES> 1,312,000
<ALLOWANCES> 252,000
<INVENTORY> 271,000
<CURRENT-ASSETS> 1,435,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,755,000
<CURRENT-LIABILITIES> 424,000
<BONDS> 77,000
0
0
<COMMON> 61,000
<OTHER-SE> 915,000
<TOTAL-LIABILITY-AND-EQUITY> 1,755,000
<SALES> 0
<TOTAL-REVENUES> 1,679,000
<CGS> 1,055,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 558,000
<LOSS-PROVISION> 9,000
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> 63,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,000
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
