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# SECURITIES AND
EXCHANGE COMMISSIONWashington, D.C. 20549

# Form 10-KSB

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

For the fiscal year ended December 29, 2007

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

# Commission File
Number: 1-9009

TOFUTTI BRANDS INC.(Name of small business
issuer 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(Issuer's telephone number)
Securities registered under 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 registered under Section 12(g) of the Act: None

Check
whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of
the Exchange Act during the past 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.

Yes x No o

Check
if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B
contained in this form, and no disclosure will 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-KSB or any amendment to this Form 10-KSB. 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

Issuers
revenues for its most recent fiscal year: $19,150,000.

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 31,
2008 was $7,009,000.

As
of March 31, 2008, the issuer had 5,593,867 shares of Common Stock, par value $.01,
outstanding.

Transitional Small Business Disclosure Format        Yes o          No x



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TABLE OF CONTENTS

|            |                                                                                                |   
|----------- | ---------------------------------------------------------------------------------------------- | --
|
|
|
|
|PART I      |                                                                                                | 4 
|Item 1.     | Description of Business                                                                        | 4 
|Item 2.     | Description of Property                                                                        | 13
|Item 3.     | Legal Proceedings                                                                              | 13
|Item 4.     | Submission of Matters to a Vote of Security Holders                                            | 13
|PART II     |                                                                                                | 14
|Item 5.     | Market for Common Equity and Related Stockholder Matters                                       | 14
|Item 6.     | Management's Discussion or Plan of Operation                                                   | 14
|Item 7.     | Financial Statements                                                                           | 20
|Item 8.     | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure           | 21
|Item 8A(T). | Controls and Procedures                                                                        | 21
|Item 8B.    | Other Information                                                                              | 22
|PART III    |                                                                                                | 23
|Item 9.     | Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance
|            | with Section 16(a) of the Exchange Act                                                         | 23
|Item 10.    | Executive Compensation                                                                         | 25
|Item 11.    | Security Ownership of Certain Beneficial Owners and Management and                            
|            | Related Stockholder Matters.                                                                   | 27
|Item 12.    | Certain Relationships and Related Transactions, and Director Independence                      | 29
|Item 13.    | Exhibits                                                                                       | 29
|Item 14.    | Principal Accountant Fees and Services                                                         | 30
|SIGNATURES  |                                                                                                | 31



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# FORWARD LOOKING
STATEMENTS

This Annual Report on Form 10-KSB
contains various 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 within the Private Securities Litigation Reform Act of 1995, as
amended. Such forward-looking statements reflect our current view with respect to future
events and financial results. Forward-looking statements usually include the verbs
anticipates, believes, estimates, expects,
intends, plans, projects, understands and
other verbs suggesting uncertainty. 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. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. We undertake no
obligation to publicly release any revisions to these forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events. We have attempted to identify additional significant uncertainties
and other factors affecting forward-looking statements in the Risk Factors section which
appears in Item 1. Description of Business.

3

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# PART I

|Item 1. | Description of Business.
|------- | ------------------------

GENERAL

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

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

STRATEGY

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

TOFUTTI PRODUCT LINE

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

Frozen Desserts

| | t | 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, Better Pecan®,
Coffee Marshmallow and Strawberry Cheesecake. Premium TOFUTTI soft serve mix is
available in three flavors: Vanilla, Chocolate, and Peanut Butter. TOFUTTI in
three gallon bulk cans is available in Vanilla, Chocolate Supreme and Vanilla Almond
Bark.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | t | 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 tangy lime-flavored TOFUTTI between
two vanilla wafers. Using the same vanilla wafers, we have also introduced the WAVE
CUTIETM in three different flavors  blueberry, strawberry
or chocolate sauce blended with creamy vanilla TOFUTTI.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

4

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| | t | 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.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | t | 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | t | TOFUTTI
KIDS, a frozen dessert treat aimed at the childrens market, are
bullet-shaped stick novelties made with creamy premium vanilla TOFUTTI with a
taste of our dairy free BETTER THAN CREAM CHEESE added to give them a cheesecake
flavor, surrounded with real fruit ice. A multi-pack product, they come in strawberry,
orange, and lime flavors in each package.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | t | MARRY
ME BARS are stick novelties that feature creamy vanilla TOFUTTIsurrounded
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

| | t | 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.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | t | 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | t | 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | t | 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.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5

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Other Food Products

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

| | t | 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.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | t | TOFUTTI
COOKIESare made with all natural ingredients and unbleached flour. The 16 oz.
packages are available in Peanut Butter, Oatmeal Raisin and Chocolate Chip. Like all TOFUTTI products, they are completely dairy and cholesterol free and can be found in select
supermarkets and health food stores.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 forty (40) distributors in the national health food
market.

Our
sales to health food distributors in 2007 declined to $9,522,000, or 50% of total sales,
as compared to $11,956,000, or 61% of total sales, in 2006. In 2007, sales to Trader
Joes declined to $3,816,000, or 20% of sales, as compared to $4,402,000, or 23% of
sales, in 2006. Our sales to the kosher market declined to $1,056,000, or 6% of sales, in
2007, from sales of $1,149,000, or 6% of sales, in 2006. Our sales to international
distributors and to certain domestic distributors increased in 2007, but not in sufficient
volume to offset the sales declines noted above.

