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 September 30, 1995
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 Charter)
Delaware 13-3094658
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(State of Incorporation) (I.R.S. Employer
Identification No.)
50 Jackson Drive, Cranford, New Jersey 07016
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(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
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APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 1, 1995 the Issuer had 6,053,567 shares of Common Stock,
par value $.01, outstanding
Transitional Small Business Disclosure Format (check one):
Yes No X
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1
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TOFUTTI BRANDS INC.
INDEX
Page
Part I - Financial Information:
Condensed Balance Sheets - September 30, 1995
(Unaudited) and December 31, 1995 (Audited) 3
Condensed Statements of Operations - (Unaudited) - Thirteen
and thirty-nine week periods ended September 30, 1995 and
thirteen and thirty-nine periods ended
October 1, 1995 4
Condensed Statements of Cash Flows - (Unaudited) - Thirty-nine
week period ended September 30, 1995 and thirty-nine week
period ended October 1, 1994 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
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<TABLE>
<CAPTION>
TOFUTTI BRANDS INC.
Condensed Balance Sheets
(000's omitted)
September 30, December 31,
1995 1994
(Unaudited) (Audited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 5 7
Accounts receivable (net of reserve of
$187 in 1995 and $171 in 1994) 994 1,069
Inventories 145 126
Prepaid expenses 2 10
------ -----
Total current assets 1,146 1,212
Deferred taxes 244 244
Other assets 35 30
------ -----
Total assets $ 1,425 1,486
====== =====
Liabilities and Stockholders' Equity
Current liabilities:
Legal settlement payable - current portion $ 13 12
Accounts payable 329 474
Accrued liabilities 55 62
------ -----
Total current liabilities 397 548
Long-term debt - legal settlement 84 94
------ -----
Total liabilities 481 642
Stockholders' equity:
Preferred stock - -
Common stock 61 60
Paid-in capital 3,504 3,494
Retained (deficit) (2,621) (2,710)
------ ------
Total stockholders' equity 944 844
------ ------
Total liabilities and stockholders'
equity $ 1,425 1,486
====== ======
<FN>
See accompanying notes to condensed financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
TOFUTTI BRANDS INC.
Condensed Statement of Operations
(Unaudited)
(000's omitted)
Thirty- Thirty-
Thirteen Thirteen Nine Nine
weeks weeks weeks weeks
ended ended ended ended
9/30/95 10/1/94 9/30/95 10/1/94
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 1,334 1,573 3,844 3,830
Cost of sales 806 960 2,285 2,226
----- ----- ----- -----
Gross profit 528 613 1,559 1,604
----- ----- ----- -----
Operating expenses:
Selling 186 217 586 553
Marketing and sales promotion 99 181 256 313
Research and development 40 46 122 133
General and administrative 166 159 495 495
----- ----- ----- -----
491 603 1,459 1,494
----- ----- ----- -----
Operating income 37 10 100 110
Interest expense 3 4 9 10
----- ----- ----- -----
Income before income
tax expense 34 6 91 100
Income tax expense - - 1 -
----- ----- ----- ----
Net income $ 34 6 90 100
Net income per share $ .01 .00 .01 .02
===== ===== ==== ====
Weighted average number of
shares outstanding 6,086 6,063 6,086 6,063
===== ===== ===== =====
<FN>
See accompanying notes to condensed financial statements.
</FN>
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
TOFUTTI BRANDS INC.
Condensed Statements of Cash Flows
(Unaudited)
(000's omitted)
Thirty- Thirty-
nine nine
weeks weeks
ended ended
9/30/95 10/1/94
<S> <C> <C>
Cash flows from operating
activities, net $ (12) (38)
Cash flows from investing activities: - -
Cash flows from financing activities 10 11
---- ----
Net increase (decrease) in
cash and cash equivalents ( 2) (27)
Cash at beginning of period 7 135
---- ----
Cash at end of period $ 5 108
==== ====
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 9 10
Income taxes 1 -
<FN>
See accompanying notes to condensed financial statements.
</FN>
</TABLE>
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 31, 1994 included in the Company's Annual Report on Form
10-KSB filed with the Securities and Exchange Commission. The results
of operations for the thirty-nine week period ended September 30, 1995
are not necessarily indicative of the results to be expected for the
full year.
(2) Inventories
The composition of inventories is as follows:
Sept. 30, Dec. 31,
1995 1994
---- ----
Raw materials and packaging
supplies $ 51 50
Finished goods 94 76
---- ----
$ 145 126
==== ====
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.
Results of Operations
Thirteen Weeks Ended September 30, 1995 Compared with Thirteen
Weeks Ended October 1, 1994
Net sales for the thirteen weeks ended September 30, 1995 were $1,334,000, a
decrease of $239,000, or 15% from the sales level realized for the thirteen
weeks ended October 1, 1994. This decrease was due almost exclusively to a
decrease in foreign sales versus the same quarter last year. The Company's gross
profit for the current quarter decreased by $85,000, while its gross profit
percentage increased slightly to 40% as compared to 39% for the same period last
year. The increase in the gross profit percentage was due to a decrease in
foreign sales, on which the Company has a lower gross margin.
