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# SECURITIES AND
EXCHANGE COMMISSIONWashington, D.C. 20549Form 10-K

|x | ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
|- | -------------------------------------------------------------------------------

For the fiscal year ended December 27, 2008

|o | TRANSITION REPORT UNDER 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                                                       | 13-3094658                          
|(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.)
|                                                              
|50 Jackson Drive, Cranford, New Jersey                         | 07016                               
|(Address of principal executive offices)                       | (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 $.01 per share | American Stock Exchange                  

Securities 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 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. x

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 voting
stock held by non-affiliates computed by reference to the closing sale price of such
stock, as reported by the American Stock Exchange, on March 23, 2009 was $3,233,000.

As of March 23, 2009, the issuer had
5,176,678 shares of Common Stock, par value $.01, outstanding.



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# TABLE OF CONTENTS

|           |              |                                                                                       |   
|---------- | ------------ | ------------------------------------------------------------------------------------- | --
|
|
|
|
|PART I     |              |                                                                                       | 3 
|           | Item 1.      | Business                                                                              | 3 
|           | Item 1A.     | Risk Factors                                                                          | 9 
|           | Item 1B.     | Unresolved Staff Comments                                                             | 12
|           | Item 2.      | Properties                                                                            | 12
|           | Item 3.      | Legal Proceedings                                                                     | 12
|           | Item 4.      | Submission of Matters to a Vote of Security Holders                                   | 12
|PART II    |              |                                                                                       | 13
|           | Item 5.      | Market for Registrant's Common Equity, Related Stockholder Matters and Issuer        
|           |              | Purchases of Equity Securities                                                        | 13
|           | Item 6.      | Selected Financial Data                                                               | 15
|           | Item 7.      | Management's Discussion and Analysis of Financial Condition and Results of Operations | 16
|           | Item 7A.     | Quantitative and Qualitative Disclosures about Market Risk                            | 21
|           | Item 8.      | Financial Statements and Supplementary Data                                           | 22
|           | Item 9.      | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure  | 23
|           | Item 9A (T). | Controls and Procedures                                                               | 23
|           | Item 9B.     | Other Information                                                                     | 24
|PART III   |              |                                                                                       | 25
|           | Item 10.     | Directors, Executive Officers and Corporate Governance                                | 25
|           | Item 11.     | Executive Compensation                                                                | 27
|           | Item 12.     | Security Ownership of Certain Beneficial Owners and Management and Related           
|           |              | Stockholder Matters                                                                   | 29
|           | Item 13.     | Certain Relationships and Related Transactions, and Director Independence             | 30
|           | Item 14.     | Principal Accounting Fees and Services                                                | 31
|PART IV    |              |                                                                                       | 32
|           | Item 15.     | Exhibits, Financial Statement Schedules                                               | 32
|SIGNATURES |              |                                                                                       | 33

1

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INTRODUCTION

We
are engaged in the development, production and marketing of TOFUTTI(R)brand nondairy
frozen desserts and other food products.  TOFUTTI products are nondairy, soy-based
products which contain no butterfat, cholesterol or lactose.

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 on December
27, 2008 and December 29, 2007.

2

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PART I

|Item 1. |  | Business.
|------- |  | ---------

GENERAL

We
are engaged in the development, production and marketing of TOFUTTI(R)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

| | u | 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 nine flavors of premium, hard
frozen TOFUTTI in pints: Vanilla, Chocolate Supreme, Wildberry Supreme, Vanilla
Almond Bark®, Vanilla Fudge, Chocolate Cookie Crunch and Better Pecan®. Premium
TOFUTTI soft serve mix is available in Vanilla and Chocolate. TOFUTTI in
three gallon bulk cans is available in Vanilla, Chocolate Supreme and Vanilla Almond
Bark.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | u | TOFUTTI
CUTIES®, our best selling product, are bite size frozen sandwiches combining a
Vanilla, Cookies and Cream, Chocolate, Peanut Butter, Mint Chocolate Chip, Wild Berry, or
Coffee 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,
our TOTALLY VANILLA TOFUTTI CUTIE is vanilla TOFUTTI between
two vanilla wafers, while our KEY LIME CUTIE combines lime-flavored TOFUTTI between
two vanilla wafers. Using the same vanilla wafers, we also offer the WAVE CUTIETM, which has a strawberry sauce blended with creamy vanilla TOFUTTI.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3

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| | u | 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 TREATS are ideal for
anyone on either a low fat or low carb diet.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | u | MINT
BY MINTZ are no sugar added stick novelties shaped just like TREATS, with a
mint-flavored TOFUTTI center, covered with a thick, dark chocolate coating.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------

| | u | MARRY
ME BARSare stick novelties that feature creamy vanilla TOFUTTI surrounded
with 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

| | u | 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. The 8 oz. retail packages are available in
Plain, French Onion, Herbs & Chives, Smoked Salmon, Garlic & Herb, and Garden
Veggie flavors. The plain version is also available in 30 lb. bulk boxes.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | u | 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | u | For
consumers concerned with their fat and calorie intake, 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 plain, chopped olive and cheddar flavors.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | u | 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

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Other Food Products

| | u | TOFUTTI
PIZZA PIZZAZcombines a delicious pan crust, zesty sauce and TOFUTTI totally
dairy free BETTER THAN  MOZZARELLA CHEESE into a completely authentic, yet
healthy pizza. TOFUTTI PIZZA PIZZAZis sold three squared slices to a package and
is available in freezer cases in select supermarkets and health food stores.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | u | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.  Generally, most 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 twenty-nine (29) distributors in the national health food
market.

Our
sales to health food distributors in fiscal 2008 decreased to $9,300,000, or 47% of total
sales, as compared to $9,522,000, or 50% of total sales, in fiscal 2007.  In fiscal 2008,
sales to Trader Joe's declined to $3,634,000, or 19% of sales, as compared to $3,816,000,
or 20% of sales, in fiscal 2007.  Our sales to the kosher market increased to $1,120,000,
or 6% of sales, in fiscal 2008, from sales of $1,056,000, or 6% of sales, in fiscal 2007.

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

5

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| |                       | Fiscal Year endedDecember 27, 2008 | Fiscal Year endedDecember 29, 2007
| | --------------------- | ---------------------------------- | ----------------------------------
|
|
|
|
| | California            |                                    |                                   
| | Midwest               |                                    |                                   
| | New England           |                                    |                                   
| | Metropolitan New York |                                    |                                   
| | Mid-Atlantic          |                                    |                                   
| | Florida               |                                    |                                   
| | Northwest             |                                    |                                   
| | Rocky Mountains       |                                    |                                   
| | Southeast             |                                    |                                   
| | Southwest             |                                    |                                   
| | Upstate New York      |                                    |                                   

In
December 2007, we were informed by Edys Grand Ice Cream, a subsidiary of the
Dreyers Ice Cream Company, that they would no longer distribute our products in
Florida and the southeastern United States effective March 14, 2008. We were successful in
transferring the distribution of our frozen dessert products directly to the warehouses of
Publix Super Markets, Inc., with whom we conduct most of our supermarket business in this
region. The balance of our retail business in this region was transferred to our existing
health and specialty food distributors.

During
fiscal 2008, we shipped TOFUTTI nondairy products to distributors in Australia, Bermuda,
Canada, China, England, Israel, Mexico and Panama. 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
decreased to $1,736,000, or 9% of sales, in fiscal 2008, as compared to $1,954,000, or 10%
of sales, in fiscal 2007. 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. Currently, our export sales business has not been negatively impacted by
the stronger U.S. dollar.

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 have 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 and, wherever possible, directly to supermarket warehouses. 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.

6

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PRODUCT DEVELOPMENT

All
of our current products were developed internally in our own laboratory. During the last
two years, David Mintz, our Chief Executive Officer, has devoted a substantial amount of
time and effort to the development of new products and the reformulation of other
products. In fiscal 2008 and 2007, our product development expenses were $590,000 and
$481,000, 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.

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.

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.

