10-Q - TOFB - Equibles

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-Q

☒	Quarterly<br> report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended July 2, 2022
☐	Transition<br> report pursuant to Section 13 or 15(d) of the Exchange Act for the transition period from ☐ to ☐
---	---

Commission

file number: 1-9009

TofuttiBrands Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	13-3094658
(State of<br> Incorporation)	(I.R.S. Employer Identification No.)

50Jackson Drive, Cranford, New Jersey 07016

(Address of Principal Executive Offices)

(908)272-2400

(Registrant’s Telephone Number, including area code)

Securities

registered pursuant to Section 12(g) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common<br> Stock, par value $0.01 per share	TOFB	None

N/A

(Former

Name, Former Address and Former Fiscal Year,

if

Changed Since Last Report)

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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically 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 ☒ No ☐

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

Large<br> accelerated filer ☐	Accelerated<br> filer ☐
Non-accelerated<br> filer ☒
Smaller<br> reporting company ☒	Emerging<br> growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

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

Yes

☐ No ☒

As

of August 16, 2022 the Registrant had 5,153,706 shares of Common Stock, par value $0.01, outstanding.

TOFUTTI

BRANDS INC.

INDEX

		Page
Part I - Financial Information:
Item<br> 1.	Unaudited Condensed Financial Statements
	Unaudited Condensed Balance Sheets – July 2, 2022 and January 1, 2022	3
	Unaudited Condensed Statements of Operations -Thirteen and Twenty-Six Weeks ended July 2, 2022 and July 3, 2021	4
	Unaudited Condensed Statements of Changes in Stockholders’ Equity -Thirteen and Twenty-Six Weeks ended July 2, 2022 and July 3, 2021	5
	Unaudited Condensed Statements of Cash Flows -Twenty-Six Weeks ended July 2, 2022 and July 3, 2021	6
	Notes to Unaudited Condensed Financial Statements	7
Item<br> 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item<br> 3.	Quantitative and Qualitative Disclosures About Market Risk	17
Item<br> 4.	Controls and Procedures	17
Part II - Other Information:
Item<br> 1.	Legal Proceedings	18
Item<br> 1A.	Risk Factors	18
Item<br> 2.	Unregistered Sales of Equity Securities and Use of Proceeds	18
Item<br> 3.	Defaults Upon Senior Securities	18
Item<br> 4.	Mine Safety Disclosures	18
Item<br> 5.	Other Information	18
Item<br> 6.	Exhibits	18
Signatures		19

| 2 |

| --- |

PART

I - FINANCIAL INFORMATION

Item1. Financial Statements

TOFUTTI

BRANDS INC.

Unaudited

Condensed Balance Sheets

(inthousands, except share and per share figures)

		January<br> 1, 2022
Assets
Current<br> assets:
Cash	1,176	$	1,698
Accounts<br> receivable, net of allowance for doubtful accounts and sales promotions of 465 and 435, respectively	1,122		1,336
Inventories	2,574		1,874
Prepaid<br> expenses and other current assets	41		98
Total<br> current assets	4,913		5,006
Operating<br> lease right-of-use assets	147		203
Deferred<br> tax assets	174		112
Other<br> assets	19		21
Total<br> assets	5,253	$	5,342
Liabilities<br> and Stockholders’ Equity
Current<br> liabilities:
SBA<br> loan payable	—	$	165
Income<br> taxes payable	43		46
Accounts<br> payable	231		122
Accrued<br> expenses	380		347
Total<br> current liabilities	654		680
Operating<br> lease liabilities	35		95
Total<br> liabilities	689		775
Stockholders’<br> equity:
Preferred<br> stock - par value .01 per share; authorized 100,000 shares, none issued and outstanding	—		—
Common<br> stock - par value .01 per share; authorized 15,000,000 shares, 5,153,706 shares issued and outstanding	52		52
Additional<br> paid-in capital	207		207
Retained<br> earnings	4,305		4,308
Total<br> stockholders’ equity	4,564		4,567
Total<br> liabilities and stockholders’ equity	5,253	$	5,342

All values are in US Dollars.

See

accompanying notes to unaudited condensed financial statements.

| 3 |

| --- |

TOFUTTI

BRANDS, INC.

