TOFUTTI BRANDS INC - FORM 10-K

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EX-32.2 - TOFUTTI BRANDS INC	c69174_ex32-2.htm
EX-31.2 - TOFUTTI BRANDS INC	c69174_ex31-2.htm
EX-31.1 - TOFUTTI BRANDS INC	c69174_ex31-1.htm
EX-32.1 - TOFUTTI BRANDS INC	c69174_ex32-1.htm

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K


x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the fiscal year ended December 31, 2011

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

Commission File Number: 1-9009

TOFUTTI BRANDS INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)	13-3094658 (I.R.S. Employer Identification No.)

50 Jackson Drive, Cranford, New Jersey (Address of principal executive offices)	07016 (Zip Code)

(908) 272-2400
((Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



	Title of each class		Name of each exchange on which registered

Common Stock, par value $0.01 per share		NYSE AMEX

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)

Yes o No x

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of the most recently completed second fiscal quarter: $4,920,326.64

As of March 30, 2012, the issuer had 5,153,706 shares of common stock, par value $0.01, outstanding.

TABLE OF CONTENTS


PART I			3
	Item 1.	Business	3
	Item 1A.	Risk Factors	9
	Item 1B.	Unresolved Staff Comments	13
	Item 2.	Properties	13
	Item 3.	Legal Proceedings	13
	Item 4.	Mine Safety Disclosures	13
PART II			14
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
	Item 6.	Selected Financial Data	16
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
	Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	20
	Item 8.	Financial Statements and Supplementary Data	20
	Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	21
	Item 9A.	Controls and Procedures	21
	Item 9B.	Other Information	22
PART III			23
	Item 10.	Directors, Executive Officers and Corporate Governance	23
	Item 11.	Executive Compensation	25
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	27
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	28
	Item 14.	Principal Accounting Fees and Services	29
PART IV			30
	Item 15.	Exhibits and Financial Statement Schedules	30
SIGNATURES			32

INTRODUCTION

As used in this annual report, the terms “we,” “us” and “our” mean Tofutti Brands Inc., unless otherwise indicated.

Statements made in this annual report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this annual report or to any previous filling with the Securities and Exchange Commission, you may read the document itself for a complete recitation of its terms.

Except for the historical information contained in this annual report, the statements contained in this annual report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, as amended, with respect to our business, financial condition and results of operations. Such forward-looking statements reflect our current view with respect to future events and financial results. We urge you to consider that statements which use the terms “anticipate,” “believe,” “do not believe,” “expect,” “plan,” “intend,” “estimate,” “anticipate” and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements. Such forward-looking statements are also included in Item 1. “Business” and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly release any update or revision to any forward-looking statements to reflect new information, future events or circumstances, or otherwise after the date hereof. We have attempted to identify significant uncertainties and other factors affecting forward-looking statements in the Risk Factors section that appears in Item 1A. “Risk Factors.”

We operate on a fiscal year ending on the Saturday closest to December 31. Fiscal years for the financial statements included herein are the fifty-two week periods ended December 31, 2011(fiscal 2011) and January 1, 2011 (fiscal 2010).

PART I


Item 1.	Business.

GENERAL

We are engaged in the development, production and marketing of TOFUTTI® brand nondairy frozen desserts and other food products. TOFUTTI products are nondairy, soy-based products which contain no butterfat, cholesterol or lactose. Our products are 100% milk free yet offer the same texture and full-bodied taste as their dairy counterparts. Our products are also free of cholesterol and derive their fat from soy and corn, both naturally lower in saturated fat than dairy products.

We were organized under the laws of the State of New York in 1981 and became a Delaware corporation in 1984. Our registered office and principal executive offices are located at 50 Jackson Drive, Cranford, New Jersey 07016, our telephone number is 908-272-2400 and our email address is info@tofutti.com. Our address on the Internet is www.tofutti.com. The information on our website is not incorporated by reference into this annual report.

STRATEGY

Our objective is to be a leading provider of nondairy, soy-based food products, primarily frozen desserts and soy-cheese products, to supermarkets and health food stores in the United States and abroad. We intend to continue to introduce new products that offer good taste while containing no butterfat, cholesterol or dairy to these markets. We focus our marketing efforts toward those consumers who find our products essential to their everyday diets because of health, lifestyle or religious reasons. As part of this strategy, we seek to achieve brand awareness through product innovation, eye-catching packaging, trade advertising and a strong word-of-mouth marketing program. We believe that our ability to offer a wide range of nondairy, soy-based parve kosher products will continue to provide us with a competitive advantage.

TOFUTTI PRODUCT LINE

We offer a broad product line of nondairy soy-based products. Our products include frozen desserts, nondairy cheeses and spreads, other frozen food products and several dry grocery items.

Frozen Desserts


®	Premium TOFUTTI® nondairy frozen dessert, available in prepacked pints, three-gallon cans, and soft serve mix, is sold nationally in supermarkets, health food stores, retail shops, and restaurants. Premium TOFUTTI was the first nondairy frozen dessert to be marketed to the general public through supermarkets. We currently offer seven flavors of premium, hard frozen TOFUTTI in pints. Premium TOFUTTI soft serve mix is available in Vanilla. TOFUTTI in three gallon bulk cans is available in three flavors.

®	TOFUTTI CUTIES®, our best selling product, are bite size frozen sandwiches combining a Vanilla, Cookies and Cream, Chocolate, Mint Chocolate Chip or Wild Berry filling between two chocolate wafers. Half the size of traditional ice cream sandwiches, TOFUTTI CUTIES offer consumers a portion controlled treat. Unlike ice cream sandwiches, CUTIES are totally dairy free, without butterfat or cholesterol, yet with the same great taste that makes ice cream sandwiches one of the best selling novelties in the freezer case. Like all our frozen dessert


	products, they are completely trans fat free, including the wafers. For those individuals who cannot have chocolate, we offer our TOTALLY VANILLA TOFUTTI CUTIE, made from vanilla TOFUTTI between two vanilla wafers, while our KEY LIME CUTIE combines tangy lime-flavored TOFUTTI between two vanilla wafers.

®	YOURS TRULY cones have a generous scoop of creamy vanilla TOFUTTI set in a chocolate-coated crispy cone, then covered in deep, rich chocolate and topped with a crispy chocolate cookie crunch. The YOURS TRULY CARAMEL SUNDAE cone has a caramel core in the center of vanilla TOFUTTI, while YOURS TRULY TRIPLE CHOCOLATE HAPPINESS cones have a chocolate core.

®	TOTALLY FUDGE POPS®, CHOCOLATE FUDGE TREATS, and COFFEE BREAK TREATS are stick novelties that offer the consumer the same taste as real fudge or coffee bars. The TOTALLY FUDGE POPS, made with organic sugar and with no gluten added, have 70 calories and 1 gram of fat per bar, while fat free, no sugar added CHOCOLATE FUDGE TREATS and COFFEE BREAK TREATS™ have only 30 calories per bar. Both products appeal to anyone on either a low fat or low carb diet.

®	CHOCOLATE COVERED FLOWERS, a frozen dessert stick novelty, combine a dark chocolate coating over a blend of frozen flower and fruit nectars for a portion controlled treat.

®	HOORAY HOORAY is an exciting new sugar free stick novelty made with stevia, a natural sugar replacement ideal for those individuals who want to avoid sugar. Each bar has a creamy center of vanilla Tofutti, surrounded by a sugar-free chocolate coating containing crisped rice

®	CAFÉ LATTE is a stick novelty with a center of rich coffee flavored Tofutti surrounded by a deep chocolate coating

®	BLACK GOLD is a stick novelty, which takes rich chocolate Tofutti and enrobes it in a deep, dark chocolate coating

®	MARRY ME BARS™ are stick novelties that feature creamy vanilla TOFUTTI surrounded by a dark chocolate coating. Made with organic sugar and with no gluten added, MARRY ME BARS satisfy important diet requirements of certain consumers with that great TOFUTTI taste.

Nondairy Cheese Products

®	BETTER THAN CREAM CHEESE® is similar in taste and texture to traditional cream cheese, but is milk and butterfat free and contains no cholesterol. It is as versatile as real cream cheese, whether spread on a bagel, used as a dip for snack items, such as crackers or chips, or used in any favorite recipe. It is available in 8 oz. retail packages or 30 lb. bulk boxes for food service customers.

®	SOUR SUPREME® is similar in taste and texture to traditional sour cream, but is milk and butterfat free and contains no cholesterol. SOUR SUPREME has the versatility of sour cream with the added benefit of being dairy free. The 12 oz. retail packages are available in plain and guacamole. The plain version is also available in 30 lb. bulk boxes. Like BETTER THAN CREAM CHEESE, SOUR SUPREME is sold nationally in most health food stores and select supermarkets.


®	TOFUTTI also offers versions of BETTER THAN CREAM CHEESE and SOUR SUPREME without partially hydrogenated fat and no trans fatty acids. They are also made with organic sugar and are available in most health food stores. Non-hydrogenated fat BETTER THAN CREAM CHEESE is available in three flavors and the plain flavor is also available in 30 lb. bulk boxes.

®	TOFUTTI SOY-CHEESE SLICES™ offer consumers a delicious nondairy, vegan alternative to regular cheese slices and contain no trans fatty acids. Available as individually wrapped slices in 8 oz. packages, TOFUTTI SOY-CHEESE SLICES are sold in most health food stores and select supermarkets and come in two types: Mozzarella and American.

