SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 26, 1998

                         Commission File Number: 1-9009

                               TOFUTTI BRANDS INC.
                 (Name of small business issuer in its charter)

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

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

Issuer's telephone number:  (908) 272-2400

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

                                                     Name of each exchange
             Title of each class                     on which registered 
             -------------------                     ------------------- 
 Common Stock, par value $.01 per share             American Stock Exchange

Securities registered pursuant to 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,  and (2) has been
subject to such filing requirements for the past 90 days.

                                                           Yes  x   No    

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]

Issuer's revenues for its most recent fiscal year: $8,991,000

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 10, 1999 was $2,996,127.

As of March 10, 1999, the Registrant had 6,183,567  shares of Common Stock,  par
value $.01, outstanding.

Transitional Small Business Disclosure Format     Yes       No  x.



                                                              

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                                     PART I

Item 1.  Description of Business

GENERAL

     Tofutti Brands Inc., a Delaware  corporation  (the "Company") is engaged in
the  development,  production and marketing of TOFUTTI(R) brand non-dairy frozen
desserts and other food products.  TOFUTTI  products are  non-dairy,  soya-based
products  which  contain no  butterfat,  cholesterol  or lactose.  Butterfat and
cholesterol  are perceived by some medical  experts and a significant  number of
consumers as causing health problems. In addition,  some studies have shown that
lactose  intolerance,  the inability to metabolize milk and dairy  products,  is
present to varying degrees in a significant number of people. All dairy products
have  lactose,  or milk  sugar.  Most  human  beings  are born  with a supply of
lactase, an enzyme essential for digesting lactose.  With age, the body's supply
of lactase may diminish, which may cause difficulty in the digestion of lactose.
TOFUTTI  products are 100% milk free yet offer the same texture and  full-bodied
taste as their dairy counterparts. TOFUTTI products are also free of cholesterol
and derive their fat from soy and corn,  both  naturally  lower in saturated fat
than dairy products.

     TOFUTTI  products are an alternative for  dairy-conscious  individuals with
lactose  intolerance or for those  health-oriented  people with a desire to keep
cholesterol  intake in check. The Company's  products enable such individuals to
enjoy products  similar to dairy products  without their downside  health risks.
Although the Company  believes  the absence of lactose and  butterfat in TOFUTTI
products  makes them  attractive  to persons with lactose  intolerance  or heart
disease,  the Company has not  conducted  any studies  regarding the efficacy of
TOFUTTI  products as they relate to lactose  intolerance  and heart  disease and
makes no representation as to the accuracy of studies performed by others.

     The Company  introduced  several new products during 1998.  Among them were
several new frozen items including sugar free, fat free TOFUTTI non-dairy frozen
dessert in half-gallons,  TOFUTTI  BLINTZES and POTATO PANCAKES,  both made with
the Company's  BETTER THAN CREAM  CHEESE(R) and TOFUTTI PIZZA PIZZAZ,  made with
the Company's  non-dairy  mozzarella cheese. The Company also introduced several
new  shelf-stable  products in 1998;  TOFUTTI TEDDY BEARS  CHOCOLATE and PANCAKE
SYRUPS are fat free, all natural  products,  while TOFUTTI TOTALLY NUTS,  offers
consumers roasted soy nuts as a healthy snack alternative. With the introduction
of  its  new  products  and  improved  channels  of  distribution,  the  Company
significantly improved its sales in 1998.

TOFUTTI PRODUCT LINE

o    Premium TOFUTTI  non-dairy  frozen dessert,  available in prepacked  pints,
     three-gallon  cans and soft serve mix, is sold nationally in  supermarkets,
     grocery stores, retail shops and restaurants.  The Company currently offers
     seven flavors of premium hard frozen



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     TOFUTTI:  Chocolate  Supreme,  Wildberry Supreme,  Vanilla,  Vanilla Almond
     Bark(R), Vanilla Fudge, Chocolate Cookie Crunch and Better Pecan(R).

o    TOFUTTI  low fat  non-dairy  frozen  dessert  offers the  calorie-conscious
     consumer a creamy  dessert  that is 98% fat free and less than 120 calories
     per  serving.  Sold  nationally  in pints,  LOW FAT TOFUTTI is offered in a
     number  of  flavors  including  Vanilla  Fudge,   Chocolate  Fudge,  Coffee
     Marshmallow  Swirl,  Strawberry  Banana and Peach Mango. LOW FAT TOFUTTI is
     also available as a soft serve mix in three flavors: Vanilla, Chocolate and
     Strawberry.

