See accompanying notes to unaudited condensed financial statements.

TOFUTTI BRANDS INC.

Unaudited Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

See accompanying notes to unaudited condensed financial statements.

TOFUTTI BRANDS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(In thousands, except for share and per share data)

Note 1: Liquidity and Capital Resources

At March 28, 2020, Tofutti Brands, Inc. (“Tofutti” or the “Company”) had approximately $908 in cash compared to $514 at December 28, 2019. Net cash provided by operating activities for the thirteen weeks ended March 28, 2020 was $394 compared to $62 provided by operating activities for the thirteen weeks ended March 30, 2019. Net cash used in investing activities for the thirteen weeks ended March 28, 2020 was $0 compared to $29 used in investing activities for the thirteen weeks ended March 30, 2019. Net cash used in financing activities for both the thirteen weeks ended March 28, 2020 and March 30, 2019 was $0.

The Company historically has primarily financed operations and met capital requirements through positive cash flow from operations. However, due to net losses and cash used in operations in prior years in order to provide the Company with additional working capital, on January 6, 2016, David Mintz, the Company’s Chairman and Chief Executive, provided it with a loan of $500. The original loan was convertible into shares of the Company’s common stock at a conversion price of $4.01 per share, the closing price of its common stock on the NYSE MKT on the date the promissory note was first entered into. The loan, which has been extended until December 31, 2022 effective January 10, 2020, is convertible into the Company’s common stock at a conversion price of $1.77 per share, the closing price of the common stock on the OTCQB on the date the extension of the promissory note was entered into. See Note 10.

The Company’s ability to introduce successful new products may be adversely affected by a number of factors, such as unforeseen cost and expenses, economic environment, increased competition, the inability to make sales calls due to travel restrictions imposed by governmental agencies in response to the spread of COVID-19 and other factors beyond the Company’s control. The Company’s ability to promote sales through promotional activities has also been constrained as many supermarkets are understaffed and unable to change pricing for items in stock, resulting in the cancelation of many sales promotional discounts for the foreseeable future. Trade food shows and sales conferences, major events used to introduce and sell the Company’s products, have been postponed indefinitely.

Management cannot provide assurance that the Company will operate profitably in the future, or that it will not require significant additional financing in order to accomplish or exceed the objectives of its business plan. In addition, the continued spread of COVID-19 and the resulting economic downturn could materially and adversely affect the Company’s business and results of operations. Consequently, the Company’s historical operating results cannot be relied on to be an indicator of future performance, and management cannot predict whether the Company will obtain or sustain positive operating cash flow or generate net income in the future.

Small Business Administration Loan

On May 4, 2020, the Company was granted a loan (the “Loan”) from the Valley National Bank in the aggregate amount of $165, pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The term of the loan is four years, with monthly payments due the first day of each month, beginning seven months from the date of initial disbursement, or December 1, 2020, whichever is earlier. Interest accrues at 1% per year, effective on the date of initial disbursement. In addition, a portion of the loan may be forgiven under provisions under the CARES Act based on payments for payroll, rent and utilities during the period subsequent to obtaining the loan.

TOFUTTI BRANDS INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except for share and per share data)

Note 2: Description of Business

Tofutti is engaged in one business segment, the development, production and marketing of non-dairy frozen desserts and other food products.

The Company reports on operating segments in accordance with standards for public companies to report information about operating segments and geographic distribution of sales in financial statements. While the Company has multiple products and or product groups, its goal is to focus on non-dairy foods. The Company’s chief operating decision maker tracks revenue by product groups, but does not track more granular operating results by product group as many of the ingredients are similar among these groups. As a result, the Company has determined that it has only one operating segment, which is the development, production and marketing of soy-based, non-dairy frozen desserts, frozen food products and soy-based cheese products.

Note 3:1: Basis of Presentation

The accompanying unaudited condensed 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 accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations for the thirteen weekthirteen-week period ended March 28, 2020April 3, 2021 are not necessarily indicative of the results to be expected for the full year or any other period.

The Company’s fiscal year is either a fifty-two or fifty-three weekfifty-three-week period which ends on the Saturday closest to December 31^st.