®	BETTER THAN RICOTTA CHEESE®, our dairy free ricotta cheese alternative offers consumers a dairy-free alternative that tastes and works just like real ricotta cheese in all their favorite recipes. Available in 16 oz retail and bulk sizes for food service, BETTER THAN RICOTTA is available nationally in supermarkets and health food stores

Other Food Products

®	TOFUTTI PIZZA PIZZAZ combines a delicious pan crust, zesty sauce and TOFUTTI totally dairy free mozzarella cheese into a completely authentic, yet healthy pizza. TOFUTTI PIZZA PIZZAZ is sold three squared slices to a package and is available in freezer cases in select supermarkets and health food stores.

®	TOFUTTI BLINTZES are frozen crepes filled with TOFUTTI BETTER THAN CREAM CHEESE that are dairy and cholesterol free, yet taste just like real cheese blintzes. Our BLINTZES can be served hot, warm, or slightly chilled as a main meal or a snack.

2012 Product Introductions

During the first quarter of 2012, we introduced Tofutti Jumbo and Mini Raviolis made with BETTER THAN RICOTTA, our new non-dairy ricotta cheese product. We are currently developing additional frozen food items utilizing our various non-dairy cheese products, though we have no planned introduction dates.

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. All of our products are sold by independent unaffiliated food brokers to distributors and sometimes on a direct basis to retail chain accounts. Food brokers act as our agents within designated territories or for specific accounts and receive commissions, which average 5% of net collected sales. Certain key domestic accounts and all international accounts are handled directly by us. Our products are also sold in approximately twenty-five other countries.

We currently sell our frozen dessert products in most major markets in the United States, including Atlanta, Baltimore, Boston, Charlotte, Chicago, Cincinnati, Cleveland, Dallas, Denver, Detroit, Houston, Kansas City, Los Angeles, Miami, Milwaukee, Minneapolis, New York, Orlando, Philadelphia, Phoenix, Portland, Richmond, San Francisco, Seattle, St. Louis, Tampa and Washington, D.C.

We currently distribute all of our products by common carrier or by allowing customers to pick-up products from outside storage facilities. We do not own, lease or otherwise maintain any vehicles involved in the shipping of our products. From our co-packing facilities, we either ship direct to our customers or we ship to outside public storage facilities from which our customers are able to pick-up

products. Use of outside storage facilities in several key locations in the United States allows us to provide our customers with products in a timely fashion.

In addition to ice cream distributors, our products are handled by almost every major national and regional natural and/or gourmet specialty distributor in the country. We distribute our products through thirty (30) distributors in the national health food market. In certain situations, we also sell directly to several major supermarket chains who maintain their own warehouses.

Our sales to health food distributors in fiscal 2011 decreased to approximately $8,276,000, or 52% of total sales, as compared to approximately $9,078,000, or 51% of total sales, in fiscal 2010. In fiscal 2011, sales to Trader Joe’s decreased to approximately $1,420,000, or 9% of sales, as compared to approximately $3,377,000, or 19% of sales in fiscal 2010. The reduction in sales to Trader Joe’s, formerly our largest customer, was primarily due to the determination of Trader Joe’s to cease selling branded goods. Our sales to the kosher market increased to approximately $1,624,000, or 10% of sales, in fiscal 2011, from sales of approximately $798,000, or 5% of sales, in fiscal 2010.

The following table presents the geographical breakdown of our sales in our largest domestic markets for the last two fiscal years.


	Fiscal Year ended December 31, 2011					Fiscal Year ended January 1, 2011

	Sales		% of total Sales			Sales		% of total Sales

	(Dollars in thousands)
California	$	2,998		19	%	$	4,178		24	%
Midwest		2,525		16	%		2,536		14	%
Metropolitan New York		2,314		15	%		2,425		14	%
New England		2,068		13	%		2,992		17	%
Northwest		833		5	%		723		4	%
Mid-Atlantic		815		5	%		891		5	%
Florida		530		3	%		977		6	%
Rocky Mountains		363		2	%		386		2	%
Southwest		341		2	%		207		1	%
Southeast		297		2	%		320		2	%
Upstate New York		237		1	%		199		1	%

During fiscal 2011, we shipped TOFUTTI nondairy products to distributors in Australia, Brazil, Canada, China, England, Israel, Mexico, Panama and Trinidad. Our distributor in England is our master distributor for all of Europe and part of the Middle East, excluding Israel, and sells our products to approximately twenty other countries. Sales to foreign distributors increased to approximately $2,049,000, or 13% of sales, in fiscal 2011, as compared to approximately $1,652,000, or 9% of sales, in fiscal 2010. We conduct all of our foreign business in U.S. dollars. Therefore, our future export sales could be adversely affected by an increase in the value of the U.S. dollar against local currencies, which could increase the local currency price of our products.

COMPETITION

TOFUTTI frozen desserts compete with all forms of ice cream products, yogurt-based desserts and other soy-based frozen desserts. We believe that we are a leader in the nondairy frozen dessert product market and offer the most complete line of nondairy frozen dessert products. Other soy-based

frozen dessert products are presently being sold throughout the United States by established manufacturers, distributors of ice cream and other frozen dessert products. The ice cream and frozen dessert industry is highly competitive and most companies with whom we compete are substantially larger and have significantly greater resources than us. Our other products also face substantial competition from both nondairy and dairy competitive products marketed by companies with significantly greater resources than we have. We believe that we are able to compete effectively due to our ability to offer an array of non-dairy frozen dessert and other food products that contain no butterfat, cholesterol or lactose and are 100% milk-free, yet offer the same texture and full-bodied taste as their dairy counterparts.

PRODUCT DEVELOPMENT

All of our current products were developed internally in our own laboratory. David Mintz, our Chief Executive Officer, devotes a substantial amount of his time and effort to new product development and product reformulation. In fiscal 2011 and 2010, our product development expenses were approximately $546,000 and $563,000, respectively. These amounts do not include any portion of Mr. Mintz’s salary, and since they cannot be directly associated with any specific customers or products, they are considered part of operating expenses. All product development costs are expensed as incurred.

PRODUCTION

We believe that all of our products are produced under the strictest quality control procedures that are available in each manufacturing facility used by us. These quality control procedures include, but are not limited to, the cleaning processes utilized prior to running our products; spot line inspections during production; in-house laboratory testing as required by government agencies; supervision of all our production by our kosher supervisory service; and random testing by outside independent laboratories to ensure that our internal quality control procedures and guidelines are being properly followed.

All of our products are produced by co-packers to whom we supply certain key ingredients and packaging for the manufacturing processes. Our co-packing facilities are fully licensed and must comply with all state and federal laws and regulations. We currently utilize seven co-packers. Our co-packers manufacture and package our products and, in certain instances, warehouse such products pending shipment. For certain key product categories, such as nondairy frozen desserts and nondairy cheeses, we have more than one co-packer. In selecting an appropriate co-packer, we take into account all of the preceding factors, plus cost considerations such as product processing fees and freight and warehouse expenses.

During the years ended December 31, 2011 and January 1, 2011, we purchased approximately 28% and 31%, respectively, of our finished goods from Ice Cream Specialties, our primary frozen dessert novelty co-packer and 24% and 21% of our finished goods, respectively, from Franklin Foods, our BETTER THAN CREAM CHEESE and SOUR SUPREME co-packer.

Relationship with Co-Packers

We do not have any written production agreements with our co-packers and do not anticipate that we would encounter any material difficulty in obtaining alternative production sources, at a comparable cost, if one or all of our co-packers decide to terminate their relationships with us. Nevertheless, any disruption in supply could have a material adverse effect on our company.

In order to protect our formulas, we have entered into confidentiality arrangements with our co-packers and certain of their employees. All of our employees, including officers, sign similar confidentiality agreements. There can be no assurance that such confidentiality arrangements can or will

be maintained, or that our 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.

Kosher Certification

KOF-K Kosher Supervision, or KOF-K, of Teaneck, New Jersey provides us with our 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. Approval of the manufacturing facilities we use include periodic inspections, and in most cases, on-site supervision of actual production. We believe that our ability to successfully market and distribute our products is dependent upon our continued compliance with the requirements of rabbinical certification. All TOFUTTI products meet the requirements for certification as kosher-parve.

TRADEMARKS AND PATENTS

We have registered our trademark, TOFUTTI®, and other trademarks for our frozen desserts and other products in the United States and approximately thirty-five foreign countries. We believe our trademarks are an important means of establishing consumer recognition for our products and we will vigorously oppose any unauthorized use of our trademarks. We are not currently involved in any trademark litigation.

Although we believe that our formulas and processes are proprietary, we have not sought patent protection for such technology. Instead, we are relying on the complexity of our technology, on trade secrecy laws and on confidentiality agreements. We believe that our technology has been independently developed and does not infringe the patents of others.

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 we seek to market does not conform to an applicable standard, special permission to market such a product is required.

Our United States product labels are subject to regulation by the United States Food and Drug Administration, or the 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. Our labels, ingredients and manufacturing processes are subject to inspection by the FDA. We believe that we are in compliance with current labeling requirements and conduct periodic reviews to make certain that such compliance is on-going.

The Food, Drug and Cosmetic Act, the Food Safety Modernization 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 safety, health and environmental 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. Our Cranford, New Jersey facility is subject to inspection by the New Jersey-Kosher Enforcement Bureau and the New Jersey Environmental Health Services. We believe that we and our distributors and co-packers are in compliance in all material respects with governmental regulations regarding our current products and have obtained the material governmental permits, licenses, qualifications and approvals required for our operations. Our compliance with Federal, state and local environmental laws has not materially affected us either economically or in the manner in which we conduct our business. However, there can be no assurance that our company, our distributors and our 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 our products to consumers.