o    Cool and refreshing TOFUTTI SORBETS in pint containers offer the consumer a
     natural  sorbet  dessert and come in six  flavors:  Chocolate,  Strawberry,
     Orange Peach Mango, Lemon, Coffee and Raspberry Tea.

o    HONEY  SWEETENED  TOFUTTI  in pints  offers  those  individuals  with sugar
     restrictions a natural alternative without artificial  sweeteners and comes
     in two flavors: Vanilla Chamomile and Krazy Garlic Plus.

o    TOFUTTI SUNDAE HALF GALLONS offer the diet conscious consumer a sugar free,
     fat free  dessert with the taste and texture of premium  TOFUTTI.  They are
     currently available in three flavors: Vanilla Fudge Sundae, Chocolate Fudge
     Sundae and Strawberry Sundae.

o    TOFUTTI  CUTIES(R) are bite-size frozen  sandwiches  combining a chocolate,
     vanilla,  wildberry or peanut butter filling between two chocolate  wafers.
     Half the size of  traditional  ice cream  sandwiches,  TOFUTTI CUTIES offer
     consumers a portion controlled treat.

o    TOFUTTI TOO-TOO'S are frozen dessert cookie sandwiches combining creamy and
     delicious TOFUTTI with a round,  vanilla/chocolate  chip cookie.  TOO-TOO's
     are  available  in three  flavors:  Vanilla,  Vanilla/Chocolate  Swirl  and
     Vanilla/Chocolate Chip.

o    TOFUTTI  FRUTTI(R)  stick  novelties  have 180 calories per bar and combine
     creamy vanilla TOFUTTI with a tangy sorbet covered in chocolate.

o    TEDDY FUDGE POPS(R) and  CHOCOLATE  FUDGE TREATS are stick  novelties  that
     offer the consumer  the same taste as real fudge bars.  The TEDDY FUDGE POP
     has 70 calories  and 1 gram of fat per bar,  while  CHOCOLATE  FUDGE TREATS
     have only 30 calories per bar and are fat and sugar free.

o    The  TOFUTTI  CUTIE PIE is a rich,  premium  novelty  treat on a stick that
     combines a rich,  creamy TOFUTTI vanilla or chocolate center covered with a
     chocolate  coating.  It is  available in most health food stores and select
     supermarkets.



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<PAGE>



o    TOFUTTI  FROZEN  DESSERT  CAKES  offer  the  Tofutti  consumer  an  upscale
     non-dairy  frozen dessert  alternative to dairy ice cream cakes.  The cakes
     come in  various  types,  CHOCOLATE  LOVERS  DELIGHT,  ROCK N' ROLL and the
     SPRINKLE ROLL, and sizes. They are currently  available in supermarkets and
     health food store outlets.

o    TOFUTTI BETTER THAN CHEESECAKE(R) is made with the Company's popular BETTER
     THAN CREAM CHEESE and SOUR SUPREME.  Each 20 oz. cake is  completely  dairy
     free and the product is available in three flavors: Plain, Chocolate Marble
     and Strawberry.

o    TOFUTTI ITALIAN STYLE CANNOLI are made using the Company's non-dairy BETTER
     THAN CREAM CHEESE.  They combine a creamy,  non-dairy cheese filling with a
     chocolate covered cannoli shell and are available in retail packages.

o    TOFUTTI COOKIES are made with all natural ingredients and unbleached flour.
     The 16 oz.  packages  are  available  in  peanut  butter,  oatmeal  raisin,
     chocolate chip and TOFIGGI(R) fig bars. Like all TOFUTTI products, they are
     completely dairy and cholesterol free.

o    TOFUTTI SOY LAVASCH(R)  flatbread  crackers,  made with TOFUTTI BETTER THAN
     CREAM  CHEESE,  offer  consumers a tasty snack that tastes  delicious  with
     spreads or simply plain.  SOY LAVASCH come in 5 oz. retail packages and are
     available in four flavors:  Onion & Poppy,  Garlic & Dill,  Hot & Spicy and
     Herb & Chive.

o    TOFUTTI SOY RITE(R) is a frozen soy beverage that offers  health  conscious
     consumers  a  nutritional  creamy  beverage  drink  with all the  taste and
     texture of real milk,  yet  contains  no lactose or  cholesterol.  SOY RITE
     comes in Vanilla and Chocolate Flavors and is available in 8 oz. and 16 oz.
     containers.

o    BETTER THAN CREAM  CHEESE(R) is similar in taste and texture to traditional
     cream cheese but is milk and  butterfat  free and contains no  cholesterol.
     The 8 oz. retail packages are available in plain,  French onion,  herbs and
     chives,  wildberry,  smoked salmon, jalapeno,  ginseng and dill, garlic and
     herb and garden veggie.  The plain version is also available in 30 lb. bulk
     boxes, while certain select flavors are available in 5 lb. containers.

o    SOUR SUPREME(R)  complements BETTER THAN CREAM CHEESE in that it is similar
     in  taste  and  texture  to   traditional   sour  cream  but  is  milk  and
     butterfat-free and contains no cholesterol.  The 12 oz. retail packages are
     available in plain,  guacamole,  salsa and cherries 'n' berries.  The plain
     version is also available in 30 lb. bulk boxes.