Note 4: New and2: Recently AdoptedIssued Accounting Standards

The Company considers the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on the Company’s balance sheets or statements of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. The amendments in this Update require a new topic to be added (Topic 326) to the Accounting Standards Codification (“ASC”) and removes the thresholds that entities apply to measure credit losses on financial instruments measured at amortized cost, such as loans, trade receivables, reinsurance recoverables, and off-balance-sheet credit exposures, and held-to-maturity securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. The guidance under ASU 2016-13 will remove all current recognition thresholds and will require entities under the new current expected credit loss (“CECL”) model to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that an entity expects to collect over the instrument’s contractual life. The new CECL model is based upon expected losses rather than incurred losses. Additionally, the credit loss recognition guidance for available-for-sale securities is amended and will require that credit losses on such debt securities should be recognized as an allowance for credit losses rather than a direct write-down of amortized cost balance. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are currently evaluating the effect that this new guidance will have on our financial statements and related disclosures.

Note 3: Inventories

Inventories consist of the following:

TOFUTTI BRANDS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(In thousands, except for share and per share data)

Note 5: Inventories

The composition of inventories is as follows:

Note 6:4: 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. 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. The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes.

Note 7:5: Earnings Per Share

BasicFully diluted earnings per common share has been computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per common share for the periods ended March 28, 2020 and March 30, 2019 have been computed by dividing net incomeearnings by the weighted average number of common shares outstanding, and common stock equivalents, which include options andwould account for a potential 282,486 shares to be issued upon conversion. The convertible notes outstanding during the same period. Notnote for 282,486 shares was included in the calculations forcalculation of fully diluted earnings. For the periodsthirteen weeks ended March 28, 2020, and March 30, 2019 werestock equivalents of 80,000 non-qualified options granted to directorsshares and a convertible note payable, as a consequence of their anti-dilutive effect.for 124,688 shares were excluded from diluted earnings per share calculations since the effect was anti-dilutive.

The following table sets forth the computation of basic and diluted earnings per share:

Note 6: Equipment

Equipment consists of the following:

Depreciation expense for the thirteen weeks ended April 3, 2021 and the thirteen weeks ended March 28, 2020 was $3 and $2, respectively.

TOFUTTI BRANDS INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(In thousands, except for share and per share data)

Note 8: Fixed Assets

Fixed assets consist of the following:

Depreciation expense for the thirteen weeks ended March 28, 2020 and the thirteen weeks ended March 30, 2019 was $2 and $0, respectively.

Note 9:7: Share Based Compensation

On June 10, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan provides for grants of various types of awards that are designed to attract and retain highly qualified personnel who will contribute to the success of the Company and to provide incentives to participants in the 2014 Plan that are linked directly to increases in shareholder value which will therefore inure to the benefit of all shareholders of the Company. The Company intends to rely on a combination of multi-year performance awards, options and other stock-based awards for these purposes.

The 2014 Plan made 250,000 shares of common stock available for awards. The 2014 Plan also permits performance-based 2014 awards paid under it to be tax deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, as “performance-based compensation.” AsThere were no stock options outstanding as of March 28, 2020, the Company had issued 80,000 non-qualified stock option awards under the 2014 Plan. 50,000 options expired on March 31, 2020, and another 30,000 options expired on June 9, 2020.April 3, 2021.

Note 10: Note8: Notes Payable

Small Business Administration (SBA) Loan

On May 4, 2020 the Company received from the SBA a loan of $165 from the Paycheck Protection Program at an interest rate of 1%. Interest and payments were deferred until March 4, 2021. The current portion of the loan was $120 as of April 3, 2021 and the loan will expire on May 4, 2022. No demand for repayment of the loan has been made as of May 24, 2021.

Related Party

On January 6, 2016, David Mintz, the Company’s former Chairman and Chief Executive, who passed away in February 2021, provided the Company with a loan of $500.$500 with an annual interest rate of 5% payable on a quarterly basis. The loan, which was originally set to expire on December 31, 2017 has beenwas extended to December 31, 2022 effective January 10, 2020. The original loan was convertible into shares of the Company’s common stock at a conversion price of $4.01 per share, the closing price of its common stock on the NYSE MKT on the date the promissory note was first entered into. The extended loan is, at the option of the holder, convertible into the Company’s common stock at a conversion price of $1.77 per share, the closing price of the Company’s common stock on the date of the extension of the promissory note. No other terms of the loan were modified. Commencing March 31, 2016, interest of 5% is payable on a quarterly basis without compounding. The loan may be prepaid in whole or in part at any time without premium or penalty. In any event of default, as defined in the promissory note, without any action on the part of Mr. Mintz, the interest rate will increase to 12% per annum and the entire principal and interest balance under the loan, and all of the Company’s other obligations under the loan, will be immediately due and payable, and Mr. Mintz will be entitled to seek and institute any and all remedies available to him.