New government laws and regulations may be introduced in the future that could result in additional compliance costs, seizures, confiscations, recalls or monetary fines, any of which could prevent or inhibit the development, distribution and sale of our products. If we fail to comply with applicable laws and regulations, we may be subject to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material adverse effect on our business, results of operations and financial condition.

EMPLOYEES

On December 31, 2011, we employed ten persons on a full-time basis as compared to eight persons on a full time basis on January 1, 2011. We do not have any collective bargaining agreements with our employees.


Item 1A.	Risk Factors.

Investing in our common stock involves a high degree of risk and uncertainty. You should carefully consider the risks and uncertainties described below before investing in our common stock. If any of the following risks actually occurs, our business prospects, financial condition and results of operations could be harmed. In that case, the value of our common stock could decline, and you could lose all or part of your investment.

Risks Related to Our Business

We Depend on a Few Key Customers for a Significant Portion of Our Sales. During the fiscal years ended December 31, 2011 and January 1, 2011, Trader Joe’s accounted for 9% and 19% of our net sales, respectively. In 2011, we were informed that Trader Joe’s would no longer purchase our products as they determined to replace our products with their own private label substitutes. We do not expect to record any sales to Trader Joe’s in 2012. Our failure to replace some of our historical Trader Joe’s revenues could have a material adverse effect on our company.

In addition, a significant portion of our sales are to several key distributors, which are large distribution companies with numerous divisions and subsidiaries who act independently. Such distributors as a group accounted for 35% of our net sales for the fiscal year ended December 31, 2011 and 40% of our net sales for the fiscal year ended January 1, 2011. In 2010, one of our major distributors, Tree of Life, Inc., was purchased by Kehe Food Distributors, another of our major distributors. Although we believe that the business associated with any of our primary distributors can be readily transferred to other distributors or directly to supermarket warehouses if necessary, no assurance can be given that a change in distributors would not be disruptive to our business, which could have a material adverse effect on our business and results of operations.

We Depend on Several Key Suppliers to Produce Our Products. We do not produce any of our own products. During the years ended December 31, 2011 and January 1, 2011, we purchased approximately 28% and 31%, respectively, of our finished goods from Ice Cream Specialties, our primary frozen dessert novelty co-packer and 24% and 21% of our finished goods, respectively, from Franklin Foods, our BETTER THAN CREAM CHEESE and SOUR SUPREME co-packer. These producers are required to comply with FDA regulations and federal and state agencies relating to the production of food products. Although we believe that there will be no problem in continuing to obtain finished goods from our current or alternative sources in the future, any disruption in supply could have a material adverse effect on our company.

Our Business May Be Negatively Affected by the Current Economic Climate. The current economic climate, and particularly the increased difficulty in securing credit, could impact the ability of our customers to purchase our products. Certain of our retail customers who have seen significant dampening of consumer demand, could face increased financial pressures that could impact their ability to purchase our products and make payments in a timely manner. The continued high unemployment levels in the U.S. and the lingering effects of the global credit crisis, will impact the ability of our customers to purchase our products.

A Material Change in Consumer Demand for Our Products Could Have a Significant Impact on Our Business. We are a consumer food products company and rely on continued demand for our products. To achieve business goals, we must develop and sell products that appeal to consumers. If demand and growth rates fall substantially below expected levels or our market share declines significantly in these businesses, our results could be negatively impacted. This could occur due to unforeseen negative economic or political events or to changes in consumer trends and habits.

Our Business Faces Cost Pressures Which Could Affect Our Business Results. Our costs are subject to fluctuations, particularly due to changes in commodity prices, raw materials, cost of labor, foreign exchange and interest rates. Therefore, our success is dependent, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings projects and sourcing decisions. In the manufacturing and general overhead areas, we need to maintain key manufacturing and supply arrangements, including any key sole supplier and manufacturing plant arrangements.

Economic Downturns and Disruptions in Financial Markets Can Adversely Affect Our Business and Results of Operations. Our results of operations can be materially affected by adverse conditions in the financial markets and depressed economic conditions generally. Worsening economic conditions, such as continued European sovereign debt uncertainty, may result in diminished demand for our products and in decreased sales volumes. Recessionary environments adversely affect the demand for our products as a result of constraints on discretionary spending by our retail customers. In addition, this could result in longer sales cycles, slower acceptance of new products and increased competition for our products, which in turn could cause us to reduce prices for our products resulting in reduced gross margins. Any of these events would likely harm our business, operating results and financial condition.

Natural Disasters, Terrorist Attacks or Breaches of Network or Information Technology Security Could Have an Adverse Effect on Our Business. Natural disasters, terrorist acts, acts of war, cyber-attacks or other breaches of network or information technology (IT) security may cause equipment failures or disrupt our systems and operations, or the systems and operations of our contract manufacturers and distributors. While we maintain insurance coverage for some of these events, the potential liabilities associated with these events could exceed the insurance coverage we maintain. The inability of our contract manufacturers or distributors to operate their facilities as a result of such events, even for a limited period of time, may result in significant expenses and/or loss of market share to other competitors. In addition, a failure to protect the privacy of customer and employee confidential data against breaches of network or IT security could result in damage to our reputation. Any of these occurrences could result in a material adverse effect on our results of operations and financial condition.

We Operate in a Competitive Environment. The frozen dessert and health food markets are highly competitive. The ability to successfully introduce innovative products on a periodic basis that are accepted by the marketplace is a significant competitive factor. In addition, many of our principal competitors are large, diversified companies with resources significantly greater than ours. We expect strong competition to continue, including competition for adequate distribution and competition for the limited shelf space for the frozen dessert category in supermarkets and other retail food outlets.

We Rely on a Limited Number of Key Executives to Manage our Business. Our success is significantly dependent on the services of David Mintz (age 80), Chief Executive Officer, and Steven Kass (age 60), Chief Financial Officer. The loss of the services of either of these persons could have a material adverse effect on our business.

Our Principal Shareholder Has the Ability to Control the Policies and Management of Our Company. Our Chairman of the Board and Chief Executive Officer, David Mintz, holds 2,630,440 shares of common stock representing approximately 51.0% of the outstanding shares, permitting him to elect all members of the Board of Directors and thereby effectively control the business, policies and management of our company.

Product Liability Suits, if Brought, Could Have a Material Adverse Effect on Our Business. From time to time in the normal course of our business, we become subject to product liability claims. If a product liability claim exceeding our insurance coverage were to be successfully asserted against us, it could harm our business. We cannot assure you that such coverage will be sufficient to insure against claims which may be brought against us, or that we will be able to maintain such insurance or obtain additional insurance covering existing or new products. As a marketer of food products, we are subject to the risk of claims for product liability. We maintain general product liability and umbrella insurance coverages and generally require that our co-packers maintain product liability insurance with us as a co-insured. Similarly, most of our customers require us to name them as additional insureds as well, and in some cases we are required to sign hold harmless and indemnification agreements.

Continuing Need to Introduce New Products. The successful introduction of innovative products on a periodic basis has become increasingly important to our sales growth. Accordingly, the future degree of market acceptance of any of our new products, which may be accompanied by significant promotional expenditures, is likely to have an important impact on our future financial results.

Our Operating Results Vary Quarterly and Seasonally. We have often recognized a slightly greater portion of revenues in the second and third quarter of the year. Our expense levels are substantially based on our expectations for future revenues and are therefore relatively fixed in the short-term. If revenue levels fall below expectations, our quarterly results are likely to be disproportionately adversely affected because a proportionately smaller amount of our expenses vary with our revenues. We expect to continue to experience slightly higher sales in the second and third quarters, and slightly lower sales in the fourth and first quarters, as a result of reduced sales of nondairy frozen desserts. Sales to our major customers fluctuate widely from period to period and there is no way to accurately predict that their sales pattern from one year will be repeated in the corresponding period of the next fiscal year. Due to the foregoing factors, in some future quarter our operating results may be below the expectations of investors. In such event, it is likely that the price of our common stock would be materially adversely affected.

The Absence of Patent Protection Could Adversely Affect Our Results of Operations. We rely upon the confidentiality of our formulas and our know-how rather than upon patent protection since patent protection may not be available for the recipes or manufacturing processes for any of our food products. There is no assurance that such confidentiality can or will be maintained or that our know-how cannot be obtained by others or that others do not now possess similar or even more effective capabilities. The failure to maintain the confidentiality of our know-how could adversely affect our operating results.

We are Subject to Risks Associated with International Operations. In fiscal 2011 approximately 13% of our revenues were from international sales. Although we continue to expand our international operations, we cannot be certain that we will be able to maintain or increase international market demand for our products. To the extent that we cannot do so in a timely manner, our business, operating results and financial condition will be adversely affected. International operations are subject to inherent risks, including the following:


	•	the impact of possible recessionary environments in multiple foreign markets;

	•	longer receivables collection periods and greater difficulty in accounts receivable collection;

	•	unexpected changes in regulatory requirements;

	•	potentially adverse tax consequences; and

	•	political and economic instability.

We May Be Adversely Affected by Fluctuations in Currency Exchange Rates. Our foreign transactions are always in U.S. dollars, and to date we have not engaged in any currency hedging transactions intended to reduce the effect of fluctuations in foreign currency exchange rates on our results of operations. Therefore, our future export sales could be adversely affected by an increase in the value of the U.S. dollar, which could increase the local currency price of our products. Although exposure to currency fluctuations to date has not had a material adverse effect on our business, there can be no assurance such fluctuations in the future will not have a material adverse effect on revenues from international sales and, consequently, our business, operating results and financial condition.

