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 March 29, 1997
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
-------- ----------
(State of Incorporation) (I.R.S. Employer
Identification No.)
50 Jackson Drive, Cranford, New Jersey 07016
--------------------------------------------
(Address of Principal Executive Offices)
(908) 272-2400
--------------
(Issuer's Telephone Number, Including Area Code)
---------------------------------------------------
(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 May 9, 1997 the Issuer had 6,053,567 shares of Common Stock, par
value $.01, outstanding
Transitional Small Business Disclosure Format (check one):
Yes No X
<PAGE>
TOFUTTI BRANDS INC.
INDEX
Page
----
Part I - Financial Information:
Condensed Balance Sheets - March 29, 1997
(Unaudited) and December 28, 1996 (Audited) 3
Condensed Statements of Operations -
(Unaudited) - Thirteen Week Period ended
March 29, 1997 and Thirteen Week Period
ended March 30, 1996 4
Condensed Statements of Cash Flows -
(Unaudited) - Thirteen Week Period
ended March 29, 1997 and Thirteen Week
Period ended March 30, 1997 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 10
Signatures 11
2
<PAGE>
TOFUTTI BRANDS INC.
Condensed Balance Sheets
(000's omitted)
March 29, December 28,
1997 1996
(Unaudited) (Audited)
----------- ---------
Assets
Current assets:
Cash and cash equivalents $ 96 11
Accounts receivable (net of reserve of
$316 in 1997 and $295 in 1996) 1,038 977
Inventories (Note 2) 385 351
Prepaid expenses 9 10
----- -----
Total current assets 1,528 1,349
Deferred taxes 311 311
Other assets 76 76
----- -----
Total assets $1,915 1,736
===== =====
Liabilities and Stockholders' Equity
Current liabilities:
Legal settlement payable - current portion $ 15 15
Accounts payable 538 504
Accrued liabilities 160 115
----- -----
Total current liabilities 713 634
Long-term debt - legal settlement 63 66
----- -----
Total liabilities 776 700
Stockholders' equity:
Preferred stock - -
Common stock 61 61
Paid-in capital 3,503 3,503
Retained (deficit) (2,425) (2,528)
------ ------
Total stockholders' equity 1,139 1,036
------ ------
Total liabilities and stockholders'
equity $ 1,915 1,736
====== ======
See accompanying notes to condensed financial statements.
3
<PAGE>
TOFUTTI BRANDS INC.
Condensed Statement of Operations
(Unaudited)
(000's omitted)
Thirteen Thirteen
weeks weeks
ended ended
March 29,1997 March 30, 1996
------------- --------------
Net sales $ 1,524 1,095
Cost of sales 972 654
----- -----
Gross profit 552 441
----- -----
Operating expenses:
Selling 173 160
Marketing and sales promotion 44 42
Research and development 58 42
General and administrative 170 180
----- -----
445 424
----- -----
Operating income 107 17
Interest expense 4 3
----- -----
Income before income
tax expense 103 14
Income tax expense - 1
----- -----
Net income $ 103 13
===== =====
Net income per share $ .02 -
===== ====
Weighted average number of
shares outstanding 6,054 6,054
===== =====
See accompanying notes to condensed financial statements.
4
<PAGE>
TOFUTTI BRANDS INC.
Condensed Statements of Cash Flows
(Unaudited)
(000's omitted)
Thirteen Thirteen
weeks weeks
ended ended
March 29, 1997 March 30, 1996
-------------- --------------
Cash flows from operating
activities, net $ 85 2
Cash flows from investing activities - -
Cash flows from financing activities - -
---- ---
Net increase (decrease) in
cash and cash equivalents 85 2
Cash at beginning of period 11 10
---- ----
Cash at end of period $ 96 12
==== ====
Supplemental disclosures of cash
flow information:
Cash paid during the period for:
Interest $ 4 3
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 28, 1996 included
in the Company's Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission. The results of operations for the thirteen week period
ended March 29, 1997 are not necessarily indicative of the results to be
expected for the full year.