TOFUTTI BRANDS INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except for share and per share data)

Note 11:9: Revenue

Performance obligations relating to the delivery of food products are satisfied when the goods are shipped to the customer and net of all applicable discounts, as follows: Payment term discounts, off-invoice allowance, manufacturer chargeback, freight allowance, spoilage discounts, and product returns.

Approximately 91% and 93% of the Americas revenue in the 2021 and the 2020 periods, respectively, is attributable to sales in the United States. All of the Company’s assets are located in the United States.

TOFUTTI BRANDS INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(In thousands, except for share and per share data)

Note 12:10: Leases

The Company’s facilities areCompany is located in a one-story facility in Cranford, New Jersey. The 6,200 square foot facility houses its administrative offices, a warehouse, walk-in freezer and refrigerator, and a product development laboratory and test kitchen. The Company’s original lease agreement expired on July 1, 1999, but it continues to occupy the premises on a monthly basis. Any changes by either the landlord or the Company remains subject to a six monthsix-month notification period. The Company currently has no plans to enter into a long-term lease agreement for the facility. Rent expense was $20 in the thirteen weeks ended April 3, 2021 and $19 in the thirteen weeks ended March 28, 2020 and $27 in the thirteen weeks ended March 30, 2019.2020. The Company’s management believes that the Cranford facility will continue to satisfy its space requirements for the foreseeable future and that if necessary, such space can be replaced without a significant impact to the business. The Company rents warehouse storage space at various outside facilities. Outside warehouse expenses amounted to $112 for the thirteen weeks ended April 3, 2021 and $114 for both the thirteen weeks ended March 28, 2020 and March 30, 2019.2020.

Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases primarily consisting of facilitiesone facility and office equipment with remaining lease terms of approximately two to four years. The Company does not have the option to terminate the leases early.

Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company has combined the lease and non-lease components in determining the lease liabilities and right-of-use, or ROU, assets.

The Company’s lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. The Company used the incremental borrowing rate on December 29, 2018 of 5.5% for all leases that commenced prior to that date.

TOFUTTI BRANDS INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
(In thousands, except for share and per share data)

ROU lease assets and lease liabilities for our operating leases were recorded in the balance sheet as follows:

Future lease payments included in the measurement of lease liabilities on the balance sheet as of December 28, 2019, for the following five fiscal years and thereafterApril 3, 2021 are as follows:

TOFUTTI BRANDS INC.

Item 2.Management’s Discussion and Analysis of Financial Condition

Item 2.

Management’s Discussion and Analysis of FinancialCondition and Results of Operations

The following is management’s discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the accompanying financial statements.

The discussion and analysis which follows in this Quarterly Report and in other reports and documents and in oral statements made on our behalf by our 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 our current views with respect to future events and financial results. These include statements regarding our earnings, projected growth and forecasts, and similar matters which are not historical facts. We remind 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 in the food industry and general economic conditions, 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 our behalf should be considered in light of these factors.

Critical Accounting Policies

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these unaudited condensed financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the 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. The policies discussed below are considered by management to be critical to an understanding of our financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

Revenue Recognition.We primarily sell non-dairyvegan and dairy-free soy-based cheeses, frozen desserts cheeses and other food products as detailed in Note 11: Revenue.products. We recognize revenue when control over the products transfers to our customers, deemed to be the performance obligation, which generally occurs upon deliverywhen the product is shipped or shipmentpicked up from one of our distribution locations by the products.customer. We account for product shipping, handling and insurance as fulfillment activities with revenues for these activities recorded within net revenue and costs recorded within cost of sales. Revenues are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. We base these estimates of expected amounts principally on historical utilization and redemption rates. Estimates that affect revenue, such as trade incentives and product returns, are monitored and adjusted each period until the incentives or product returns are realized.