Our Stock Price is Subject to Volatility. The market price of our common stock has been subject to fluctuations in the past and may be subject to wide fluctuations in the future in response to announcements concerning us or our competitors, quarterly variations in operating results, the introduction of new products or changes in product pricing policies by us or our competitors, general market conditions in the industry, developments in the financial markets and other factors.

We Do Not Intend to Pay Cash Dividends. Our policy is to retain earnings, if any, for use in our business and, for this reason, we do not intend to pay cash dividends on our shares of common stock in the foreseeable future.

Our Failure to Maintain Effective Internal Controls in Accordance with Section 404 of the Sarbanes-Oxley Act of 2002 Could Have an Adverse Effect on our Financial Results and the Market Price of Our Ordinary Shares. The Sarbanes-Oxley Act of 2002 imposes certain duties on us and our executives and directors. Our efforts to comply with the requirements of Section 404 have resulted in increased general and administrative expense and a diversion of management time and attention, and we expect these efforts to require the continued commitment of resources. Section 404 of the Sarbanes-Oxley Act requires us to provide management’s annual review and evaluation of our internal control over financial reporting in connection with the filing of our Annual Report on Form 10-K for each fiscal year. The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation to meet the detailed standards under the rules. If we continue to fail to maintain adequate internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting. Our failure to maintain effective internal controls over financial reporting could result in investigation or sanctions by regulatory authorities, and could have a material adverse effect on our operating results, investor confidence in our reported financial information, and the market price of our ordinary shares.


Item 1B.	Unresolved Staff Comments.

	None.


Item 2.	Properties.

Our facilities are located in a one-story facility in Cranford, New Jersey. The 6,200 square foot facility houses our administrative offices, a warehouse, walk-in freezer and refrigerator, and a product development laboratory and test kitchen. Our lease agreement expired on July 1, 1999, but we continue to occupy the premises under the terms of that agreement, subject to a six month notification period for us and the landlord with respect to any changes. We currently have no plans to enter into a long-term lease agreement for the facility. Our rent expense was $81,000 in both fiscal 2011 and 2010. Our management believes that the Cranford facility will continue to satisfy our space requirements for the foreseeable future.


Item 3.	Legal Proceedings.

We are not a party to any material litigation.


Item 4.	Mine Safety Disclosures.

	Not applicable.

PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock has traded on the NYSE AMEX under the symbol TOF since October 29, 1985. Each share ranks equally as to dividends, voting rights, participation in assets on winding-up and in all other respects. No shares have been or will be issued subject to call or assessment. There are no preemptive rights, provisions for redemption or for either cancellation or surrender, or provisions for sinking or purchase funds.

The following table sets forth the high and low sales prices as reported on the NYSE AMEX for the two most recent fiscal years:


Quarter Ended	High		Low

April 3, 2010	$	1.65	$	1.32
July 3, 2010		4.33		1.40
October 2, 2010		3.75		2.10
January 1, 2011		2.58		1.83
April 2, 2011		2.91		1.71
July 2, 2011		2.75		1.87
October 1, 2011		2.51		1.90
December 31, 2011		2.19		1.53

The closing price for our common stock on March 30, 2012, as reported on the NYSE AMEX, was $1.84.

Holders of Record

As of March 30, 2012, there were approximately 562 direct holders of record of our common stock. Based upon the most recent census performed by our stock transfer agent, brokerage houses and other financial institutions hold our common stock for approximately an additional 913 shareholders.

Dividends

We have not paid and have no present intention of paying cash dividends on our common stock in the foreseeable future.

Equity Compensation Plans

The following table sets forth, as of December 31, 2011, certain information related to our compensation plans under which shares of our common stock are authorized for issuance.


Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities Remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a) (c)
Equity Compensation Plans Approved by Security Holders	41,000	$2.90	59,000

Equity Compensation Plans Not Approved by Security Holders	—	n/a	—

2004 Non-Employee Directors’ Stock Option Plan

Our shareholders adopted the 2004 Non-Employee Directors’ Stock Option Plan (the “2004 Directors’ Plan”) on June 3, 2004. The purpose and intent of the 2004 Directors’ Plan is to attract and retain the best available individuals as non-employee directors of the company, to provide additional incentive to non-employee directors to continue to serve as directors and to encourage their continued service on the Board. All options granted under 2004 Directors’ Plan are “non-qualified stock options.” The maximum aggregate number of shares of common stock which may be issued under the 2004 Directors’ Plan is 100,000 shares.

The 2004 Directors’ Plan is currently administered by our Board of Directors, which in the future may delegate such administration to a committee of directors. Subject to the provisions of the 2004 Directors’ Plan and applicable law, the Board or the Committee has the authority, to determine, among other things, to whom options may be granted, the number of shares of common stock to be covered by each option, the exercise price for each share, the vesting period of the option, and the terms, conditions and restrictions thereof, to construe and interpret the 2004 Directors’ Plan, to prescribe, amend and rescind rules and regulations relating to the 2004 Directors’ Plan, and to make all other determinations deemed necessary or advisable for the administration of the 2004 Directors’ Plan.

The term of any option granted under the 2004 Directors’ Plan was fixed by the Board of Directors at the time the options were granted, provided that the exercise period was not to be longer than five years from the date of grant. All options granted under the 2004 Directors’ Plan have up to five-year terms and have vesting periods that range from one to three years from the grant date. The exercise price of any options granted under the 2004 Directors’ Plan is the fair market value at the date of grant. As of March 30, 2012, our non-employee directors as a group, consisting of seven persons, held options to purchase 41,000 shares of common stock under the 2004 Directors’ Plan.

Sales of Unregistered Securities

There were no sales of unregistered securities during fiscal 2011.

Purchase of Equity Securities By the Issuer and Affiliates

The following table sets forth for the thirteen weeks ended December 31, 2011 (the fourth quarter of fiscal 2011), certain information with respect to the purchase by us of shares of our common stock.


Period	Total number of shares purchased (a)	Average price paid per share ($) (b)	Total number of shares purchased as part of publicly announced plans or programs (c)	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (d)
October 2011	—	—	—	—

November 2011	—	—	—	—

December 2011	14,492	1.664	14,492	360,000


Item 6.	Selected Financial Data.

Not applicable.


Item 7.	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 audited financial statements.

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.

Revenue Recognition. We recognize revenue when goods are shipped from our production facilities or outside warehouses and the following four criteria have been met: (i) the product has been shipped and we have no significant remaining obligations; (ii) persuasive evidence of an arrangement exists; (iii) the price to the buyer is fixed or determinable; and (iv) collection is probable. We record as deductions against sales all trade discounts, returns and allowances that occur in the ordinary course of business, when the sale occurs. To the extent we charge our customers for freight expense, it is included in revenues. The amount of freight costs charged to customers has not been material to date.

Accounts 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 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-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 market 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.

Income Taxes. 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. 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

Accounting Standards updates that became effective after December 31, 2011 are not expected to have a significant effect on our financial position or results of operations.

Results of Operations

Fiscal Year Ended December 31, 2011 Compared with Fiscal Year Ended January 1, 2011

We operate on a fiscal year ending on the Saturday closest to December 31. Fiscal years for the financial statements included in this report are the fifty-two week periods ended December 31, 2011 and the ended January 1, 2011.

Net sales for the fiscal year ended December 31, 2011 were $15,926,000, a decrease of $1,787,000, or 10%, from net sales of $17,713,000 for the fiscal year ended January 1, 2011. The reduction in sales was primarily due to the determination of Trader Joe’s, our largest customer, to cease selling branded goods. During fiscal 2011, sales to Trader Joe’s declined to $1,420,000 from $3,377,000 in fiscal 2010, a reduction of $1,957,000. We also believe that we will recover some portion of these sales as our retail customers switch to other retail sources to purchase our products. We believe our sales will improve during fiscal year 2012 due to the introduction of new products and price increases that will be instituted in the first two quarter of 2012.

Our gross profit in the year ended December 31, 2011 decreased by $957,000 to $4,485,000, reflecting the lower level of sales. Our gross profit percentage for the year ended December 31, 2011 was 28% compared to 31% for the year ended January 1, 2011. This decrease in gross profit percentage was due to an increase in certain material and packaging costs in the 2011 period compared to the 2010 period. Freight out expense increased to $1,033,000 for the year ended December 31, 2011 compared with $981,000 for the year ended January 1, 2011. While the actual dollar cost of freight increased slightly in 2011, its cost as a percentage of sales increased from 5.5% in 2010 to 6.5% in 2011. Due to the expected high cost of fuel, we anticipate that our freight cost as a percentage of sales will approximate

the 2011 percentages should fuel costs remain steady. Our gross profit was also impacted by price increases for certain key ingredients and packaging costs. We have begun to implement price increases for some of our products, which we expect will help improve our profit margin in 2012.

Selling and warehousing expenses decreased by $60,000 to $1,493,000 for fiscal 2011 from $1,553,000 in fiscal 2010. This decrease was caused primarily by a $76,000 decrease in outside warehouse rental expense, a $148,000 decrease in payroll expense, and a $21,000 decrease in commission expense. The reduction in payroll expense was primarily due to no provisions for bonuses in fiscal 2011. These decreases were offset by increases in bad debt expense of $146,000, meetings and convention expense of $16,000 and messenger and courier expense of $13,000. The increase in bad debt expense was due primarily to an increase in the reserve for bad debts for certain accounts. We anticipate that with the exception of commission expenses and outside warehouse rental expense, which are variable to sales, all other selling expenses in 2012 should remain relatively consistent with our expenses in 2011.