6

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

|                      | Fiscal Year endedDecember 29, 2007 | Fiscal Year endedDecember 30, 2006
|--------------------- | ---------------------------------- | ----------------------------------
|
|
|
|
|California            |                                    |                                   
|Midwest               |                                    |                                   
|New England           |                                    |                                   
|Metropolitan New York |                                    |                                   
|Mid-Atlantic          |                                    |                                   
|Florida               |                                    |                                   
|Northwest             |                                    |                                   
|Southeast             |                                    |                                   
|Rocky Mountains       |                                    |                                   
|Upstate New York      |                                    |                                   
|Southwest             |                                    |                                   

For
a number of years, Eskimo Pie, a wholly-owned subsidiary of Cool Brands International,
handled the supermarket distribution of our nondairy frozen dessert products in the
metropolitan New York City area and throughout the southeastern United States, mostly in
Florida. In November 2006, Eskimo Pie sold their New York City distribution system to
Calip Ice Cream, an independent ice cream distributor, and their Florida distribution
business to Southwest Traders, a major West Coast food distributor. Both companies, as
part of the terms of sale for their respective areas of distribution, assumed the
distribution of our nondairy frozen dessert products. In February 2006, Southwest Traders,
no longer wishing to distribute ice cream product in Florida, completely shut down their
facilities there. At the same time that Southwest terminated their operations in Florida,
we transferred over the supermarket distribution of our product in Florida and other
mutually agreed to areas of the southeastern United States to Edys Grand Ice Cream,
a subsidiary of the Dreyers Ice Cream Company. These distribution arrangements continued
throughout 2007.

In
December 2007, we were informed by Edys Grand Ice Cream that they would no longer
distribute our products in Florida and the southeastern United States as of 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. We anticipate an increase in our business with Publix
for the remainder of 2008 as a result of this change. The balance of our retail business
in this region will be handled by our existing health and specialty food distributors.

During
2007, we shipped TOFUTTI nondairy products to distributors in Australia, Bermuda, Canada,
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 increased to
$1,954,000, or 10% of sales, in 2007, as compared to $1,777,000, or 9% of sales, in 2006.
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, which could
increase the local currency price of our products. Currently, our export sales business
has been positively impacted by the weak U. S. dollar.

7

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

PRODUCT DEVELOPMENT

All
of our current products are 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 our current
products. In fiscal 2007 and 2006, our product development expenses were $481,000 and
$477,000, 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 made 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 manufactured 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.

8

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Transfer
of Production Facilities

In
August 2005, we moved all our frozen dessert manufacturing to Ellsworth Ice Cream in
Saratoga Springs, New York. Although Ellsworth was able to manufacture all our frozen
dessert products to our technical specifications and customer demand, we became
increasingly concerned about Ellsworths financial situation. We continued to look
for alternative production sources for our frozen dessert pints, Tofutti Cuties and stick
novelties. During the fourth quarter of 2006, we moved our frozen dessert pint production
to Leibys Dairy in Tamaqua, Pennsylvania. In May 2007, Ellsworth unexpectedly and
without warning ceased manufacturing. Although we were able to move our ice cream novelty
manufacturing to Ice Cream Specialties in Lafayette, Indiana within four weeks of the
Ellsworth closing, this required us to postpone the shipment of certain large orders that
would have been shipped in the second quarter until the third quarter of 2007 and to
allocate existing inventory of novelty products among all our customers, further
negatively impacting our sales for the second and third quarters. During the third and
fourth quarters of 2007, we continued to expand our ice cream novelty production at Ice
Cream Specialties. We are also looking for additional frozen dessert manufacturing
facilities so that we will have the capacity to support our future production needs.

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 contract manufacturers decide to
terminate their relationships with us.

In
order to protect our formulas, we have entered into confidentiality arrangements with our
contract manufacturers 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.

KOF-K
Kosher Supervision, or KOF-K, of Teaneck, New Jersey provides us with our kosher
certification service. Before KOF-K will permit its certification, evidenced by its
symbol, to be placed on a product, KOF-K must approve both the ingredients contained in
the product and the facility processing the product. Approval of the manufacturing
facilities we use include periodic inspections, and in most cases, on-site supervision of
actual production. We believe that our ability to successfully market and distribute our
products is dependent upon our continued compliance with the requirements of rabbinical
certification. All TOFUTTI products meet the requirements for certification as
kosher-parve.

TRADEMARKS AND PATENTS

We
have registered our trademark, TOFUTTI®, and other trademarks for our frozen desserts
and other products in the United States and approximately thirty-six 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.

9

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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.

The
FDA published the final rule amending the Nutritional Labeling regulations to require
declaration of Trans Fatty Acids in the nutritional label of conventional
foods and dietary supplements on July 11, 2003. The final rule became effective on January
1, 2006. Additionally, an allergen labeling law was passed and signed on August 3, 2004.
This law requires certain allergens to be clearly labeled by January 1, 2006. All the
necessary packaging changes were made in a timely fashion.

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 29, 2007, we employed eleven persons on a full-time basis, and on December 30,
2006, we employed ten 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.

10

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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.

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 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 29, 2007 and December 30, 2006, we purchased approximately 4% and 19% of our
finished goods, respectively, from Ellsworth Ice Cream Company, our former frozen dessert
co-packer that went out of business in May 2007. We made a permanent transfer of the
products that were handled by Ellsworth to Leibys in 2007, and we purchased 9% of
our finished goods from this producer. In fiscal 2007 and fiscal 2006, we purchased 17%
and 15% of our finished goods, respectively, from Franklin Foods, our Better Than Cream
Cheese and Sour Supreme co-packer, and we purchased approximately 10% of our finished
goods from Kemps Foods, our former frozen dessert co-packer in 2006. 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 affect on our company.