Unaudited

Condensed Statements of Operations

(inthousands, except per share figures)

	Thirteen<br> <br>weeks ended <br>July 2, 2022			Thirteen<br> <br>weeks ended <br>July 3, 2021		Twenty-six<br> <br>weeks ended <br>July 2, 2022			Twenty-six<br> <br>weeks ended <br>July 3, 2021
Net<br> sales	$	2,979		$	3,027	$	6,442		$	6,177
Cost<br> of sales		2,454			2,269		5,060			4,418
Gross<br> profit		525			758		1,382			1,759
Operating<br> expenses:
Selling<br> and warehouse		309			303		573			627
Marketing		111			66		267			135
Research<br> and development		42			36		82			75
General<br> and administrative		349			319		686			766
Total<br> operating expenses		811			724		1,608			1,603
Income<br> (loss) from operations		(286	)		34		(226	)		156
Other<br> income:
SBA<br> loan forgiveness		—			—		165			—
Income<br> (loss)before interest expense and income taxes		(286	)		34		(61	)		156
Interest<br> expense		—			6		—			12
(Loss)<br> income before income tax		(286	)		28		(61	)		144
Income<br> tax expense (benefit)		(78	)		—		(58	)		36
Net<br> income (loss)	$	(208	)	$	28	$	(3	)	$	108
Weighted average<br> common shares outstanding:
Basic		5,154			5,154		5,154			5,154
Diluted		5,154			5,436		5,154			5,436
Earnings (loss) per<br> common share:
Basic	$	(0.04	)	$	0.01	$	(0.00	)	$	0.02
Diluted	$	(0.04	)	$	0.01	$	(0.00	)	$	0.02

See

accompanying notes to unaudited condensed financial statements.

| 4 |

| --- |

TOFUTTI

BRANDS, INC.

Unaudited

Condensed Statements of Changes in Stockholders’ Equity

(inthousands)

	Common<br> Stock		Additional<br> Paid-in Capital		Retained<br> Earnings			Total
	Thirteen<br> and twenty-six weeks ended July 2, 2022
	Common<br> Stock		Additional<br> Paid-in Capital		Retained<br> Earnings			Total
January<br> 1, 2022	$	52	$	207	$	4,308		$	4,567
Net<br> income		—		—		205			205
April<br> 2, 2022	$	52	$	207	$	4,513		$	4,772
Net<br> loss		—		—		(208	)		(208	)
July<br> 2, 2022	$	52	$	207	$	4,305		$	4,564
	Thirteen<br> and twenty-six weeks ended July 3, 2021
---	---	---	---	---	---	---	---	---
	Common<br> Stock		Additional<br> Paid-in Capital		Retained<br> Earnings		Total
January<br> 2, 2021	$	52	$	207	$	4,165	$	4,424
Net<br> income		—		—		80		80
April<br> 3, 2021		52		207		4,245		4,504
Beginning Balance		52		207		4,245		4,504
Net<br> income		—		—		28		28
July<br> 3, 2021	$	52	$	207	$	4,273	$	4,532
Ending Balance	$	52	$	207	$	4,273	$	4,532

See

accompanying notes to unaudited condensed financial statements.

| 5 |

| --- |

TOFUTTI

BRANDS INC.

Unaudited

Condensed Statements of Cash Flows

(inthousands)

	Twenty-six<br> weeks ended<br> July 2, 2022			Twenty-six<br> weeks ended<br> July 3, 2021
Cash<br> (used in) provided by operating activities, net	$	(522	)	$	610
Net<br> (decrease) increase in cash		(522	)		610
Cash at beginning<br> of period		1,698			1,459
Cash at end of period	$	1,176		$	2,069
Supplemental<br> cash flow information:
Income<br> taxes paid	$	—		$	120
Interest<br> paid	$	—		$	12

See

accompanying notes to unaudited condensed financial statements.

| 6 |

| --- |

TOFUTTI

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

Note1: Basis of Presentation

The accompanying unaudited condensed financial information, in the opinion of management, reflects all adjustments (which include only normally recurring adjustments) necessary to present fairly the Company’s financial position, operating results and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The results of operations for the thirteen-week and twenty-six-week period ended July 2, 2022 are not necessarily indicative of the results to be expected for the full year or any other period.