7

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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 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.

8

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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 27, 2008 and on December 29, 2007, we employed eleven persons on a full-time
basis. We consider our relations with our employees to be good. 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

Reliance
on Independent Distributors.The success of our business depends, in large part, upon
the establishment and maintenance of a strong distribution network. 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.

Dependence
on Key Suppliers. We do not produce any of our own products. During the years ended
December 27, 2008 and December 29, 2007, we purchased approximately 30% and 15%, of our
finished goods, respectively, from Ice Cream Specialties, our primary frozen dessert
novelty co-packer; 8% and 9%, respectively, from Leibys Dairy, Inc, our frozen
dessert pint co-packer; 7% and 0%, respectively, from Washburn Dairy, our secondary frozen
dessert novelty co-packer; 18% and 17%, respectively, from Franklin Foods, our BETTER
THAN CREAM CHEESE  and  SOUR SUPREME co-packer; and 6% and 5% respectively, from
Old Fashioned Kitchen, Inc., our blintz co-packer. These producers are required to comply
with FDA regulations 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.

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.

9

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Dependence
on Key Customers. During the years ended December 27, 2008 and December 29, 2007,
Trader Joes accounted for 19% and 20% of our net sales, respectively. 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 31% of our net sales for the year ended
December 27, 2008 and 55% of our net sales for the year ended December 29, 2007. The loss
of a substantial portion of our sales to Trader Joes would have a material adverse
affect on our company.

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 effect our operating results.

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
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 and in the last
month, or even weeks, of a quarter. 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.

Reliance
on a Limited Number of Key Personnel. Our success is significantly dependent on the
services of David Mintz (age 77), Chief Executive Officer, and Steven Kass (age 57), Chief
Financial Officer. The loss of the services of either of these persons could have a
material adverse effect on our business.

Control
of the Company. Our Chairman of the Board and Chief Executive Officer, David Mintz,
together with our Chief Financial Officer, Steven Kass, hold 2,850,440 shares of common
stock representing approximately 55% of the outstanding shares, permitting them to elect
all members of the Board of Directors and thereby effectively control the business,
policies and management of our company.

10

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We
are Subject to Risks Associated with International Operations.
In fiscal 2008 approximately 9% 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.

# Risks Related to
Economic Pressures

Our
business may be negatively affected by the current global credit crisis. 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 extent of the impact, if any, of the global credit
crisis, will depend on a number of factors, including whether the U.S. economy, and the
global economy generally, enter into a prolonged recession as a result of the
deterioration of the credit markets.

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.

11

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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. Our costs
during most of 2008 were impacted by higher commodity and freight costs. 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.

We
face risks related to the current credit crisis.The current uncertainty in the global
economic conditions resulting from the recent disruption in credit markets pose a risk to
the overall economy that could impact consumer and customer demand for our products, as
well as our ability to manage normal commercial relationships with our customers,
suppliers and creditors. If the current situation deteriorates significantly, our business
could be negatively impacted, including such areas as reduced demand for our products from
a slow-down in the general economy, or supplier or customer disruptions resulting from
tighter credit markets.

|Item 1B. |  | Unresolved Staff Comments.
|-------- |  | --------------------------

None.

|Item 2. |  | Properties.
|------- |  | -----------

Our
facilities are located in a modern 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 $80,000 in both fiscal 2008 and 2007. 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. |  | Submission of Matters to a Vote of Security Holders.
|------- |  | ----------------------------------------------------

No
matters were submitted to a vote of security holders during the fourth quarter of fiscal
year ended December 27, 2008.

12

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# 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 American Stock Exchange 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 American Stock
Exchange for the two most recent fiscal years:

|Quarter Ended      | High | Low
|------------------ | ---- | ---
|
|
|
|
|March 31, 2007     |      |    
|                   |      |    
|June 30, 2007      |      |    
|                   |      |    
|September 29, 2007 |      |    
|                   |      |    
|December 29, 2007  |      |    
|                   |      |    
|March 29, 2008     |      |    
|                   |      |    
|June 28, 2008      |      |    
|                   |      |    
|September 27, 2008 |      |    
|                   |      |    
|December 27, 2008  |      |    

The closing price for our common
stock on March 23, 2009, as reported on the American Stock Exchange, was $1.49.

# Holders of Record

As
of March 23, 2009, there were approximately 604 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 2,000 shareholders.

# Dividends

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

13

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# Equity Compensation Plans

The following table sets forth, as of
December 27, 2008, 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 | 471,000                                                                                         | $1.31                                                                           | 39,000                                                                                                                                        
|Equity Compensation Plans   
|Not Approved                
|by Security Holders          | -                                                                                               | n/a                                                                             | -                                                                                                                                             

|(1) | 410,000
of these options expired on March 18, 2009.
|--- | ---------------------------------------------------

# 1993 Stock Option Plan

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. As of March 23, 2009, none of our executive officers and directors
held options to purchase shares of common stock under the 1993 Plan.

The
term of any option granted under the 1993 Stock Option Plan was fixed by the Board of
Directors at the time the options were granted. All options granted under the 1993 Stock
Option Plan had up to 10-year terms and vesting periods that ranged from one to three
years from date of grant.  The exercise price of any options granted under the
1993 Stock Option Plan was the fair market value at the date of grant.

# 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 nonstatutory
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 1993 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.

14

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As
of March 23, 2009, options to purchase 61,000 shares of our common stock were granted
under 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 23, 2009,
our non-employee directors as a group, consisting of three persons, held options to
purchase 51,000 shares of common stock under the 2004 Directors Plan, and a former
non-employee director held options to purchase 10,000 shares under the 2004
Directors Plan.

# Sales of Unregistered
Securities

There
were no sales of unregistered securities during fiscal 2008.

# Purchase of Equity
Securities By the Issuer and Affiliates

Our
Board of Directors first instituted a share repurchase program in September 2000 which,
after several amendments, has to date authorized the repurchase of 1,850,000 shares of our
common stock at prevailing market prices.

The
following table sets forth for the thirteen weeks ended December 27, 2008 (the fourth
quarter of fiscal 2008), 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)
|------------------------- | ------------------------------------ | ------------------------------------ | ------------------------------------------------------------------------------------ | -----------------------------------------------------------------------------------------------------------------
|
|
|
|
|September 28, 2008        |                                      |                                      |                                                                                      |                                                                                                                  
|through November 1, 2008  |                                      |                                      |                                                                                      | 62,400                                                                                                           
|                          |                                      |                                     
|November 2, 2008          |                                      |                                     
|through November 29, 2008 |                                      |                                      |                                                                                      | 80,510                                                                                                           
|                          |                                      |                                     
|November 30, 2008         |                                      |                                     
|through December 27, 2008 |                                      |                                      |                                                                                      | 85,614                                                                                                           

|Item 6. |  | Selected Financial Data.
|------- |  | ------------------------

Not
applicable.

15

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|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 allowance for doubtful accounts. We do
not accrue interest on accounts receivable past due.

Allowance
for Inventory Obsolescence.  We are required to state our inventories at the
lower of cost or market price. We maintain an allowance for inventory obsolescence for
losses resulting from inventory items becoming unsaleable due to expiration of product
shelf life, loss of specific customers or changes in customers requirements. Based
on historical and projected sales information, we believe our allowance is adequate.
However, changes in general economic, business and market conditions could cause our
customers purchasing requirements to change. These changes could affect our ability
to sell our inventory; therefore, the allowance for inventory obsolescence is reviewed
regularly and changes to the allowance are updated as new information is received.

16

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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. Upon the adoption of FASB Interpretation No. 48, or FIN
48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109, January 1, 2007, we recognized a liability of $150,000 with
respect to our uncertain tax positions, including related interest or penalties, which
resulted in a direct charge to retained earnings. Our federal and state tax returns are
open to examination for the years 2004 through 2007, however, the Internal Revenue Service
commenced an examination of our federal income tax returns for 2005, 2006 and 2007 in
2009.

