SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 1996
Commission File Number: 1-9009
TOFUTTI BRANDS INC.
(Name of small business issuer in its charter)
Delaware 13-3094658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Jackson Drive, Cranford, New Jersey 07016
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (908) 272-2400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $.01 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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, and (2) has been
subject to such filing requirements for the past 90 days.
Yes [x] No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year: $5,842,000
The aggregate market value of voting stock held by non-affiliates computed by
reference to the closing sale price of such stock, as reported by the American
Stock Exchange, on March 11, 1997 was $2,089,000.
As of March 11, 1997, the Registrant had 6,053,567 shares of Common Stock, par
value $.01, outstanding.
Transitional Small Business Disclosure Format Yes [ ] No [x].
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PART I
Item 1. Description of Business
GENERAL
Tofutti Brands Inc., a Delaware corporation (the "Company") is engaged in
the development, production and marketing of TOFUTTI(R) brand non-dairy frozen
desserts and other food products. TOFUTTI products are non-dairy, soya-based
products which contain no butterfat, cholesterol or lactose. Butterfat and
cholesterol are perceived by some medical experts and a significant number of
consumers as causing health problems. In addition, some studies have shown that
lactose intolerance, the inability to metabolize milk and dairy products, is
present to varying degrees in a significant number of people. All dairy products
have lactose, or milk sugar. Most human beings are born with a supply of
lactase, an enzyme essential for digesting lactose. With age, the body's supply
of lactase may diminish, which may cause difficulty in the digestion of lactose.
TOFUTTI products are 100% milk free yet offer the same texture and full-bodied
taste as their dairy counterparts. TOFUTTI products are also free of cholesterol
and derive their fat from soy and corn, both naturally lower in saturated fat
than dairy products.
TOFUTTI products are an alternative for dairy-conscious individuals with
lactose intolerance or for those health-oriented people with a desire to keep
cholesterol intake in check. The Company's products enable such individuals to
enjoy products similar to dairy products without their downside health risks.
Although the Company believes the absence of lactose and butterfat in TOFUTTI
products makes them attractive to persons with lactose intolerance or heart
disease, the Company has not conducted any studies regarding the efficacy of
TOFUTTI products as they relate to lactose intolerance and heart disease and
makes no representation as to the accuracy of studies performed by others.
Since May 1982, the Company has been engaged in the sale of a liquid mix
for the processing of TOFUTTI in numerous flavors by soft serve machines at
retail locations. In June 1984, the Company commenced selling hard frozen
TOFUTTI. In 1987, the Company introduced a low fat version of Tofutti called
Lite Lite(R), in both hard frozen and soft serve forms. During 1988, the Company
introduced two soya-based, non-dairy products, EGG WATCHERS(R) and BETTER THAN
CREAM CHEESE(R). SOUR SUPREME(R), a non-dairy sour cream, was introduced at the
end of 1991. During 1993, the Company introduced BETTER THAN YOGURT(R),
containing non-dairy acidophilus cultures. This product replaced the hard frozen
Lite Lite line and became the low fat alternative to premium Tofutti. In 1993
the Company also introduced TOFUTTI FRUTTI(R), a cholesterol-free, fat-free
frozen dessert sweetened only with fruit juice, which is currently being sold in
health food stores. On November 1, 1993, the Company signed a licensing
agreement with Papetti's Hygrade Egg Products, Inc. ("Papetti's"), the Company's
then-current EGG WATCHERS co-packer. The agreement granted Papetti's exclusive
worldwide manufacturing and distribution rights for TOFUTTI EGG WATCHERS. During
1994, the Company increased its distribution in the natural health food market.
The
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Company also saw significant increases in its TOFUTTI CUTIE(R) novelty sales.
During the spring of 1995 the Company introduced two new stick novelties,
TOFUTTI TEDDY FUDGE BARS(R), a low fat fudge bar and TOFUTTI CHOCOLATE FUDGE
TREATS, a sugar-free, fat-free chocolate fudge bar. During the summer, the
Company added a Wildberry CUTIE to its mini sandwich novelty line. In early fall
1995, the Company introduced its new pint sorbet line and introduced chocolate
enrobed novelty slices, featuring the TOFUTTI CUTIE PIE, later in the fall. The
Company introduced its non-dairy tofu-filled TOFUTTI TORTELLINI and MINI RAVIOLI
in December 1995. The Company also changed its BETTER THAN YOGURT product line
to low fat TOFUTTI non-dairy frozen dessert.
The Company made several new product introductions in 1996. During the
year, the Company extended its non-dairy cheese line by introducing six new
flavors of BETTER THAN CREAM CHEESE and three new flavors of SOUR SUPREME.
During the summer of 1996, the Company introduced several new frozen novelty
items, including cakes and other chocolate enrobed novelties. The Company at
this time also introduced its first non-frozen, non-refrigerated product line,
TOFUTTI COOKIES. In December, the Company introduced a chocolate coated CANNOLI
filled with a non-dairy cheese filling.
In 1996, the Company also made a change in its distribution arrangements
for the metropolitan New York area. Effective March 31, 1996, the Company
terminated the services of The Haagen-Dazs Company and appointed the Mattus Ice
Cream Company to be its New York area master distributor.
TOFUTTI PRODUCT LINE
o Premium TOFUTTI non-dairy frozen dessert, available in prepacked
pints, three-gallon cans and soft serve mix, is sold nationally in
supermarkets, grocery stores, retail shops and restaurants. The
Company currently offers seven flavors of premium hard frozen TOFUTTI:
Chocolate Supreme, Wildberry Supreme, Vanilla, Vanilla Almond Bark(R),
Vanilla Fudge, Chocolate Cookie Crunch and Better Pecan(R).
o TOFUTTI low fat non-dairy frozen dessert offers the calorie-conscious
consumer a creamy dessert that is 98% fat free and less than 120
calories per serving. Sold nationally in pints, LOW FAT TOFUTTI is
offered in a number of flavors including Vanilla Fudge, Chocolate
Fudge, Coffee Marshmallow Swirl, Strawberry Banana and Peach Mango.
o TOFUTTI FRUTTI(R) in pint containers is a non-dairy, cholesterol-free,
fat-free frozen dessert sweetened only with fruit juice, with non-dairy
active acidophilus cultures. Three flavors, Apricot Mango, Vanilla
Apple Orchard and Three Berry, are being distributed to health food
stores.