Key sales terms, such as pricing and quantities ordered, are established on a frequent basis such that most customer arrangements and related incentives have a one year or shorter duration. As such, we do not capitalize contract inception costs and we capitalize product fulfillment costs in accordance with U.S. GAAP and our inventory policies. We generally do not have any unbilled receivables at the end of a period.

Accounts Receivable.Receivable. The majority of our accounts receivables are due from distributors (domestic and international) and retailers. Credit is extended based on evaluation of a customers’ financial condition and, generally, collateral is not required. Accounts receivable are most often due within 30 to 90 days and are stated at amounts due from customers net of an allowance for doubtful accounts.accounts and reserve for sales promotions. Accounts outstanding longer than the contractual payment terms are considered past due. We determine whether an allowance is necessary by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, the customer’s current ability to pay its obligation, and the condition of the general economy and the industry as a whole. We write offwrite-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the bad debt expense account. We do not accrue interest on accounts receivable past due.

Inventory.Inventory is stated at lower of cost or marketnet realizable value determined by first in first out (FIFO) method. Inventories in excess of future demand are written down and charged to the provision for inventories. At the point of which loss is recognized, a new, lower cost basis for that inventory is established and subsequent changes in facts and circumstances do not result in the restoration or increase in the newly established cost basis.

Fixed Assets. Fixed assets consist of frozen dessert manufacturing equipment that has been installed at our new co-packer’s frozen dessert manufacturing facilities. Depreciation is provided by charges to income using the straight-line method over the useful life of ten years.

Leases.Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. We have operating leases primarily consisting of facilities with remaining lease terms of approximately twoone to fourthree years. Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, we have combined the lease and non-lease components in determining the lease liabilities and ROUright of use assets.

Income Taxes.Taxes. 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. 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. A valuation allowance is recorded if there is uncertainty as to the realization of deferred tax assets. We will recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.

Recent accounting pronouncements

Our company considers the applicability and impact of all Accounting Standard Updates (“ASUs”). ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on our balance sheets or statements of operations.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. The amendments in this Update require a new topic to be added (Topic 326) to the Accounting Standards Codification (“ASC”) and removes the thresholds that entities apply to measure credit losses on financial instruments measured at amortized cost, such as loans, trade receivables, reinsurance recoverables, and off-balance-sheet credit exposures, and held-to-maturity securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. The guidance under ASU 2016-13 will remove all current recognition thresholds and will require entities under the new current expected credit loss (“CECL”) model to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that an entity expects to collect over the instrument’s contractual life. The new CECL model is based upon expected losses rather than incurred losses. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. We are currently evaluating the effect that this new guidance will have on our financial statements and related disclosures.

Recent Developments

TheOn February 24, 2021 David Mintz, our founder, Chief Executive Officer and Chairman of the Board of Directors, passed away. Steven Kass, Chief Financial Officer, was appointed interim CEO by our Board of Directors and was confirmed as permanent CEO by the Board on April 27, 2021.

An outbreak of infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has now spread globally. This outbreak has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, disruption of and delays in healthcare service preparation and delivery, prolonged quarantines, cancellations, supply chain disruptions, and lower consumer demand, layoffs, defaults and other significant economic impacts, as well as general concern and uncertainty. The impact of this outbreak has adversely affected the economies of many nations and the entire global economy and may impact our Company in ways that cannot necessarily be foreseen. Other infectious illness outbreaks that may arise in the future could have similar impacts. Public health crises caused by the outbreak may exacerbate other pre-existing political, social and economic risks in certain countries or globally.

The current severity of the pandemic and the uncertainty regarding the length of its effects could have negative consequences for our company. To date, the effects of the pandemic have not materially affected our company’sCompany’s operations. All of our co-packing facilities are currently operating as normalnormally and the pandemic has not constrained any of our production requirements. We continue to be able to schedule trucks for delivery and a large majority of our customers are still operating and ordering our products as before.