(2) Inventories
The composition of inventories is as follows:
March 29, Dec. 28,
1997 1996
---- ----
Raw materials and packaging
supplies $ 125 262
Finished goods 259 89
---- ----
$ 384 351
==== ====
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 which follows in this Quarterly Report and in other
reports and documents of the Company and oral statements made on behalf of the
Company by its management and others may contain trend analysis and other
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934 which reflect the Company's current views with respect to
future events and financial results. These include statements regarding the
Company's earnings, projected growth and forecasts, and similar matters which
are not historical facts. The Company reminds stockholders that forward-looking
statements are merely predictions and therefore are inherently subject to
uncertainties and other factors which could cause the actual future events or
results to differ materially from those described in the forward-looking
statements. These uncertainties and other factors include, among other things,
business conditions and growth in the food industry and general economies, both
domestic and international; lower than expected customer orders; competitive
factors; changes in product mix or distribution channels; and resource
constraints encountered in developing new products. The forward-looking
statements contained in this Quarterly Report and made elsewhere by or on behalf
of the Company should be considered in light of these factors.
Results of Operations
Thirteen Weeks Ended March 29, 1997 Compared with Thirteen Weeks
Ended March 30, 1996
Net sales for the thirteen weeks ended March 29, 1997 were $1,524,000 an
increase of $429,000 or 39% from the sales level realized for the thirteen weeks
ended March 30, 1996. In the 1997 period sales of hard pack Tofutti increased by
$306,000, while food products sales increased by $123,000. As a result of the
increase in sales, the Company's gross profit in the current period
7
<PAGE>
increased by $111,000. However, the Company's gross profit percentage declined
from 40% in the 1996 period to 36% for the current period. The decrease in gross
profit percentage was principally due to lower prices and higher costs
associated with special introductory allowance programs relating to the
Company's new products.
The Company anticipates a continuing increase in sales during the second and
third quarters of the current fiscal year due to the introduction of new
products and expanded distribution. Such increase is dependent upon market
acceptance of these products, for which no assurance can be given.
Selling expenses increased slightly to $173,000 for the current fiscal quarter
compared with $160,000 for the comparable period in 1996 due to the higher sales
level. Marketing and sales promotion remained constant at $44,000 in 1997 versus
$42,000 in 1996.
Research and development costs, which consist principally of salary expenses,
increased to $58,000 for the thirteen weeks ended March 29, 1997 compared to
$42,000 for the comparable period in 1996 due to the hiring of an additional
person and additional research and development expenses associated with the
Company's new products. These additional expenses consist mainly of start-up
costs incurred at new co-packing facilities.
General and administrative expenses decreased slightly to $170,000 for the
current quarter compared with $180,000 for the comparable period in 1996.
Interest expense was $4,000 for the current quarter, versus $3,000 last year.
Liquidity and Capital Resources
At March 29, 1997, the Company's working capital was $815,000, an increase of
$100,000 from December 28, 1996. At the end of the thirteen week period,
accounts receivable increased by $61,000 from December 28, 1996 due to the
higher sales level. Inventories increased by $34,000 reflecting an increase in
finished goods inventory at outside warehouses, while prepaid expenses decreased
by $1,000. Other assets and deferred taxes were unchanged from December 28, 1996
at $311,000 for both periods. Accounts payable and accrued liabilities increased
by $34,000 and $45,000, respectively. The Company does not have any material
capital commitments.
8
<PAGE>
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 second and third quarters of this year, the Company believes
that its revenues will improve in 1997. Management believes that it will have
sufficient financial resources to continue its operations through the coming
year.
9
<PAGE>
PART II - OTHER INFORMATION
TOFUTTI BRANDS INC.
Item 4. Submission of Matters to a Vote of Shareholders
None.
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
(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.
10
<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)
/s/David Mintz
--------------
David Mintz
President
/s/Steven Kass
--------------
Steven Kass
Chief Financial Officer
Date: May 12, 1997
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-27-1997
<PERIOD-END> Mar-29-1997
<CASH> 96,000
<SECURITIES> 0
<RECEIVABLES> 1,354,000
<ALLOWANCES> 316,000
<INVENTORY> 385,000
<CURRENT-ASSETS> 1,528,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,915,000
<CURRENT-LIABILITIES> 713,000
<BONDS> 0
0
0
<COMMON> 61,000
<OTHER-SE> 1,078,000
<TOTAL-LIABILITY-AND-EQUITY> 1,915,000
<SALES> 1,524,000
<TOTAL-REVENUES> 1,524,000
<CGS> 972,000
<TOTAL-COSTS> 1,417,000
<OTHER-EXPENSES> 445,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,000
<INCOME-PRETAX> 103,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,000
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