# Recent Accounting
Pronouncements

In
December 2007, the FASB issued SFAS No. 141(revised 2007), Business
Combinations, which will become effective for business combination transactions having
an acquisition date on or after January 1, 2009. This standard requires the acquiring
entity in a business combination to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition date to be
measured at their respective fair values. The Statement requires acquisition-related
costs, as well as restructuring costs the acquirer expects to incur for which it is not
obligated at acquisition date, to be recorded against income rather than included in
purchase-price determination. It also requires recognition of contingent arrangements at
their acquisition-date fair values, with subsequent changes in fair value generally
reflected in income. We do not expect the adoption of SFAS No. 141 to have a material
effect on our company, as no acquisitions are currently contemplated.

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51, which will become effective for
us January 1, 2009, with retroactive adoption of the Statements presentation
and disclosure requirements for existing minority interests. This standard will require
ownership interests in subsidiaries held by parties other than the parent to be presented
within the equity section of the consolidated balance sheet but separate from the
parents equity. It will also require the amount of consolidated net income
attributable to the parent and the noncontrolling interest to be clearly identified and
presented on the face of the consolidated income statement. Certain changes in a
parents ownership interest are to be accounted for as equity transactions and when a
subsidiary is deconsolidated, any noncontrolling equity investment in the former
subsidiary is to be initially measured at fair value. We do not anticipate the
implementation of SFAS No. 160 will significantly change the presentation of our financial
statements.

In
February 2008, the FASB issued FASB Staff Position (FSP) No. 157-1,
Application of FASB Statement No. 157 to FASB Statement No. 13 and Its
Related Interpretive Accounting Pronouncements That Address Leasing Transactions,
which became effective for us on December 30, 2007. This FSP excludes FASB Statement
No. 13, Accounting for Leases, and its related interpretive accounting
pronouncements from the provisions of SFAS No. 157. Implementation of this standard did
not have a material effect on our financial statements.

In
February 2008, the FASB issued FSP No. 157-2,Effective Date of FASB Statement
No. 157, which delays our January 1, 2008 effective date of SFAS No. 157 for
all nonfinancial assets and nonfinancial liabilities, except those recognized or disclosed
at fair value in the financial statements on a recurring basis (at least annually), until
January 1, 2009. Implementation of this standard is not expected to have a material effect
on our financial statements.

In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities  An Amendment of FASB Statement
No. 133 (SFAS No. 161), which amends and expands the
disclosure requirements of SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities to require qualitative disclosure about
objectives and strategies in using derivatives, quantitative disclosures about fair value
amounts of gains and losses on derivative instruments, and disclosures about the
underlying credit-risk-related contingent features in derivative agreements.
SFAS No. 161 is intended to improve financial reporting by requiring
transparency about the location and amounts of derivative instruments in an entitys
financial statements; how derivative instruments and related hedged items are accounted
for under SFAS No. 133; and how derivative instruments and related hedged items
affect its financial position, financial performance and cash flows.
SFAS No. 161 is effective for financial statements issued for fiscal years
beginning after November 15, 2008. Implementation of this standard did not have a
material effect on our financial statements.

17

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# Results of Operations

# Fifty-two Weeks Ended
December 27, 2008 Compared with Fifty-Two Weeks Ended December 29, 2007

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 period ended December 27,
2008 and the fifty-two week period ended on December 29, 2007.

Net
sales for the fifty-two weeks ended December 27, 2008 were $19,609,000, an increase of
$459,000, or 2%, from net sales of $19,150,000 for the fifty-two weeks ended December 29,
2007.

Although
sales increased in fiscal 2008, our gross profit in fiscal 2008 decreased by $100,000, or
2%, while our gross profit percentage decreased to 27% in fiscal 2008 from 29% in fiscal
2007. The entire frozen dessert industry was subject to significant price increases to
certain key ingredients and packaging, due mainly to supply shortages as a result of
political events in certain foreign countries, the general economic situation here in the
United States and the cost of petroleum, from which a number of our packaging items are
produced. This was partially offset by an increase of freight out expense, which was only
marginal despite significant increases in the cost of fuel throughout most of 2008, to
$1,430,000 in fiscal 2008 from $1,411,000 in fiscal 2007. This marginal increase is
attributable in part to the fact that shipping our frozen dessert novelties from our new
ice cream co-packer in Indiana to the West Coast is more cost-effective than shipping them
from our third-party Mountville, Pennsylvania warehouse or from our former frozen dessert
novelties manufacturers location, and in part because in some instances we increased
the minimum size of orders to customers where we paid the freight, which reduced our
shipping costs. While we anticipate that our gross profit will increase due to increased
unit sales and higher sales prices in 2009, our expected gross profit percentage will not
improve materially due to promotional allowances associated with the planned introduction
of new products. We also expect ingredient costs for certain key items and packaging costs
to continue at their current high levels.

Selling
and warehousing expenses increased by $170,000 to $1,826,000 for fiscal 2008 from
$1,656,000 in fiscal 2007. This increase was caused primarily by a $71,000 increase in
payroll costs due to the hiring of an additional person in sales and an $81,000 increase
in bad debt expense. We anticipate that with the exception of commission expenses and
outside warehouse rental expense, which are variable to sales, all other selling expenses
in 2009 should remain relatively consistent with our expenses in 2008.

Marketing
expenses increased by $204,000 in fiscal 2008 to $557,000 as compared to $353,000 in
fiscal 2007. This increase is primarily attributable to a $30,000 increase in television
advertising expense for a pilot program in one of our consumer markets and a $194,000
increase in newspaper advertising expense partially offset by a decrease in artwork and
plates expense of $26,000. Newspaper advertising expenses increased due to additional
costs incurred for advertising in some new advertising venues. We expect marketing
expenses to decrease in fiscal 2009.

Product
development expenses increased to $590,000 in fiscal 2008 as compared to $481,000 in
fiscal 2007. The increase was caused primarily by increases in payroll costs of $48,000,
lab costs and supplies of $34,000 and professional fees and outside services of $19,000.
Our management expects that product development costs in 2009 will remain consistent with
fiscal 2008 costs.

18

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General
and administrative expenses were $2,014,000 for fiscal 2008 as compared with $2,233,000
for fiscal 2007, a decrease of $219,000 or 10%. The decrease was primarily due to a
$272,000 decrease in stock-based compensation expense as a result of the accounting charge
associated with a modification and cash pay-out for the redemption of a stock option,
which was considered additional compensation expense for financial reporting purposes in
fiscal 2007. This decrease was partially offset by increases in payroll costs of $38,000
and professional fees and outside services of $45,000. We anticipate that professional
fees and outside services, which include legal and accounting fees, will increase in
fiscal 2009 primarily due to the costs associated with compliance with the internal
controls provisions of The Sarbanes-Oxley Act. Our management expects that general and
administrative expenses in 2009 will remain consistent with fiscal 2008 expenses.

Overall,
total operating expenses in fiscal 2008 increased to $4,987,000, an increase of $264,000,
or 6%, from total operating expenses in fiscal 2007. Total operating expenses in fiscal
2007 were impacted by $272,000 in stock-based compensation expense included in our general
and administrative expenses for 2007, the result of an accounting charge associated with a
modification and cash pay-out for the redemption of a stock option. Had we not incurred
that charge, the increase in total operating expenses from 2007 to 2008 would have been
$536,000, or 11%.

Income
before income taxes decreased by $364,000 to $435,000 in fiscal 2008 as compared with
$799,000 in fiscal 2007 as a result of our reduced gross profit and higher operating
expenses.

Income
taxes for the current fiscal period were $218,000, or 50% of taxable income, compared to
$334,000, or 42% of taxable income, in fiscal 2007. The increase in our effective tax rate
in fiscal 2008 was due to permanent differences as well as an increase to our FIN 48
liability.