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.

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.

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.

Dependence
on Key Customers.During the years ended December 29, 2007 and December 30, 2006,
Trader Joes accounted for 20% and 23% 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 55% of our net sales for the year ended
December 29, 2007 and 58% of our net sales for the year ended December 30, 2006. The loss
of a substantial portion of our sales to Trader Joes would have a material adverse
affect on our company.

11

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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.

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 76), Chief Executive Officer, and Steven Kass (age 56), 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 51% 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.

We
are Subject to Risks Associated with International Operations.
In 2007 approximately 10% 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.
| | - | -----------------------------------

12

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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.

|Item 2. | Description of Property.
|------- | ------------------------

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 2007 and $76,000 in 2006. 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 29, 2007.

13

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# PART II

|Item 5. | Market for Common Equity and Related Stockholder Matters.
|------- | ---------------------------------------------------------

Our
common stock has traded on the American Stock Exchange under the symbol TOF since October
29, 1985.  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
|------------------ | ---- | ---
|
|
|
|
|April 1, 2006      |      |    
|                   |      |    
|July 1, 2006       |      |    
|                   |      |    
|September 30, 2006 |      |    
|                   |      |    
|December 30, 2006  |      |    
|                   |      |    
|March 31, 2007     |      |    
|                   |      |    
|June 30, 2007      |      |    
|                   |      |    
|September 29, 2007 |      |    
|                   |      |    
|December 29, 2007  |      |    

As
of March 31, 2008, there were approximately 606 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 1,290 shareholders. We have not paid and have no present intention of paying
cash dividends on our common stock in the foreseeable future.

|Item 6. | Managements Discussion or Plan of Operation.
|------- | ---------------------------------------------

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.

14

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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.

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 $150,000 as a liability including
related interest or penalties as a direct charge to retained earnings related to our
uncertain tax positions. Our federal and state tax returns are open to examination for the
years 2003 through 2006.

# Recent Accounting
Pronouncements

In
September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or SFAS
157. Among other requirements, SFAS 157 defines fair value and establishes a framework for
measuring fair value and also expands disclosure about the use of fair value to measure
assets and liabilities. SFAS 157 is effective beginning the first fiscal year that begins
after November 15, 2007. The adoption of the provisions of SFAS No. 157 is not
expected to materially impact our financial position and results of operations.

In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities  Including an Amendment of FASB Statement No.
115 (SFAS No. 159). SFAS No. 159 establishes a fair value option permitting entities
to elect the option to measure eligible financial instruments and certain other items at
fair value on specified election dates. Unrealized gains and losses on items for which the
fair value option has been elected will be reported in earnings. The fair value option may
be applied on an instrument-by-instrument basis, with a few exceptions, is irrevocable and
is applied only to entire instruments and not to portions of instruments. SFAS No. 159 is
effective as the beginning of the first fiscal year beginning after November 15, 2007, and
should not be applied retrospectively to fiscal years beginning prior to the effective
date. On the adoption date, an entity may elect the fair value option for eligible items
existing at that date and the adjustment for the initial remeasurement of those items to
fair value should be reported as a cumulative effect adjustment to the opening balance of
retained earnings. The adoption of the provisions of SFAS No.159 is not expected to
materially impact our financial position and results of operations.

15

---

---

In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS
141(R)). SFAS 141(R) expands the definition of transactions and events that qualify as
business combinations; requires that the acquired assets and liabilities, including
contingencies, be recorded at the fair value determined on the acquisition date and
changes thereafter reflected in revenue, not goodwill; changes the recognition timing for
restructuring costs; and requires acquisition costs to be expensed as incurred. Adoption
of SFAS 141(R) is required for combinations after December 15, 2008.

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in Consolidated
Financial Statements (SFAS 160). SFAS 160 re-characterizes minority interests in
consolidated subsidiaries as non-controlling interests and requires the classification of
minority interests as a component of equity. Under SFAS 160, a change in control will be
measured at fair value, with any gain or loss recognized in earnings. The effective date
for SFAS 160 is for annual periods beginning on or after December 15, 2008. The adoption
of the provisions of SFAS No. 160 is not expected to materially impact our financial
position and results of operations.

# Results of Operations

# Fifty-Two Weeks Ended
December 29, 2007 Compared with Fifty-Two Weeks Ended December 30, 2006

Net
sales the fifty-two weeks ended December 29, 2007 (fiscal 2007) were $19,150,000, a
decrease of $315,000, or 2%, from net sales of $19,465,000 for the fifty-two weeks ended
December 30, 2006 (fiscal 2006).

Our
efforts to grow our sales were negatively impacted by three factors. First, and most
importantly, we lost a significant amount of business when the ice cream plant that
formerly produced our frozen dessert products shut down unexpectedly at the end of April
2007. Once we used up our then existing inventories, we experienced inventory shortages of
our frozen dessert novelties until we were able to obtain production elsewhere. We fully
restocked our inventory by the middle of the fourth quarter of 2007. A second reason for
the decline in our sales is that one of our largest customers discontinued the purchase of
one product that generated $400,000 in sales in 2006. Although the sales loss was
sizeable, the impact to our profitability was not significant since this was not a highly
profitable item for us. The third reason was that we found it prudent to discontinue a
number of slower moving items whose continued production was not cost efficient in
relation to the sales level that these items generated. These declines were offset by
increased sales to certain foreign distributors of approximately $177,000 and certain of
our domestic distributors.

