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Tofutti Brands 10-Q 2012

Documents found in this filing:

  1. 10-Q
  2. Ex-31.1
  3. Ex-31.2
  4. Ex-32.1
  5. Ex-32.2
  6. Ex-32.2

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q


 

 

x

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2012

 

 

o

Transition report pursuant to Section 13 or 15(d) of the Exchange Act for the transition period from [          ] to [          ]


 

 

Commission file number: 1-9009

 

 

Tofutti Brands Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

13-3094658

(State of Incorporation)

(I.R.S. Employer Identification No.)

 

 

50 Jackson Drive, Cranford, New Jersey 07016

(Address of Principal Executive Offices)

 

 

(908) 272-2400

(Registrant’s Telephone Number, including area code)

 

 

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 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 x   No o

 

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


 

 

 

Large accelerated filer o

 

Accelerated filer o

Non-accelerated filer o

 

 

(Do not check if smaller reporting company)

 

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

As of May 11, 2012 the Registrant had 5,153,706 shares of Common Stock, par value $0.01, outstanding.



TOFUTTI BRANDS INC.

INDEX

 

 

 

 

 

 

 

 

 

 

Page

 

 

 

 


 

 

 

 

 

 

Part I - Financial Information:

 

3

 

 

 

 

 

 

Item 1.

Financial Statements

 

3

 

 

 

 

 

 

 

 

 

Condensed Balance Sheets – March 31, 2012 (Unaudited) and December 31, 2012

 

3

 

 

 

 

 

 

 

 

 

Condensed Statements of Operations - (Unaudited) - Thirteen Week Periods ended March 31, 2012 and April 2, 2011

 

4

 

 

 

 

 

 

 

 

 

Condensed Statements of Cash Flows - (Unaudited) - Thirteen Week Periods ended March 31, 2012 and April 2, 2011

 

5

 

 

 

 

 

 

 

 

 

Notes to Condensed Financial Statements

 

6

 

 

 

 

 

 

 

 

Item 2.

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

 

9

 

 

 

 

 

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

12

 

 

 

 

 

 

 

 

Item 4.

Controls and Procedures

 

12

 

 

 

 

 

 

 

Part II - Other Information:

 

15

 

 

 

 

 

 

Item 1.

Legal Proceedings

 

15

 

 

 

 

 

 

 

 

Item 1A.

Risk Factors

 

15

 

 

 

 

 

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

15

 

 

 

 

 

 

 

 

Item 3.

Defaults Upon Senior Securities

 

15

 

 

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

15

 

 

 

 

 

 

 

 

Item 5.

Other Information

 

15

 

 

 

 

 

 

 

 

Item 6.

Exhibits

 

15

 

 

 

 

 

 

 

 

 

Signatures

 

16

 

2



PART I - FINANCIAL INFORMATION

 

 

Item 1.

Financial Statements

TOFUTTI BRANDS INC.
Condensed Balance Sheets
(in thousands, except share and per share figures)

 

 

 

 

 

 

 

 

 

 

March 31,
2012

 

December 31,
2011*

 

 

 


 


 

 

 

(unaudited)

 

 

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

972

 

$

1,594

 

Accounts receivable, net of allowance for doubtful accounts and sales promotions of $501 and $486, respectively

 

 

1,954

 

 

1,936

 

Inventories, net of reserve of $50 and $50, respectively

 

 

1,936

 

 

1,441

 

Prepaid expenses

 

 

104

 

 

122

 

Refundable income taxes

 

 

48

 

 

42

 

Deferred income taxes

 

 

395

 

 

265

 

 

 



 



 

Total current assets

 

 

5,409

 

 

5,400

 

 

 



 



 

 

 

 

 

 

 

 

 

Fixed assets, net of accumulated amortization of $44 and $43

 

 

4

 

 

5

 

Other assets

 

 

16

 

 

16

 

 

 



 



 

 

 

$

5,429

 

$

5,421

 

 

 



 



 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

731

 

$

319

 

Accrued expenses

 

 

459

 

 

637

 

 

 



 



 

Total current liabilities

 

 

1,190

 

 

956

 

 

 



 



 

 

 

 

 

 

 

 

 

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 5,153,706 shares at March 31, 2012 and 5,162,186 shares at December 31, 2011

 

 

52

 

 

52

 

Retained earnings

 

 

4,187

 

 

4,413

 

 

 



 



 

Total stockholders’ equity

 

 

4,239

 

 

4,465

 

 

 



 



 

Total liabilities and stockholders’ equity

 

$

5,429

 

$

5,421

 

 

 



 



 


 

 

*

Derived from audited financial information.