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

Note2: Recently Issued Accounting Standards

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

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

Note3: Inventories

Inventories consist of the following:

Schedule of Inventories

	July<br> 2, 2022		January<br> 1, 2022
Finished<br> products	$	1,334	$	1,218
Raw<br> materials and packaging		1,240		656
Inventories,<br> net	$	2,574	$	1,874

| 7 |

| --- |

TOFUTTI

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

Note4: Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes.

Note5: Earnings (Loss) Per Share

Fully

diluted earnings (loss) per common share have been computed by dividing earnings by the weighted average number of common shares outstanding, which would account for a potential 282,486 shares to be issued upon conversion of a convertible note as of July 3, 2021. The convertible note for 282,486 shares was included in the calculation of fully diluted earnings for the thirteen and twenty-six weeks ended July 3, 2021. The note was repaid in full on December 22, 2021. There are no dilutive shares issuable in either the thirteen or twenty-six week periods ended July 2, 2022 .

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

Schedule of Earnings Per Share, Basic and Diluted

	Thirteen<br> <br>weeks ended<br> <br>July 2, 2022			Thirteen<br> <br>weeks ended<br> <br>July 3, 2021		Twenty-six<br> <br>weeks ended<br> <br>July 2, 2022			Twenty-six<br> <br>weeks ended<br> <br>July 3, 2021
Net<br> income (loss), numerator, basic computation	$	(208	)	$	28	$	(3	)	$	108
Interest<br> expense		—			6		—			12
Net<br> income (loss), numerator, diluted computation	$	(208	)	$	34	$	(3	)	$	120
Weighted<br> average shares - denominator basic computation		5,154			5,154		5,154			5,154
Effect<br> of convertible note		—			282		—			282
Weighted<br> average shares, as adjusted - denominator diluted computation		5,154			5,436		5,154			5,436
Earnings<br> (loss) per common share - basic	$	(0.04	)	$	0.01	$	(0.00	)	$	0.02
Earnings<br> (loss) per common share - diluted	$	(0.04	)	$	0.01	$	(0.00	)	$	0.02

| 8 |

| --- |

TOFUTTI

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

Note6: Share Based Compensation

On June 10, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan (the “2014 Plan”). The 2014 Plan provides for grants of various types of awards that are designed to attract and retain highly qualified personnel who will contribute to the success of the Company and to provide incentives to participants in the 2014 Plan that are linked directly to increases in shareholder value which will therefore inure to the benefit of all shareholders of the Company.

The

2014 Plan made 250,000 shares of common stock available for awards. The 2014 Plan also permits performance-based 2014 awards paid under it to be tax deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, as “performance-based compensation.” No stock options were issued in 2022 or 2021 and no options were outstanding as of July 2, 2022 and January 1, 2022.

Note7: Notes Payable

SmallBusiness Administration (SBA) Loan

On

May 2, 2020 the Company received from the SBA a loan of $165 from the Paycheck Protection Program at an interest rate of 1%. Interest and payments were deferred until March 4, 2021 The current portion of the loan was $165 as of January 2, 2021 and the loan would have expired on May 2, 2022. On January 12, 2022, the Company was informed by the SBA that the entire amount of the loan had been forgiven free of taxation. The Company recorded forgiveness of debt income of $165 in the twenty-six weeks ended July 2, 2022 as SBA loan forgiveness on the unaudited condensed statement of operations.

RelatedParty

On

January 6, 2016, David Mintz, the Company’s former Chairman and Chief Executive Officer, provided the Company with a loan of $500. The loan was extended until December 31, 2021 and was, at the option of the holder, convertible into the Company’s common stock at a conversion price of $1.77 per share. Interest expense incurred to the related party was $25 for both fiscal years ended January 1, 2022 and January 2, 2021. On December 22, 2021, the entire loan of $500 plus accrued interest of $25 was paid by the Company to Mr. Mintz’s estate.