16

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---

While
our gross profit in fiscal 2007 decreased by $58,000, or 1%, due primarily to the decrease
in sales, our gross profit percentage was 29% in both the 2007 and 2006 fiscal years. 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 a decrease of freight out expense of $278,000 to $1,411,000 from
$1,689,000 in fiscal 2006. This decrease is attributable in part to the fact that shipping
our frozen dessert novelties from our new ice cream plant 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. We do not anticipate a significant
reduction in the cost of shipping expense in 2008, as world oil prices show no signs of
abating in the foreseeable future. We anticipate that our gross profit will increase due
to increased unit sales and higher sales prices in 2008, 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. We have initiated a
series of price increases that will become effective in the first and second quarters of
2008, which we believe will help us maintain, or improve, our current gross profit
percentage.

Selling
and warehousing expenses increased by $214,000 to $1,656,000 for fiscal 2007 from
$1,442,000 in fiscal 2006. This increase was caused primarily by a $97,000 increase in
outside warehouse rental, a $42,000 increase in travel and entertainment expense and an
$80,000 increase in bad debt expense due to a large recovery included in the 2006 figures.
The increase in outside warehouse rental expense was a result of the build up of finished
goods inventory during the transition to our new principal frozen dessert manufacturing
facilities to ensure adequate supplies of products during the transition period. The
increase in travel and entertainment expense reflects costs associated with visiting key
customers during the production transition period and the attainment of new distributors
in certain key markets. We anticipate that with the exception of commission expenses and
outside warehouse rental expense, which are variable to sales, all other selling expenses
in 2008 should remain relatively consistent with our expenses in 2007.

Marketing
expenses decreased by $191,000 in fiscal 2007 to $353,000 as compared to $544,000 in
fiscal 2006. This decrease is primarily attributable to a $93,000 decrease in expenses for
artwork and plates for new packaging for certain products, an $88,000 decrease in
television advertising expense for a pilot program in one of our markets, and a $10,000
decrease in newspaper advertising expense. We expect marketing expenses to remain
consistent with fiscal 2007 expenses or increase modestly in fiscal 2008.

Product
development expenses increased slightly to $481,000 in fiscal 2007 as compared to $477,000
in fiscal 2006. Our management expects that product development costs will remain
consistent with fiscal 2007 cost in fiscal 2008.

General
and administrative expenses were $2,233,000 for fiscal 2007 as compared with $1,988,000
for fiscal 2006, an increase of $245,000 or 12%. The increase was primarily due to the
$272,000 increase 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, and
an increase of $30,000 in data processing expense. These increases were offset by
reductions of $23,000 in insurance expense, $32,000 in travel, entertainment and auto
expenses and $27,000 in professional fess and outside services. We anticipate that
professional fees and outside services, which include legal and accounting fees, will
increase in fiscal 2008 primarily due to the costs associated with compliance with the
internal controls provisions of The Sarbanes-Oxley Act.

Overall,
total operating expenses in fiscal 2007 increased to $4,723,000, an increase of $272,000,
or 6%, from total operating expenses in fiscal 2006. Had we not incurred the $287,000 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, our operating expenses would have decreased slightly
from fiscal 2006.

17

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Income
before income taxes decreased by $330,000 to $799,000 in fiscal 2007 as compared with
$1,129,000 in fiscal 2006 as a result of decreased sales, which resulted in a lower gross
profit, and stock-based compensation expense of $287,000.

Income
taxes for the current fiscal period were $334,000, or 42% of taxable income, compared to
$512,000, or 45% of taxable income, in fiscal 2006. We believe that our effective tax rate
will continue to approximate our historical tax rate of 40%-42% during fiscal 2008.

# Liquidity and Capital
Resources

At
December 29, 2007, our working capital was $4,457,000, an increase of $492,000 from
December 30, 2006. Our current and quick acid test ratios, both measures of liquidity,
were 4.0 and 3.0, respectively, at December 29, 2007 compared to 3.0 and 1.5,
respectively, at December 30, 2006. We believe our existing cash and cash equivalents on
hand at December 29, 2007, and the cash flows expected from operations will be sufficient
to support the Company for at least the next twelve months.

At
December 29, 2007, accounts receivable decreased by $93,000 to $1,991,000 from December
30, 2006, reflecting an increase in cash collections and a slight reduction in sales in
the fiscal year ended December 29, 2007. The average number of days used to collect our
gross accounts receivable in fiscal 2007 was 39 days as compared to 44 days in fiscal
2006. At December 29, 2007, inventories decreased to $1,552,000 from $2,992,000 at
December 30, 2006. The decrease in our inventories is due to two factors. First, the
establishment of relationships with more reliable frozen dessert co-packers allowed us to
reduce our finished goods inventory that we had built up to guard against out of stock
items in the event that our former frozen dessert co-packer ceased operations. Second, our
current frozen dessert co-packer purchases all ingredients and packaging prior to
production, which is the industry standard. With our previous co-packer, we had to
purchase most of the raw materials and packaging. Accounts payable and accrued expenses,
excluding our provision for uncertain tax positions, decreased by $208,000 to $780,000 at
December 29, 2007 from $988,000 at December 30, 2006, reflecting a reduction in our
purchases of ingredients and packaging.

