U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934 for the quarterly period ended September 27, 2003
___ Transition report under Section 13 or 15(d) of the Exchange Act for the
transition period from ____to ____
Commission file number: 1-9009
Tofutti Brands Inc.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3094658
-------- ----------
(State of Incorporation) (I.R.S. Employer
Identification No.)
50 Jackson Drive, Cranford, New Jersey 07016
--------------------------------------------
(Address of Principal Executive Offices)
(908) 272-2400
--------------
(Issuer's Telephone Number, Including Area Code)
------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No __
APPLICABLE ONLY TO CORPORATE ISSUERS
As of November 7, 2003 the Issuer had 5,743,667 shares of Common Stock,
par value $.01, outstanding.
Transitional Small Business Disclosure Format (check one):
Yes __No X
TOFUTTI BRANDS INC.
INDEX
Page
- --------------------------------------------------------------------------------
Part I - Financial Information:
Item 1. Condensed Balance Sheets - September 27, 2003
(Unaudited) and December 28, 2002 (Audited) 3
Condensed Statements of Income - (Unaudited) - Thirteen and
Thirty-nine week periods ended September 27, 2003 and
September 28, 2002 4
Condensed Statements of Cash Flows -
(Unaudited) - Thirty-nine week periods
ended September 27, 2003 and September 28, 2002 5
Notes to Condensed Financial Statements -(Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3 Controls and Procedures 14
Part II - Other Information:
Item 2. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Shareholders 15
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 17
2
PART I - FINANCIAL INFORMATION
Item 1.
TOFUTTI BRANDS INC.
Condensed Balance Sheets
(000's omitted except for share data)
September 27, December 28,
2003 2002
(Unaudited) (Audited)
----------- ---------
Assets
Current assets:
Cash and equivalents $2,331 $2,234
Accounts receivable (net of allowance for doubtful
accounts of $388 and $340, respectively) 1,794 1,369
Inventories 743 814
Prepaid expenses 25 15
Deferred income taxes 343 485
----- ---
Total current assets 5,236 4,917
Fixed assets (net of accumulated depreciation $2) 46 --
Other assets 216 216
---- ---
Total assets $5,498 $5,133
====== ======
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 564 $ 75
Accrued compensation -- 375
Income taxes payable 111 82
---- ---
Total current liabilities 675 532
Commitments and contingencies
Stockholders' equity:
Preferred stock-par value $.01 per share; 100,000 -- --
shares authorized; none issued
Common stock-par value $.01 per share; 57 59
15,000,000 shares authorized; 5,710,867 and
5,878,567 shares issued and outstanding at
September 27, 2003 and December 28, 2002,
respectively
Additional paid-in capital 1,613 2,081
Accumulated earnings 3,153 2,461
------ -----
Total stockholders' equity 4,823 4,601
------ -----
Total liabilities and stockholders' equity $5,498 $5,133
====== ======
See accompanying notes to condensed financial statements.
3
TOFUTTI BRANDS INC.
Condensed Statements of Income
(Unaudited)
(000's omitted)
Thirteen Thirteen Thirty-nine Thirty-nine
weeks ended weeks ended weeks ended weeks ended
Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept. 28, 2002
-------------- -------------- -------------- --------------
Net sales $4,960 $4,491 $14,555 $13,315
Cost of sales 3,493 3,140 9,844 8,939
----- ----- ------- -----
Gross profit 1,467 1,351 4,711 4,376
----- ----- ----- -----
Operating expenses:
Selling 549 470 1,532 1,408
Marketing 137 136 513 309
Research and development 156 96 398 296
General and administrative 356 275 1,093 931
----- --- ----- ---
1,198 977 3,536 2,944
----- --- ----- -----
Operating income 269 374 1,175 1,432
Interest income 1 6 6 19
---- ---- ----- ----
Income before income taxes 270 380 1,181 1,451
Income taxes 112 148 489 589
---- --- ----- ---
Net income $ 158 $232 $ 692 $862
====== ==== ====== ====
Weighted average common shares
outstanding:
Basic 5,714 6,099 5,757 6,085
====== ===== ====== =====
Diluted 6,761 7,153 6,753 7,065
====== ===== ====== =====
Net income per share:
Basic $0.03 $0.04 $0.12 $0.14
===== ===== ===== =====
Diluted $0.02 $0.03 $0.10 $0.12
===== ===== ===== =====
See accompanying notes to condensed financial statements.
4
TOFUTTI BRANDS INC.
Condensed Statements of Cash Flows
(Unaudited)
(000's omitted)
Thirty-nine Thirty-nine
weeks weeks
ended ended
Sept. 27, 2003 Sept. 28, 2002
-------------- --------------
Cash flows from operating activities, net $632 $763
Cash flows from investing activities (48) 116
Cash flows from financing activities, net (487) (468)
----- -----
Net change in cash and equivalents 97 411
Cash and equivalents at beginning of period 2,234 2,329
----- -----
Cash and equivalents at end of period 2,331 2,740
===== =====
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Taxes $ 318 $750
===== ====
See accompanying notes to condensed financial statements.
5
TOFUTTI BRANDS INC.
Notes to Condensed Financial Statements
(Unaudited)
(000's omitted)
Note 1: Description of Business
Tofutti Brands Inc. ("Tofutti" or the "Company") is engaged in
one business segment, the development, production and marketing
of non-dairy frozen desserts and other food products.
Note 2: Basis of Presentation
The accompanying financial information is unaudited, but, in the
opinion of management, reflects all adjustments (which include
only normally recurring adjustments) necessary to present fairly
the Company's financial position, operating results and cash
flows for the periods presented. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with 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 financial information should be read in
conjunction with the audited financial statements and notes
thereto for the year ended December 28, 2002 included in the
Company's Annual Report on Form 10-KSB filed with the Securities
and Exchange Commission. The results of operations for the
thirty-nine week period ended September 27, 2003 are not
necessarily indicative of the results to be expected for the full
year.
The Company operates on a fiscal year which ends on the Saturday
closest to December 31.
Note 3: Inventories
The composition of inventories is as follows:
September 27, 2003 December 28, 2002
------------------ -----------------
Finished products $483 $576
Raw materials and packaging 260 238
--- ---
$743 $814
==== ====
6
TOFUTTI BRANDS INC.
Notes to Condensed Financial Statements (continued)
(Unaudited)
(000's omitted)
Note 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 and operating loss and
tax credit carry forwards. 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.
Note 5: Market Risk
We invest our excess cash, should there be any, in bank
certificates of deposit, high rated money market funds and
repurchase agreements. The bank certificates of deposit are
usually for a term of not more than six months nor more than $100
per account.
Note 6: Earnings Per Share
Basic 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 has been computed
by dividing net income by the weighted average number of common
shares outstanding including dilutive effects of stock options.
7
TOFUTTI BRANDS INC.
Notes to Condensed Financial Statements (continued)
(Unaudited)
(000's omitted)
The following table sets forth the computation of basic and
diluted earnings per share:
Thirteen Thirteen Thirty-nine Thirty-nine
Weeks Weeks Weeks Weeks
Ended Ended Ended Ended
Sept. 27, 2003 Sept. 28, 2002 Sept. 27, 2003 Sept. 28, 2002
-------------- -------------- -------------- --------------
Numerator
Net income-basic . . . . . . . . . . . . . . $158 $232 $692 $862
==== ==== ==== ====
Net income-diluted . . . . . . . . . . . . . $158 $232 $692 $862
==== ==== ==== ====
Denominator
Denominator for basic earnings per share
Weighted average shares . . . . . . . . 5,714 6,099 5,757 6,085
----- ----- ----- -----
Effect of dilutive securities
Stock options . . . . . . . . . . . . . 1,047 1,054 996 980
----- ----- ------ -----
Denominator for diluted earnings per share 6,761 7,153 6,753 7,065
----- ----- ----- -----
Earnings per share
Basic . . . . . . . . . . . . . . . . . $0.03 $0.04 $0.12 $0.14
===== ===== ===== =====
Diluted . . . . . . . . . . . . . . . . $0.02 $0.03 $0.10 $0.12
===== ===== ===== =====
Note 7: Stock-Based Compensation
The Company follows the intrinsic method of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25) and related interpretations in accounting for its
employee stock options because, as discussed below, Financial
Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation" (FAS 123) requires use of option
valuation models that were not developed for use in valuing
employee stock options. FAS 123 permits a company to elect to
follow the intrinsic method of APB 25 rather than the alternative
fair value accounting provided under FAS 123, but requires pro
forma net income and earnings per share disclosures as well as
various other disclosures not required under APB 25 for companies
following APB 25. The Company has adopted the disclosure
provisions required under Financial Accounting Standards Board
Statement No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure" (FAS 148). Under APB 25, because the
exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant, no
compensation expense was recognized.
Pro forma information regarding net income and earnings per share
is required by FAS 123 and FAS 148, and has been determined as if
the Company had accounted for its employee stock options under
the fair value method of that Statement. No options were granted
during the thirteen and thirty-nine weeks ended September 27,
2003 and the thirteen and thirty-nine weeks ended September 28,
2002.
8
TOFUTTI BRANDS INC.
Notes to Condensed Financial Statements (continued)
(Unaudited)
(000's omitted)
For purposes of pro forma disclosures, the estimated fair value
of options is amortized to expense over the options' vesting
period. The Company's pro forma information follows:
Thirteen weeks ended Thirty-nine weeks ended
---------------------- ------------------------
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
2003 2002 2003 2002
---- ---- ---- ----
Net income, as reported $ 158 $ 232 $ 692 $ 862
Stock-based employee compensation expense
under fair value method, net of related tax
effects -- -- -- --
---- ---- ---- ----
Pro forma net income $158 $232 $692 $862
==== ==== ==== ====
Earnings per share:
Basic, as reported $0.03 $0.04 $0.12 $0.14
===== ===== ===== =====
Basic, pro forma $0.03 $0.04 $0.12 $0.14
===== ===== ===== =====
Diluted, as reported $0.02 $0.03 $0.10 $0.12
===== ===== ===== =====
Diluted, pro forma $0.02 $0.03 $0.10 $0.12
===== ===== ===== =====
Note 8: Contingent Liability
The Company was recently served with a complaint by a candy
manufacturer. The plaintiff has alleged that the Company breached
its obligations in connection with the sale of certain candy bars
manufactured by the candy manufacturer that were to be
distributed by the Company within the United States. The candy
manufacturer is seeking damages in the amount of $313 plus
interest. The Company has counterclaimed, asserting among other
things, that the candy manufacturer breached its obligations to
the Company and caused damages to the Company. The litigation is
in its early stages and no discovery has been conducted. The
Company intends to vigorously defend this action and oppose all
relief sought by the plaintiff while seeking compensation on its
counterclaims.
Note 9: Subsequent Event
In view of the strong financial condition of the Company, the
Company's Board of Directors on October 13, 2003 authorized a
transaction with David Mintz, Chairman of the Board of Directors,
Chief Executive Officer and President, whereby Mr. Mintz
surrendered 300,000 of his options in consideration of the
payment to him of $358, an amount equal to the difference of 75%
of the closing market price of the Company's common stock on that
date ($3.15) less the exercise price of such options.
9
TOFUTTI BRANDS INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following is management's discussion and analysis of certain significant
factors which have affected our financial position and operating results during
the periods included in the accompanying condensed financial statements.
The discussion and analysis which follows in this quarterly report and in other
reports and documents and 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 and growth in the food industry and general
economies, both domestic and international; lower than expected customer orders;
competitive factors; changes in product mix or distribution channels; and
resource constraints encountered in developing new products. The forward-looking
statements contained in this quarterly report and made elsewhere by or on our
behalf should be considered in light of these factors.
We have attempted to identify additional significant uncertainties and other
factors affecting forward-looking statements in the "Risk Factors" contained in
our Annual Report on Form 10-KSB for the fiscal year ended December 28, 2002. We
will provide copies of our Form 10-KSB to stockholders free of charge upon
receipt of a written request submitted to our Secretary at Tofutti Brands Inc.,
50 Jackson Drive, Cranford, New Jersey 07016. Stockholders may also obtain
copies of the Form 10-KSB for a nominal charge from the Public Reference Section
of the Securities and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549 or at the Commission's website: http://www.sec.gov.
Critical Accounting Policies
Our financial statements have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these
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.
10
Revenue Recognition. Our revenue recognition policy is significant because our
revenue is a key component of our results of operations. Revenue is recognized
when goods are shipped from production facilities or outside warehouses.
Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts
for estimated losses resulting from the inability of our customers to make
required payments. Based on historical information, we believe that our
allowance is adequate. Changes in general economic, business and market
conditions could result in an impairment in the ability of our customers to make
their required payments; therefore, the allowance for doubtful accounts is
reviewed monthly and changes to the allowance are updated based on actual
collection experience. We use a combination of percentage of sales, specific
account identification and the aging of accounts receivable to establish an
allowance for losses on accounts receivable.
Allowance for Inventory Obsolescence. We maintain an allowance for inventory
obsolescence for losses resulting from inventory items becoming unsaleable due
to loss of specific customers or changes in customers' requirements. Based on
historical and projected sales information, we believe our allowance is
adequate. However, changes in general economic, business and market conditions
could cause our customers' purchasing requirements to change. These changes
could affect our inventory saleability; therefore, the allowance for inventory
obsolescence is reviewed regularly and changes to the allowance are updated as
new information is received.
Valuation Allowance for Deferred Tax Assets. The carrying value of deferred tax
assets assumes that we will be able to generate sufficient future taxable income
to realize the deferred tax assets based on estimates and assumptions. If these
estimates and assumptions change in the future, we may be required to record a
valuation allowance against deferred tax assets which could result in additional
income tax expense.
Results of Operations
Thirteen Weeks Ended September 27, 2003 Compared with Thirteen Weeks Ended
September 27, 2002
- --------------------------------------------------------------------------
Net sales for the thirteen weeks ended September 27, 2003 were $4,960,000
compared to $4,491,000 for the thirteen weeks ended September 28, 2002. Our
gross profit for the current quarter increased by $116,000 and our gross profit
percentage was 30% compared to 33% for the 2002 period.
We anticipate a continuing increase in sales for the balance of the current
fiscal year due to the introduction of new products and expanded distribution.
Such increase is dependent upon market acceptance of these products, for which
no assurance can be given. In addition, we are continuing to make a major
commitment to obtain additional shelf space for our products in large chain
supermarkets. Competition for this space is intense and obtaining it will
require us to increase spending for additional introductory allowances for the
placement of these products. These costs will have a continuing negative impact
on net dollar sales and our gross profit percentage as we expense these costs as
incurred against sales and not over the expected life of these authorizations.
Our cost of sales during the quarter continued to be adversely impacted by
significant industry-wide price increases in paper and plastic packaging and raw
materials, which increased our cost
11
of good sold. We expect these costs to remain at their current high level for
the foreseeable future. In particular, historically stable commodities such as
oils, cocoa, vanilla and other flavors have recently experienced significant
increases over the previous twelve months. In some cases, these increases have
been in excess of 100%. Finally, there have been significant increases in
co-packer fees. To offset these cost increases, we have instituted a series of
price increases effective in the fourth quarter of this fiscal year. However,
the major impact of these increases will not be felt until the beginning of
2004. These increases should help our company return to its historical gross
margins and improve our overall profitability.
Selling expenses increased by 17% to $549,000 for the current fiscal quarter
compared with $470,000 for the comparable period in 2002. This increase in the
2003 period was due primarily to higher freight, commission and trade show
expenses generated by the increased level of sales.
Marketing expenses remained relatively unchanged at $137,000 in the fiscal 2003
period. We believe that sales promotional activity with our customers is the
most cost effective way to increase sales.
Research and development costs, which consist principally of salary expenses,
increased to $156,000 for the thirteen weeks ended September 27, 2003 compared
to $96,000 for the comparable period in 2002. This increase was mainly
attributable to increased costs for payroll and lab supplies.
General and administrative expenses increased to $356,000 for the current
quarter compared with $275,000 for the comparable period in 2002 due primarily
to an increase in payroll costs, travel and repair costs and entertainment
expenses, computer costs, and building maintenance and repair costs.
Interest income was $1,000 for the current fiscal quarter as compared with
$6,000 for the comparable period in 2002. The decrease was primarily
attributable to lower prevailing interest rates in 2003.
Thirty-Nine Weeks Ended September 27, 2003 Compared with Thirty-Nine Weeks Ended
September 28, 2002
- --------------------------------------------------------------------------------
Net sales for the thirty-nine weeks ended September 27, 2003 were $14,555,000,
an increase of $1,240,000, or 9%, from the sales level realized for the
thirty-nine weeks ended September 28, 2002. As a result of the increase in
sales, our gross profit for the current period increased by $335,000, and our
gross profit percentage was 32% compared to 34% for the 2002 period.
Our cost of sales during the thirty-nine week period continued to be adversely
impacted by significant industry-wide price increases in paper and plastic
packaging and raw materials, which increased our cost of good sold.
Selling expenses increased 9% to $1,532,000 for the thirty-nine weeks ended
September 27, 2003 compared to $1,408,000 for the thirty-nine weeks ended
September 28, 2002. This increase in the 2003 period was due primarily to higher
freight ($87,000) and commission ($20,000) expenses generated by the higher
level of sales for the thirty-nine week period.
12
Marketing expenses increased by $204,000 to $513,000 in the fiscal 2003 period
due principally to increases in artwork and plates for new products ($55,000),
point of sale material ($31,000), and promotions ($100,000). The company's
policy is to expense packaging artwork and design costs as incurred as opposed
to the expected life of the package. Point of sale materials are expensed as
purchased and not amortized.
Research and development costs, which consist principally of salary expenses,
increased to $398,000 for the thirty-nine weeks ended September 27, 2003
compared to $296,000 for the comparable period in 2002. This increase was mainly
attributable to increased costs for payroll ($69,000) and lab supplies
($26,000).
General and administrative expenses increased to $1,093,000 for the current
period compared with $931,000 for the comparable period in 2002 due primarily to
an increase in payroll costs ($84,000), travel and entertainment expenses
($23,000), computer costs ($10,000) and building maintenance and repair
($24,000).
Interest income was $6,000 for the current fiscal quarter as compared with
$19,000 for the comparable period in 2002. The decrease was primarily
attributable to lower prevailing interest rates in 2003.
Income before income tax decreased by $270,000 to $1,181,000 for the thirty-nine
weeks ended September 27, 2003 compared to the thirty-nine weeks ended September
28, 2002 resulting in a decrease in income tax expense of $100,000.
Liquidity and Capital Resources
As of September 27, 2003, we had approximately $2.3 million in cash and
equivalents and our working capital was approximately $4.3 million. Inventories
decreased by $71,000 reflecting an improvement in inventory turn. The increase
in accounts receivable at September 27, 2003 was primarily the result of greater
sales recorded in the nine months of 2003 compared to the end of fiscal year
2002. Our cash flow from operating activities was $632,000 for the nine months
ended September 27, 2003. Net cash used in investing activities of $48,000 for
the nine months ended September 27, 2003 reflect the costs associated with
recent improvements to our Cranford facility. Net cash used in financing
activities was $487,000 for the nine months ended September 27, 2003, which
funds were primarily used for stock and option repurchases.
On September 18, 2000, our Board of Directors authorized the repurchase of
250,000 shares of our common stock at prevailing market prices. This program was
increased subsequently, with the latest increase authorized by our Board of
Directors in April 2003, increasing the repurchase program to one million
shares. From December 29, 2002 through September 27, 2003 we purchased 199,700
shares at a cost of $518,000, bringing our total purchases to 825,700 shares at
a total cost of $1,968,000 or $2.38 per share.