See accompanying notes to condensed financial statements.

3


TOFUTTI BRANDS, INC.
Condensed Statements of Operations
(Unaudited)
(in thousands, except per share figures)

 

 

 

 

 

 

 

 

 

 

Thirteen
weeks
ended
March 31, 2012

 

Thirteen
weeks
ended
April 2, 2011

 

 

 


 


 

 

 

 

 

 

 

Net sales

 

$

3,290

 

$

4,005

 

Cost of sales

 

 

2,477

 

 

2,922

 

 

 



 



 

Gross profit

 

 

813

 

 

1,083

 

 

 



 



 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Selling

 

 

385

 

 

374

 

Marketing

 

 

132

 

 

137

 

Research and development

 

 

168

 

 

150

 

General and administrative

 

 

468

 

 

533

 

 

 



 



 

 

 

 

1,153

 

 

1,194

 

 

 



 



 

 

 

 

 

 

 

 

 

Loss before income taxes

 

 

(340

)

 

(111

)

 

 

 

 

 

 

 

 

Income tax benefit

 

 

130

 

 

45

 

 

 



 



 

 

 

 

 

 

 

 

 

Net loss

 

$

(210

)

$

(66

)

 

 



 



 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

Basic

 

 

5,155

 

 

5,177

 

 

 



 



 

Diluted

 

 

5,155

 

 

5,177

 

 

 



 



 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

$

(0.01

)

 

 



 



 

Diluted

 

$

(0.04

)

$

(0.01

)

 

 



 



 

See accompanying notes to condensed financial statements.

4


TOFUTTI BRANDS INC.
Condensed Statements of Cash Flows
(Unaudited)
(in thousands)

 

 

 

 

 

 

 

 

 

 

Thirteen
weeks
ended
March 31, 2012

 

Thirteen
weeks
ended
April 2, 2011

 

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows used in operating activities, net

 

$

(605

)

$

(876

)

 

 

 

 

 

 

 

 

Cash flows used in financing activities, net

 

 

(17

)

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

Net (decrease) in cash and cash equivalents

 

 

(622

)

 

(876

)

 

 

 

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

 

1,594

 

 

2,528

 

 

 



 



 

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

972

 

$

1,652

 

 

 



 



 

 

 

 

 

 

 

 

 

Supplemental cash flow information:

 

 

 

 

 

 

 

Income taxes paid

 

$

6

 

$

312

 

 

 



 



 

See accompanying notes to condensed financial statements.

5


TOFUTTI BRANDS INC.
Notes to Condensed Financial Statements
(in thousands, except per share figures)

 

 

Note 1: Description of Business


 

 

 

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


 

 

Note 2: Basis of Presentation


 

 

 

The accompanying financial information is unaudited, but, in the opinion of management, reflects all adjustments (which include only normally recurring adjustments) necessary to present fairly the Company’s financial position, operating results and cash flows for the periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The condensed balance sheet amounts as of December 31, 2011 are derived from our audited financial statements for the year ended December 31, 2011. The financial information should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2011 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for the thirteen week period ended March 31, 2012 are not necessarily indicative of the results to be expected for the full year or any other period.

 

 

 

The Company operates on a fiscal year which ends on the Saturday closest to December 31st.


 

 

Note 3: Recent Accounting Pronouncements


 

 

 

There have been no recent accounting pronouncements or changes in accounting pronouncements during the thirteen weeks ended March 31, 2012, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, that are of material significance, or have potential material significance, to the Company.

6


TOFUTTI BRANDS INC.
Notes to Condensed Financial Statements
(in thousands, except per share figures)

 

 

Note 4: Inventories


 

 

 

The composition of inventories is as follows:


 

 

 

 

 

 

 

 

 

 

March 31,
2012

 

December 31,
2011

 

 

 


 


 

 

 

 

 

 

 

 

 

Finished products

 

$

1,348

 

$

1,003

 

Raw materials and packaging

 

 

588

 

 

438

 

 

 



 



 

 

 

$

1,936

 

$

1,441

 

 

 



 



 


 

 

Note 5: 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.

 

 

Note 6: Market Risk

 

 

 

 

We invest our excess cash, should there be any, in bank certificates of deposit and high rated money market funds. The bank certificate of deposits are usually for a term of not more than six months and generally not for more than $250 per institution.