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o Cool and refreshing TOFUTTI SORBETS in pint containers offer the
consumer a natural sorbet dessert and come in six flavors: Chocolate,
Strawberry, Orange Peach Mango, Lemon, Coffee and Raspberry Tea.
o TOFUTTI CUTIES(R) are bite-size frozen sandwiches combining a
chocolate, vanilla or wildberry filling between two chocolate wafers.
Half the size of traditional ice cream sandwiches, TOFUTTI CUTIES offer
consumers a portion controlled treat.
o TOFUTTI FRUTTI(R) stick novelties have 180 calories per bar and combine
creamy vanilla TOFUTTI with a tangy sorbet covered in chocolate.
o TEDDY FUDGE POPS(R) and CHOCOLATE FUDGE TREATS are stick novelties that
offer the consumer the same taste as real fudge bars. The TEDDY FUDGE
POP has 70 calories and 1 gram of fat per bar, while CHOCOLATE FUDGE
TREATS have only 30 calories per bar and are fat and sugar free.
o The TOFUTTI CUTIE PIE is a rich, premium novelty treat that combines a
rich vanilla or chocolate center covered with a chocolate coating. They
are available in bulk pack for institutional sale or retail pack for
supermarkets.
o TOFUTTI DIXIE CUPS offer the consumer a portion controlled 4 oz. cup
of TOFUTTI frozen dessert in either Vanilla or Chocolate flavors.
o TOFUTTI SUNDAE CUPS offer the diet conscious consumer a sugar free,
fat free dessert with the taste and texture of premium TOFUTTI. They
are currently available in two flavors: Vanilla Fudge Sundae and
Strawberry Sundae.
o TOFUTTI FROZEN DESSERT CAKES offer the Tofutti consumer an upscale
non-dairy frozen dessert alternative to dairy ice cream cakes. The
cakes come in various types, CHOCOLATE LOVERS DELIGHT, ROCK N' ROLL and
the SPRINKLE ROLL, and sizes. They are currently available in
supermarkets and health food store outlets.
o TOFUTTI ITALIAN STYLE CANNOLI are made using the Company's non-dairy
BETTER THAN CREAM CHEESE. They combine a creamy, non-dairy cheese
filling with a chocolate covered cannoli shell. The CANNOLI are
available in retail and bulk boxes.
o BETTER THAN CREAM CHEESE(R) is similar in taste and texture to
traditional cream cheese but is milk and butterfat free and contains no
cholesterol. The 8 oz. retail packages are available in plain, French
onion, herbs and chives, wildberry, smoked salmon, jalapeno, cinnamon
and raisin, ginseng and dill, and garlic and herb. The plain version is
also available in 30 lb. bulk boxes.
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o SOUR SUPREME(R) complements BETTER THAN CREAM CHEESE in that it is
similar in taste and texture to traditional sour cream but is milk and
butterfat-free and contains no cholesterol. The 12 oz. retail packages
are available in plain, guacamole, salsa and cherries 'n' berries. The
plain version is also available in 30 lb. bulk boxes.
o TOFUTTI TORTELLINI and MINI RAVIOLI are bite-sized frozen pasta filled
with TOFUTTI BETTER THAN CREAM CHEESE and are sold in 15 oz. bags for
supermarkets and 10 lb. boxes for institutional sales. The tortellini
are available in three flavors: cheese, spinach cheese and meatless
meat.
o EGG WATCHERS(R) is a fat-free replacement for whole eggs that has the
taste, nutrition and versatility of whole eggs without the cholesterol
and with 60% less calories and fat. EGG WATCHERS can be used in
virtually all recipes that require whole eggs.
o TOFUTTI COOKIES are made with all natural ingredients and unbleached
flour. The 16 oz. packages are available in peanut butter, oatmeal
raisin, chocolate chip and fig bars. Like all TOFUTTI products, they
are completely dairy and cholesterol free.
PRODUCTION
All of the Company's products are manufactured by co-packers to whom the
Company supplies certain key ingredients for the manufacturing process. The
Company's co-packers manufacture and package the Company's products and, in
certain instances, warehouse such products pending shipment. For certain key
product categories, such as non-dairy frozen dessert and non-dairy cheeses, the
Company has more than one co-packer. The Company currently has ten co-packers,
including one in the United Kingdom that manufactures the Company's non-dairy
frozen dessert pints.
The Company does not have any written production agreements with its
co-packers and does not anticipate that it would encounter any material
difficulty in obtaining alternative production sources, at a comparable cost, if
one or all of its contract manufacturers decide to terminate their relationships
with the Company.
In order to protect its formulas, the Company has entered into
confidentiality arrangements with its contract manufacturers and their
employees. There can be no assurance that such confidentiality arrangements can
or will be maintained, or that the Company's trade secrets, know-how and
marketing ability cannot be obtained by others, or that others do not now
possess similar or even more effective capabilities.
KOF-K Kosher Supervision ("KOF-K") of Teaneck, New Jersey provides the
Company's kosher certification service. Before KOF-K will permit its
certification, evidenced by its symbol, to be placed on a product, KOF-K must
approve both the ingredients contained in the product and the facility
processing the product. The Company believes that its ability to successfully
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market and distribute its products is dependent upon its continued compliance
with the requirements of rabbinic certification. All TOFUTTI products meet the
requirements for certification as kosher-parve.
MARKETING AND DISTRIBUTION
TOFUTTI products are sold and distributed across the United States and
internationally, and can be found in gourmet specialty shops, Kosher
supermarkets, natural/health food stores, and national and regional supermarket
chains. Generally, all products marketed by the Company are sold either through
independent unaffiliated food brokers or distributors and sometimes on a direct
basis to retail chain accounts. Food brokers act as agents for the Company
within designated territories or for specific accounts and receive commissions,
which average 5% of net sales.
On April 1, 1993, the Company entered into an exclusive distribution
agreement with Haagen-Dazs, a subsidiary of Grand Metropolitan Ltd., for the
distribution of its non-dairy frozen dessert products principally in the New
York metropolitan area. On February 27, 1996, the Company informed Haagen-Dazs
that its services would be terminated effective March 31, 1996 and that the
Mattus Ice Cream Company would begin distributing in the metropolitan New York
area. During 1996, sales to Haagen-Dazs distributors nationwide totaled $141,000
or 2% of sales as compared to $1,044,000 or 21% of sales in 1995. In September
1993, Haagen-Dazs began distributing the Company's frozen dessert products in
Florida and in 1994 began distributing in Atlanta, Phoenix, Dallas and San
Francisco. Currently, the Company still sells to Haagen-Dazs in Florida and
Atlanta. Total sales to Haagen-Dazs and Mattus in the New York metropolitan area
were $419,000 or 7% of sales in 1996 as compared to $663,000 or 13% of sales in
1995. The reduction in sales in the metropolitan New York area was due to the
fact that in anticipation of the termination of its agreement with the Company,
Haagen-Dazs made minimal purchases of product during the first quarter of 1996,
as compared to the first quarter of 1995. Additionally, the Company issued
credits in excess of $100,000 to Haagen-Dazs to settle returned product and
trade allowance expenses. The Company anticipates an improvement in its
metropolitan New York area business during 1997.
During 1996, the Company expanded its distribution in the national health
food market, which now includes twenty-two distributors. Sales to the Company's
health food distributors in 1996 were $2,232,000 or 38% of sales, as compared to
$1,543,000 or 31% of sales in 1995. In 1996, the Company had sales of $821,000
or 14% of sales to Trader Joe's, a west coast based health food supermarket
chain, as compared to $609,000 or 12% in 1995. Overall, the Company's west coast
sales were $1,511,000 or 26% of sales in 1996, as compared to $1,237,000 or 25%
in 1995. The Company continues to have a strong presence in the kosher market,
with sales of $599,000 or 10% of sales in 1996, as compared with sales of
$496,000 or 10% in 1995. The Company expects the favorable trend in the national
health food, west coast and kosher markets to continue in 1997. The Company
currently sells its frozen desserts in most major markets in the United States,
including Atlanta, Boston, Dallas, Philadelphia, Cleveland, Cincinnati, Detroit,
Denver, Phoenix, Los Angeles, San Francisco and Seattle.
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During 1996, the Company shipped TOFUTTI non-dairy products to distributors
in Canada, England, Belgium, France, Germany, the Netherlands, Sweden, Panama,
Martinique, Mexico, Israel and Australia. Sales to foreign countries totaled
$621,000 or 11% of sales in 1996, versus $661,000 or 13% of sales in 1995. The
decrease in export sales was due primarily to a reduction in sales to the
Company's Israeli distributor, which was partially offset by increased sales to
other foreign customers. The Company's future export sales could be adversely
affected by an increase in the value of the U.S. dollar, which could increase
the Company's local currency price for its products.
RESEARCH AND DEVELOPMENT
During the last two years, David Mintz, Chief Executive Officer, and Reuben
Rapoport, Director of Product Development, have devoted substantial time and
effort to the development of new products and the reformulation of the Company's
current products. In 1996 and 1995, the Company's research and development
expenses were $206,000 and $176,000, respectively. Such amounts do not include
any portion of Mr. Mintz's salary.
COMPETITION
TOFUTTI frozen desserts compete with all forms of ice cream products,
yogurt-based desserts and other soya-based frozen desserts. The Company believes
it has the most complete line of non-dairy frozen dessert products and is a
leader in this market. Other soya-based frozen dessert products are presently
being sold in both soft serve and hard frozen form throughout the United States
by established manufacturers and distributors of ice cream and other frozen
dessert products. The ice cream and frozen dessert industry is highly
competitive and most companies with whom the Company competes are substantially
larger and have significantly greater resources than the Company. The Company's
other products also face substantial competition, from both non-dairy and dairy
competitive products marketed by companies with significantly greater resources
than the Company.
GOVERNMENT REGULATION
Companies engaged in the manufacture, packaging and distribution of food
items are subject to extensive regulation by various government agencies which,
pursuant to statutes, rules, and regulations, prescribe quality, purity,
manufacturing and labeling requirements. Food products are often subject to
"standard of identity" requirements which are promulgated at either the Federal
or state level to determine the permissible qualitative and quantitative
ingredient content of food. To the extent that any product that the Company
seeks to market does not conform to an applicable standard, special permission
to market such a product is required.
The Company's United States product labels are subject to regulation by the
United States Food and Drug Administration ("FDA"). Such regulations include
standards for product descriptions, nutritional claims, label format, minimum
type sizes, content and location of nutritional information panels, nutritional
comparisons, and ingredient content panels. The Company's labels, ingredients
and manufacturing processes are subject to inspection by the FDA.
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In 1994, federal laws relating to food product labeling were amended to require
food product companies to make numerous changes in their product labeling. The
Company believes that it is in compliance with current labeling requirements.
The Food, Drug and Cosmetic Act and rules and regulations promulgated by
the FDA thereunder, contain no specific Federal standard of identity which is
applicable to TOFUTTI. TOFUTTI frozen dessert products meet the New York State
standard of identity for "parevine," which has been adopted by at least eight
other states. Many states require registration and label review before food
products can be sold. While approval in one jurisdiction generally indicates the
products will meet with approval in other jurisdictions, there is no assurance
that approval from other jurisdictions will be forthcoming.