Note8: Revenue

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

Revenues by geographical region are as follows:

Schedule of Revenue

	Thirteen<br> <br>weeks ended<br> <br>July 2, 2022		Thirteen<br> <br>weeks ended<br> <br>July 3, 2021		Twenty-six<br> <br>weeks ended<br> <br>July 2, 2022		Twenty-six<br> <br>weeks ended<br> <br>July 3, 2021
Revenues<br> by geography:
Americas	$	2,780	$	2,768	$	6,065	$	5,747
Europe		109		39		109		59
Asia<br> Pacific and Africa		-		36		-		130
Middle<br> East		90		184		268		241
Revenues	$	2,979	$	3,027	$	6,442	$	6,177

| 9 |

| --- |

TOFUTTI

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

Approximately 94% of the Americas’ revenue in 2022 and 2021 is attributable to sales in the United States in both the thirteen and twenty-six week periods. All of the Company’s assets are located in the United States.

Net sales by major product category:

Summary of Net Sales by Major Product Category

	Thirteen<br> <br>weeks ended<br> <br>July 2, 2022		Thirteen<br> <br>weeks ended<br> <br>July 3, 2021		Twenty-six<br> <br>weeks ended<br> <br>July 2, 2022		Twenty-six<br> <br>weeks ended<br> <br>July 3, 2021
Frozen<br> desserts and foods	$	453	$	530	$	1,000	$	960
Cheeses		2,526		2,497		5,442		5,217
Net<br> sales	$	2,979	$	3,027	$	6,442	$	6,177

Note9: 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 on a monthly basis. 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 $20 for the thirteen weeks ended July 2, 2022 and July 3, 2021. Rent expense was $40 for the twenty-six weeks ended July 2, 2022 and July 3, 2021. The Company’s management believes that the Cranford facility will continue to satisfy its space requirements for the foreseeable future and that if necessary, such space can be replaced without a significant impact to the business. The Company rents warehouse storage space at various outside facilities. Outside warehouse expenses were $96 for the thirteen weeks ended July 2, 2022 and $137 for the thirteen weeks ended July 3, 2021 and $191 for the twenty-six weeks ended July 2, 2022 and $249 for the twenty-six weeks ended July 3, 2021.

Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. The standard requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease. The current portion of lease liabilities is included in accrued expenses on the condensed balance sheets.

The

Company’s lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. At the time of adoption of Topic 842, the Company used the incremental borrowing rate of 5.5% for all leases that commenced prior to that date.

| 10 |

| --- |

TOFUTTI

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

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

Schedule of ROU lease Assets and Liabilities For Operating Leases

	As<br> of			As<br> of
	July<br> 2, 2022			January<br> 1, 2022
Operating<br> lease right-of-use assets	$	147		$	203
Current<br> portion of lease liabilities		123			123
Operating<br> lease liabilities		35			95
Total<br> lease liability	$	158		$	218
Weighted<br> average remaining lease term (in years)		2.6			3.0
Weighted average<br> discount rate		5.5	%		5.5	%

Future lease payments included in the measurement of lease liabilities on the balance sheet as of July 2, 2022 are as follows:

Schedule of Future Lease Payments

	As<br> of
	July<br> 2, 2022
2022<br> (remaining)	$	54
2023		110
Total<br> future minimum lease payments		164
Less:<br> Present value adjustment		(6	)
Total	$	158

| 11 |

| --- |

TOFUTTI

BRANDS INC.

Item2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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

The discussion and analysis which follows in this Quarterly Report and in other reports and documents and in oral statements made on our behalf by our management and others may contain trend analysis and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to future events and financial results. These include statements regarding our earnings, projected growth and forecasts, and similar matters which are not historical facts. We remind stockholders that forward-looking statements are merely predictions and therefore are inherently subject to uncertainties and other factors which could cause the actual future events or results to differ materially from those described in the forward-looking statements. These uncertainties and other factors include, among other things, business conditions in the food industry and general economic conditions, both domestic and international; lower than expected customer orders; competitive factors; changes in product mix or distribution channels; and resource constraints encountered in developing new products. The forward-looking statements contained in this Quarterly Report and made elsewhere by or on our behalf should be considered in light of these factors.

CriticalAccounting Estimates

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.

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

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

AccountsReceivable. 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 and reserve for sales promotions. Accounts outstanding longer than the contractual payment terms are considered past due. We determine whether an allowance is necessary by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, the customer’s current ability to pay its obligation, and the condition of the general economy and the industry as a whole. We write-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.

| 12 |

| --- |

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

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

IncomeTaxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded if there is uncertainty as to the realization of deferred tax assets. We will recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.