Marketing expenses increased slightly in fiscal 2011 to $513,000 compared to $504,000 in fiscal 2010. Increases in public relations expense of $7,000, artwork and plates expense of $21,000 and promotion expense of $33,000 were offset by a decrease in advertising expense of $52,000. We expect marketing expenses to remain close to the same level in fiscal 2012.

Product development expenses decreased to $546,000 in fiscal 2011 as compared to $563,000 in fiscal 2010. The decrease was caused primarily by a decrease in payroll costs of $18,000 and lab and supplies expense of $19,000, which were offset by an increase in professional fees and outside services of $18,000. We expect that product development costs in 2012 will remain consistent with fiscal 2011 costs.

General and administrative expenses were $1,801,000 for fiscal 2011 as compared with $2,020,000 for fiscal 2010, a decrease of $219,000. The decrease was primarily due to a $343,000 decrease in payroll expense. This decrease was partially offset by increases in real and personal property tax expense of $13,000, professional fees and outside services expense of $73,000, IT expense of $32,000 and public relations expense of $15,000. The reduction in payroll expense was due primarily due to the decision to not pay bonuses to our executive officers in fiscal 2011 while in fiscal 2010 such bonuses amounted to $500,000 in the aggregate. In connection with such decision, we stopped accruing amounts for bonuses in the third quarter of 2011 and management intends to review this determination later in 2012. We anticipate that professional fees and outside services, which include legal and accounting fees, will increase in fiscal 2012 primarily due to the costs associated with the mandatory implementation of the requirement to file our financial reports with the Securities and Exchange Commission in XBRL (eXtensible Business Reporting Language). Our management expects that general and administrative expenses in 2012 will remain consistent with fiscal 2011 expenses.

Overall, total operating expenses in fiscal 2011 decreased to $4,353,000, a decrease of $287,000, or 6%, from total operating expenses in fiscal 2010.

Income before income taxes decreased by $670,000 to $132,000 in fiscal 2011 as compared with $802,000 in fiscal 2010, primarily as a result of our lower revenues and gross profit, which was partially offset by the reduction in operating expenses.

Income taxes for the 2011 fiscal period were $89,000 compared to $340,000 in fiscal 2010, and our income tax rate was 67% for the 2011 fiscal year compared to 42% in the 2010 fiscal year. The increase in the income tax rate for fiscal 2011 was due to the effect of certain deferred income tax expense items.

Liquidity and Capital Resources

At December 31, 2011, we had approximately $1,594,000 in cash and cash equivalents, and our working capital was $4,444,000, an increase of $24,000 from January 1, 2011. Our current and quick

acid test ratios, both measures of liquidity, were 5.65 and 3.7, respectively, at December 31, 2011 compared to 4.3 and 3.0, respectively, at January 1, 2011.

At December 31, 2011, our accounts receivable increased by $598,000 to $1,936,000 from January 1, 2011, reflecting the aging of certain accounts at year end. The average number of days outstanding for accounts receivable in fiscal 2011 was 47 days as compared to 35 days in fiscal 2010.

At December 31, 2011, our inventories decreased to $1,441,000 from $1,697,000 at January 1, 2011. The decrease in our inventories is due both to a reduction in sales and the discontinuation of a number of slower moving products, along with their ingredient and packaging inventories. Refundable and deferred income taxes increased from $186,000 at the end of fiscal 2010 to $307,000 at December 31, 2011 due to the reclassification of tax assets. Accounts payable and accrued expenses decreased by $389,000 to $956,000 at December 31, 2011, from $1,345,000 at January 1, 2011, reflecting no provision for bonuses in fiscal 2011.

Our Board of Directors first instituted a share repurchase program in September 2000 which, after several amendments, has to date authorized the repurchase of 2,200,000 shares of our common stock at prevailing market prices. While we may purchase an additional 360,000 shares of common stock based on such authorization, we did not purchase any shares of our common stock from the first quarter of fiscal 2009 until December 2011. During December 2011, we repurchased 14,492 shares at a cost of $24,115. We repurchased an additional 8,480 shares in January and February 2012 at a cost of $14,000. Cumulatively, from the beginning of our share repurchase program, we have purchased 1,829,000 shares at a cost of $5,318,000.


Cash Flows	Fiscal Year ended

	December 31, 2011			January 1, 2011

	(In thousands)

Net cash (used in) provided by operating activities	$	(910	)	$	1,115
Net cash (used in) financing activities		(24	)		—

Net (decrease) increase in cash and cash equivalents		(934	)		1,115
Cash and cash equivalents at beginning of year		2,528			1,413

Cash and cash equivalents at end of year	$	1,594		$	2,528

Cash used in operating activities was $910,000 for the fiscal year ended December 31, 2011 compared with cash provided by operating activities of $1,115,000 for the fiscal year ended January 1, 2011. In the fiscal year ended December 31, 2011, our cash flow from operating activities reflected net income of $43,000, a $598,000 increase in accounts receivable, a $256,000 decrease in inventories, a $106,000 increase in prepaid expenses, and a $389,000 decrease in accounts payable and accrued expenses.

We used $24,000 in financing activities in the fiscal year ended December 31, 2011 for the repurchase of common stock, compared to $0 used in financing activities in the fiscal year ended January 1, 2011.

As a result of the foregoing, our cash and cash equivalents decreased to $1,594,000 at December 31, 2011 from $2,528,000 at January 1, 2011.

We believe our existing cash and cash equivalents on hand at December 31, 2011, and the cash flows expected from operations will be sufficient to support our operating and capital requirements during the next twelve months.

Contractual Obligations

We have no contractual obligations at December 31, 2011.

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 minimal seasonal variations with slightly increased sales historically in the second and third quarters of the fiscal year. We expect to continue to experience slightly higher sales in the second and third quarters, and slightly lower sales in the fourth and first quarters, as a result of reduced sales of nondairy frozen desserts during those periods.

Market Risk

We will invest our excess cash, should there be any, in highly rated money market funds which are subject to changes in short-term interest rates. We do not believe that our foreign currency exposure is significant as our export sales are transacted in U.S. dollars. We did not enter into any foreign exchange contracts in the year ended December 31, 2011.

Off-Balance Sheet Arrangements

None.


Item 7A.	Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.


Item 8.	Financial Statements and Supplementary Data.

Index to Financial Statements


Report of Independent Registered Public Accounting Firm		F-1

Financial Statements:

Balance Sheets		F-2

Statements of Income		F-3

Statements of Changes in Stockholders’ Equity		F-4

Statements of Cash Flows		F-5

Notes to Financial Statements		F-6

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Tofutti Brands, Inc.

We have audited the accompanying balance sheets of Tofutti Brands, Inc. (the “Company”) as of December 31, 2011 and January 1, 2011, and the related statements of income, stockholders’ equity, and cash flows for the fiscal year ended December 31, 2011 and the fiscal year ended January 1, 2011. The 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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 31, 2011 and January 1, 2011, and the results of its operations and its cash flows for the fiscal year ended December 31, 2011 and the fiscal year ended January 1, 2011, in conformity with accounting principles generally accepted in the United States of America.

/s/ EisnerAmper LLP

EisnerAmper LLP

Edison, NJ

April 5, 2012

F-1

TOFUTTI BRANDS INC.
BALANCE SHEETS
(In thousands, except for share and per share data)


	December 31, 2011		January 1, 2011

Assets
Current assets:
Cash and cash equivalents	$	1,594	$	2,528
Accounts receivable, net of allowance for doubtful accounts and sales promotions of $486 and $320, respectively		1,936		1,338
Inventories, net of reserve of $50 and $50, respectively		1,441		1,697
Prepaid expenses		122		16
Refundable income taxes		42		—
Deferred income taxes		265		186

Total current assets		5,400		5,765


Leasehold improvements, net of accumulated amortization of $43 and $38, respectively		5		10
Other assets		16		16

	$	5,421	$	5,791


Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	319	$	260
Accrued expenses		637		585
Accrued officers’ compensation		—		500

Total current liabilities		956		1,345


Commitments and contingencies		—		—

Stockholders’ equity:
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 5,162,186 shares at December 31, 2011, and 5,176,678 shares at January 1, 2011		52		52
Additional paid-in capital		—		7
Retained earnings		4,413		4,387

Total stockholders’ equity		4,465		4,446

Total liabilities and stockholders’ equity	$	5,421	$	5,791

See accompanying notes to financial statements.

F-2

TOFUTTI BRANDS INC.
STATEMENTS OF INCOME
(In thousands, except for per share data)


	Fiscal year ended December 31, 2011		Fiscal Year ended January 1, 2011


Net sales	$	15,926	$	17,713
Cost of sales		11,441		12,271

Gross profit		4,485		5,442


Operating expenses:
Selling and warehousing		1,493		1,553
Marketing		513		504
Product development costs		546		563
General and administrative		1,801		2,020

		4,353		4,640


Income before income taxes		132		802

Income taxes		89		340


Net income	$	43	$	462


Weighted average common shares outstanding:
Basic		5,176		5,177

Diluted		5,176		5,177


Net income per common share:
Basic	$	0.01	$	0.09

Diluted	$	0.01	$	0.09

See accompanying notes to financial statements.

F-3

TOFUTTI BRANDS INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
Fiscal Years ended December 31, 2011 and January 1, 2011
(In thousands, except for share data)


	Common Stock					Additional Paid-In Capital			Retained Earnings			Total Stockholders’ Equity

	Shares			Amount

Balances, January 2, 2010		5,176,678		$	52	$	—		$	3,925		$	3,977
Stock compensation expense		—			—		7			—			7
Net income for year ended January 1, 2011		—			—		—			462			462

Balances, January 1, 2011		5,176,678			52		7			4,387			4,446
Stock repurchase		(14,492	)		—		(7	)		(17	)		(24	)
Net income for year ended December 31, 2011		—			—		—			43			43

Balances, December 31, 2011		5,162,186		$	52	$	—		$	4,413		$	4,465

See accompanying notes to financial statements.