Most of our administrative functions are being performed remotely. A small crew maintains the office for those functions that cannot be handled remotely. Our ability to collect money, pay bills, handle customer and consumer communications, schedule production, and order ingredients necessary for our production has not been impacted. To date, the pandemic has had minimal impact on our sales. The majority of our sales relate to retail products sold in supermarkets. Supermarket sales in general have seen a substantial surge in business due to the pandemic, as consumers stock up on all products that they would normally purchase. We experienced a slight decline in sales at the beginning of the imposition of restrictionsThe only negative effect to mitigate the spread of COVID-19 and experienced a declineour business to date has been with respect to our food service sales to retail outlets, such as restaurants and small food shops, which account for a small part of our total business. We expect that any potential decline inbusiness and with respect to our inability to regain our level of export sales will be offset in whole or in part by a similar decline in sales andto foreign jurisdictions. Our marketing expensesefforts have also been constrained due to social distancing restrictions and other current government rules and regulations that preclude face to face sales meeting, attendance at trade shows and the initiation of new promotions.

To date we have not experienced a significant change in the timeliness of payments of our invoices and our cash position remains stable with approximately $908,000$2,446,000 of cash and cash equivalents as of March 28, 2020 and $1,200,000 as of May 31, 2020.April 3, 2021.

Depending on the length and severity of the pandemic, it could negatively affect our business in the following ways:

If some or all of the preceding events take place, they would have a significant impact on our operations and ability to maintain our current level of operations without a further infusion of capital.capital, which may not be available to us.

Results of Operations

Thirteen Weeks Ended March 28, 2020April 3, 2021 Compared with Thirteen Weeks Ended March 30, 201928, 2020

Net sales for the thirteen weeks ended March 28, 2020April 3, 2021 decreased by $275,000,$76,000, or 8%2%, to $3,226,000,$3,150,000, from net sales of $3,501,000$3,226,000 for the thirteen weeks ended March 30, 2019.28, 2020. Sales of our frozen dessert and frozen food products, which consist primarily of frozen dessert products, decreasedincreased slightly to $430,000 in the thirteen weeks ended April 3, 2021 from $412,000 infor the thirteen weeks ended March 28, 2020 from $523,000 for the thirteen weeks ended March 30, 2019.2020. Sales of our vegan cheese products decreased to $2,720,000 in the 2021 period from $2,814,000 in the 20202021 period from $2,978,000due to a decline in the 2019 period. Sales of both our frozen dessert products and our vegan cheese product line were negatively impacted by the start of restrictions imposed due to the COVID-19 coronavirus, particularly in our export business. Our export vegan cheeseslice product sales were also negatively impacted by the bankruptcy of our UK distributor at the end of 2019 due to the economic downturn in the UK brought about by the uncertainties of Brexit. We are in the process of finding a suitable replacement.resulting from production delays.

Our gross profit increased slightly to $1,001,000 in the period ended April 3, 2021 from $996,000 in the period ended March 28, 2020 from $983,000 in the period ended March 30, 2019.2020. Our gross profit percentage was 32% for the period ending April 3, 2021 compared to 31% for the period ending March 28, 2020 compared to 28% for the period ending March 30, 2019. The increase was due to more vegan cheese products as a percentage of overall sales during the thirteen week 2020 period, which carry higher margins.2020.

Freight out expense, a significant part of our cost of sales, increaseddecreased by $38,000,$16,000, or 19%7%, to $227,000 for the thirteen weeks ended April 3, 2021 compared with $243,000 for the thirteen weeks ended March 28, 2020 compared with $205,0002020. Freight out expense decreased due to the slight decrease in sales. Freight out expense was 7% of sales for the thirteen weeks March 30, 2019. Freight out expense increased dueended April 3, 2021 compared to increased freight rates caused by a shortage of drivers during the COVID-19 outbreak. Freight out expense was 7%8% of sales for the thirteen weeks ended March 28, 2020 compared to 6% for the thirteen weeks ended March 30, 2019.2020. We anticipate that freight out expense will continue at the same percentage of sales over the remainder of 2020.2021.

Selling expenses decreasedincreased by $90,000,$16,000, or 23%5%, to $323,000 for the thirteen weeks ended April 3, 2021 from $307,000 for the thirteen weeks ended March 28, 2020 from $397,0002020.