RecentDevelopments

An outbreak of an infectious respiratory illness caused by a novel coronavirus known as COVID-19 was first detected in China in December 2019 and has now spread globally. This outbreak has resulted in travel restrictions, closed international borders, enhanced health screenings at ports of entry and elsewhere, prolonged quarantines, order cancellations, supply chain disruptions, increased costs for raw materials, and lower consumer demand, and other significant economic impacts, as well as general concern and uncertainty.

The severity of the pandemic and the future uncertainty regarding the length of its effects could have negative consequences for our company. To date, the effects of the pandemic have negatively affected certain aspects of our operations. All of our co-packing facilities are currently operating normally, and the pandemic has not constrained any of our production requirements. The cost of certain key ingredients and packaging has increased substantially due to short-term supply issues related to COVID-19. Additionally, we are currently experiencing longer lead times in receiving certain ingredients and packaging. We anticipate that these longer lead times will persist for the balance of 2022. We continue to be able to schedule trucks for delivery and a large majority of our customers are still operating and ordering our products as before. However, our freight costs have increased substantially due to a driver shortage caused by COVID-19 and a significant increase in fuel costs. Fuel costs have continued to increase substantially due to record high petroleum costs caused by the current unsettled world political situation. In response to these cost increases and the potential for additional cost increases affecting various aspects of our operations, we initiated a series of sales price increases commencing in the fourth quarter of 2021 and continuing into the first quarter of 2022 to help offset these cost increases. As these costs have either continued to increase, or have remained at their high historic levels, we have been forced to implement further price increases to our customers which will become effective during the fourth quarter of the current year.

| 13 |

| --- |

Our ability to handle customer and consumer communications, schedule production, and order ingredients necessary for our production has not been materially impacted. Nor have we experienced a significant change in the timeliness of payments of our invoices. Our cash position is $1,283,292 as of August 8, 2022 as compared to our fiscal year end January 1, 2022 balance of $1,698,000

Resultsof Operations

Thirteen Weeks Ended July 2, 2022 Compared with Thirteen Weeks Ended July 3, 2021

Net sales for the thirteen weeks ended July 2, 2022 decreased by $48,000, or 2%, to $2,979,000, from net sales of $3,027,000 for the thirteen weeks ended July 3, 2021. Sales of our vegan cheese products increased slightly to $2,526,000 in the thirteen weeks ended July 2, 2022 from $2,497,000 in the thirteen weeks ended July 3, 2021. Sales of our frozen dessert and frozen food products, which consist primarily of frozen dessert products, decreased to $453,000 in the thirteen weeks ended July 2, 2022 from $530,000 for the thirteen weeks ended July 3, 2021. We anticipate an increase in sales dollars over the balance of the current fiscal year as the price increases we implemented take effect.

Our gross profit decreased significantly to $525,000 for the thirteen weeks ended July 2, 2022 from $758,000 for the thirteen weeks ended July 3, 2021. Our gross profit percentage was 18% for the thirteen weeks ending July 2, 2022 compared to 25% for the thirteen weeks ending July 3, 2021. The decrease in both our gross profit and gross profit percentage were caused by the substantial increases in certain ingredients and freight expense. These substantial cost increases were due primarily to the lingering supply chain issues caused by the Covid-19 pandemic and the record high cost of petroleum. Besides causing substantial increases in our freight expenses, the high cost of petroleum has also directly impacted the costs of certain ingredients and packaging such as the plastic packaging we use for our spreadable cheese products. Our gross profit dollars and gross profit percentage were also negatively impacted by an increase in our sales promotion and allowance expenses to $403,000 in the second quarter of this year as compared to $336,000 in the second quarter of prior fiscal year. We anticipate that our gross profit dollars and gross profit percentage will continue to be negatively affected for the balance of fiscal year 2022.