Food manufacturing facilities are subject to inspections by various
regulatory authorities. A finding of a failure to comply with one or more
regulatory requirements can result in the imposition of sanctions including the
closing of all or a portion of a company's facilities, subject to a period
during which the company can remedy the alleged violations. The Company has
applied for and received a wholesale frozen desserts manufacturer's license from
the New York Department of Agriculture and Markets. This license does not
authorize the Company to manufacture its frozen dessert products directly. The
license is presently valid only to the extent that the Company's products are
manufactured at its present contract production facilities in New Jersey, New
York, Pennsylvania, Vermont and Maine. Manufacturing at any other facility
would, to the extent that the Company's products are distributed in New York,
require separate approval by the New York Department of Agriculture and Markets.
Other states have similar rules requiring pre-clearance or notification of any
change in a manufacturing location. The Company's Cranford, New Jersey facility
is subject to inspection by the New Jersey-Kosher Enforcement Bureau and
Environmental Health Services.
The Company believes it and its distributors and co-packers are in
compliance in all material respects with governmental regulations regarding its
current products and has obtained the material governmental permits, licenses,
qualifications and approvals required for its operations. The Company's
compliance with Federal, state and local environmental laws has not materially
affected it either economically or in the manner in which it conducts its
business. However, there can be no assurance that the Company, its distributors
and co-packers will be able to comply with such laws and regulations in the
future or that new governmental laws and regulations will not be introduced that
could prevent or temporarily inhibit the development, distribution and sale of
the Company's products to consumers.
TRADEMARKS AND PATENTS
The Company has registered its trademark, TOFUTTI(R), and other trademarks
for its frozen desserts and other products in the United States and
approximately 35 foreign countries. The Company believes its trademarks are an
important means of establishing consumer recognition for its products.
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Although the Company believes that its formulas and processes are
proprietary, the Company has not sought patent protection for such technology.
Instead, the Company is relying on the complexity of its technology, on trade
secrecy laws, and on confidentiality agreements. The Company believes that its
technology has been independently developed and does not infringe the patents of
others.
EMPLOYEES
On December 28, 1996, the Company employed seven people on a full-time
basis, compared with eight people as of December 30, 1995. The Company considers
its relations with its employees to be good.
Item 2. Description of Properties
The Company's facilities are located in a modern one-story facility in
Cranford, New Jersey. The 6,200 square foot facility houses the Company's
administrative offices, a warehouse, walk-in freezer and refrigerator, and a
product development laboratory and test kitchen. On January 3, 1994, the Company
signed a five-year lease extension which expires July 1, 1999. Management
believes that the Cranford facility will continue to satisfy the Company's space
requirements for the foreseeable future.
Item 3. Legal Proceedings
The Company is not a party to any material litigation.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock has traded on the American Stock Exchange under
the symbol TOF since October 29, 1985. The following table sets forth the high
and low sales prices as reported on the American Stock Exchange for the two most
recent fiscal years:
Quarter Ended High Low
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April 1, 1995........................ 1 13/16
July 1, 1995......................... 7/8 9/16
September 30, 1995................... 1-1/2 5/8
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Quarter Ended High Low
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December 30, 1995.................... 15/16 9/16
March 30, 1996....................... 1 9/16
June 29, 1996........................ 15/16 5/8
September 28, 1996................... 3/4 5/8
December 28, 1996.................... 3/4 9/16
As of March 11, 1997, there were approximately 1,141 holders of record of
the Company's Common Stock. The Company has not paid and has no present
intention of paying cash dividends on its Common Stock in the foreseeable
future.
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This report contains forward-looking statements which are subject to risks
and uncertainties. Actual results could differ materially from the
forward-looking statements in this report. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in "Description of Business," as well as those discussed elsewhere in this
report. The following discussion and analysis should be read in conjunction with
the Company's financial statements and notes thereto included elsewhere in this
report.
Fifty-two Weeks Ended December 28, 1996 Compared with Fifty-two Weeks Ended
December 30, 1995
Net sales for the fifty-two weeks ended December 28, 1996 were $5,842,000,
an increase of $819,000 from the sales level realized for the fifty-two weeks
ended December 30, 1995. In the 1996 period, sales of hard pack TOFUTTI and food
product sales increased by $449,000 and $390,000, respectively. The hard pack
sales increase was attributable to an increase in novelty sales of $749,000,
which was offset by a decline in pint sales of $316,000. The Company's gross
profit for the current year increased by $123,000 due primarily to the sales
increase, while its gross profit percentage decreased to 36% from 40% in 1995.
The decline in the Company's gross profit percentage was due to the increase in
frozen novelty and food product sales and the decline in pint sales. The gross
profit percentage on novelties and food products is less than on pints. The
gross profit in 1996 was also adversely affected by the start-up costs
associated with the Company's new frozen dessert and non-dairy cheese products.
Based on its recent sales trend, the Company believes that its revenues
will improve in 1997. The Company expects continued sales increases in its
frozen dessert and food product lines and in most customer categories.
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Selling expenses increased to $870,000 for the current fiscal period from
$848,000 for the comparable 1995 period. The primary cause of the increase was
increased warehouse and freight expenses. The increase in warehouse expense is
attributable to the increase in inventory. The increased freight expense is
attributable to an increase in shipments to the mid-western and western United
States. Marketing and sales promotion expenses decreased in 1996 to $230,000
from $276,000 in 1995. This decrease was due principally to the Company's
reduction in trade magazine and newspaper advertising.
Research and development expenses increased in 1996 to $206,000 as compared
to $176,000 in 1995. The increase in research and development expenses was due
to increased costs associated with new product development and the start-up of
new co-packing plants to make those products. General and administrative
expenses were $716,000 for the current period compared with $661,000 for the
comparable period in 1995. The increase of $55,000 was due in part to increased
telephone, building maintenance, professional fees, and business insurance
expenses.
Interest expense was $12,000 for each of the fifty-two week periods ended
December 28, 1996 and December 30, 1995.
As a result of reductions in the valuation allowance on deferred tax
assets, the Company recorded income tax benefits of $45,000 and $19,000 in 1996
and 1995, respectively.