F-4

TOFUTTI BRANDS INC.
STATEMENTS OF CASH FLOWS
(In thousands)


	Fiscal Year ended December 31, 2011			Fiscal Year ended January 1, 2011

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	43		$	462
Adjustments to reconcile net income to net cash flows provided by (used in) operating activities:
Amortization		5			5
Provision for bad debts and sales promotions		166			60
Stock compensation expense		—			7
Deferred taxes		(79	)		113
Change in assets and liabilities:
Accounts receivable		(764	)		63
Inventories		256			234
Prepaid expenses		(106	)		(3	)
Income taxes refundable		(42	)		109
Accounts payable and accrued expenses and compensation		(389	)		65

Net cash flows (used in) provided by operating activities		(910	)		1,115


CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of common stock		(24	)		—

Net cash flows used in financing activities		(24	)		—


NET CHANGE IN CASH AND CASH EQUIVALENTS		(934	)		1,115
CASH AND CASH EQUIVALENTS, AT BEGINNING OF YEAR		2,528			1,413

CASH AND CASH EQUIVALENTS, AT END OF YEAR	$	1,594		$	2,528

SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid	$	312		$	5

See accompanying notes to financial statements.

F-5

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

NOTE 1: DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business - Tofutti Brands Inc. (“Tofutti” or the “Company”) is engaged in one business segment, the development, production and marketing of nondairy frozen desserts and other food products.

Fiscal Year - The Company operates on a fiscal year ending on the Saturday closest to December 31st. Fiscal years for the financial statements included herein are the fifty-two week fiscal periods ended on December 31, 2011 and January 1, 2011, respectively.

Estimates and Uncertainties - The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America 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. Significant estimates include allowance for doubtful accounts, sales promotion accruals and inventory reserves. Actual results could differ from those estimates.

Revenue Recognition - Revenue is recognized when goods are shipped from production facilities or outside warehouses to customers. Revenue is recognized when the following four criteria under ASC 605 have been met: the product has been shipped and the Company has no significant remaining obligations; persuasive evidence of an arrangement exists; the price to the buyer is fixed or determinable; and collection is probable. Deductions from sales for promotional programs, manufacturers’ charge-backs, co-operative advertising programs and other programs are recorded as reductions of revenues and are provided for at the time of initial sale of product. Freight charged to customers is included in revenues, and has generally been insignificant.

Concentration of Credit/Sales Risk - Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and unsecured trade receivables. During the year, the Company’s cash balance at a financial institution exceeded the FDIC limit of $250.

The Company performs ongoing evaluations of its customers’ financial condition and does not require collateral. Management feels that credit risk beyond the established allowances at December 31, 2011 is limited.

During the fiscal years ended December 31, 2011 and January 1, 2011, the Company derived approximately 87% and 91%, respectively, of its net sales domestically. The remaining sales in both periods were exports to foreign countries. The Company’s sales to one customer represented 9% of net sales during fiscal 2011 and 19% of net sales during fiscal 2010. The accounts receivable balance of one customer represented approximately 11% of total accounts receivable at December 31, 2011 and 11% of total accounts receivable at January 1, 2011. In addition, a significant portion of the Company’s sales are to several key distributors, which are large distribution companies with numerous divisions and subsidiaries who act independently. Such distributors as a group accounted for 35% and 40% of the Company’s net sales for the fiscal years ended December 31, 2011 and January 1, 2011.

Accounts Receivable - The majority of the Company’s 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 outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade

F-6

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

accounts receivable are past due, the Company’s previous loss history, the customer’s current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the bad debt expense. The Company does not accrue interest on accounts receivable past due.

Cash and Equivalents - The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents.

Inventories - Inventory is stated at lower of cost or market 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.

The Company purchased approximately 28% and 31% of its finished products from one supplier and 24% and 21% of its finished products from another supplier during the periods ended December 31, 2011 and January 1, 2011, respectively.

Fixed Assets - Fixed assets consist of leasehold improvements. Amortization is provided by charges to income using the straight-line method over the useful life of ten years.

Income 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. The Company 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.

Net Income 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 share has been computed by dividing net income by the weighted average number of common shares outstanding, including the dilutive effects of stock options. For the fiscal years ended December 31, 2011 and January 1, 2011, stock equivalents of 41,000 shares and 51,000 shares, respectively, were excluded from the diluted earnings per share calculations since the effect was anti-dilutive, because the strike price of these options was greater than the quoted market value at such date.

F-7

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


	Fiscal Year Ended December 31, 2011		Fiscal Year Ended January 1, 2011


Net income, numerator, basic and diluted computation	$	43	$	462


Weighted average shares - denominator basic computation		5,176		5,177
Effect of dilutive stock options		—		—

Weighted average shares, as adjusted - denominator diluted computation		5,176		5,177

Net income per common share:
Basic	$	0.01	$	0.09

Diluted	$	0.01	$	0.09

Stock Based Compensation -The Company follows the provisions of ASC 718 Share-Based Payment. The Company uses the Black-Scholes option pricing model to measure the estimated fair value of the options under ASC 718. The compensation expense, less forfeitures, is being recognized over the service period on a straight-line basis.

Fair Value of Financial Instruments - The fair value of financial instruments, which primarily consist of cash and equivalents, accounts receivable and accounts payable are stated at their carrying values. The carrying amounts approximate fair value because of the short-term nature of those instruments.

Freight Costs - Freight costs to ship inventory to customers and to outside warehouses amounted to $1,033 and $981 during the fiscal years ended December 31, 2011 and January 1, 2011, respectively. Such costs are included in costs of goods sold.

Advertising Costs - The Company expenses advertising costs as they are incurred. Advertising expenses amounted to $244 and $295 during the fiscal years ended December 31, 2011 and January 1, 2011, respectively.

Product Development Costs - Costs of new product development and product redesign are charged to expense as incurred.

Recent Accounting Pronouncements - Accounting Standards Updates that became effective after December 31 are not expected to have a significant effect on our financial position or results of operations.

NOTE 2: INVENTORIES

Inventories consist of the following:


	December 31, 2011		January 1, 2011

Finished products	$	1,003	$	1,236
Raw materials and packaging		438		461

	$	1,441	$	1,697

F-8

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

NOTE 3: STOCK OPTIONS

The 1993 Stock Option Plan (the “1993 Plan”) provides for the grant 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 grant of non-qualified stock options to key employees and consultants. The 1993 Plan had a term of ten years and terminated in 2003. No grants have been made under the 1993 Plan since 2003, and no further grants of options can be made under the 1993 Plan.

The Company’s shareholders adopted the 2004 Non-Employee Directors’ Stock Option Plan (the “2004 Directors’ Plan”) on June 3, 2004. The purpose and intent of the 2004 Directors’ Plan is to attract and retain the best available individuals as non-employee directors of the Company, to provide additional incentive to non-employee directors to continue to serve as directors and to encourage their continued service on the Board. All options granted under 2004 Directors’ Plan are “non-qualified stock options.” The maximum aggregate number of shares of common stock which may be issued under the 2004 Directors’ Plan is 100,000 shares. The maximum term of any option under the plan is five years, and generally vests over a period of three years.

The following is a summary of stock option activity from January 2, 2010 to December 31, 2011:


	1993 PLAN INCENTIVE OPTIONS				2004 DIRECTORS’ PLAN NON-QUALIFIED OPTIONS

	Shares		Weighted Average Exercise Price ($)		Shares			Weighted Average Exercise Price ($)		Total Aggregate Intrinsic Value ($)

Outstanding at January 2, 2010		—		—		61,000			2.94		—

Exercisable at January 2, 2010		—		—		61,000			2.94		—

Expired in fiscal 2010		—		—		(10,000	)		3.14		—

Outstanding at January 1, 2011		—		—		51,000			2.90		—

Exercisable at January 1, 2011		—		—		51,000			2.90		—

Expired in fiscal 2011		—		—		10,000			2.90		—

Outstanding at December 31, 2011		—		—		41,000			2.90		—

There were no stock options granted in the last two fiscal years.

The following table summarizes information about stock options outstanding at December 31, 2011:


Range of Exercise Prices ($)	Number Outstanding	Weighted Average Remaining Life (in years)	Weighted Average Exercise Price($)	Number Exercisable

2.90	41,000	0.83	2.90	41,000

The options outstanding are fully vested as of year-end, December 31, 2011.

F-9

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

NOTE 4: LEASES

The Company’s facilities are 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 under the terms of that agreement. Any changes by either the landlord or the Company remains subject to a six month notification period. The Company currently has no plans to enter into a long-term lease agreement for the facility. Rent expense was $81 in 2011 and $81 in 2010. 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.

NOTE 5: INCOME TAXES

The components of income tax expense (benefit) for the fiscal years ended December 31, 2011 and January 1, 2011 are as follows:


	December 31, 2011			January 1, 2011

Current:
Federal	$	134		$	177
State		14			50

		148			227

Deferred:
Federal		(50	)		88
State		(9	)		25

		(59	)		(113	)

Total income tax expense	$	89		$	340

A reconciliation between the expected federal tax expense at the statutory tax rate of 34% and the Company’s actual tax expense for the fiscal years ended December 31, 2011 and January 1, 2011 follows:


	December 31, 2011			January 1, 2011

Income tax expense computed at federal statutory rate	$	45		$	278
State income taxes, net of federal income tax benefit		10			50
Permanent and other items		(4	)		155
Prior year items		38			—

	$	89		$	340

Deferred tax assets for the fiscal years ended December 31, 2011 and January 1, 2011 consist of the following components:


	December 31, 2011		January 1, 2011

Allowance for doubtful accounts	$	194	$	128
Inventory		51		58
Unrecognized tax benefits		20		—

Deferred tax asset	$	265	$	186

F-10

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

The Company 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.

The following table indicates the changes to the Company’s uncertain tax positions for the fiscal years ended December 31, 2011 and January 1, 2011 including interest and penalties:


Balance at January 2, 2010	$	444
Reductions based on tax positions related to the prior year		(143	)

Balance at January 1, 2011	$	301
Additions based on tax positions related to the current year		75
Balance at December 31, 2011	$	376

The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes. The Company had approximately $121 of accrued interest and penalties related to uncertain tax positions. The amount of uncertain tax positions that would affect the effective tax rate if they were recognized is $58.

The liability at December 31, 2011 for uncertain tax positions is included in accrued expenses. The Company’s federal and state tax returns are open to examination for the years 2008 to 2010.

F-11


Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.

None.


Item 9A.	Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As of December 31, 2011, our company’s chief executive officer and chief financial officer conducted an evaluation regarding the effectiveness of our company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective with respect to the material weaknesses, as described below in our internal control over financial reporting, that have not been fully remediated as of the end of the fiscal year 2011.

Disclosure Controls and Internal Controls. As provided in Rule 13a-14 of the General Rules and Regulations under the Securities and Exchange Act of 1934, as amended, Disclosure Controls are defined as meaning controls and procedures that are designed with the objective of insuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, designed and reported within the time periods specified by the SEC’s rules and forms. Disclosure Controls include, within the definition under the Exchange Act, and without limitation, controls and procedures to insure that information required to be disclosed by us in our reports is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure. Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3) our transactions are properly recorded and reported, all to permit the preparation of our financial statements inconformity with generally accepted accounting principles.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of the Chief Executive Officer and Chief Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management’s evaluation of internal control over financial reporting includes using the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, framework, an

integrated framework for the evaluation of internal controls issued by COSO, to identify the risks and control objectives related to the evaluation of our control environment.

Based on their evaluation under the frameworks described above, our chief executive officer and chief financial officer have concluded that our internal control over financial reporting was ineffective as of December 31, 2011 because of the following material weaknesses in internal controls over financial reporting:


	•	a continuing lack of sufficient resources and an insufficient level of monitoring and oversight, which may restrict our ability to gather, analyze and report information relative to the financial statements in a timely manner.

	•	The limited size of the accounting department makes it impracticable to achieve an optimum separation of duties.

Remediation Plan

We are continuing to seek ways to remediate these weaknesses, which stem from our small workforce, that will not require us to hire additional personnel.

Changes in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during the quarter ended December 31, 2011, that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.


Item 9B.	Other Information.

None.

PART III


Item 10.	Directors, Executive Officers and Corporate Governance.

Our directors and executive officers are:


Name	Age	Position

David Mintz	80	Chairman of the Board of Directors, Chief Executive Officer
Steven Kass	60	Chief Financial Officer, Secretary and Treasurer
Neal S. Axelrod	59	Director
Joseph Fischer	72	Director
Aaron Forem	57	Director
Philip Gotthelf	59	Director
Scott Korman	57	Director
Reuben Rapoport	83	Director
Franklyn Snitow	65	Director

David Mintz has been our Chairman of the Board and Chief Executive Officer since August 1981. Mr. Mintz’s knowledge about our company and his role as the developer of our product line is essential to the operation of our board.

Steven Kass has been our Chief Financial Officer since November 1986 and Secretary and Treasurer since January 1987.

Neal S. Axelrod has been a director since August 2007. Mr. Axelrod has been a self-employed certified public accountant in New Jersey since 1977. Mr. Axelrod’s accounting and financial background enhances the breadth of experience of the board of directors.

Joseph Fischer has been a director since August 2007. He previously served as a director from March 2004 until June 2007. He has been the principal in FMM Investments, which manages private portfolios, since 1992. Prior to that and since 1982, Mr. Fischer was the Controller of the Swingline Division of American Brands Inc. Mr. Fisher’s accounting and financial background enhances the breadth of experience of the board of directors.

Aaron Forem has been a director since 2000. Since 1980, he has been the president of Wuhl Shafman Lieberman Corp., located in Newark, New Jersey, which is one of the largest produce wholesalers in the Northeastern United States. Mr. Forem’s experience in the food industry and his managerial experience enhances the breadth of experience of the board of directors.

Philip Gotthelf has been a director since 2006. He has been President of EQUIDEX Incorporated, a registered Commodity Trading Advisor, and EQUIDEX Brokerage Group, a registered Introducing Broker, since 1985. He has also been publisher of the COMMODEX System and COMMODITY FUTURES FORECAST Service since 1975 and has authored several financial books for Probus/McGraw Hill, McGraw Hill and John Wiley & Sons. Mr. Gotthelf’s financial background enhances the breadth of experience of the board of directors.

Scott Korman was elected to serve as a member of the Board of Directors and the Audit Committee of the Registrant on December 13, 2011 by our Board of Directors. Mr. Korman founded Nashone, Inc., a private equity firm, in 1984 and is its President. Nashone is also involved in financial advisory, turnaround and general management assignments. Mr. Korman is currently Chairman of Da-Tech Corporation, a Pennsylvania based contract electronics manufacturer. He previously served as Chairman and CEO of Best Manufacturing Group LLC., a leading manufacturer and distributor of uniforms, napery, service apparel, and hospitality and healthcare textiles. Mr. Korman also served as President and CEO of Welsh Farms Inc., a full service dairy, processing and distributing milk, ice cream mix and ice cream products. Mr. Korman received a B.S. in Economics from the University of Pennsylvania Wharton School in 1977. He also serves on the boards of various not-for-profit groups and was the founder of the Englewood Business Forum.

Reuben Rapoport, our former Director of Product Development who retired in April 2003, has been a director since July 1983. Mr. Rapoport’s product development background enhances the breadth of experience of the board of directors.

Franklyn Snitow has been a director since 1987. He has been a partner in the New York City law firm Snitow Kanfer Holtzer & Millus, LLP, our general counsel, since 1985. Mr. Snitow’s legal and corporate governance background enhances the breadth of experience of the board of directors.

All directors 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 All of the executive officers devote their full time to our operations.

Employment Agreements

There are currently no employment agreements between us and any of our officers.

Family Relationships

There are no family relationships between any of our directors and executive officers.

Involvement in Legal Proceedings

To the best of our knowledge, during the past ten years, none of our directors or executive officers were involved in one of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

Audit Committee and Audit Committee Financial Expert

The Audit Committee of the Board of Directors is comprised of Mr. Axelrod, who serves as chairman, Mr. Gotthelf, Mr. Forem and Mr. Korman. The Board of Directors has determined that all of the Audit Committee members are independent, as that term is defined under the enhanced independence standards for audit committee members in the Securities and Exchange Act of 1934. The Board of Directors has also determined that Mr. Axelrod is an Audit Committee Financial Expert as that term is defined in rules issued pursuant to the Sarbanes-Oxley Act of 2002.

Section 16(a) Beneficial Ownership Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers, directors and persons who own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common stock and other of our equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by Commission regulations to furnish us with copies of all Section 16(a) reports they file.

To our knowledge, based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no additional forms were required for those persons, we believe that during fiscal 2011 all persons subject to these reporting requirements filed the required reports on a timely basis.

Code of Ethics

We have adopted a Code of Business Conduct and Ethics, which applies to directors, officers, employees and agents of our company. We have also adopted a Code of Ethics for Senior Officers, which applies to our chief executive officer, and all senior financial officers of our company, including the chief financial officer, chief accounting officer or controller, or persons performing similar functions. The Code of Business Conduct and Ethics and the Code of Ethics for Senior Officers are publicly available on our website at www.tofutti.com and printed copies are available upon request. If we make any substantive amendments to the Code of Business Conduct and Ethics or the Code of Ethics or grant any waivers, including any implicit waiver, from a provision of these codes to our chief executive officer, chief financial officer or corporate controller or our directors, we will disclose the nature of such amendment or waiver on our website.


Item 11.	Executive Compensation.

The following table sets forth information concerning the total compensation during the last three fiscal years for our named executive officers whose total salary in fiscal 2010 totaled $100,000 or more:

Summary Compensation Table


Name and Principal Position	Fiscal Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	All Other Compensation ($)	Total($)

David Mintz	2011	450,000	—	—	—	—	—	450,000
Chief Executive Officer	2010	450,000	350,000	—	—	—	—	800,000
and Director	2009	459,000	350,000	—	—	—	—	809,000

Steven Kass	2011	125,000	—	—	—	—	—	125,000
Chief Financial Officer	2010	125,000	150,000					275,000
	2009	127,000	150,000	—	—	—	—	277,000

The aggregate value of all other perquisites and other personal benefits furnished to each of these executive officers was less than $10,000 in both the 2011 and 2010 fiscal years.

Grants of Plan-Based Awards for Fiscal 2011

There were no stock options awarded during the fiscal year ended December 31, 2011.

Long-Term Incentive Plans-Awards in Last Fiscal Year

We do not currently have any long-term incentive plans.

Director Compensation

Our non-employee directors earned director compensation in fiscal year ended December 31, 2011 based on the number of meetings attended. Mr. Axelrod, chairman of the audit committee, receives $1,500 per meeting attended. All other non-employees are entitled to $500 per meeting attended. Messrs. Forem and Snitow waive their compensation.