Freight out expense, a significant part of our cost of sales, increased by $53,000, or 20%, to $324,000 for the thirteen weeks ended July 2, 2022 compared with $271,000 for the thirteen weeks July 3, 2021. Freight out expense was 11% of sales for the thirteen weeks ended July 2, 2022 compared to 9% of sales for the thirteen weeks ended July 3, 2021. The increase in freight out expenses was primarily due to the increases in shipping costs due to the large increase in the cost of fuel and the unavailability of trucks and drivers. We anticipate that our freight out expense will continue at the current higher rate for the balance of 2022.

Selling expenses increased slightly by $6,000, or 2%, to $309,000 for the thirteen weeks ended July 2, 2022 from $303,000 for the thirteen weeks ended July 3, 2021. The increase was due to an increase in meetings and conventions of $20,000, commissions expense of $20,000, and travel, entertainment and auto expense of $12,000 which were partially offset by a decrease in outside warehouse rental expense of $41,000. We anticipate that our selling expenses will remain unchanged for the remainder of 2022.

Marketing expenses increased by $45,000, or 68%, to $111,000 for the thirteen weeks ended July 2, 2022 from $66,000 for the thirteen weeks ended July 3, 2021. The increase was primarily due to increases in artwork and plates expense of $54,000, advertising expense of $3,000, marketing materials of $6,000 and promotion expense of $17,000. The increase in artwork and plate expense was due to a complete redesign of all the Company’s packaging. We anticipate that our marketing expenses for the balance of the year will be higher that the corresponding periods in fiscal year 2021.

Product development costs, which consist principally of salary expenses and laboratory costs, increased slightly by $6,000, or 17%, to $42,000 for the thirteen weeks ended July 2, 2022 from $36,000 for the thirteen weeks ended July 3, 2021. We anticipate our product development costs to continue at a slightly lower level than the corresponding 2021 periods

| 14 |

| --- |

General and administrative expenses increased by $30,000, or 9%, to $349,000 for the thirteen weeks ended July 2, 2022 from $319,000 for the thirteen weeks ended July 3, 2021, primarily due to increases in payroll expense of 47,000, and public relations expense of $15,000, which were partially offset by decreases in IT expense of $13,000 and travel, entertainment, and auto expense of $9,000. We anticipate our general and administrative expense for the remaining periods in 2022 will approximate the same levels as in the corresponding 2021 periods.

Income tax benefit was $78,000 for the thirteen weeks ended July 2, 2022 and $0 for the thirteen weeks ended July 3, 2021 resulting from the lower taxable income during the thirteen weeks ended July 2, 2022 compared to the thirteen weeks ended July 3, 2021.

Twenty Six Weeks Ended July 2, 2022 Compared with Twenty Six Weeks Ended July 3, 2021

Net sales for the twenty-six weeks ended July 2, 2022 increased by $265,000, or 4%, to $6,442,000, from net sales of $6,177,000 for the twenty-six weeks ended July 3, 2021. Sales of our vegan cheese products increased to $5,442,000 in the twenty-six weeks ended July 2, 2022 from $5,217,000 in the twenty-six weeks ended July 3, 2021. Sales of our frozen dessert and frozen food products, which consist primarily of frozen dessert products, increased to $1,000,000 in the twenty-six weeks ended July 2, 2022 from $960,000 for the twenty-six weeks ended July 3, 2021.

Our gross profit decreased to $1,382,000 in the twenty-six weeks ended July 2, 2022 from $1,759,000 in the twenty-six weeks ended July 3, 2021. Our gross profit percentage was 21% for the twenty-six weeks ending July 2, 2022 compared to 28% for the twenty-six weeks ending July 3, 2021. The decrease in both our gross profit and gross profit percentage were caused by the substantial increases in certain ingredients and freight expense. These substantial cost increases were due primarily to the lingering supply chain issues caused by the Covid-19 pandemic and the record high cost of petroleum. Besides causing substantial increases in our freight expenses, the high cost of petroleum has also directly impacted the costs of certain ingredients and packaging such as the plastic packaging we use for our spreadable cheese product.

Freight out expense, a significant part of our cost of sales, increased by $145,000, or 29%, to $643,000 for the twenty-six weeks ended July 2, 2022 compared with $498,000 for the twenty-six weeks July 3, 2021. Freight out expense was 10% of sales for the twenty-six weeks ended July 2, 2022 compared to 8% of sales for the twenty-six weeks ended July 3, 2021. The increase in freight out expenses was due to the increase in sales, but primarily due to the increases in shipping costs due to the large increase in the cost of fuel and the unavailability of trucks.