Our
Board of Directors first instituted a share repurchase program in September 2000 which has
to date authorized the repurchase of 1,500,000 shares of our common stock at prevailing
market prices. As of December 29, 2007, we have repurchased 1,342,100 shares with a total
cost of $4,171,000, or an average price of $3.11 per share. We made no stock purchases in
2007. As of March 31, 2008, we repurchased 1,401,700 shares at a total cost of $4,334,000,
or an average price of $3.09 per share.

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 2008 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, 2008, 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 29, 2007 or December 30, 2006.

18

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Cash Flows

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

The
improvement in the cash flows from operating activities is principally due to the fact
that we no longer have to make significant investments in finished goods inventory, for
the reasons discussed above. The cash provided by financing activities in fiscal 2007 was
the proceeds from the stock option exercise (note that the payment of $287,000 for the
redemption of the stock options to an officer is included in cash flows from operating
activities). The cash used in financing activities in fiscal 2006 was the result of the
stock buy-back program. We did not buy back any stock in fiscal 2007, although we have
resumed the program in fiscal 2008.

# Contractual Obligations

We
have no contractual obligations at December 29, 2007.

# 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.

19

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|Item 7. | Financial Statements.
|------- | ---------------------

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

20

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# 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 29, 2007 and December 30, 2006, and
the related statements of income, changes in stockholders equity and cash flows for
each of 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 audits 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 29, 2007 and December 30, 2006, and the
results of its operations and its cash flows for each of the fifty-two week periods then
ended, in conformity with United States generally accepted accounting principles.

The Company adopted the provisions
of FASB Interpretation No. 48, or FIN 48, Accounting for Uncertainty in Income Taxes
 an interpretation of FASB Statement No. 109, as of December 31, 2006.

/s/ Amper Politziner & Mattia, P.C.
AMPER, POLITZINER & MATTIA, P.C.

Edison, New JerseyApril 10, 2008

F - 1

---

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

|                                                   | December 29,
2007 | December 30,
2006
|-------------------------------------------------- | ----------------- | -----------------
|
|
|
|
|Assets                                             |                   |                  
|Current assets:                                    |                   |                  
|Cash and cash equivalents                          |                   |                  
|Accounts receivable, net of allowance for doubtful |                   |                  
|accounts and sales promotions of $430 and $368,    |                   |                  
|respectively                                       |                   |                  
|Inventories                                        |                   |                  
|Prepaid expenses                                   |                   |                  
|Refundable income taxes                            |                   |                  
|Deferred income taxes                              |                   |                  
|                                                   |                   |                  
|Total current assets                               |                   |                  
|                                                   |                   |                  
|                                                   |                   |                  
|Fixed assets (net of accumulated amortization of   |                   |                  
|$24 and $19)                                       |                   |                  
|Other assets                                       |                   |                  
|                                                   |                   |                  
|                                                   |                   |                  
|                                                   |                   |                  
|                                                   |                   |                  
|Liabilities and Stockholders' Equity               |                   |                  
|Current liabilities:                               |                   |                  
|Accounts payable                                   |                   |                  
|Accrued expenses                                   |                   |                  
|Accrued officers' compensation                     |                   |                  
|Income taxes payable                               |                   |                  
|                                                   |                   |                  
|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 5,653,467 shares at December 29,       |                   |                  
|2007 and 5,443,467 shares at December 30, 2006     |                   |                  
|Additional paid-in capital                         |                   |                  
|Retained earnings                                  |                   |                  
|                                                   |                   |                  
|Total stockholders' equity                         |                   |                  
|                                                   |                   |                  
|Total liabilities and stockholders' equity         |                   |                  
|                                                   |                   |                  

See accompanying notes to financial statements.

F - 2

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---

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

|                               | Fifty-two weeksendedDecember 29, 2007 | Fifty-two weeksendedDecember 30, 2006
|------------------------------ | ------------------------------------- | -------------------------------------
|
|
|
|
|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

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---

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

|                                                    | Common Stock | Treasury Stock | AdditionalPaid-InCapital | RetainedEarnings | TotalStockholders'Equity
|--------------------------------------------------- | ------------ | -------------- | ------------------------ | ---------------- | ------------------------
|
|
|
|
|Balances, December 31, 2005                         |              |                |                          | 5,542,267        |                         
|Purchase of treasury stock                          |              |                |                          | --               |                         
|Retirement of treasury stock                        |              |                |                          | (128,800         | )                       
|Stock options exercised                             |              |                |                          | 20,000           |                         
|Stock compensation expense                          |              |                |                          | --               |                         
|Net income for period ended December 30, 2006       |              |                |                          | --               |                         
|                                                    |              |                |                          |                  |                         
|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        |                         
|                                                    |              |                |                          |                  |                         

See accompanying notes to financial statements.