The following table sets forth the compensation received by each of the Company’s non-employee directors for the year ended December 31, 2011. Each non-employee director is considered independent under NYSE AMEX listing standards. Messrs. Forem and Snitow waive their compensation.

Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compensation ($)	Nonqualified Deferred Compensation ($)	All Other Compensation ($)	Total ($)

Neal S. Axelrod	13,500	—	—	—	—	—	13,500
Joseph Fischer	1,000	—	—	—	—	—	1,000
Aaron Forem	500	—	—	—	—	—	500
Philip Gotthelf	4,500	—	—	—	—	—	4,500
Scott Korman	1,000	—	—	—	—	—	1,000
Reuben Rapoport	—	—	—	—	—	—	—
Franklyn Snitow	—	—	—	—	—	—	—

Employment Agreements

We do not currently have any employment agreements with our executive officers. We do not anticipate having employment contracts with executive officers and key personnel in the future.

Outstanding Equity Awards at Fiscal Year End

The following table reflects that no options awards were granted to either of the named executive officers identified above in the summary compensation table pursuant to an Equity Incentive Plan.

Outstanding Equity Awards at Fiscal Year-End

Option Awards

Stock Awards

Name

Number of
securities
underlying
unexercised
options (#)
Exerciseable

Number of
securities
underlying
unexercised
options (#)
Unexerciseable

Equity
incentive
plan
awards:
number of
securities
underlying
unexercised
unearned
options (#)

Option
exercise
price ($)

Option
expiration
date

Number
of
shares
or units
of stock
that
have not
vested
(#)

Market
value of
shares
or units
of stock
that
have not
vested
($)

Equity
incentive
plan
awards:
number
of
unearned
shares,
units or
other
rights
that have
not
vested (#)

Equity
incentive
plan
awards:
market or
payout
value of
unearned
shares,
units or
other
rights that
have not
vested ($)

David Mintz

—

Steven Kass

—


Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following tables set forth as of March 30, 2012 certain information regarding the ownership of our common stock, $0.01 par value, for each person known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock, for each executive officer named in the Summary Compensation Table, for each of our directors and for our executive officers and directors as a group:

Security ownership of certain beneficial owners.


Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Owner(2)	Percent of Class(3)

David Mintz	2,630,440	51.0%


(1)	The address of Mr. Mintz is c/o Tofutti Brands Inc., 50 Jackson Drive, Cranford, New Jersey 07016. Mr. Mintz has sole voting and/or investment power of the shares attributed to him.

(2)	Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock relating to options currently exercisable or exercisable within 60 days of March 30, 2012 are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.

(3)	Based on 5,153,706 shares issued and outstanding as of March 30, 2012.

Security ownership of management.


Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Owner(2)		Percent of Class(3)

David Mintz	2,630,440		51.0	%
Steven Kass	220,000		4.3	%
Reuben Rapoport	85,000		1.7	%
Franklyn Snitow	71,200		*
Joseph Fischer	26,000	(4)	*
Neal S. Axelrod	16,000	(5)	*
Philip Gotthelf	0		*
Aron Forem	0		*
Scott Korman	0		*
All Executive Officers and Directors as a group (9 persons)	3,058,640	(6)	58.9	%




*	Less than 1%.

(1)	The address of Messrs. Mintz, Kass, Axelrod, Fischer, Gotthelf and Rapoport is c/o Tofutti Brands Inc., 50 Jackson Drive, Cranford, New Jersey 07016. The address of Mr. Snitow is 575 Lexington Avenue, New York, New York 10017. The address of Mr. Forem is 52-62 Cornelia Street, Newark, New Jersey 07105. The address of Mr. Korman is c/o Nashone, Inc., 175 Elm Road, Englewood, NJ 0361. Each of these persons has sole voting and/or investment power of the shares attributed to him.

(2)	Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock relating to options currently exercisable or exercisable within 60 days of March 30, 2012 are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned by them.

(3)	Based on 5,153,706 shares issued and outstanding as of March 30, 2012.

(4)	Issuable upon the exercise of currently exercisable stock options.

(5)	Includes 15,000 shares issuable upon the exercise of currently exercisable stock options.

(6)	Includes 41,000 shares issuable upon the exercise of currently exercisable stock options.


Item 13.	Certain Relationships and Related Transactions, and Director Independence.

None.


Item 14.	Principal Accounting Fees and Services.

Fees for independent registered public accounting firms for fiscal 2011 and 2010

Set forth below are the aggregate fees billed for each of the last two fiscal years ended December 31, 2011 and January 1, 2011 for services rendered by EisnerAmper LLP and Amper, Politziner & Mattia, LLP.


	2011		2010

Audit fees	$	96,000	$	94,500
Audit-related fees		—		—

Total Audit & Audit-related fees	$	96,000	$	94,500
Tax fees		—		—
All other fees		—		—

Total fees	$	96,000	$	94,500

On August 17, 2010 the Audit Committee of our Board of Directors engaged EisnerAmper LLP to serve as our new independent registered public accounting firm, after we were notified on August 16, 2010 that Amper, Politziner and Mattia, LLP, an independent registered public accounting firm, would not be able to stand for re-appointment because it combined its practice on that date with that of Eisner LLP to form EisnerAmper LLP, an independent registered public accounting firm.

Audit fees consist of fees billed for services rendered for the audit of our financial statements and review of our financial statements included in our quarterly reports on Form 10-Q and services provided in connection with other statutory or regulatory filings. During fiscal 2011 and 2010, we incurred audit fees with EisnerAmper LLP in the amount of $96,000 and $68,500, respectively. During fiscal 2010, we incurred audit fees with Amper, Politziner, & Mattia, LLP in the amount of $26,000.

Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and not reported under Audit fees. No such fees were billed in fiscal 2011 and 2010.

Tax fees consist of fees billed for professional services related to the preparation of our U.S. federal and state income tax returns and tax advice. No such fees were billed in 2011 or 2010. The Audit Committee pre-approved all Audit-related fees. After considering the provision of services encompassed within the above disclosures about fees, the Audit Committee has determined that the provision of such services is compatible with maintaining EisnerAmper’s independence.

Pre-approval policy of services performed by independent registered public accounting firm

The Audit Committee’s policy is to pre-approve all audit and non-audit related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee has delegated the pre-approval authority to its chairperson when expedition of services is necessary. The independent registered public accounting firm and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval and the fees for the services performed to date.

PART IV


Item 15.	Exhibits and Financial Statement Schedules.

(a)	Financial Statements

	See Item 8.

(b)	Financial Statement Schedules

	None.

(c)	Exhibits

3.1	Certificate of Incorporation, as amended through February 1986.(1)

3.1.1	March 1986 Amendment to Certificate of Incorporation.(2)

3.1.2	June 1993 Amendment to Certificate of Incorporation.(3)

3.2	By-laws.(1)

4.1	Copy of the Registrant’s Amended 1993 Stock Option Plan.(4)

4.2	Tofutti Brands Inc. 2004 Non-Employee Directors’ Stock Option Plan.(5)

31.1	Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2	Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32.1	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	Instance Document*

101.SCH	Schema Document*

101.CAL	Calculation Linkbase Document*

101.DEF	Definition Linkbase Document*

101.LAB	Labels Linkbase Document*

101.PRE	Presentation Linkbase Document*



*	Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

(1)	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.

(2)	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.

(3)	Filed as an exhibit to the Registrant’s Form 10-KSB for the fiscal year ended January 1, 2005 and hereby incorporated by reference thereto.

(4)	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.

(5)	Filed as Appendix B to the Registrant’s Schedule 14A filed May 10, 2004 and hereby incorporated by reference thereto.

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 April 5, 2012.


	TOFUTTI BRANDS INC.
	(Registrant)
	/s/ David Mintz

	David Mintz
	Chairman of the Board and
	Chief Executive Officer

In accordance with the Securities Exchange Act of 1934, this Report has been signed below on April 5 , 2012, 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 and Accounting Officer

/s/ Neal S. Axelrod

Neal S. Axelrod

Director

Joseph Fischer

Director



Aaron Forem
Director

/s/ Philip Gotthelf

Philip Gotthelf
Director

/s/ Scott Korman

Scott Korman
Director


Reuben Rapoport
Director

/s/ Franklyn Snitow

Franklyn Snitow
Director

EXHIBIT INDEX


Exhibit


3.1		Certificate of Incorporation, as amended through February 1986.(1)

3.1.1		March 1986 Amendment to Certificate of Incorporation.(2)

3.1.2		June 1993 Amendment to Certificate of Incorporation.(3)

3.2		By-laws.(1)

4.1		Copy of the Registrant’s Amended 1993 Stock Option Plan.(4)

4.2		Tofutti Brands Inc. 2004 Non-Employee Directors’ Stock Option Plan.(5)

31.1		Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

31.2		Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.

32.1		Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Instance Document*

101.SCH		Schema Document*

101.CAL		Calculation Linkbase Document*

101.DEF		Definition Linkbase Document*

101.LAB		Labels Linkbase Document*

101.PRE		Presentation Linkbase Document*



*	Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

(1)	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.

(2)	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.

(3)	Filed as an exhibit to the Registrant’s Form 10-KSB for the fiscal year ended January 1, 2005 and hereby incorporated by reference thereto.

(4)	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.

(5)	Filed as Appendix B to the Registrant’s Schedule 14A filed May 10, 2004 and hereby incorporated by reference thereto.

TOFUTTI BRANDS INC - FORM 10-K - April 5, 2012

Attached files

TOFUTTI BRANDS INC Reports