Selling expenses decreased by $54,000, or 9%, to $573,000 for the twenty-six weeks ended July 2, 2022 from $627,000 for the twenty-six weeks ended July 3, 2021. This decrease was primarily attributable to decreases in payroll expense of $24,000 and outside warehouse rental expense of $59,000, which were offset by increases in meetings and convention expense of $20,000 and travel, entertainment, and auto expense of $18,000.

Marketing expenses increased by $132,000, or 98%, to $267,000 for the twenty-six weeks ended July 2, 2022 from $135,000 for the twenty-six weeks ended July 3, 2021. The increase was primarily due to increases in promotions expense of $38,000, artwork and plates expense of $13,000, and advertising expense of $3,000.

Product development costs, which consist principally of salary expenses and laboratory costs, increased by $7,000, or 9%, to $82,000 for the twenty-six weeks ended July 2, 2022 from $75,000 for the twenty-six weeks ended July 3, 2021, primarily due to the increase in professional fees and outside services of $22,000 which was partially offset by a decrease in lab costs and supplies of $9,000.

General and administrative expenses decreased by $80,000, or 10%, to $686,000 for the twenty-six weeks ended July 2, 2022 from $766,000 for the twenty-six weeks ended July 3, 2021, primarily due to decreases in payroll expense of $56,000, professional fees and outside services expense of $15,000, and travel, entertainment, and auto expense of $20,000 which were partially offset by an increase in public relations expense of $45,000. The decrease in payroll expense was due to no salary being paid to Mr. Mintz this period compared to the same period in the prior year.

Income tax benefit was $58,000 for the twenty-six weeks ended July 2, 2022 and income tax expense was $36,000 for the twenty-six weeks ended July 3, 2021 resulting from the lower taxable income during the twenty-six weeks ended July 2, 2022 compared to the twenty-six weeks ended July 3, 2021.

| 15 |

| --- |

Liquidityand Capital Resources

As of July 2, 2022, we had approximately $1,176,000 in cash and our working capital was approximately $4,259,000, compared with approximately $1,698,000 in cash and working capital of $4,326,000 at January 1, 2022.

Inorder to provide our company with additional working capital, on January 6, 2016, David Mintz, our former Chairman and Chief ExecutiveOfficer, provided our company with a convertible loan of $500,000. On December 22, 2021, the loan balance of $500,000 plus accrued interestof $25,000 was paid by the Company to Mr. Mintz’s estate.

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

	Twenty-six<br><br> <br>weeks ended<br> <br>July 2, 2022			Twenty-six<br><br> <br>weeks ended<br> <br>July 3, 2021
Net<br> cash (used in) provided by operating activities	$	(522,000	)	$	610,000

Net cash used in operating activities for the thirteen weeks ended July 2, 2022 was $522,000 compared to $610,000 provided by operating activities for the thirteen weeks ended July 3, 2021. Net cash used in operating activities for the twenty-six weeks ended July 2, 2022 was primarily a result of a net loss of $3,000, SBA loan forgiveness of $165,000, an increase in inventories of $700,000, deferred taxes of $62,000 and a non-cash lease expense of $4,000, offset by a decrease in accounts receivable of $199,000, an increase in accounts payable and accrued expenses of $140,000, and a decrease in prepaid expenses and other current assets of $57,000. The significant increase in inventories during the period is due to management’s decision to purchase certain key ingredients in advance of production needs to ensure an adequate supply and to prevent future production disruptions.

We believe our existing cash on hand at July 2, 2022, existing working capital and the cash flows expected from operations, will be sufficient to support our operating and capital requirements during the next twelve months.

Inflationand Seasonality

We do not believe that our operating results have been materially affected by inflation during the preceding two years. However, beginning in 2022, due to substantial increases in ingredient, packaging, freight, and co-packing expenses, we are now experiencing negative effects on our operations from inflation. While we do believe that certain of these costs and expenses will return to their previous lower levels, there is no assurance that they will do so. 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 dairy free frozen desserts during those periods.

Off-balanceSheet Arrangements

None.

ContractualObligations

We had no material contractual obligations as of July 2, 2022.