 

 

 

Note 7: Earnings Per Share

 

 

 

 

Basic earnings per common share has been computed by dividing net income by the weighted average number of common shares outstanding. Diluted earnings per common share for the periods ended March 31, 2012 and April 2, 2011 have been computed by dividing net income by the weighted average number of common shares outstanding and common stock equivalents, which include options outstanding during the same period. Not included in the calculation for each period were 41,000 and 51,000 non-qualified options granted to directors, respectively, that were antidilutive because of the net loss in the thirteen week periods ended March 31, 2012 and April 2, 2011, respectively.

7


TOFUTTI BRANDS INC.
Notes to Condensed Financial Statements
(in thousands, except per share figures)

 

 

 

 

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


 

 

 

 

 

 

 

 

 

 

Thirteen Weeks
Ended
March 31, 2012

 

Thirteen Weeks
Ended
April 2, 2011

 

 

 


 


 

Numerator

 

 

 

 

 

 

 

Net loss-basic and diluted

 

$

(210

)

$

(66

)

 

 



 



 

Denominator

 

 

 

 

 

 

 

Denominator for basic earnings per share weighted average shares

 

 

5,155

 

 

5,177

 

Effect of dilutive securities stock options

 

 

 

 

 

 

 



 



 

Denominator for diluted earnings per share

 

 

5,155

 

 

5,177

 

 

 



 



 

 

 

 

 

 

 

 

 

Loss per share

 

 

 

 

 

 

 

Basic

 

$

(0.04

)

$

(0.01

)

 

 



 



 

Diluted

 

$

(0.04

)

$

(0.01

)

 

 



 



 

8


TOFUTTI BRANDS INC.

 

 

Item 2.

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 financial statements.

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

Critical Accounting Policies

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these 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

9


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. Our federal and state tax returns are open to examination for the years 2008 through 2011.

Results of Operations

Thirteen Weeks Ended March 31, 2012 Compared with Thirteen Weeks Ended April 2, 2011

Net sales for the thirteen weeks ended March 31, 2012 were $3,290,000, a decrease of $715,000, or 18%, from the sales level realized for the thirteen weeks ended April 2, 2011. The reduction in sales was primarily due to the determination of Trader Joe’s, formerly our largest customer, to cease selling branded goods. During the first quarter of 2012, there were no sales to Trader Joe’s as compared to $761,000 in sales in the first quarter of 2011. We believe that we will begin to recover some portion of these sales as our retail customers switch to other retail sources to purchase our products. We also believe that our sales will improve during the remainder of fiscal 2012 due to the introduction of new products and price increases instituted in the first and second quarters of the year, which will become effective at various times in the second and third quarters of this year. These increases will range from 5% to 10%, depending on the product category.

Our gross profit decreased to $813,000 in the period ended March 31, 2012 from $1,083,000 in the period ended April 2, 2011 due to the significant reduction in sales. Our gross profit percentage was 25% for the period ending March 31, 2012 compared to 27% for the period ending April 2, 2011. The reduction in our gross profit percentage was due primarily to significant promotional activity on behalf of our new products. We expect such promotional activity to continue for the remainder of 2012 and continue to have a negative impact on our gross profit percentage. Additionally, increased costs for packaging and ingredients reduced our margin as well. Freight out expense, a significant part of our cost of sales, increased by $12,000, or 5%, to $241,000 for the thirteen weeks ended March 31, 2012 compared with $229,000 for the thirteen weeks ended April 2, 2011. As a percentage of sales, freight out expense increased to 7% in the 2012 thirteen week period compared to 6% for the 2011 thirteen week period. We expect freight out expense to continue at a higher level in 2012 due to the increased cost of oil, which will also negatively impact our packaging costs.

Selling expenses increased by $11,000 to $385,000 for the current fiscal quarter compared with $374,000 for the comparable period in 2011. This increase was due principally to increases in commission expense

10


of $13,000, shipping and messenger costs of $12,000, travel expense of $8,000 and outside warehouse expense of $8,000, offset by a decrease in payroll expense of $30,000. We anticipate that the current period’s selling expenses will continue on the same level or at a slightly lower level for the balance of 2012.