Selling expenses decreased to $186,000 for the current fiscal quarter compared
with $217,000 for the comparable period last year. This decrease was due to
decreased freight, commission and warehouse expenses associated with the
decreased sales level for the quarter. Marketing and sales promotion expenses
decreased to $99,000 in 1995 from $181,000 in 1994. This decrease was due
principally to an extensive radio advertising campaign in the New York area in
the third quarter of last year, which was not repeated this year.
Research and development expenses declined to $40,000 for the thirteen weeks
ended September 30, 1995 from $46,000 in the comparable 1994 period, reflecting
a reduction in non-employee expenses.
General and administrative expenses were $166,000 for the current quarter
compared with $159,000 for the comparable period in 1994.
7
<PAGE>
The imputed interest expense associated with the Company's long-term legal
settlement debt declined slightly to $3,000 for the current quarter.
Thirty-Nine Weeks Ended September 30, 1995 Compared with Thirty-
Nine Weeks Ended October 1, 1994
Net sales for the thirty-nine weeks ended September 30, 1995 were $3,844,000, an
increase of $14,000 from the sales level realized for the thirty-nine week 1994
period. In the 1995 period, sales of hard pack Tofutti decreased by $41,000,
while food product sales increased by $55,000. The Company's gross profit for
the current period decreased by $45,000, while its gross profit percentage
decreased to 41% as compared to 42% 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 1995 period. The Company's gross profit on novelties
and food products is less than on pints.
Selling expenses increased to $586,000 for the current fiscal period compared
with $553,000 for the comparable period last year. This increase was due to
increased freight, commission and warehouse expenses associated with an increase
in sales out of the New York Metropolitan area during the first half of the
year. Marketing and sales promotion expenses decreased to $256,000 from $313,000
in 1994. This decrease was due principally to an extensive radio advertising
campaign in the New York area in the third quarter of last year, which was not
repeated this year.
Research and development expenses were $122,000 for the thirty-nine weeks ended
September 30, 1995, compared with $133,000 for the comparable period last year,
reflecting a reduction in nonemployee expenses.
General and administrative expenses were $495,000 for both periods.
The Company's imputed interest expense was $9,000 for the thirty-nine weeks
ended September 30, 1995 compared with $10,000 for the thirty-nine weeks ended
October 1, 1994.
Liquidity and Capital Resources
The Company's working capital was $749,000 at September 30, 1995, an increase of
$85,000 from December 31, 1994. Accounts receivable decreased to $994,000 at
September 30, 1995, a decrease of $75,000 from December 31, 1994, due to lower
sales in September 1995 versus September 1994. Inventories increased by $19,000,
due principally
8
<PAGE>
to an increase in finished goods inventory reflecting the higher sales level on
the West Coast. Prepaid expenses decreased by $8,000 to $2,000 at September 30,
1995, due primarily to the amortization of the Company's business insurance
which renews in August. Other assets increased by $5,000 due to an increase in
the value of a split-life insurance policy which was initially purchased in
1994.
The Company was successful in reducing its outstanding accounts payable and
accrued liabilities by $145,000 and $7,000, respectively, since year end.
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 for a number of years. This has hindered the Company in its efforts
to increase the sales of its products. The Company was able to fund its
operations in the first nine months of 1995 from its current resources. Based on
recent sales trends, the Company believes that its revenues will remain stable
during the remainder of 1995. Any substantial increase or decrease in its
operations will require additional working capital. No assurance can be given
that such working capital will be available if required. Management believes
that if its operations continue in a manner consistent with its results for the
first nine months of the year, it will have sufficient financial resources to
continue its operations for the remainder of the current fiscal year and the
first half of 1996.
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
-----------------------------------------------
None.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1* Certificate of Incorporation, as amended 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
10.2***** Copy of Agreement between the Company and Haagen-Dazs
Inc. regarding exclusive distribution of hardpack TOFUTTI
in the Metropolitan New York Area
(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.
***** Filed as an exhibit to the Registrant's Form 10-QSB for the quarter
ended April 3, 1993 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 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TOFUTTI BRANDS INC.
(Registrant)
David Mintz
President
Steven Kass
Chief Financial Officer
Date: November 8, 1995
12
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 5,000
<SECURITIES> 0
<RECEIVABLES> 1,181,000
<ALLOWANCES> 187,000
<INVENTORY> 145,000
<CURRENT-ASSETS> 1,146,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,425,000
<CURRENT-LIABILITIES> 397,000
<BONDS> 84,000
0
0
<COMMON> 61,000
<OTHER-SE> 883,000
<TOTAL-LIABILITY-AND-EQUITY> 1,425,000
<SALES> 0
<TOTAL-REVENUES> 3,844,000
<CGS> 2,285,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,459,000
<LOSS-PROVISION> 24,000
<INTEREST-EXPENSE> 9,000
<INCOME-PRETAX> 91,000
<INCOME-TAX> 1,000
<INCOME-CONTINUING> 90,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,000
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