Liquidity and Capital Resources
At December 28, 1996, the Company's working capital was $715,000, an
increase of $53,000 from December 30, 1995. At the end of the fifty-two week
period, accounts receivable decreased by $29,000 from December 30, 1995,
principally reflecting the similar level of sales in December 1996 as compared
to December 1995. Inventories increased by $155,000, reflecting the additional
finished goods inventory for the Company's new products. Deferred taxes
increased $47,000 as a result of a reduction in the valuation allowance on
deferred tax assets. Accounts payable increased to $504,000 from $364,000, while
accrued expenses decreased to $115,000 from $186,000 in 1995.
The Company does not have any material capital commitments and contemplates
no material expenditures in the foreseeable future. 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.
Although the Company was able to fund its operations in 1996 from its current
resources, any substantial increase in its operations may require additional
working capital. Although the Company has had discussions and intends to have
future ones with interested parties concerning additional financing for the
Company, 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 1996, it will have sufficient financial
resources to continue its operations throughout the coming year.
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Item 7. Financial Statements
Index to Financial Statements
Independent Auditors' Report....................................F-1
Financial Statements:
Balance Sheets
December 28, 1996 and December 30, 1995.................F-2
Statements of Operations and Accumulated Deficit
Fifty-two weeks ended
December 28, 1996 and December 30, 1995.................F-3
Statements of Cash Flows
Fifty-two weeks ended
December 28, 1996 and December 30, 1995.................F-4
Notes to Financial Statements..............................F-5
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Independent Auditors' Report
The Board of Directors
Tofutti Brands Inc.:
We have audited the accompanying balance sheets of Tofutti Brands Inc. as of
December 28, 1996 and December 30, 1995, and the related statements of
operations and accumulated deficit, and cash flows for the fifty-two week
periods ended December 28, 1996 and December 30, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tofutti Brands Inc. as of
December 28, 1996 and December 30, 1995 and the results of their operations and
their cash flows for the fifty-two week periods ended December 28, 1996 and
December 30, 1995, in conformity with generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
New York, New York
March 17, 1997
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TOFUTTI BRANDS INC.
BALANCE SHEETS
(000's omitted except for share and per share data)
<TABLE>
<CAPTION>
December 28, December 30,
1996 1995
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<S> <C> <C>
Assets
Current Assets:
Cash $ 11 12
Accounts receivable (net of reserves of $295 in
1996 and $242 in 1995) (Note 2) 977 1,006
Inventories (Note 3) 351 196
Prepaid expense 10 11
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Total current assets 1,349 1,225
Fixed assets (net of accumulated depreciation) (Note 4) -- --
Deferred taxes (Note 10) 311 264
Other assets (Note 5) 76 56
------ ------
Total assets $1,736 1,545
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Legal settlement payable - current portion (Note 6) 15 13
Accounts payable 504 364
Accrued expenses (Note 7) 115 186
------ ------
Total current liabilities 634 563
Legal settlement payable (Note 6) 66 81
------ ------
Total liabilities 700 644
Stockholders' equity (Note 8):
Preferred stock - par value $.01 per share;
authorized 100,000 shares, none issued -- --
Common stock - par value $.01 per share;
authorized 15,000,000 shares, issued and
outstanding 6,053,567 shares at 12/28/96 and
at 12/30/95 61 61
Paid-in capital 3,503 3,503
Accumulated deficit (2,528) (2,663)
------ ------
Total stockholders' equity 1,036 901
------ ------
Commitments (Note 9) -- --
Total liabilities and stockholders' equity $1,736 1,545
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-2
<PAGE>
TOFUTTI BRANDS INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(000's omitted except for per share data)
<TABLE>
<CAPTION>
Fifty-two weeks Fifty-two weeks
ended ended
December 28, 1996 December 30, 1995
----------------- -----------------
<S> <C> <C>
Net sales $5,842 5,023
Cost of sales 3,718 3,022
----- -----
Gross profit 2,124 2,001
------ -----
Operating expenses:
Selling 870 848
Marketing and sales promotion 230 276
Research and development 206 176
General and administrative 716 661
----- -----
2,022 1,961
------ -----
Operating income 102 40
Interest expense 12 12
----- -----
Income before tax benefit 90 28
Income tax benefit (Note 10) 45 19
------ ------
Net income 135 47
Accumulated deficit, beginning of year (2,663) (2,710)
------ ------
Accumulated deficit, end of year (2,528) (2,663)
====== ======
Net income per share $ .02 .01
====== ======
Weighted average number of common shares
outstanding 6,054 6,071
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
TOFUTTI BRANDS INC.
STATEMENTS OF CASH FLOWS
(000's omitted)
<TABLE>
<CAPTION>
Fifty-two Fifty-two
weeks ended weeks ended
December 28, December 30,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 135 47
Net adjustments to reconcile net income to net
cash provided by operating activities:
Deferred taxes (47) (20)
Provision for bad debts 62 100
Change in assets and liabilities:
(Increase) in accounts receivable (33) (37)
(Increase) in inventories (155) (70)
Decrease (increase) in prepaid expense 1 (1)
(Increase) decrease in other assets (20) 26
Increase (decrease) in accounts payable 140 (110)
(Decrease) increase in accrued expenses (71) 124
------ ------
Net cash provided by operating activities 12 7
------ ------
Cash flows from financing activities:
Repayment of legal settlement payable (13) (12)
Issuance of common stock -- 10
------ ------
Net cash (used in) financing activities (13) (2)
------ ------
Net (decrease) increase in cash (1) 5
Cash at beginning of period 12 7
------ ------
Cash at end of period $ 11 12
====== ======
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 12 12
====== ======
Income taxes 2 1
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
TOFUTTI BRANDS INC.
NOTES TO FINANCIAL STATEMENTS
(000's omitted except for share and per share data)
(1) Summary of Significant Accounting Policies
Description of Business
Tofutti Brands Inc. (the "Company") is engaged in the development, production
and marketing of non-dairy frozen desserts and other food products.
Revenue Recognition
The Company recognizes revenue when goods are shipped from its production
facilities or outside warehouses.
Common Stock
Net income per share of common stock is based upon the weighted average number
of common shares outstanding in each year. Dilution from common stock
equivalents amounts to less than 3%.