Marketing expenses decreased by $55,000, or 44%, to $70,000 for the thirteen weeks ended March 30, 2019. This decrease was due principally to decreases of $53,000 in commission expense, $16,000 in payroll expense, $12,000 in meeting and convention expense, $6,000 in travel, entertainment and auto expense, and $3,000 in messenger expense. The decrease in commission expense was partially due to the termination of some food service brokers for which we incurred commission expense only in the 2019 period. We anticipate that our selling expenses will be significantly lower for the balance of 2020 compared to 2019.

Marketing expenses increased by $41,000, or 49%, toApril 3, 2021 from $125,000 for the thirteen weeks ended March 28, 2020 from $84,000 for the thirteen weeks ended March 30, 2019. Increases2020. The decrease was primarily due to decreases in promotions expense of $54,000 and artwork and plates expense of $6,000, which were partially offset by an increase in advertising expense of $14,000 and in promotions expense of $30,000 were partially offset by a decrease in public relations expense of $3,000. These increases were due to certain expenses falling in a different quarter in 2020 than in 2019. We anticipate reductions in marketing expenses for the balance of 2020.$4,000.

Research and development costs, which consist principally of salary expenses and laboratory costs, increaseddecreased by $32,000,$51,000, or 55%43%, to $39,000 for the thirteen weeks ended April 3, 2021 from $90,000 for the thirteen weeks ended March 28, 2020, from $58,000 for the thirteen weeks ended March 30, 2019, due partially to increasesdecreases in payroll expense of $10,000$28,000, equipment repair expense of $14,000, uniform rental expense of $6,000, and professional fees and services of $5,000. We$9,000. Because we do not anticipate that our research and development expensesdepartment will be lower overresume operations at the balancepre-COVID level in 2021, we expect that product development costs will remain constant or decline slightly for the remainder of 2020.fiscal 2021.

General and administrative expenses increased slightlyby $36,000, or 9%, to $410,000$447,000 for the thirteen weeks ended April 3, 2021 from $411,000 for the thirteen weeks ended March 28, 2020, from $409,000 for the thirteen weeks ended March 30, 2019. Decreases of payroll expense of $10,000, IT expense of $12,000, office supplies expense of $3,000 and building rental expense of $9,000 were offset by increasesprimarily due to an increase in professional fees and outside service expense of $20,000 and general insurance expense of $10,000.$25,000 We anticipate that our general and administrative expenses for the remainder of 20202021 will be similar to or slightly lower than those of 2019.2020.

Income tax expense was $36,000 for the thirteen weeks ended April 3, 2021 and $7,000 for the thirteen weeks ended March 28, 2020 and $6,00028,2020, which is in line with the comparative effective tax rates for the thirteen weeks ended March 30, 2019. We did not record tax expense other than minimum state taxes for the thirteen weeks ending March 28, 2020 and March 30, 2019.both fiscal periods.

Liquidity and Capital Resources

As of March 28, 2020,April 3, 2021, we had approximately $908,000$2,446,000 in cash and cash equivalents and our working capital was approximately $3,884,000,$4,693,000, compared with approximately $514,000$1,459,000 in cash and cash equivalents and working capital of $3,840,000$4,639,000 at December 28, 2019.January 2, 2021.

In order to provide our company with additional working capital, on January 6, 2016, David Mintz, our Chairman and Chief Executive Officer, provided our company with a loan of $500,000 which is secured by substantially all of our assets. The loan has been extended until December 31, 2022. Interest of 5% is payable on a quarterly basis without compounding. The loan may be prepaid in whole or in part at any time without premium or penalty. The loan is convertible into our common stock at a conversion price of $1.77 per share at the option of the holder, the closing price of our common stock on the OTCQB on the date the extension of the promissory note was entered into.

Small Business Administration Loan

On May 4, 2020, we were granted a loan (the “Loan”) from Valley National Bank in the aggregate amount of approximately $165,000, pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The term of the loan is fourtwo years, with monthly payments due the first day of each month, beginning seven months from the date of initial disbursement, or December 1, 2020, whichever is earlier. Interest accrues at 1% per year, effective on the date of initial disbursement. In addition, a portion of the loan may be forgiven under provisions under the CARES Act based on payments for payroll, rent and utilities during the period subsequent to obtaining the loan.

The following table summarizes our cash flows for the periods presented: