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 28, 1996
[ ] 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 8, 1996 the Issuer had 6,053,567 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:
Condensed Balance Sheets - September 28, 1996
(Unaudited) and December 30, 1995 (Audited) 3
Condensed Statements of Operations - (Unaudited) - Thirteen
and thirty-nine week periods ended September 28, 1996 and
thirteen and thirty-nine week periods ended
September 30, 1995 4
Condensed Statements of Cash Flows - (Unaudited) - Thirty-nine
week period ended September 28, 1996 and thirty-nine week
period ended September 30, 1995 5
Notes to Condensed Financial Statements -
(Unaudited) 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7-9
Part II - Other Information:
Item 4. Submission of Matters to a Vote
of Shareholders 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
2
TOFUTTI BRANDS INC.
Condensed Balance Sheets
(000's omitted)
September 28, December 30,
1996 1995
(Unaudited) (Audited)
----------- ---------
Assets
Current assets:
Cash and cash equivalents $ 5 12
Accounts receivable (net of reserve of
$289 in 1996 and $242 in 1995) 1,167 1,006
Inventories 289 196
Prepaid expenses 8 11
------ -----
Total current assets 1,469 1,225
Deferred taxes 264 264
Other assets 56 56
------ -----
Total assets $ 1,789 1,545
====== =====
Liabilities and Stockholders' Equity
Current liabilities:
Legal settlement payable - current portion $ 13 13
Accounts payable 577 364
Accrued liabilities 97 186
------ -----
Total current liabilities 687 563
Long-term debt - legal settlement 71 81
------ -----
Total liabilities 758 644
Stockholders' equity:
Preferred stock - -
Common stock 61 61
Paid-in capital 3,503 3,503
Retained (deficit) (2,533) (2,663)
------ ------
Total stockholders' equity 1,031 901
------ ------
Total liabilities and stockholders'
equity $ 1,789 1,545
====== ======
See accompanying notes to condensed financial statements.
3
TOFUTTI BRANDS INC.
Condensed Statement of Operations
(Unaudited)
(000's omitted)
Thirty- Thirty-
Thirteen Thirteen nine nine
weeks weeks weeks weeks
ended ended ended ended
9/28/96 9/30/95 9/28/96 9/30/95
------- ------- ------- -------
Net sales $ 1,656 1,334 4,430 3,844
Cost of sales 1,094 806 2,803 2,285
----- ----- ----- -----
Gross profit 562 528 1,627 1,559
----- ----- ----- -----
Operating expenses:
Selling 222 186 620 586
Marketing and sales promotion 52 99 167 256
Research and development 47 40 146 122
General and administrative 183 166 553 495
----- ----- ----- -----
504 491 1,486 1,459
----- ----- ----- -----
Operating income 58 37 141 100
Interest expense 3 3 9 9
----- ----- ----- -----
Income before income
tax expense 55 34 132 91
Income tax expense - - 1 1
----- ----- ----- -----
Net income $ 55 34 131 90
Net income per share $ .01 .01 .02 .01
===== ===== ==== ====
Weighted average number of
shares outstanding 6,065 6,086 6,065 6,086
===== ===== ===== =====
<FN>
See accompanying notes to condensed financial statements.
</FN>
4
TOFUTTI BRANDS INC.
Condensed Statements of Cash Flows
(Unaudited)
(000's omitted)
Thirty- Thirty-
nine nine
weeks weeks
ended ended
9/28/96 9/30/95
------- -------
Cash flows from operating
activities, net $ 7 (12)
Cash flows from investing activities - -
Cash flows from financing activities - 10
---- ----
Net increase (decrease) in
cash and cash equivalents 7 (2)
Cash at beginning of period 12 7
---- ----
Cash at end of period $ 5 5
==== ====
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 9 9
Income taxes 1 1
See accompanying notes to condensed financial statements.
5
TOFUTTI BRANDS INC.
Notes to Condensed Financial Statements
(Unaudited)
(000's omitted)
(1) Basis of Presentation
The accompanying financial information is unaudited, but, in the
opinion of management, reflects all adjustments (which include only
normally recurring adjustments) necessary to present fairly the
Company's financial position, operating results and cash flows for the
periods presented. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. The financial information should be read in conjunction
with the audited financial statements and notes thereto for the year
ended December 30, 1995 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 28, 1996
are not necessarily indicative of the results to be expected for the
full year.
(2) Inventories
The composition of inventories is as follows:
Sept. 28, Dec. 30,
1996 1995
------ ------
Raw materials and packaging
supplies $ 90 108
Finished goods 199 88
----- ----
$ 289 196
===== ====
6
TOFUTTI BRANDS INC.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying condensed
financial statements. The discussion and analysis contains trend analysis and
other forward- looking statements. Actual results could differ materially from
those projected in the forward-looking statements as a result of changes in the
economy, changes in the Company's product sales mix and other factors which may
be beyond the Company's control.
Results of Operations
Thirteen Weeks Ended September 28, 1996 Compared with Thirteen
Weeks Ended September 30, 1995
Net sales for the thirteen weeks ended September 28, 1996 were
$1,656,000, an increase of $322,000, or 24% from the sales level realized for
the thirteen weeks ended September 30, 1995. The Company's frozen dessert line
(principally novelty items) and food product line both showed increases during
this period. The Company's gross profit for the current quarter increased by
$34,000, while its gross profit percentage decreased to 34% from 40% for the
same period last year. The decrease in the gross profit percentage was due to an
increase in novelty and food product sales during the 1996 period. The Company's
gross profit on novelties and food products is less than on pints. The decrease
was also due to special allowances used to introduce the Company's new pasta,
cookie and frozen novelty lines.
The Company anticipates that sales will increase during the fourth
quarter of the current fiscal year as compared to the comparable 1995 period due
to the introduction of new products and expanded distribution. This increase is
dependent upon market acceptance of these products, for which no assurance can
be given.
Selling expenses increased to $222,000 for the current fiscal quarter
compared with $186,000 for the comparable period last year, due to an increase
in freight, commission, bad debt and food show expenses related to the higher
sales level. Marketing and sales promotion expenses decreased to $52,000 in 1996
7
from $99,000 in 1995. This decrease was due principally to a reduction in
promotions, magazine and newspaper advertising in the 1996 period.
Research and development expenses were $47,000 for the thirteen weeks
ended September 28, 1996, compared with $40,000 for the comparable 1995 period,
reflecting an increase in related research and development costs incurred in the
development of the Company's new products.
General and administrative expenses were $183,000 for the current
quarter compared with $166,000 for the comparable period in 1995, reflecting
increased building maintenance costs, office expense, professional fees and
outside services. Most of these increases were directly related to the increase
in sales volume.
The Company's imputed interest expense was unchanged for the thirteen
weeks ended September 28, 1996 compared with the comparable period in 1995.
Thirty-nine Weeks Ended September 28, 1996 Compared with Thirty-
nine Weeks Ended September 30, 1995
Net sales for the thirty-nine weeks ended September 28, 1996 were
$4,430,000, an increase of $586,000, or 15% from the sales level realized for
the thirty-nine weeks ended September 30, 1995. The Company's frozen dessert
line (principally novelty items) and food product line both showed increases
during this period. The Company's gross profit for the current period increased
by $68,000, while its gross profit percentage decreased to 37% as compared to
41% for the same period last year. The decrease in the gross profit percentage
was due to an increase in novelty and food product sales during the 1996 period.
The Company's gross profit on novelties and food products is less than on pints.
The decrease was also due to special allowances used to introduce the Company's
new pasta, cookie and frozen novelty lines.
Selling expenses increased to $620,000 for the current fiscal period
compared with $586,000 for the comparable period last year. The increase in
freight, commission, warehouse, bad debt and food show expenses associated with
the increased sales level was partially offset by a reduction in payroll costs.
Marketing and sales promotion expenses decreased to $167,000 from $256,000 in
1995. This decrease was due principally to a reduction in promotions, magazine
and newspaper advertising in the 1996 period.
8
Research and development expenses were $146,000 for the thirty-nine
weeks ended September 28, 1996, compared with $122,000 for the comparable period
last year, reflecting an increase in related research and development costs
incurred in the development of the Company's new products.
General and administrative expenses were $553,000 for the current
period compared with $495,000 for the comparable period in 1995, reflecting
increased building maintenance costs, office expense, professional fees and
outside services. Most of these increases were directly related to the increase
in sales volume.
The Company's imputed interest expense was unchanged at $9,000 for the
thirty-nine weeks ended September 28, 1996.
Liquidity and Capital Resources
The Company's working capital was $782,000 at September 28, 1996, an
increase of $120,000 from December 30, 1995. Accounts receivable increased to
$1,167,000 at September 28, 1996, an increase of $161,000 from December 30,
1995. This increase was attributable to the increase in sales. Inventories
increased by $93,000 due principally to an increase in finished goods inventory
reflecting the higher sales level and new product introductions.
Prepaid expenses decreased slightly by $3,000 to $8,000 at September
28, 1996. Deferred taxes and other assets were unchanged from December 30, 1995
at $264,000 and $56,000, respectively.
Accounts payable increased by $213,000 to $577,000 at September 28,
1996, reflecting the higher sales level and increase in inventory, while accrued
liabilities declined from December 30, 1995 by $89,000 to $97,000 at September
28, 1996.
As a result of the Company's inability to secure additional financing
or equity capital, it has not had sufficient funds to fully implement the
marketing of its new products. This has hindered the Company in its efforts to
increase the sales of its products. The Company continues to fund its operations
from current resources. Based on recent sales trends and the planned
introduction of new products in the fourth quarter of this year, and the first
quarter of 1997, the Company believes that its revenues may improve in 1996 and
that such improvement in sales shall continue into 1997. Management believes
that it will have sufficient financial resources to continue its operations
through the coming year.
The Company does not have any material capital commitments.
9
PART II - OTHER INFORMATION
TOFUTTI BRANDS INC.
Item 4. Submission of Matters to a Vote of Shareholders
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1* Certificate of Incorporation, as amended through February
1986.
3.1.1** March 1986 Amendment to Certificate of Incorporation
3.2* By-laws
4.1*** Copy of the Company's 1993 Stock Option Plan
10.1**** Copy of Legal Settlement between the Company and the NEMP
Corporation
(b) Reports on Form 8-K filed during the last quarter of the
period covered by this report:
None
- ---------------------
* Filed as an exhibit to the Registrant's Form 10-K for the fiscal year
ended July 31, 1985 and hereby incorporated by reference thereto.
** Filed as an exhibit to the Registrant's Form 10-K for the fiscal year
ended August 2, 1986 and hereby incorporated by reference thereto.
*** Filed as an exhibit to the Company's Form 10-KSB for the fiscal year
ended January 1, 1994 and hereby incorporated by reference thereto.
**** Filed as an exhibit to the Registrant's Form 10-K for the fiscal year
ended December 28, 1991 and hereby incorporated by reference thereto.
10
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TOFUTTI BRANDS INC.
(Registrant)
/s/David Mintz
------------------------
David Mintz
President
/s/Steven Kass
------------------------
Steven Kass
Chief Financial Officer
Date: November 12, 1996
11