# Liquidity and Capital
Resources

At
December 27, 2008 , our working capital was $3,581,000, a decrease of $876,000 from
December 29, 2007. Our current and quick acid test ratios, both measures of liquidity,
were 3.4 and 1.2, respectively, at December 27, 2008 compared to 3.6 and 2.1,
respectively, at December 29, 2007. We believe our existing cash and cash equivalents on
hand at December 27, 2008 , and the cash flows expected from operations will be sufficient
to support us for at least the next twelve months.

At
December 27, 2008 , accounts receivable decreased by $417,000 to $1,574,000 from December
29, 2007, reflecting an increase in cash collections and a slight reduction in sales in
the fourth quarter of the fiscal year ended December 27, 2008. The average number of days
used to collect our gross accounts receivable in fiscal 2008 was 38 days as compared to 46
days in fiscal 2007. At December 27, 2008 , inventories increased to $2,334,000 from
$1,552,000 at December 29, 2007. The increase in our inventories is due to a buildup in
finished goods levels to support our anticipated sales in 2009. Accounts payable and
accrued expenses decreased by $236,000 to $1,463,000 at December 27, 2008, from $1,699,000
at December 29, 2007, reflecting a reduction in our purchases of ingredients, packaging
and finished goods in the fourth quarter.

Our
Board of Directors first instituted a share repurchase program in September 2000 which has
to date authorized the repurchase of 1,850,000 shares of our common stock at prevailing
market prices. As of December 29, 2007, we had repurchased 1,342,100 shares with a total
cost of $4,171,000, or an average price of $3.11 per share. During fiscal 2008, we
repurchased an additional 464,124 shares for $1,110,000 or an average price of $2.39.
Through March 23, 2009, we have repurchased an additional 12,665 shares for $14,000,
bringing the total number of shares cumulatively purchased to 1,818,889 at a total cost of
$5,294,000, or an average price of $2.91 per share.

19

---

---



On
February 26, 2007, our Board of Directors authorized us to enter into a transaction with
Steven Kass, our Chief Financial Officer, whereby Mr. Kass surrendered 175,000 of his
stock options that were expiring that month, in consideration for a purchase price of
$2.3325 per share, reflecting a 25% discount from the $3.11 closing price of the common
stock on February 26, 2007. After subtracting the underlying $.6875 per share exercise
price of the options, this resulted in a net buyback price to our company of $1.645 per
share, or $287,875. This is reflected as additional cash compensation expense to Mr. Kass.
Concurrently, Mr. Kass exercised 150,000 options that were expiring on February 27, 2007
at an exercise price of $.6875 per share ($103,125) and 70,000 options that were expiring
on July 30, 2007 at an exercise price of $.9375 per share ($65,625) (consistent with the
original terms of the grants). The effect of these two transactions was a net cash outflow
of the company to Mr. Kass of $119,125.

We
have a $1,000,000 line of credit with Wachovia Bank. Any money borrowed under the line of
credit will be at the prime rate of borrowing and any such loans will be secured by the
assets of our company. Although management believes that we will be able to fund our
operations during 2009 from current resources, there is no guarantee that we will be able
to do so, and therefore, we established this facility to support short-term cash flow
constraints, if necessary. This agreement will expire on April 30, 2009, but can be
renewed for an additional one-year term with the consent of both parties. We intend to
extend the facility. There can be no assurances that this facility will be extended. There
were no amounts outstanding under this facility at December 27, 2008 or December 29, 2007.

Cash Flows

|                                                      | Year ended
|----------------------------------------------------- | ----------
|
|
|
|
|Net cash (used in) provided by operating activities   |           
|Net cash (used in) provided by financing activities   |           
|Net  (decrease) increase in cash and cash equivalents |           
|Cash and cash equivalents at beginning of period      |           
|                                                      |           
|Cash and cash equivalents at end of period            |           
|                                                      |           

Cash
used in operating activities was $151,000 for the fiscal year ended December 27, 2008
compared with cash provided by operating activities of $1,041,000 for the fiscal year
ended December 29, 2007 as the result of our continued investment in building inventories
to support the seasonal aspect of our business and the change in production facilities.
During the year ended December 27, 2008, we paid bonuses to management of $500,000 and
income taxes of $4,000 and in the year ended December 29, 2007, we paid bonuses to
management of $500,000.

The
$1,110,000 used in financing activities reflects the repurchase of 464,124 shares of our
common stock.

As
a result of our use of $151,000 in operating activities and $1,110,000 in financing
activities in the fiscal year ended December 27, 2008, our cash and cash equivalents
declined by $1,261,000 to $238,000.

We
believe that we will be able to fund our operations during the next twelve months with
cash generated from operations and from borrowings on our line of credit. We believe that
these sources will be sufficient to meet our operating and capital requirements during the
next twelve months.

20

---

---



# Contractual Obligations

We
have no contractual obligations at December 27, 2008.

# 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.

# Off-Balance Sheet
Arrangements

None.

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

Not
applicable.

21

---

---



|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

22

---

---



# REPORT OF INDEPENDENTREGISTERED PUBLIC
ACCOUNTING FIRM

The Board of Directors
and StockholdersTofutti Brands Inc.

We have audited the accompanying
balance sheets of Tofutti Brands Inc. as of December 27, 2008 and December 29, 2007, and
the related statements of income, changes in stockholders equity and cash flows for
the fifty-two week periods then ended. These 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 audit in accordance
with standards of the Public Accounting Oversight Board (United States). Those standards
require that we plan and perform an 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 27, 2008 and December 29, 2007, and the
results of its operations and its cash flows for the fifty-two week periods then ended, in
conformity with United States generally accepted accounting principles.

/s/ AMPER, POLITZINER &
MATTIA, LLP

Edison, New JerseyMarch 26, 2009

F - 1

---

---



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

|                                                   | December 27,
2008 | December 29,
2007
|-------------------------------------------------- | ----------------- | -----------------
|
|
|
|
|Assets                                             |                   |                  
|Current assets:                                    |                   |                  
|Cash and cash equivalents                          |                   |                  
|Accounts receivable, net of allowance for doubtful |                   |                  
|accounts and sales promotions of $528 and $430,    |                   |                  
|respectively                                       |                   |                  
|Inventories, net                                   |                   |                  
|Prepaid expenses                                   |                   |                  
|Refundable income taxes                            |                   |                  
|Deferred income taxes                              |                   |                  
|                                                   |                   |                  
|Total current assets                               |                   |                  
|                                                   |                   |                  
|                                                   |                   |                  
|Fixed assets (net of accumulated amortization of   |                   |                  
|$29 and $24)                                       |                   |                  
|Other assets                                       |                   |                  
|                                                   |                   |                  
|                                                   |                   |                  
|                                                   |                   |                  
|                                                   |                   |                  
|Liabilities and Stockholders' Equity               |                   |                  
|Current liabilities:                               |                   |                  
|Accounts payable                                   |                   |                  
|Accrued expenses                                   |                   |                  
|Accrued officers' compensation                     |                   |                  
|                                                   |                   |                  
|Total current liabilities                          |                   |                  
|                                                   |                   |                  
|                                                   |                   |                  
|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 5,189,343 shares at December 27, 2008  |                   |                  
|and 5,653,467 shares at December 29, 2007          |                   |                  
|Additional paid-in capital                         |                   |                  
|Retained earnings                                  |                   |                  
|                                                   |                   |                  
|Total stockholders' equity                         |                   |                  
|                                                   |                   |                  
|Total liabilities and stockholders' equity         |                   |                  
|                                                   |                   |                  

See accompanying notes to financial statements.

F - 2

---

---



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

|                                            | Fifty-two weeks
ended
December 27, 2008 | Fifty-two weeks
ended
December 29, 2007
|------------------------------------------- | --------------------------------------- | ---------------------------------------
|
|
|
|
|Net sales                                   |                                         |                                        
|Cost of sales                               |                                         |                                        
|                                            |                                         |                                        
|Gross profit                                |                                         |                                        
|                                            |                                         |                                        
|                                            |                                         |                                        
|Operating expenses:                         |                                         |                                        
|Selling and warehousing                     |                                         |                                        
|Marketing                                   |                                         |                                        
|Product development costs                   |                                         |                                        
|General and administrative                  |                                         |                                        
|                                            |                                         |                                        
|                                            |                                         |                                        
|                                            |                                         |                                        
|                                            |                                         |                                        
|Income before income taxes                  |                                         |                                        
|                                            |                                         |                                        
|Income taxes                                |                                         |                                        
|                                            |                                         |                                        
|                                            |                                         |                                        
|Net income                                  |                                         |                                        
|                                            |                                         |                                        
|                                            |                                         |                                        
|Weighted average common shares outstanding: |                                         |                                        
|Basic                                       |                                         |                                        
|                                            |                                         |                                        
|Diluted                                     |                                         |                                        
|                                            |                                         |                                        
|                                            |                                         |                                        
|Net income per common share:                |                                         |                                        
|Basic                                       |                                         |                                        
|                                            |                                         |                                        
|Diluted                                     |                                         |                                        
|                                            |                                         |                                        

See accompanying notes to financial statements.

F - 3

---

---



TOFUTTI BRANDS INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY(In thousands, except for share data)

|                                                    | Common Stock | AdditionalPaid-InCapital | RetainedEarnings | TotalStockholders'Equity
|--------------------------------------------------- | ------------ | ------------------------ | ---------------- | ------------------------
|
|
|
|
|Balances, December 30, 2006                         |              |                          |                  | 5,433,467               
|Stock option exercise                               |              |                          |                  | 220,000                 
|Stock compensation expense                          |              |                          |                  | -                       
|Charge to retained earnings upon adoption of FIN 48 |              |                          |                  | -                       
|Net income for period ended December 29, 2007       |              |                          |                  | -                       
|                                                    |              |                          |                  |                         
|Balances, December 29, 2007                         |              |                          |                  | 5,653,467               
|Stock compensation expense                          |              |                          |                  | -                       
|Stock purchases and retirements                     |              |                          |                  | (464,124                
|Net income for period ended December 27, 2008       |              |                          |                  | -                       
|                                                    |              |                          |                  |                         
|Balances, December 27, 2008                         |              |                          |                  | 5,189,343               
|                                                    |              |                          |                  |                         

See accompanying notes to financial statements.

F - 4

---

---



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

|                                                           | Fifty-two
weeks ended
December 27,
2008 | Fifty-two
weeks ended
December 29,
2007
|---------------------------------------------------------- | --------------------------------------- | ---------------------------------------
|
|
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                      |                                         |                                        
|Net income                                                 |                                         |                                        
|Adjustments to reconcile net income to net                 |                                         |                                        
|cash flows (used in) provided by operating activities:     |                                         |                                        
|Amortization                                               |                                         |                                        
|Provision for bad debts and sales promotions               |                                         |                                        
|Stock compensation expense                                 |                                         |                                        
|Deferred taxes                                             |                                         |                                        
|Change in assets and liabilities:                          |                                         |                                        
|Accounts receivable                                        |                                         |                                        
|Inventories                                                |                                         |                                        
|Prepaid expenses and income taxes                          |                                         |                                        
|Accounts payable and accrued expenses                      |                                         |                                        
|Income taxes payable/refundable                            |                                         |                                        
|                                                           |                                         |                                        
|Net cash flows (used in) provided by  operating activities |                                         |                                        
|                                                           |                                         |                                        
|                                                           |                                         |                                        
|CASH FLOWS FROM FINANCING ACTIVITIES:                      |                                         |                                        
|Proceeds from exercise of  stock options, net              |                                         |                                        
|Purchase of common stock                                   |                                         |                                        
|                                                           |                                         |                                        
|Net cash flows provided by (used in) financing activities  |                                         |                                        
|                                                           |                                         |                                        
|                                                           |                                         |                                        
|NET CHANGE IN CASH AND CASH EQUIVALENTS                    |                                         |                                        
|                                                           |                                         |                                        
|CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD          |                                         |                                        
|                                                           |                                         |                                        
|CASH AND CASH EQUIVALENTS, AT END OF PERIOD                |                                         |                                        
|                                                           |                                         |                                        
|                                                           |                                         |                                        
|SUPPLEMENTAL CASH FLOW INFORMATION:                        |                                         |                                        
|Income taxes paid                                          |                                         |                                        
|                                                           |                                         |                                        

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 31. Fiscal years for
the financial statements included herein are the fifty-two week periods ended on December
27, 2008 and December 29 2007, 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
Staff Accounting Bulletin No. 104 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 $100,000. Management believes that the financial institution is financially
sound and, accordingly, minimal credit risk exists.

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 29, 2007
is limited.

During the fiscal years ended
December 27, 2008 and December 29, 2007, the Company derived approximately 91% and 90%,
respectively, of its net sales domestically. The remaining sales in both periods were
exports to foreign countries. The Company had sales to one customer representing 19% of
net sales during fiscal 2008 and 20% of net sales during fiscal 2007. 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 31% and 55% of the
Companys net sales for the years ended December 27, 2008 and December 29, 2007. The
accounts receivable balance of one customer represented approximately 26% of total
accounts receivable at December 27, 2008.

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 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 allowance for doubtful accounts. The Company does not accrue
          interest on accounts receivable past due.

F - 6

---

---



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

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

Inventories  Inventories
are stated at the lower of cost or market. Cost is determined by the first-in, first-out
method. Reserves for slow moving and obsolete inventories are provided based on historical
experience, shelf life and product demand. The Company periodically reviews inventories
and establishes reserves for obsolescence based on forecasted sales and market trend.

The Company purchased approximately
30% and 15% of its finished products from one supplier and 18% and 17% of its finished
goods from another supplier during the periods ended December 27, 2008 and December 29,
2007, 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. FASB Interpretation No. 48, or
FIN 48, Accounting for Uncertainty in Income Taxes  an interpretation of FASB
Statement No. 109 was adopted December 31, 2006. This requires the Company to
measure the impact of all uncertain tax positions at the date of adoption and record a
liability for the amount of potential exposure, offset by a direct charge to retained
earnings. At adoption, the Company recognized a direct charge of $150 to retained earnings
and accrued expenses. Thereafter, any changes to the required amount of the liability
recorded to recognize the potential exposures are recognized as a charge or credit to
income tax expense. The Company had approximately $25 of accrued interest and penalties
related to uncertain tax positions. Interest and penalties related to uncertain tax
positions are recognized as a component of income tax expense.

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 periods ended December 27, 2008
and December 29, 2007, stock equivalents of 10,000 shares 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)

|                                                                       | Fifty-two Weeks
Ended December 29,
2007 | Fifty-two Weeks
Ended December 29,
2007
|---------------------------------------------------------------------- | --------------------------------------- | ---------------------------------------
|
|
|
|
|Net income, numerator, basic and diluted computation                   |                                         |                                        
|                                                                       |                                         |                                        
|                                                                       |                                         |                                        
|Weighted average shares - denominator basic computation                |                                         |                                        
|Effect of dilutive stock options                                       |                                         |                                        
|                                                                       |                                         |                                        
|Weighted average shares, as adjusted - denominator diluted computation |                                         |                                        
|                                                                       |                                         |                                        
|Net income per common share:                                           |                                         |                                        
|Basic                                                                  |                                         |                                        
|                                                                       |                                         |                                        
|Diluted                                                                |                                         |                                        
|                                                                       |                                         |                                        

Stock Based Compensation -The
Company follows the provisions of Statement of Financial Accounting Standards
(SFAS) No. 123(R), Share-Based Payment.  The Company uses the
Black-Scholes option pricing model to measure the estimated fair value of the options
under SFAS No. 123(R). 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
maturity of those instruments.

Freight Costs Freight
costs to ship inventory to customers and to outside warehouses amounted to $1,430 and
$1,411 during the periods ended December 27, 2008 and December 29, 2007, 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
$267 and $39 during the periods ended December 27, 2008 and December 29, 2007,
respectively.

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

F - 8

---

---



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

Recent Accounting
Pronouncements In December 2007, the FASB issued SFAS No.
141(revised 2007), Business Combinations, which will become effective for business
combination transactions having an acquisition date on or after January 1, 2009. This
standard requires the acquiring entity in a business combination to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the
acquisition date to be measured at their respective fair values. The Statement requires
acquisition-related costs, as well as restructuring costs the acquirer expects to incur
for which it is not obligated at acquisition date, to be recorded against income rather
than included in purchase-price determination. It also requires recognition of contingent
arrangements at their acquisition-date fair values, with subsequent changes in fair value
generally reflected in income. The Company do not expect the adoption of SFAS No. 141 to
have a material effect on it, as no acquisitions are currently contemplated.

In December 2007, the FASB issued
SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51,which will become effective for us January 1, 2009,
with retroactive adoption of the Statements presentation and disclosure requirements
for existing minority interests. This standard will require ownership interests in
subsidiaries held by parties other than the parent to be presented within the equity
section of the consolidated balance sheet but separate from the parents equity. It
will also require the amount of consolidated net income attributable to the parent and the
noncontrolling interest to be clearly identified and presented on the face of the
consolidated income statement. Certain changes in a parents ownership interest are
to be accounted for as equity transactions and when a subsidiary is deconsolidated, any
noncontrolling equity investment in the former subsidiary is to be initially measured at
fair value. The Company does not anticipate the implementation of SFAS No. 160 will
significantly change the presentation of its financial statements.

In February 2008, the FASB issued
FASB Staff Position (FSP) No. 157-1, Application of FASB Statement
No. 157 to FASB Statement No. 13 and Its Related Interpretive Accounting
Pronouncements That Address Leasing Transactions, which became effective for us on
December 30, 2007. This FSP excludes FASB Statement No. 13, Accounting for
Leases, and its related interpretive accounting pronouncements from the provisions of
SFAS No. 157. Implementation of this standard did not have a material effect on the
Companys financial statements.

In February 2008, the FASB issued FSP
No. 157-2,Effective Date of FASB Statement No. 157, which delays our
January 1, 2008 effective date of SFAS No. 157 for all nonfinancial assets and
nonfinancial liabilities, except those recognized or disclosed at fair value in the
financial statements on a recurring basis (at least annually), until January 1, 2009.
Implementation of this standard is not expected to have a material effect on the
Companys financial statements.

In March 2008, the FASB issued
SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities  An Amendment of FASB Statement No. 133
(SFAS No. 161), which amends and expands the disclosure requirements
of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities to require qualitative disclosure about objectives and strategies in
using derivatives, quantitative disclosures about fair value amounts of gains and losses
on derivative instruments, and disclosures about the underlying credit-risk-related
contingent features in derivative agreements. SFAS No. 161 is intended to
improve financial reporting by requiring transparency about the location and amounts of
derivative instruments in an entitys financial statements; how derivative
instruments and related hedged items are accounted for under SFAS No. 133; and
how derivative instruments and related hedged items affect its financial position,
financial performance and cash flows. SFAS No. 161 is effective for financial
statements issued for fiscal years beginning after November 15, 2008. Implementation
of this standard did not have a material effect on the Companys financial
statements.

F - 9

---

---



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

|NOTE 2: |  | INVENTORIES
|------- |  | -----------

Inventories consist of the following:

|                            | December 27,
2008 | December 29,
2007
|--------------------------- | ----------------- | -----------------
|
|
|
|
|Finished products           |                   |                  
|Raw materials and packaging |                   |                  
|                            |                   |                  
|                            |                   |                  
|                            |                   |                  

|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. No grants
have been made under the 1993 Plan since 2003.

The following is a summary of stock
option activity from December 30, 2006 to December 27, 2008:

|                                    | INCENTIVE OPTIONS | NON-QUALIFIED OPTIONS | 
|----------------------------------- | ----------------- | --------------------- | 
|
|
|
|
|Outstanding at December 30, 2006    |                   |                       | 
|Exercised in 2007                   |                   |                       | 
|Forfeited in 2007                   |                   |                       | 
|Surrendered and repurchased in 2007 |                   |                       | 
|Granted in 2007                     |                   |                       | 
|                                    |                   |                       | 
|Outstanding at December 29, 2007    |                   |                       | 
|                                    |                   |                       | 
|Exercisable at December 29, 2007    |                   |                       | 
|                                    |                   |                       | 
|Outstanding at December 27, 2008    |                   |                       | 
|                                    |                   |                       | 
|Exercisable at December 27, 2008    |                   |                       | 
|                                    |                   |                       | 

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 nonstatutory stock options. The maximum
aggregate number of shares of common stock which may be issued under the 2004
Directors Plan is 100,000 shares. See Note 6 for discussion of 2007 stock option
repurchase and exercise to an officer.

F - 10

---

---



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

In 2007, 41,000 non-qualified stock
options were granted to two non-employee directors with a fair value at grant date of
$2.90, using the following assumptions: Dividend rate = 0%, expected life = 5, risk free
interest = 3.81% and volatility = 14.43%.

There were no stock options granted
in 2008.

The following table summarizes
information about stock options outstanding at December 27, 2008 :

|Range of
Exercise Prices ($) | Number
Outstanding | Weighted Average
Remaining Life
(in years) | Weighted
Average
Exercise
Price($) | Number
Exercisable
|---------------------------- | ------------------ | ------------------------------------------ | ---------------------------------- | ------------------
|
|
|
|
|                             | 1.0625             |                                            |                                    | 410,000           
|                             | 3.14               |                                            |                                    | 10,000            
|                             | 2.90               |                                            |                                    | 10,000            
|                             | 2.90               |                                            |                                    | 41,000            
|                             |                    |                                            |                                    |                   
|                             | 1.0625-3.14        |                                            |                                    | 471,000           
|                             |                    |                                            |                                    |                   

The aggregate unrecognized stock-based
compensation charge at December 27, 2008 is approximately $19 expected to be expensed over
two years.

|NOTE 4: |  | LEASES
|------- |  | ------

The Companys facilities are
located in a modern 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 lease agreement
expired on July 1, 1999, but it continues to occupy the premises under the terms of that
agreement, subject to a six month notification period for the landlord or for the Company
with respect to any changes. The Company currently has no plans to enter into a long-term
lease agreement for the facility. Rent expense was $80 in 2008 and $80 in 2007. 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 27, 2008 and December 29, 2007 are as
follows:

|                         | December 27,
2008 | December 29,
2007
|------------------------ | ----------------- | -----------------
|
|
|
|
|Current:                 |                   |                  
|Federal                  |                   |                  
|State                    |                   |                  
|                         |                   |                  
|                         |                   |                  
|                         |                   |                  
|Deferred:                |                   |                  
|Federal                  |                   |                  
|State                    |                   |                  
|                         |                   |                  
|                         |                   |                  
|                         |                   |                  
|Total income tax expense |                   |                  
|                         |                   |                  

F - 11

---

---



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

A reconciliation between the expected
federal tax expense at the statutory tax rate of 34% and the Companys actual tax
expense for the periods ended December 27, 2008 and December 29, 2007 follows:

|                                                      | December 27,
2008 | December 29,
2007
|----------------------------------------------------- | ----------------- | -----------------
|
|
|
|
|Income tax expense computed at federal statutory rate |                   |                  
|State income taxes, net of federal income tax benefit |                   |                  
|Permanent and other items                             |                   |                  
|Under-accrual of prior year                           |                   |                  
|Addition to FIN 48 provision                          |                   |                  
|                                                      |                   |                  
|                                                      |                   |                  
|                                                      |                   |                  

Deferred tax asset at December 27,
2008 and December 29, 2007 consist of the following components:

|                                            | December 27,
2008 | December 29,
2007
|------------------------------------------- | ----------------- | -----------------
|
|
|
|
|Allowance for doubtful accounts             |                   |                  
|Inventory                                   |                   |                  
|Credits for tax paid to other jurisdictions |                   |                  
|                                            |                   |                  
|Deferred tax asset                          |                   |                  
|                                            |                   |                  

The Company adopted the provisions of
FIN 48 on December 31, 2006, the first day of the Companys fiscal year. As a result
of the implementation of FIN 48, the Company recognized a $150 increase in the liability
for unrecognized tax benefits, which was accounted for as a reduction to the December 31,
2006 balance of retained earnings. A reconciliation of the beginning and ending amount of
unrecognized tax benefits is as follows:

|                                                             | 
|------------------------------------------------------------ | 
|
|
|
|
|Balance at December 29, 2007                                 | 
|Additions based on tax positions related to the current year | 
|                                                             | 
|Balance at December 27, 2008                                 | 
|                                                             | 

The Company accounts for penalties or
interest related to uncertain tax positions as part of its provision for income taxes. The
Company has accrued for penalties or interest for the U.S. (both Federal and State) as of
December 27, 2008 and December 29, 2007. The Company believes that its unrecognized tax
benefits would have an impact on the effective tax rate.

The provision at December 27, 2008
for uncertain tax positions is included in accrued expenses. The Companys federal
and state tax returns are open to examination for the years 2004 to 2007, however, the
Internal Revenue Service commenced an examination of the Companys federal income tax
returns for 2005, 2006 and 2007 in 2009.

F - 12

---

---



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

|NOTE 6: |  | RELATED PARTY TRANSACTIONS
|------- |  | --------------------------

On February 26, 2007, the Board of
Directors authorized the Company enter into a transaction with Steven Kass, our Chief
Financial Officer, whereby Mr. Kass surrendered 175,000 of his stock options that were
expiring on February 27, 2007, at a purchase price of a 25% discount from the $3.11
closing price of the common stock on February 26, 2007, or $2.3325 per share. After
subtracting the underlying cost of the options, $.6875, this resulted in a net buyback
price to the Company of $1.645 per share, or $287.9. This is reflected as an additional
cash compensation expense to Mr. Kass as a result of the modification to the option terms
and repurchase by the Company. Concurrently, Mr. Kass exercised 150,000 options that were
expiring on February 27, 2007 at an exercise price of $.6875 per share ($103.1) and 70,000
options that were expiring on July 30, 2007 at an exercise price of $.9375 per share
($65.7), for a combined total proceeds to the Company of $168.8. The effect of these two
transactions was a net cash outflow of the Company to Mr. Kass of $119.1.

|NOTE 7: |  | LINE OF CREDIT
|------- |  | --------------

The Company established a $1,000 line
of credit with Wachovia Bank in April 2006, which was renewed for an additional year
effective April 30, 2007.  As of March 23, 2009, the Company has not used the line of
credit. If the line of credit is drawn upon, the underlying promissory note becomes due
and payable in consecutive monthly payments of accrued interest only, commencing, and
continuing on, the same day of each month thereafter until fully paid.  The line of
credit may be used to finance working capital of the Company and interest on the unpaid
balance shall accrue at Wachovias Prime Rate.  The line of credit is secured by
all of the personal property of the registrant including, without limitation, all
accounts, equipment, accessions, inventory, chattel paper, instruments, investment
property, documents, letter-of-credit rights, deposit accounts, and general intangibles,
wherever located.

F - 13

---

---



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

None.

|Item 9A (T). |  | Controls and Procedures.
|------------ |  | ------------------------

# Evaluation of Disclosure
Controls and Procedures

Evaluation
of Disclosure Controls and Procedures. As of December 27, 2008 , 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 as of the end of
the fiscal year 2008.

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 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.

23

---

---



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 27, 2008 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 statement 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.
| | - | ----------------------------------------------------------------------------------------------------------------

# Remediation Plan

It
is our intention to increase the staffing level of the accounting department as demands on
our accounting staff increase.

# Changes in Internal
Control over Financial Reporting

No
change in our internal control over financial reporting occurred during the quarter ended
December 27, 2008, 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 on this annual report.

|Item 9B. |  | Other Information.
|-------- |  | ------------------

None.

24

---

---



# PART III

|Item 10. |  | Directors, Executive Officers and Corporate Governance.
|-------- |  | -------------------------------------------------------

Our
directors and executive officers are:

|Name            | Age |  | Position                                                   
|--------------- | --- |  | -----------------------------------------------------------
|
|
|
|
|David Mintz     | 77  |  | Chairman of the Board of Directors, Chief Executive Officer
|Steven Kass     | 57  |  | Chief Financial Officer, Secretary and Treasurer           
|Neal S. Axelrod | 56  |  | Director                                                   
|Joseph Fischer  | 69  |  | Director                                                   
|Aron Forem      | 54  |  | Director                                                   
|Philip Gotthelf | 56  |  | Director                                                   
|Reuben Rapoport | 80  |  | Director                                                   
|Franklyn Snitow | 62  |  | Director                                                   

David
Mintz has been our Chairman of the Board and Chief Executive Officer since August 1981.

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.

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.

Aron
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.

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.

Reuben
Rapoport, our former Director of Product Development who retired in April 2003, has been a
director since July 1983.

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.

25

---

---



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 five 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
Financial Expert

The
Audit Committee of the Board of Directors is comprised of Mr. Axelrod, who serves as
chairman, Mr. Gotthelf and Mr. Forem. 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 2008 all persons subject to
these reporting requirements filed the required reports on a timely basis.

26

---

---



# Code of Ethics

We
have adopted a Code of Ethics for Executive and Financial Officers. This code of ethics
applies to our chief executive officer, chief financial officer, corporate controller and
other finance organization employees. We also adopted a Code of Conduct, which applies to
all of our employees. The Code of Ethics and the Code of Conduct 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 Ethics or the Code of Conduct 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, 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 2008
totaled $100,000 or more:

Summary Compensation Table

|Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock
Awards
($) | Option
Awards ($) | Non-Equity
Incentive
Plan
Compensation
($) | All Other
Compensation
($) | Total($)
|--------------------------- | ---- | ---------- | --------- | ---------------- | ----------------- | ------------------------------------------ | -------------------------- | --------
|
|
|
|
|David Mintz                 |      |            |           | 2008             |                   |                                            | 450,000                    |         
|Chief Executive Officer     |      |            |           | 2007             |                   |                                            | 450,000                    |         
|and Director                |      |            |           | 2006             |                   |                                            | 450,000                    |         
|                            |      |           
|Steven Kass                 |      |            |           | 2008             |                   |                                            | 125,000                    |         
|Chief Financial Officer     |      |            |           | 2007             |                   |                                            | 125,000                    |         
|                            |      |            |           | 2006             |                   |                                            | 125,000                    |         

---

|(1) | The
value of the unexercised options as of December 27, 2008 is calculated as
               the difference between the closing price of the common stock as of
December 27,                2008 and the option exercise price.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On
February 26, 2007, our Board of Directors authorized us to enter into a
               transaction with Steven Kass, our Chief Financial Officer, whereby Mr.
Kass                surrendered 175,000 of his stock options that were expiring that
month, in                consideration for a purchase price of $2.3325 per share,
reflecting a 25%                discount from the $3.11 closing price of the common stock
on February 26, 2007.                After subtracting the underlying $.6875 per share
exercise price of the options,                this resulted in a net buyback price to our
company of $1.645 per share, or                $287,875. Concurrently, Mr. Kass exercised
150,000 options that were expiring on                February 27, 2007 at an exercise
price of $.6875 per share ($103,125) and 70,000                options that were expiring
on July 30, 2007 at an exercise price of $.9375 per                share ($65,625)
(consistent with the original terms of the grants), for a                combined total
purchase cost of $168,750, resulting in a net payment to Mr. Kass                of
$119,125. The value of the unexercised options is calculated as the
               difference between the closing price of the common stock as of December
27, 2008                and the option exercise price ($566,100).
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
aggregate value of all other perquisites and other personal benefits furnished in each of
the last three years to each of these executive officers was less than 10% of each
officers salary for such year.

27

---

---



# Grants of Plan-Based
Awards for Fiscal 2008

There
were no stock options awarded during the fiscal year ended December 27, 2008.

# 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 2008 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.

The
following table sets forth the compensation received by each of the Companys
non-employee Directors for the year ended December 27, 2008. Each non-employee director is
considered independent under AMEX listing standards.

|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 |                                 |                  |                   | 3,500                                      |                                        |                            | -        
|Joseph Fischer  |                                 |                  |                   | -                                          |                                        |                            | -        
|Aron Forem      |                                 |                  |                   | -                                          |                                        |                            | -        
|Philip Gotthelf |                                 |                  |                   | 2,000                                      |                                        |                            | -        
|Franklyn Snitow |                                 |                  |                   | 1,000                                      |                                        |                            | -        

# 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 summarizes the options awards granted to each of the named executive
officers identified above in the summary compensation table above pursuant to an Equity
Incentive Plan. Mr. Kass exercised 150,000 options that were expiring on February 27, 2007
at an exercise price of $.6875 per share ($103,125) and 70,000 options that were expiring
on July 30, 2007 at an exercise price of $.9375 per share ($65,625) (consistent with the
original terms of the grants), for a combined total purchase cost of $168,750.

28

---

---



# Outstanding Equity
Awards at Fiscal Year-End

|Option Awards | Stock Awards
|------------- | ------------
|
|
|
|David Mintz   |             
|Steven Kass   |             

---

|(1) | Reflects
options issued to Steven Kass to purchase shares of our common stock.                Mr.
Kass was granted options to purchase our common stock at an exercise price
               of $1.0625. As of December 27, 2008, all of the options were vested. On
March                18, 2009, all of the options expired.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related
StockholderMatters.
|-------- |  | ----------------------------------------------------------------------------------------------

The
following tables set forth as of March 23, 2009 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                                   |                                          |                    
|Financial & Investment Management Group, Ltd. |                                          |                    

|(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 23, 2009 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 5,176,678 shares issued and outstanding as of March 23, 2009.
|--- | ----------------------------------------------------------------------

|(4) | Based
on the information contained in a Schedule 13G filed by the Financial                & Investment
Management Group, Ltd. filed March 4, 2009. The address of the                Financial
& Investment Management Group, Ltd. is 111 Cass Street, Traverse                City,
MI 49684.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

29

---

---



# Security ownership of
management.

|Name and
Address of Beneficial Owner(1) | Amount and
Nature of Beneficial Owner(2) | Percent of Class(3)
|--------------------------------------- | ---------------------------------------- | -------------------
|
|
|
|
|David Mintz                             |                                          |                    
|Steven Kass                             |                                          |                    
|Reuben Rapoport                         |                                          |                    
|Franklyn Snitow                         |                                          |                    
|Joseph Fischer                          |                                          |                    
|Philip Gotthelf                         |                                          |                    
|Neal S. Axelrod                         |                                          |                    
|Aron Forem                              |                                          |                    
|All Executive Officers and              |                                          |                    
|Directors as a group (8                 |                                          |                    
|persons)                                |                                          |                    

---

|* | 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. 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 23, 2009 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 5,176,678 shares issued and outstanding as of March 23, 2009.
|--- | ----------------------------------------------------------------------

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

|(5) | Issuable
upon the exercise of currently exercisable stock options.
|--- | ------------------------------------------------------------------

|(6) | Issuable
upon the exercise of currently exercisable stock options.
|--- | ------------------------------------------------------------------

|(7) | Includes
33,999 shares issuable upon the exercise of currently exercisable stock
               options.
|--- | --------------------------------------------------------------------------------------------------------

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

None.

30

---

---



|Item 14. |  | Principal Accounting Fees and Services.
|-------- |  | ---------------------------------------

# Fees Paid to Independent
Public Accountants

The
following table sets forth, for each of the years indicated, the fees paid to our
independent public accountants and the percentage of each of the fees out of the total
amount paid to the accountants.

|                   | Year Ended
|------------------ | ----------
|
|
|
|
|Audit Fees (1)     |           
|Audit-related Fees |           
|Tax Fees           |           
|All Other Fees     |           
|                   |           
|Total              |           
|                   |           

---

|(1) | Audit
fees consist of services that would normally be provided in connection
               with statutory and regulatory filings or engagements, including services
that                generally only the independent accountant can reasonably provide.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# Pre-Approval Policies
and Procedures

Our
Audit Committee has adopted a policy and procedures for the pre-approval of audit and
non-audit services rendered by our independent public accountants, Amper, Politziner &
Mattia, LLP. The policy generally pre-approves certain specific services in the categories
of audit services, audit-related services, and tax services up to specified amounts, and
sets requirements for specific case-by-case pre-approval of discrete projects, those which
may have a material effect on our operations or services over certain amounts.
Pre-approval may be given as part of the Audit Committees approval of the scope of
the engagement of our independent auditor or on an individual basis. The pre-approval of
services may be delegated to one or more of the Audit Committees members, but the
decision must be presented to the full Audit Committee at its next scheduled meeting. The
policy prohibits retention of the independent public accountants to perform the prohibited
non-audit functions defined in Section 201 of the Sarbanes-Oxley Act or the rules of the
SEC, and also considers whether proposed services are compatible with the independence of
the public accountants.

31

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# PART IV

|Item 15. |  | Exhibits, 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)
|--- | ----------------------------------------------------------------------

|10.1 | Form
of Loan Agreement between the Registrant and Wachovia Bank, N. A.(6)
|---- | -------------------------------------------------------------------------

|10.2 | Form
of Promissory Note between the Registrant and Wachovia Bank, N. A.(6)
|---- | --------------------------------------------------------------------------

|10.3 | Form
of Security Agreement between the Registrant and Wachovia Bank, N. A.(6)
|---- | -----------------------------------------------------------------------------

|23.1 | Consent
of Amper, Politziner & Mattia, LLP
|---- | ------------------------------------------

|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.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------

---

|(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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|(6) | Filed
as an exhibit to the Registrants Form 8-K bearing a cover date of
               April 13, 2006 and hereby incorporated by reference thereto.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

32

---

---



# 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 March 27, 2009.

| |  | TOFUTTI BRANDS INC.(Registrant)By: /s/ David Mintz
David MintzChairman of the Board andChief Executive Officer
| |  | ----------------------------------------------------------------------------------------------------------------------------

In
accordance with the Securities Exchange Act of 1934, this Report has been signed below on
March 27, 2009, by the following persons on behalf of the Registrant and in the capacities
indicated.

/s/ David MintzDavid Mintz
Chairman of the Board
and Chief Executive Officer

/s/ Steven KassSteven Kass
Secretary, Treasurer and
Chief Financial and Accounting Officer

/s/ Neal AxelrodNeal S. Axelrod
Director

/s/ Joseph FischerJoseph Fischer
Director

33

---

---



/s/ Aron ForemAron Forem
Director
/s/ Philip GotthelfPhilip Gotthelf
Director
/s/ Reuben RapoportReuben Rapoport
Director
/s/ Franklyn SnitowFranklyn Snitow
Director

34

---

---



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)
|--- |  | ----------------------------------------------------------------------

|10.1 |  | Form
of Loan Agreement between the Registrant and Wachovia Bank, N. A.(6)
|---- |  | -------------------------------------------------------------------------

|10.2 |  | Form
of Promissory Note between the Registrant and Wachovia Bank, N. A.(6)
|---- |  | --------------------------------------------------------------------------

|10.3 |  | Form
of Security Agreement between the Registrant and Wachovia Bank, N. A.(6)
|---- |  | -----------------------------------------------------------------------------

|23.1 |  | Consent
of Amper, Politziner & Mattia, LLP
|---- |  | ------------------------------------------

|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.
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------

---

|(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.
|--- | ------------------------------------------------------------------------------------------------------------------------------------

|(6) | Filed
as an exhibit to the Registrants Form 8-K bearing a cover date of
               April 13, 2006 and hereby incorporated by reference thereto.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------



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