F - 4

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---

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

|                                                           | Fifty-two
weeks ended
December 29,
2007 | Fifty-two
weeks ended
December 30,
2006
|---------------------------------------------------------- | --------------------------------------- | ---------------------------------------
|
|
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                      |                                         |                                        
|Net income                                                 |                                         |                                        
|Adjustments to reconcile net income to net                 |                                         |                                        
|cash flows provided by (used in) operating activities:     |                                         |                                        
|Amortization                                               |                                         |                                        
|Provision for (recovery of) 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 provided by (used in) operating activities  |                                         |                                        
|                                                           |                                         |                                        
|                                                           |                                         |                                        
|CASH FLOWS FROM FINANCING ACTIVITIES:                      |                                         |                                        
|Proceeds from exercise of  stock options, net              |                                         |                                        
|Purchase of treasury 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

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---

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
29, 2007 and December 30 2006, 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 years ended December 29,
2007 and December 30, 2006, the Company derived approximately 90% and 91%, 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 20% of net sales during
fiscal 2007 and 23% of net sales during fiscal 2006. 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 55% and 58% of the Companys net sales for the
years ended December 29, 2007 and December 30, 2006. The accounts receivable balance of
one customer represented approximately 15% of total accounts receivable at December 29,
2007.

F - 6

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---

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

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.

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
4% and 19% of its finished products from one supplier and 17% and 15% of its finished
goods from another supplier during the periods ended December 29, 2007 and December 30,
2006, 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 29, 2007
and December 30, 2006, 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

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---

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 30,
2006
|---------------------------------------------------------------------- | --------------------------------------- | ---------------------------------------
|
|
|
|
|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 adopted SFAS No. 123(R) Share-Based Payment on January 1, 2006, which
requires all share-based payments to employees, including grants of employee stock
options, to be valued at fair value on the date of grant, and to be expensed over the
applicable vesting period. In addition, companies must also recognize compensation expense
related to any awards that are not fully vested as of the effective date. Compensation
expense for the unvested awards will be measured based on the fair value of the awards
previously calculated in developing the pro forma disclosures in accordance with the
provisions of SFAS No. 123.

Fair Value of Financial
Instruments  SFAS No. 107, Disclosures about Fair Value of Financial
Instruments, defines the fair value of a financial instrument as the amount at which
the instrument could be exchanged in a current transaction between willing parties.

Cash and equivalents, accounts
receivable and accounts payable as of December 29, 2007 and December 30, 2006 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 $1,411 and
$1,689 during the periods ended December 29, 2007 and December 30, 2006, 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
$39 and $137 during the periods ended December 29, 2007 and December 30, 2006,
respectively.

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

Recent Accounting
Pronouncements  In September 2006, the FASB issued SFAS No. 157,
Fair Value Measurements, or SFAS 157. Among other requirements, SFAS 157
defines fair value and establishes a framework for measuring fair value and also expands
disclosure about the use of fair value to measure assets and liabilities. SFAS 157 is
effective beginning the first fiscal year that begins after November 15, 2007. The
adoption of the provisions of SFAS No. 157 is not expected to materially impact the
Companys financial position and results of operations.

F - 8

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---

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

In February 2007, the FASB issued
SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities
 Including an Amendment of FASB Statement No. 115 (SFAS No. 159). SFAS No. 159
establishes a fair value option permitting entities to elect the option to measure
eligible financial instruments and certain other items at fair value on specified election
dates. Unrealized gains and losses on items for which the fair value option has been
elected will be reported in earnings. The fair value option may be applied on an
instrument-by-instrument basis, with a few exceptions, is irrevocable and is applied only
to entire instruments and not to portions of instruments. SFAS No. 159 is effective as the
beginning of the first fiscal year beginning after November 15, 2007, and should not be
applied retrospectively to fiscal years beginning prior to the effective date. On the
adoption date, an entity may elect the fair value option for eligible items existing at
that date and the adjustment for the initial remeasurement of those items to fair value
should be reported as a cumulative effect adjustment to the opening balance of retained
earnings. The adoption of the provisions of SFAS No. 159 is not expected to materially
impact the Companys financial position and results of operations.

In December 2007, the FASB issued
SFAS No. 141(R), Business Combinations (SFAS 141(R)). SFAS 141(R) expands the
definition of transactions and events that qualify as business combinations; requires that
the acquired assets and liabilities, including contingencies, be recorded at the fair
value determined on the acquisition date and changes thereafter reflected in revenue, not
goodwill; changes the recognition timing for restructuring costs; and requires acquisition
costs to be expensed as incurred. Adoption of SFAS 141(R) is required for combinations
after December 15, 2008.

In December 2007, the FASB issued
SFAS No. 160, Noncontrolling Interest in Consolidated Financial Statements
(SFAS 160). SFAS 160 re-characterizes minority interests in consolidated subsidiaries as
non-controlling interests and requires the classification of minority interests as a
component of equity. Under SFAS 160, a change in control will be measured at fair value,
with any gain or loss recognized in earnings. The effective date for SFAS 160 is for
annual periods beginning on or after December 15, 2008. The adoption of the provisions of
SFAS No. 160 is not expected to materially impact the Companys financial position
and results of operations.

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

Inventories consist of the following:

|                            | December 29,
2007 | December 30,
2006
|--------------------------- | ----------------- | -----------------
|
|
|
|
|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.

F - 9

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---

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

The following is a summary of stock
option activity from January 1, 2006 to December 29, 2007:

|                                    | INCENTIVE OPTIONS | NON-QUALIFIED OPTIONS | 
|----------------------------------- | ----------------- | --------------------- | 
|
|
|
|
|Outstanding at December 31, 2005    |                   |                       | 
|Granted in 2006                     |                   |                       | 
|Exercised in 2006                   |                   |                       | 
|                                    |                   |                       | 
|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 30, 2006    |                   |                       | 
|                                    |                   |                       | 
|Exercisable at December 29, 2007    |                   |                       | 
|                                    |                   |                       | 

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.

In 2006, 16,000 non-qualified stock
options were granted to two non-employee directors with a fair value at grant date of
$1.00, using the following assumptions: Dividend rate = 0%, expected life = 5, risk free
interest = 3.89% and volatility = 63%. The intrinsic value of the 20,000 shares exercised
during 2006 was approximately $22,000 at the date of the exercise. 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%.

F - 10

---

---

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

The following table summarizes
information about stock options outstanding at December 29, 2007:

|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 29, 2007 is approximately $28 expected to be expensed over
three 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 2007 and $76 in 2006. 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 years ended December 29, 2007 and December 30, 2006 are as follows:

| |                          | Dec. 29,
2007 | Dec. 30,
2006
| | ------------------------ | ------------- | -------------
|
|
|
|
| | Current:                 |               |              
| | Federal                  |               |              
| | State                    |               |              
| |                          |               |              
| |                          |               |              
| |                          |               |              
| | Deferred:                |               |              
| | Federal                  |               |              
| | State                    |               |              
| |                          |               |              
| |                          |               |              
| |                          |               |              
| | Total income tax expense |               |              
| |                          |               |              

F - 11

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---

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 29, 2007 and December 30, 2006 follows:

| |                                                       | Dec. 29,
2007 | Dec. 30,
2006
| | ----------------------------------------------------- | ------------- | -------------
|
|
|
|
| | Income tax expense computed at federal statutory rate |               |              
| | Permanent and other items                             |               |              
| | Under-accrual of prior year                           |               |              
| | Addition to FIN 48 provision                          |               |              
| | State income taxes, net of federal income tax benefit |               |              
| |                                                       |               |              
| |                                                       |               |              
| |                                                       |               |              

Deferred tax asset at December 29,
2007 and December 30, 2006 consist of the following components:

| |                                             | Dec. 29,
2007 | Dec. 30,
2006
| | ------------------------------------------- | ------------- | -------------
|
|
|
|
| | Allowance for doubtful accounts             |               |              
| | Inventory                                   |               |              
| | Accruals and reserves                       |               |              
| | 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 31, 2006               | 
| | Additions based on tax positions           | 
| | related to the current year                | 
| | Additions for tax positions of prior years | 
| |                                            | 
| | Balance at December 29, 2007               | 
| |                                            | 

The provision at December 29, 2007
for uncertain tax positions is included in accrued expenses. The Company's federal and state tax
returns are open to examination for the years 2003 to 2006.

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 April 7, 2008, 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 8. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure.
|------- | -------------------------------------------------------------------------------------

None.

|Item 8A(T). | Controls and Procedures.
|----------- | ------------------------

(a)
          As of the end of the period covered by this Annual Report on Form 10-KSB, we
          evaluated the effectiveness of the design and operation of our disclosure
          controls and procedures, or Disclosure Controls, and our internal controls and
          procedures for financial reporting, or Internal Controls. This evaluation, or
          the controls Evaluation, was done under the supervision and with the
          participation of our chief executive officer and principal financial officer.
          Rules adopted by the Securities and Exchange Commission, or the SEC, require
          that in this section of our Annual Report we present the conclusions of our
          chief executive officer and the principal financial officer about the
          effectiveness of our Disclosure Controls and Internal Controls based on and as
          of the date of their evaluation.

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.

Our
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.

21

---

---

Based
on our evaluation under the frameworks described above, our management has concluded that
our internal control over financial reporting was ineffective as of December 29, 2007
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.
| | - | ----------------------------------------------------------------------------------------------------------------

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

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 8B. | Other Information.
|-------- | ------------------

None.

22

---

---

# PART III

|Item 9. | Directors, Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance withSection 16(a) of the Exchange Act.
|------- | -------------------------------------------------------------------------------------------------------------------------------------

Our
directors and executive officers are:

|Name            | Age |  | Position                                                   
|--------------- | --- |  | -----------------------------------------------------------
|
|
|
|
|David Mintz     | 76  |  | Chairman of the Board of Directors, Chief Executive Officer
|Steven Kass     | 56  |  | Chief Financial Officer, Secretary and Treasurer           
|Neal S. Axelrod | 55  |  | Director                                                   
|Joseph Fischer  | 68  |  | Director                                                   
|Aron Forem      | 53  |  | Director                                                   
|Philip Gotthelf | 55  |  | Director                                                   
|Reuben Rapoport | 79  |  | Director                                                   
|Franklyn Snitow | 61  |  | 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 was elected to the Board of Directors effective August 6, 2007 to serve until
the next Annual Meeting of Stockholders. Mr. Axelrod has been a self-employed certified
public accountant in New Jersey since 1977.

Joseph
Fischer was elected to the Board of Directors effective August 6, 2007 to serve until the
next Annual Meeting of Stockholders. 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.

23

---

---

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.

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 2007 all persons subject to
these reporting requirements filed the required reports on a timely basis.

24

---

---

# 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 10. | 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 2007
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                 |      |            |           | 2007             |                   |                                            | 450,000                    |         
|Chief Executive Officer     |      |            |           | 2006             |                   |                                            | 450,000                    |         
|and Director                |      |            |           | 2005             |                   |                                            | 450,000                    |         
|                            |      |           
|Steven Kass                 |      |            |           | 2007             |                   |                                            | 125,000                    |         
|Chief Financial             |      |            |           | 2006             |                   |                                            | 125,000                    |         
|Officer                     |      |            |           | 2005             |                   |                                            | 125,000                    |         

---

|(1) | 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
exercised options is calculated as the difference                     between the closing
price of the Common Stock on the date of exercise 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.

25

---

---

# Grants of Plan-Based
Awards for 2007

The
following table provides information relating to stock options awarded during the fiscal
year ended December 31, 2007:

|Name          | Grant Date | Date ofMeeting | All OtherStockAwards:Number ofShares ofStock orUnits (#) | All OtherStockAwards:Number ofSecuritiesUnderlyingOptions (#) | Exercise orBase Price ofOptionAwards($/SH) (1) | Grant DateValue ofStockOptionAwards
|------------- | ---------- | -------------- | -------------------------------------------------------- | ------------------------------------------------------------- | ---------------------------------------------- | -----------------------------------
|
|
|
|
|Neal Axelrod  |            |                |                                                          | 11/08/07                                                      |                                                |                                    
|Joseph Fisher |            |                |                                                          | 11/08/07                                                      |                                                |                                    

|(1) | The
exercise price of the options is equal to the closing market price of the
          common stock on the grant date.
|--- | -----------------------------------------------------------------------------------------------------------------------

# 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 2007 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 $1,000 per meeting attended. In
addition, two of our independent directors received stock option grants in 2007. See
Grants of Plan-Based Awards for 2007 above.

The
following table sets for the compensation received by each of the Companys
non-employee Directors. 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 |                                 |                  |                   | 1,750                                      |                                        |                            | --       
|Joseph Fischer  |                                 |                  |                   | 1,500                                      |                                        |                            | --       
|Aron Forem      |                                 |                  |                   | 1,000                                      |                                        |                            | --       
|Philip Gotthelf |                                 |                  |                   | 2,500                                      |                                        |                            | --       
|Franklyn Snitow |                                 |                  |                   | 2,000                                      |                                        |                            | --       

# 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.

26

---

---

# Outstanding Equity
Awards at Fiscal Year End

The
following table summarizes the options awards granted to each of the named executive
officer identified above in the summary compensation table above pursuant to 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.

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 29, 2007, all of the
options vested.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Item 11. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
|-------- | -----------------------------------------------------------------------------------------------

The
following tables set forth as of March 31, 2008 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. |                                          |                    
| | Steven Kass                                   |                                          |                    

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

27

---

---

|(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 31, 2008 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 5,593,867 shares issued and outstanding as of March 31, 2008.
|--- | ----------------------------------------------------------------------

|(4) | Based
on the information contained in a Schedule 13G filed by the Financial
                    & Investment Management Group, Ltd. filed February 26, 2008. The
address of                     the Financial & Investment Management Group, Ltd. is
111 Cass Street,                     Traverse City, MI 49684.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Includes
400,000 shares issuable upon the exercise of currently exercisable
                    stock options.
|--- | --------------------------------------------------------------------------------------------------------------

# 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 31, 2008 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 5,593,867 shares issued and outstanding as of March 31, 2008.
|--- | ----------------------------------------------------------------------

|(4) | Includes
400,000 shares issuable upon the exercise of currently exercisable
                    stock options.
|--- | --------------------------------------------------------------------------------------------------------------

|(5) | Includes
8,666 shares issuable upon the exercise of currently exercisable stock
                    options.
|--- | ------------------------------------------------------------------------------------------------------------

|(6) | Includes
6,666 shares issuable upon the exercise of currently exercisable stock
                    options.
|--- | ------------------------------------------------------------------------------------------------------------

|(7) | Includes
5,000 shares issuable upon the exercise of currently exercisable stock
                    options.
|--- | ------------------------------------------------------------------------------------------------------------

|(8) | Includes
414,332 shares issuable upon the exercise of currently exercisable
                    stock options.
|--- | --------------------------------------------------------------------------------------------------------------

28

---

---

|Item 12. | Certain Relationships and Related Transactions, and Director Independence.
|-------- | --------------------------------------------------------------------------

None.

|Item 13. | 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, P. C.
|---- | --------------------------------------------

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

Schedule II  page S-1,
immediately following the signature page.

29

---

---

|Item 14. | Principal Accountant 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, P.C. 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.

30

---

---

# SIGNATURES

Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized on April 14, 2008.

| |  | 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
April 14, 2008, 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 S. AxelrodNeal S. Axelrod
Director
/s/ Joseph FischerJoseph Fischer
Director

31

---

---

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

32

---

---

# SCHEDULE II

# Tofutti Brands Inc.

|                                    | Balance at
Beginning of
Fiscal Year | Additions
Charged to
Earnings | Write-offs Net
of Recoveries | Balance at End of
Fiscal Year
|----------------------------------- | ----------------------------------- | ----------------------------- | ---------------------------- | -----------------------------
|
|
|
|
|Fiscal year ended December 29, 2007 |                                     |                               |                              |                              
|Allowance for doubtful accounts     |                                     |                               | $                            | 243                          
|Sales promotion allowance           |                                     |                               |                              | 125                          
|                                    |                                     |                              
|Fiscal year ended December 30, 2006 |                                     |                              
|Allowance for doubtful accounts     |                                     |                               | $                            | 291                          
|Sales promotion allowance           |                                     |                               |                              | 100                          

S - 1

---

---

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, P. C.
|---- | --------------------------------------------

|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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