In view of the strong financial condition of the company, our Board of Directors
on October 13, 2003 authorized us to enter into a transaction with David Mintz,
our Chairman of the Board of Directors, Chief Executive Officer and President,
whereby Mr. Mintz surrendered 300,000 of his options in consideration of the
payment to him of $358,110, an amount equal to the difference of 75% of the
closing market price of our common stock on that date ($3.15) less the exercise
price of such options.
13
Our capital requirements are dependent on many factors, including market
acceptance of our products, as well as our marketing and sales activities. We
anticipate that our cash resources will be used primarily to fund our operating
activities, as well as for stock repurchases. We do not presently have any
material capital commitments and contemplate no material capital expenditures in
the foreseeable future. We believe that we have sufficient funds to complete the
stock repurchase program as currently authorized and to fund our operations
during the remainder of 2003 from our current resources.
Inflation and Seasonality
We do not believe that our operating results have been materially affected by
inflation during the preceding two years. There can be no assurance, however,
that our operating results will not be affected by inflation in the future. Our
business is subject to seasonal variations with increased sales in the second
and third quarters of the fiscal year. We expect to continue to experience
relatively higher sales in the second and third quarters, and relatively lower
sales in the fourth and first quarters, as a result of reduced sales of
non-dairy frozen desserts during those periods.
Market Risk
We invest our excess cash, should there be any, in bank certificates of deposit
and the highest rated money market funds. The bank certificate of deposits are
usually for a term of not more than six months and never for more than $100,000
per account.
Item 3. Controls and Procedures
-----------------------
Evaluation of Disclosure Controls and Procedures. Our principal executive
officer and principal financial officer, after evaluating the effectiveness of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly
Report on Form 10-QSB, have concluded that, based on such evaluation, our
disclosure controls and procedures were adequate and effective to ensure that
material information relating to us, including our consolidated subsidiaries,
was made known to them by others within those entities, particularly during the
period in which this Quarterly Report on Form 10-QSB was being prepared.
Changes in Internal Controls. There were no changes in our internal control over
financial reporting, identified in connection with the evaluation of such
internal control that occurred during our last fiscal quarter, that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
14
PART II - OTHER INFORMATION
TOFUTTI BRANDS INC.
Item 2. Legal Proceedings
-----------------
Our company was recently served with a complaint by a candy manufacturer. The
plaintiff has alleged that we breached our obligations in connection with the
sale of certain candy bars manufactured by the candy manufacturer that were to
be distributed by us within the United States. The candy manufacturer is seeking
damages in the amount of $313,351, plus interest. We have counterclaimed,
asserting among other things, that the candy manufacturer breached its
obligations to us and caused us damages. The litigation is in its early stages
and no discovery has been conducted. We intend to vigorously defend this action
and oppose all relief sought by the plaintiff while seeking compensation on its
counterclaims.
Item 4. Submission of Matters to a Vote of Shareholders
-----------------------------------------------
None.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
3.1* Certificate of Incorporation, as amended through February 1986.
3.1.1** March 1986 Amendment to Certificate of Incorporation.
3.2* By-laws.
4.1*** Copy of the Registrant's Amended 1993 Stock Option Plan.
31.1 Certification by Chief Executive Officer Pursuant Section 302 (a)
of the Sarbanes-Oxley Act of 2002.
31.2 Certification by Chief Financial Officer Pursuant to Section 302
(a) of the Sarbanes-Oxley Act of 2002.
32.1 Certification by Chief Executive Officer Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
32.2 Certification by Chief Financial Officer Pursuant Section 906 of
the Sarbanes-Oxley Act of 2002.
- ------------------
* 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.
15
** 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 Registrant's Form S-8 (Registration No.
333-79567) filed May 28, 1999 and hereby incorporated by reference
thereto.
(b) Reports on Form 8-K filed during the last quarter of the period covered
by this report:
None.
16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TOFUTTI BRANDS INC.
(Registrant)
/s/David Mintz
--------------
David Mintz
President and Chief Executive Officer
/s/Steven Kass
--------------
Steven Kass
Chief Financial Officer
Date: November 12, 2003
17