In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement 123, "Accounting for Stock-Based Compensation," which allowed
companies, beginning in 1996, to either retain APB Opinion 25 for recognizing
expense for stock-based compensation, or to adopt a new accounting method based
on estimated fair value. The Company has decided to continue to follow APB 25
and describe the impact of using an estimated fair value approach on a pro forma
basis in footnote disclosure. Since the Company did not issue any stock options
in 1996 or 1995, such pro forma disclosure was not required.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.
Fixed Assets
Fixed assets are carried at cost. Depreciation is computed using the
straight-line method. When assets are retired or otherwise disposed of, the cost
and related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is recognized in income for the period. The cost of
maintenance and repairs is charged to income as incurred; significant renewals
and betterments are capitalized.
F-5
<PAGE>
TOFUTTI BRANDS INC.
NOTES TO FINANCIAL STATEMENTS
(000's omitted except for share and per share data)
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.
Fair Value of Financial Instruments
FASB Statement No. 107, "Disclosures about Fair Value of Financial Instruments,"
defines the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing parties.
Cash, accounts receivable, accounts payable, accrued expenses and legal
settlement payable as of December 28, 1996 and December 30, 1995 are stated at
their carrying values. The carrying amounts approximate fair value because of
the short-term maturity of those instruments or because the interest rates
approximate market rates of interest.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) Accounts Receivable
The Company accounts for its bad debts using the reserve method. The reserve for
bad debts consists of the following:
Fifty-two weeks Fifty-two weeks
ended ended
December 28, December 30,
1996 1995
-------------- ---------------
Beginning balance $ 242 $ 171
Additions charged to expense 62 100
Less: Write off 9 29
------ ------
$ 295 $ 242
===== =====
F-6
<PAGE>
(3) Inventories
Inventories consist of:
December 28, December 30,
1996 1995
---- ----
Finished products $ 262 $ 108
Raw materials and packaging 89 88
------ -------
$ 351 $ 196
===== =====
(4) Fixed Assets
Fixed assets consist of the following:
December 28, December 30, Useful
1996 1995 Lives
------ ------ -----
Machinery and equipment $ 30 30 5 yr
Leasehold improvements 29 29 5 yr
-- --
59 59
Less accumulated depreciation 59 59
-- --
$ -- --
==== ====
(5) Other Assets
On October 17, 1994, the Company's Board of Directors adopted a resolution
wherein the Corporation was authorized to purchase a $1,000 split dollar
insurance plan on the life of a member of David Mintz's family. Mr. Mintz is
Chairman and President of the Company. The purpose of this transaction is to
provide the Mintz estate with funds sufficient to pay any estate taxes levied
upon the transfer of Mr. Mintz's Tofutti stock, which would otherwise have
necessitated a sale of the stock. The sale of such stock might have the negative
effect of significantly decreasing the market price of the stock to the
detriment of other shareholders. Upon the death of the family member, the
Company is to receive a complete refund of all its premiums paid plus interest
at 4%.
F-7
<PAGE>
TOFUTTI BRANDS INC.
NOTES TO FINANCIAL STATEMENTS
(000's omitted except for share and per share data)
(6) Legal Settlement Payable
On May 1, 1991 the Company and its former commission agent, NEMP Corporation,
settled a lawsuit that was commenced in 1989. Under the terms of the settlement,
the Company agreed to pay NEMP $2 per month for a period of ten years, which
includes interest at an imputed rate of 12% per annum. If there is a change in
ownership in the Company, NEMP will receive an additional $120. As of December
28, 1996, the balance of the settlement was $81 and is shown as a liability in
the Company's balance sheet, the current portion of which is $15. Management of
the Company believes that the monthly payments will not have a material impact
on the Company's future cash flow.
The Company is not a party to any material legal proceedings at present.
(7) Accrued Expenses
Accrued expenses consist of the following:
December 28, December 30,
1996 1995
------------ ------------
Advertising $ 7 --
Professional fees 26 25
Selling 80 134
Inventory purchases -- 27
Other 2 --
----- -----
Total $ 115 $ 186
====== =====
(8) Stock Options
The 1993 Stock Option Plan (the "1993 Plan") provides for the granting to key
employees of incentive stock options, within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended, and for the granting of nonstatutory
options to key employees and consultants. The 1993 Plan is currently
administered by the Board of Directors, which determines the terms and
conditions of the options granted under the 1993 Plan, including the exercise
price, number of shares subject to the option and the exercisability thereof. A
total of 400,000 shares have been reserved for issuance under the 1993 Plan. At
December 28, 1996, 138,000 shares were subject to outstanding options and
212,000 shares, representing less than 4% of the Common Stock outstanding,
remained available for future grant.
F-8
<PAGE>
TOFUTTI BRANDS INC.
NOTES TO FINANCIAL STATEMENTS
(000's omitted except for share and per share data)
The following is a summary of stock option activity from December 31, 1994 to
December 28, 1996:
<TABLE>
<CAPTION>
INCENTIVE OPTIONS NON-QUALIFIED OPTIONS
----------------- ---------------------
Shares Option Price Shares Option Price
------ ------------ ------ ------------
<S> <C> <C> <C> <C>
Outstanding at December 31, 1994 99,000 $.625--$.6875 55,000 $.625
Exercisable at December 31, 1994 66,000 $.625--$.6875 -- --
Exercised in 1995 (16,000) $.625 -- 26,000 $.625
Outstanding and exercisable at
December 30, 1995 and
December 28, 1996 83,000 $.625--$.6875 55,000 $.625
</TABLE>
The following table summarizes information about the stock option plan awards
outstanding at December 28, 1996:
OPTIONS OUTSTANDING AND EXERCISABLE
Weighted Average Weighted
Range of Number Remaining Life Average
Exercise Prices Outstanding (in years) Exercise Price
--------------- ----------- ---------- --------------
$.625--$.6875 138,000 2.3 $.659
(9) Lease Obligation
Future minimum lease payments under an existing operating lease that expires on
July 1, 1999 are as follows:
Period ending Amount
- ------------- ------
December 27, 1997 $ 71
December 26, 1998 74
Thru July 1, 1999 37
--
Total $182
====
Annual net rental expenses aggregated $68 for each of the fifty-two week periods
ended December 28, 1996 and December 30, 1995.
F-9
<PAGE>
TOFUTTI BRANDS INC.
NOTES TO FINANCIAL STATEMENTS
(000's omitted except for share and per share data)
(10) Income Taxes
The components of income tax benefits for 1996 and 1995 are as follows:
1996 1995
---- ----
Current tax expense $ 2 $ 1
Deferred tax benefit (47) (20)
---- ----
$ (45) (19)
==== ====
Total income tax benefit for the fifty-two week periods ended December 28, 1996
and December 30, 1995 differs from the amount computed using the Federal
statutory rate primarily due to a reduction in the valuation allowance of $132
and $30 in 1996 and 1995, respectively.
Deferred tax assets at December 28, 1996 and December 30, 1995 are as follows:
December 28, December 30,
1996 1995
---- ----
Allowance for doubtful accounts $123 92
Inventory 7 63
Settlement reserve 35 41
Loss carryforwards 641 695
--- ---
Gross deferred tax assets 806 891
Valuation allowance 495 627
--- ---
Deferred tax asset $311 264
==== ===
Based upon the level of projected future taxable income over the periods in
which the deferred tax assets are deductible, management believes it is more
likely than not the Company will realize the benefits of these deductible
differences, net of the existing valuation allowances at December 28, 1996. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
The Company has loss carryforwards of approximately $558 and $1,272, which
will expire in 2004 and 2005, respectively, if the Company does not generate
sufficient taxable income. The Company also has unused tax credits of
approximately $24.
(11) Business Concentrations
During the fifty-two week periods ended December 28, 1996 and December 30, 1995,
the Company derived approximately 89% and 87%, respectively, of its net sales
domestically. The remaining sales of 11% and 13% in 1996 and 1995, respectively,
were exports to various other countries. Sales to two customers represented 14%
and 12% of net sales in 1996. In 1995, sales to two customers represented 12%
and 8% of net sales.
F-10
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
None.
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
The Directors and Executive Officers of the Company are:
Name Age Position
- ---- --- --------
David Mintz............... 65 Chairman of the Board of Directors,
Chief Executive Officer
Steven Kass............... 45 Chief Financial Officer, Secretary and
Treasurer
Reuben Rapoport........... 66 Director of Product Development and
Director
Franklyn Snitow........... 50 Director
Bernard Koster............ 62 Director
David Mintz has been Chairman of the Board and Chief Executive Officer of
the Company and its predecessor since August 1981.
Steven Kass has been Chief Financial Officer of the Company since November
1986 and the Secretary and Treasurer since January 1987.
Reuben Rapoport has been the Director of Product Development of the Company
since January 1984 and a Director of the Company since July 1983.
Franklyn Snitow has been a Director of the Company since 1987. He has been
a partner in the New York City law firm of Snitow & Pauley, the Company's
general counsel, since 1985.
Bernard Koster has been a Director of the Company since March 1993. He has
been counsel to the New Jersey law firm of Litwin and Holsinger since January
1993. Since February 1990, Mr. Koster has also acted as an independent business
consultant. From 1980 to 1990, Mr. Koster was president of Kartsun Ltd., a
private company engaged in venture capital formation.
All Directors of the Company hold office until the next Annual Meeting of
Stockholders and until their successors have been elected and qualified.
Officers serve at the pleasure of the Board of Directors. There are no family
relationships between Directors and executive officers
-13-
<PAGE>
of the Company. All of the executive officers devote their full time to the
operations of the Company.
Compliance with Section 16(a) of The Exchange Act. Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires the Company's officers and
directors, and persons who own more than ten-percent of its Common Stock, to
file initial statements of beneficial ownership (Form 3), and statements of
changes in beneficial ownership (Forms 4 or 5), of Common Stock and other equity
securities of the Company with the Securities and Exchange Commission (the
"SEC") and the American Stock Exchange. Officers, directors and greater than
ten-percent stockholders are required by SEC regulation to furnish the Company
with copies of all such forms they file.
To the Company's knowledge, based solely on its review of the copies of
such forms received by it, or written representations from certain reporting
persons that no additional forms were required for those persons, the Company
believes that during fiscal 1996 its officers, directors and greater than
ten-percent beneficial owners complied with all applicable filing requirements.
Item 10. Executive Compensation
The following table sets forth information concerning the total
compensation during the last three fiscal years for the Company's executive
officers whose total salary in fiscal 1996 totaled $100,000 or more:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Securities Underlying
Name and Principal Position Year Salary ($) Options (#)
- --------------------------- ---- ---------- -----------
<S> <C> <C> <C>
David Mintz 1996 $155,000(1) --
Chief Executive Officer 1995 125,000 --
and Chairman of the Board 1994 125,000 --
Steven Kass 1996 100,000(1) --
Chief Financial Officer 1995 -- (2) --
Secretary and Treasurer 1994 -- (2) --
- ---------------
<FN>
(1) Includes bonuses of $30,000 and $15,000 for Messrs. Mintz and Kass, respectively,
accrued at year-end and payable April 1, 1997.
(2) Less than $100,000.
</FN>
</TABLE>
The aggregate value of all other perquisites and other personal benefits
furnished in each of the last three years to each of these executive officers
was less than 10% of each officer's salary for such year.
On October 17, 1994, the Company's Board of Directors adopted a resolution
wherein the Corporation was authorized to purchase a $1,000,000 split dollar
insurance plan on the life of a member of David Mintz's family. Mr. Mintz is
Chairman and Chief Executive Officer of the
-14-
<PAGE>
Company. The purpose of this transaction is to provide the Mintz estate with
funds sufficient to pay any estate taxes levied upon the transfer of Mr. Mintz's
Tofutti stock, which would have otherwise necessitated a sale of the stock. The
sale of such stock might have a negative effect of significantly decreasing the
market price of the stock to the detriment of other shareholders. Upon the death
of the family member, the Company is to receive a complete refund of all its
premiums paid plus interest at 4%.
There are currently no employment agreements between the Company and any of
its officers. The Company has not paid any cash remuneration to Mr. Snitow or
Mr. Koster for their services as Directors in the last three years.
STOCK OPTIONS
The following table provides information concerning stock options held in
1996 by each of the executive officers named above in the Summary Compensation
Table. There were no options granted to any officers in 1996.
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Shares
Shares Underlying Unexercised Value of Unexercised in the
Acquired on Value Options at FY-End (#) Money Options at FY-End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ------------ ------------ ------------------------- --------------------------
<S> <C> <C> <C> <C>
David Mintz, -- -- 75,000 (E) $ -- (1)
Chief Executive Officer
and Chairman of the
Board
Steven Kass, -- -- -- --
Executive Vice President
Chief Financial Officer,
Secretary and Treasurer
- --------
<FN>
(E) Exercisable options
(1) Year-end market price less than option price
</FN>
</TABLE>
-15-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of March 11, 1997, certain information
regarding the Company's Common Stock, $.01 par value, for each person known by
the Company to be the beneficial owner of more than 5% of the outstanding shares
of the Company's Common Stock, for each executive officer named in the Summary
Compensation Table, for each of the Company's Directors and for the executive
officers and Directors of the Company as a group:
Amount of
Name Beneficial Ownership Percent of Class
- ---- -------------------- ----------------
David Mintz......................... 3,090,440 (1) 49.9%
Franklyn Snitow..................... 30,000 (2) *
Reuben Rapoport..................... 20,000 *
Bernard Koster...................... 16,000 (3) *
Steven Kass......................... -- *
All Executive Officers and
Directors as a group (5 persons).... 3,156,440 (4) 51.0%
- ----------
The address of all individuals except Messrs. Koster and Snitow is c/o
Tofutti Brands, Inc., 50 Jackson Drive, Cranford, New Jersey 07016. The address
of Mr. Snitow is 345 Madison Avenue, New York, NY 10017 and the address of Mr.
Koster is 1450 Broadway, New York, New York 10018. Each person listed above has
sole voting and/or investment power of the shares attributed to him.
* Less than 1%.
(1) Includes 75,000 shares issuable upon the exercise of currently exercisable
stock options.
(2) Issuable upon the exercise of currently exercisable stock options.
(3) Issuable upon the exercise of currently exercisable stock options.
(4) Issuable upon the exercise of currently exercisable stock options.
Item 12. Certain Relationships and Related Transactions
Franklyn Snitow, a director of the Company, is a member of the law firm of
Snitow & Pauley, which firm provided minimal legal services on behalf of the
Company in 1996.
-16-
<PAGE>
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1* Certificate of Incorporation.
3.1.1** March 1986 Amendment to Certificate of Incorporation.
3.2* By-laws of Registrant.
4.1*** Copy of the Registrant's 1993 Stock Option Plan.
10.1**** Copy of Legal Settlement between the Company and the NEMP
Corporation.
23.1 Consent of Independent Auditors.
(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.
-17-
<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 on March 25, 1997.
TOFUTTI BRANDS INC.
(Registrant)
/s/ David Mintz
---------------
David Mintz
Chairman of the Board and
Chief Executive Officer
Date: March 25, 1997
In Accordance with the Securities Exchange Act of 1934, this Report has
been signed below on March 22, 1997, by the following persons on behalf of the
Registrant and in the capacities indicated.
/s/ David Mintz
- ---------------
David Mintz
Chairman of the Board
and Chief Executive Officer
/s/ Steven Kass
- ---------------
Steven Kass
Secretary, Treasurer and
Chief Financial Officer
/s/ Bernard Koster
- ------------------
Bernard Koster
Director
/s/ Reuben Rapoport
- -------------------
Reuben Rapoport
Director
/s/ Franklyn Snitow
- -------------------
Franklyn Snitow
Director
-18-
<PAGE>
EXHIBIT INDEX
Exhibit Page
3.1* Certificate of Incorporation, as amended through February
1986.
3.1.1** March 1986 Amendment to Certificate of Incorporation.
3.2* By-laws of the Registrant.
4.1*** Copy of the Registrant's 1993 Stock Option Plan.
10.1**** Copy of Legal Settlement between the Company and the NEMP
Corporation.
23.1 Consent of Independent Auditors.
* 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.
<PAGE>
EXHIBIT 23.1
Exhibit 23.1
Consent of Independent Auditors
The Board of Directors
Tofutti Brands Inc.:
We consent to the incorporation by reference in the Registration Statement (No.
33-72654) on Form S-8 of Tofutti Brands Inc. of our report dated March 17, 1997,
relating to the balance sheets of Tofutti Brands Inc. as of December 28, 1996
and December 30, 1995 and the related statements of operations and accumulated
deficit, and cash flows for the fifty-two week periods ended December 28, 1996
and December 30, 1995, which report appears in the December 28, 1996 annual
report on Form 10-KSB of Tofutti Brands Inc.
/s/KPMG Peat Marwick LLP
New York, New York
March 25, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> DEC-28-1996
<CASH> 11,000
<SECURITIES> 0
<RECEIVABLES> 1,272,000
<ALLOWANCES> 295,000
<INVENTORY> 351,000
<CURRENT-ASSETS> 1,349,000
<PP&E> 59,000
<DEPRECIATION> 59,000
<TOTAL-ASSETS> 1,736,000
<CURRENT-LIABILITIES> 634,000
<BONDS> 0
0
0
<COMMON> 61,000
<OTHER-SE> 975,000
<TOTAL-LIABILITY-AND-EQUITY> 1,736,000
<SALES> 5,842,000
<TOTAL-REVENUES> 5,842,000
<CGS> 3,718,000
<TOTAL-COSTS> 4,146,000
<OTHER-EXPENSES> 2,022,000
<LOSS-PROVISION> 62,000
<INTEREST-EXPENSE> 12,000
<INCOME-PRETAX> 90,000
<INCOME-TAX> (45,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,000
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