RecentlyIssued Accounting Standards

See Note 2 to the unaudited condensed financial statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

| 16 |

| --- |

Item3. Quantitative and Qualitative Disclosures About Market Risk

We do not believe that our exposure to market risk related to the effect of changes in interest rates, foreign currency exchange rates, commodity prices and other market risks with regard to instruments entered into for trading or for other purposes is material.

Item4. Controls and Procedures

Evaluationof Disclosure Controls and Procedures. As of July 2, 2022, our Company’s chief executive and 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 and financial officer concluded that our disclosure controls and procedures were not effective as July 2, 2022.

DisclosureControls 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 in conformity with generally accepted accounting principles.

Management’sReport 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 interim 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 COSO framework, an integrated framework for the evaluation of internal controls issued by the Committee of Sponsoring Organizations of the Treadway Commission, to identify the risks and control objectives related to the evaluation of our control environment.

Based on the evaluation under the frameworks described above, Mr. Kass, our chief executive and chief financial officer, has concluded that our internal control over financial reporting was ineffective as of July 2, 2022 because of the following material weaknesses in internal controls over financial reporting:

●	A<br> continuing lack of sufficient resources and an insufficient level of monitoring and oversight, which may restrict our ability to<br> gather, analyze and report information relative to the financial statements, including but not limited to accounting estimates, reserves,<br> allowances, and income tax matters, in a timely manner.
●	The<br> limited size of the accounting department makes it impracticable to achieve an optimum separation of duties and monitoring of internal<br> controls.

To date, we have been unable to remediate these weaknesses, which stem from our small workforce of four persons at July 2, 2022.

Changesin Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the period covered by this report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

| 17 |

| --- |

PART

II - OTHER INFORMATION

Item1. Legal Proceedings

We are not a party to any material litigation.

Item1A. Risk Factors

There have been no material changes to the Company’s “Risk Factors” set forth in its Annual Report on Form 10-K for the year ended January 1, 2022.

Item2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item3. Default Upon Senior Securities

None.

Item4. Mine Safety Disclosures

None.

Item5. Other Information

None.

Item6. Exhibits

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	Inline<br> XBRL Instance Document
101.SCH	Inline<br> XBRL Schema Document
101.CAL	Inline<br> XBRL Calculation Linkbase Document
101.DEF	Inline<br> XBRL Definition Linkbase Document
101.LAB	Inline<br> XBRL Labels Linkbase Document
101.PRE	Inline<br> XBRL Presentation Linkbase Document
104	Cover<br> Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

| 18 |

| --- |

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TOFUTTI<br> BRANDS INC.
	(Registrant)
	/s/ Steven Kass
	Steven<br> Kass
	Chief<br> Executive Officer
	Chief<br> Accounting and Financial Officer
Date:<br> August 16, 2022

| 19 |

| --- |

Exhibit31.1

CERTIFICATIONPURSUANT TO

SECTION302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Steven Kass, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Tofutti Brands Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; and

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent function):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:<br> August 16, 2022
/s/ Steven Kass
Steven<br> Kass
Chief<br> Executive Officer

* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

Exhibit31.2

CERTIFICATIONPURSUANT TO

SECTION302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Steven Kass, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Tofutti Brands Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:<br> August 16, 2022
/s/ Steven Kass
Steven<br> Kass
Chief<br> Financial Officer

* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

Exhibit32.1

CERTIFICATIONPURSUANT TO

18U.S.C. SECTION 1350

ASADOPTED PURSUANT TO

SECTION906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tofutti Brands Inc. (the “Company”) on Form 10-Q for the period ending July 2, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Kass, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Steven Kass
Steven<br> Kass
Chief<br> Executive Officer
Date:<br> August 16, 2022

* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.

Exhibit32.2

CERTIFICATIONPURSUANT TO

18U.S.C. SECTION 1350

ASADOPTED PURSUANT TO

SECTION906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Tofutti Brands Inc. (the “Company”) on Form 10-Q for the period ending July 2, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steven Kass, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Steven Kass
Steven<br> Kass
Chief<br> Financial Officer
Date:<br> August 16, 2022

* The originally executed copy of this Certification will be maintained at the Company’s offices and will be made available for inspection upon request.