Marketing expenses decreased slightly by $5,000 to $132,000 in the fiscal 2012 period due principally to decreases in promotion expense of $20,000, newspaper advertising expense of $18,000, which was partially offset by increases in public relations expense of $23,000, artwork and plate expense of $5,000 and point of sale material expense of $5,000. We anticipate that the current period’s marketing expenses will continue on the same level for the balance of 2012.

Research and development costs, which consist principally of salary expenses and laboratory costs, increased by $18,000 to $168,000 for the thirteen weeks ended March 31, 2012 from $150,000 for the comparable period in 2011, due to an increase in lab costs and supplies of $4,000, payroll expenses of $7,000, equipment repairs of $4,000 and auto expense of $3,000. The increase in payroll expense was due to the addition of another person in research and development.

General and administrative expenses decreased by $65,000 to $468,000 for the thirteen weeks ended March 31, 2012 compared with $533,000 for the comparable period in 2011 due to a decrease in payroll costs of $117,000, which was offset by increases in office supply expense of $5,000, IT expense of $28,000, outside public relations expense of $5,000 and auto expense of $14,000. We anticipate that the current period’s general and administrative expenses will continue on the same level, or increase slightly, for the balance of 2012.

There was no provision for bonuses in the first quarter of 2012 as compared to a provision of $125,000 in the first quarter of 2011, resulting in the significant decrease in overall payroll expense during the first quarter of 2012.

In the thirteen weeks ended March 31, 2012, we recorded an income tax benefit of $130,000 compared to an income tax benefit of $45,000 in the thirteen weeks ended April 2, 2011. The income tax benefit in both periods reflect our net losses in such periods.

Liquidity and Capital Resources

As of March 31, 2012, we had approximately $1.0 million in cash and cash equivalents and our working capital was approximately $4.2 million, compared with approximately $1.6 million in cash and cash equivalents and working capital of $4.4 million at December 31, 2011.

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

 

 

 

 

 

 

 

 

 

 

Thirteen Weeks
ended March 31, 2012

 

Thirteen Weeks
ended April 2, 2011

 

 

 




 

Net cash used in operating activities

 

$

(605,000

)

$

(876,000

)

Net cash used in financing activities

 

 

(17,000

)

 

 

Net change in cash and cash equivalents

 

$

(622,000

)

$

(876,000

)

 

 



 



 

The decrease in our cash and cash equivalents for the thirteen weeks ended March 31, 2012 is primarily attributable to the $605,000 used in operating activities. The net cash used in operating activities was the

11


result of the $210,000 net loss in the period, a $495,000 increase in inventory and refundable and deferred taxes of $136,000, offset in part by an increase in accounts payable and accrued expenses of $234,000. Net cash used in financing activities was used in connection with the repurchase of shares of our common stock under our share repurchase program. We believe that we will be able to fund our operations during the next twelve months from our working capital and from cash generated from operations.

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.

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.

Off-balance Sheet Arrangements

None.

Contractual Obligations

As of March 31, 2012, we did not have any contractual obligations or commercial commitments, including obligations relating to discontinued operations.

Recent Accounting Pronouncements

See Note 3 to the unaudited condensed consolidated financial statements included in Part I, Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

 

 

Item 3.

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.

 

 

Item 4.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures. As of March 31, 2012, 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

12


financial officer concluded that our disclosure controls and procedures were not effective as March 31, 2012.

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 in conformity with generally accepted accounting principles.

Management’s 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 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 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 March 31, 2012 because of the following material weaknesses in internal controls over financial reporting:

 

 

 

 

a 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 and income tax assertions in a timely manner.

 

 

 

 

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

We are seeking ways to remediate these weaknesses, which stem from our small workforce, which consisted of twelve employees at March 31, 2012, that will not require us to hire additional personnel.

13


Changes in 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.

14


PART II - OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

 

 

We are not a party to any material litigation.

 

 

Item 1A.

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 December 31, 2011.

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

 

 

None.

 

 

Item 3.

Default Upon Senior Securities

 

 

 

None.

 

 

Item 4.

Mine Safety Disclosures

 

 

 

None.

 

 

Item 5.

Other Information

 

 

 

None.

 

 

Item 6.

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

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.

15


SIGNATURES

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

 

 

 

TOFUTTI BRANDS INC.

 

             (Registrant)

 

 

 

/s/ David Mintz

 

 

 


 

David Mintz

 

President

 

 

 

/s/ Steven Kass

 

 

 


 

Steven Kass

 

Chief Accounting and Financial Officer

 

 

Date: May 15, 2012

 

16


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