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o    TOFUTTI  TORTELLINI are bite-sized  frozen pasta filled with TOFUTTI BETTER
     THAN CREAM CHEESE and are sold in 15 oz. bags for  supermarkets  and health
     food stores.  The  tortellini  are  available  in two  flavors:  cheese and
     spinach cheese.

o    TOFUTTI  PIZZA  PIZZAZ  combines a  delicious  pan crust,  zesty  sauce and
     TOFUTTI'S totally dairy free mozzarella cheese into a completely authentic,
     yet healthy pizza. It is available in three square slice retail boxes.

o    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. Whether as a main meal or a snack, they can be served either hot,
     warm or slightly chilled.

o    TOFUTTI POTATO PANCAKES offer the consumer a snack or dinner side dish that
     combines a delicious  mixture of potato and the  Company's  non-dairy  sour
     cream, SOUR SUPREME.

o    TOFUTTI  TEDDY BEARS  CHOCOLATE  SYRUP and PANCAKE SYRUP offer the consumer
     syrups that are not only dairy and cholesterol  free, but fat free as well.
     Both products can be used in  conjunction  with other  Tofutti  products or
     regular dairy products.

o    TOFUTTI  TOTALLY  NUTS,  a new  homestyle  roasted soy bean snack  product,
     offers consumers a healthy yet delicious snack alternative. TOFUTTI TOTALLY
     NUTS are available in 6.5 oz. retail packages and are sold to the Company's
     natural and specialty products customers.

o    EGG  WATCHERS(R)  is a  fat-free  replacement  for whole  eggs that has the
     taste,  nutrition and versatility of whole eggs without the cholesterol and
     with 60% less  calories and fat. EGG WATCHERS can be used in virtually  all
     recipes that require whole eggs.


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 products marketed by the Company are sold by independent
unaffiliated  food brokers to  distributors  and  sometimes on a direct basis to
retail  chain  accounts.  Food  brokers  act as agents  for the  Company  within
designated  territories or for specific accounts and receive commissions,  which
average 5% of net sales.

     During 1998,  the Company had national  supermarket  sales of $2,390,000 or
27% of sales,  as compared to $2,169,000 or 29% of sales in 1997. The Mattus Ice
Cream Company  distributes the Company's  non-dairy  frozen dessert  products to
supermarket accounts in the metropolitan New York area. Total sales to Mattus in
the New York  metropolitan  area  were  $864,000  or 10% of  sales  in 1998,  as
compared with sales of $802,000 or 11% of sales in 1997. The Company



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currently sells its frozen dessert  products in most major markets in the United
States, including Atlanta, Boston, Cincinnati,  Cleveland,  Denver, Detroit, Los
Angeles, Miami, New York, Philadelphia, Phoenix, San Francisco and Seattle.

     The Company  distributes its products through  twenty-four  distributors in
the national health food market. Sales to the Company's health food distributors
in 1998 were  $4,231,000  or 47% of sales,  as compared to  $3,084,000 or 41% of
sales in 1997. In 1998,  sales to Trader  Joe's,  a West Coast based health food
supermarket  chain, rose to $1,418,000 or 16% of sales as compared to $1,032,000
or 14% of sales in 1997. Overall, the Company's West Coast sales were $2,221,000
or 25% of sales in 1998, as compared to $1,810,000 or 24% of sales in 1997.  The
Company continues to have a strong presence in the kosher market,  with sales of
$605,000  or 7% of sales in 1998,  as  compared  with sales of $649,000 or 9% of
sales in 1997.  During 1998,  the Company had sales to food service  accounts of
$705,000 or 8% of sales,  as  compared  with sales of $673,000 or 9% of sales in
1997.

     During 1998, the Company shipped TOFUTTI non-dairy products to distributors
in Australia,  Belgium,  Bermuda,  Canada,  England,  France,  Germany,  Israel,
Kuwait, Martinique, Mexico, the Netherlands, Panama, Portugal, Spain and Sweden.
Sales to distributors in foreign countries totaled $1,060,000 or 12% of sales in
1998,  as compared to $865,000 or 12% of sales in 1997.  The  increase in export
sales was due  primarily  to an increase in sales to the  Company's  Israeli and
Canadian  distributors.  The  Company's  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 its products.

     The Company expects the favorable sales trend in the supermarket,  national
health  food,  West Coast,  kosher,  food service and  international  markets to
continue in 1999.

COMPETITION

     TOFUTTI  frozen  desserts  compete  with all forms of ice  cream  products,
yogurt-based desserts and other soya-based frozen desserts. The Company believes
it has the most  complete  line of non-dairy  frozen  dessert  products and is a
leader in this market.  Other  soya-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 the Company competes are  substantially
larger and have significantly  greater resources than the Company. The Company's
other products also face substantial competition,  from both non-dairy and dairy
competitive products marketed by companies with significantly  greater resources
than the Company.

RESEARCH AND DEVELOPMENT

     During the last two years, David Mintz, Chief Executive Officer, and Reuben
Rapoport,  Director of Product  Development,  have devoted  substantial time and
effort to the development of new products and the reformulation of the Company's
current products. In 1998 and 1997,



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the  Company's  research and  development  expenses  were $342,000 and $273,000,
respectively. Such amounts do not include any portion of Mr. Mintz's salary.

PRODUCTION

     All of the Company's  products are  manufactured  by co-packers to whom the
Company supplies certain key ingredients for the  manufacturing  processes.  The
Company's  co-packers  manufacture  and package the  Company's  products and, in
certain  instances,  warehouse such products pending  shipment.  For certain key
product categories,  such as non-dairy frozen dessert and non-dairy cheeses, the
Company  has more  than one  co-packer.  The  Company  currently  has  seventeen
co-packers,  including one in the United Kingdom that manufactures the Company's
non-dairy frozen dessert pints.

     The  Company  does not  have any  written  production  agreements  with its
co-packers  and  does  not  anticipate  that it  would  encounter  any  material
difficulty in obtaining alternative production sources, at a comparable cost, if
one or all of its contract manufacturers decide to terminate their relationships
with the Company.

     In  order  to  protect  its   formulas,   the  Company  has  entered   into
confidentiality   arrangements   with  its  contract   manufacturers  and  their
employees. There can be no assurance that such confidentiality  arrangements can
or will be  maintained,  or that  the  Company's  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  ("KOF-K") of Teaneck,  New Jersey  provides the
Company's   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.  The Company  believes that its ability to  successfully
market and distribute  its products is dependent  upon its continued  compliance
with the requirements of rabbinic  certification.  All TOFUTTI products meet the
requirements for certification as kosher-parve.

TRADEMARKS AND PATENTS

     The Company has registered its trademark,  TOFUTTI(R), and other trademarks
for  its  frozen   desserts  and  other   products  in  the  United  States  and
approximately   thirty-seven   foreign  countries.   The  Company  believes  its
trademarks are an important means of establishing  consumer  recognition for its
products.

     Although  the  Company   believes  that  its  formulas  and  processes  are
proprietary,  the Company has not sought patent  protection for such technology.
Instead,  the Company is relying on the complexity of its  technology,  on trade
secrecy laws, and on confidentiality  agreements.  The Company believes that its
technology has been independently developed and does not infringe the patents of
others.





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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 the Company
seeks to market does not conform to an applicable  standard,  special permission
to market such a product is required.

     The Company's United States product labels are subject to regulation by the
United States Food and Drug  Administration  ("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.  The Company's labels,  ingredients
and  manufacturing  processes  are  subject to  inspection  by the FDA. In 1994,
federal  laws  relating to food  product  labeling  were amended to require food
product  companies  to make  numerous  changes in their  product  labeling.  The
Company believes that it is in compliance with current labeling requirements.

     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
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.  The  Company's
Cranford,  New Jersey facility is subject to inspection by the New Jersey-Kosher
Enforcement  Bureau and Environmental  Health Services.  The Company believes it
and its distributors  and co-packers are in compliance in all material  respects
with  governmental  regulations  regarding its current products and has obtained
the  material  governmental  permits,  licenses,  qualifications  and  approvals
required for its operations.  The Company's  compliance with Federal,  state and
local  environmental laws has not materially  affected it either economically or
in the  manner  in which it  conducts  its  business.  However,  there can be no
assurance that the Company,  its  distributors  and  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 the  Company's  products to
consumers.

EMPLOYEES

     On  December  26,  1998 the Company  employed  nine  persons on a full-time
basis,  compared  with eight  persons  as of  December  27,  1997.  The  Company
considers its relations with its employees to be good.



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Item 2.  Description of Properties

     The  Company's  facilities  are located in a modern  one-story  facility in
Cranford,  New Jersey.  The 6,200  square  foot  facility  houses the  Company's
administrative  offices,  a warehouse,  walk-in freezer and refrigerator,  and a
product development laboratory and test kitchen. On January 3, 1994, the Company
signed a five-year  lease  extension  which expires July 1, 1999.  The Company's
annual  rental under its lease was $74,000 in 1998.  The Company is currently in
negotiations  to extend the lease  beyond  its  current  expiration  date and is
reasonably  certain  that  such  lease  extension  will be  granted.  Management
believes that the Cranford facility will continue to satisfy the Company's space
requirements for the foreseeable future.


Item 3.  Legal Proceedings

     The Company is not a party to any material litigation.


Item 4.  Submission of Matters to a Vote of Security Holders

     None.

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     The Company's  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
-------------                                     ----              ---
March 29, 1997........................          $   7/8          $  9/16
June 28, 1997.........................            1-3/16            9/16
September 27, 1997....................            2-7/8             3/4
December 27, 1997.....................            2-3/16          1-1/8

March 29, 1998........................            1-9/16           15/16




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Quarter Ended                                     High              Low
-------------                                     ----              ---
June 27, 1998.........................            2               1-1/4
September 26, 1998....................            1-7/16            7/8
December 26, 1998.....................            1-5/16            7/8

     As of March 10, 1999, there were  approximately  1,042 holders of record of
the  Company's  Common  Stock.  The  Company  has not  paid  and has no  present
intention  of paying  cash  dividends  on its  Common  Stock in the  foreseeable
future.


Item 6. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

     The  following  is   management's   discussion   and  analysis  of  certain
significant  factors which have affected the  Company's  financial  position and
operating  results  during the periods  included in the  accompanying  financial
statements.

     The  discussion  and analysis  which  follows in this Annual  Report and in
other reports and documents of the Company and oral statements made on behalf of
the Company by its  management  and others may contain trend  analysis and other
forward-looking  statements  within the meaning of Section 21E of the Securities
Exchange Act of 1934 which reflect the  Company's  current views with respect to
future events and financial  results.  These  include  statements  regarding the
Company's  earnings,  projected growth and forecasts,  and similar matters which
are not historical facts. The Company reminds  stockholders that forward-looking
statements are merely  predictions  and,  therefore,  are inherently  subject to
uncertainties  and other  factors  which could cause the actual future events or
results  to  differ  materially  from  those  described  in the  forward-looking
statements.  These uncertainties and other factors include,  among other things,
business conditions and growth in the food industry and general economies,  both
domestic and  international;  lower than expected  customer orders;  competitive
factors;   changes  in  product  mix  or  distribution  channels;  and  resource
constraints encountered in developing new products. In addition, difficulties in
completing  remediation of the year 2000 issues by the Company, its customers or
suppliers may have a material  adverse affect on the Company and its operations.
The  forward-looking  statements  contained  in  this  Annual  Report  and  made
elsewhere by or on behalf of the Company  should be considered in light of these
factors.

Fifty-two Weeks Ended December 26, 1998 Compared with Fifty-two Weeks Ended
December 22, 1997

     Net sales for the fifty-two weeks ended December 26, 1998 were  $8,991,000,
an increase of $1,551,000 or 21% from the sales level realized for the fifty-two
weeks ended  December 27, 1997.  In the 1998 period,  non-dairy  frozen  dessert
product  sales and food product  sales  increased by  $1,013,000  and  $538,000,
respectively, from the 1997 period. The increase in non-dairy



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frozen dessert sales was  attributable to an increase in sales of all categories
of frozen dessert products,  while the increase in food product sales was mostly
attributable  to an  increase  in sales of BETTER  THAN  CREAM  CHEESE  and SOUR
SUPREME.  The  Company's  gross profit in 1998  increased by $472,000 or 17% due
primarily to the sales  increase,  while its gross profit  percentage  decreased
slightly from 36% in 1997 to 35% in 1998. The Company's gross profit  percentage
in 1998 was adversely  affected by the start-up  manufacturing  costs associated
with the Company's new products and the increased cost of allowances  associated
with the introduction of those new products.  The Company anticipates that while
its gross profit will increase due to increased  sales in 1999, its gross profit
percentage will not improve due to manufacturing  start-up costs associated with
the planned introduction of new products in 1999.

     Based on its recent  sales  trends,  the Company  expects  continued  sales
increases  in its frozen  dessert and food  product  lines and in most  customer
categories.

     Selling expenses  increased 26% to $1,268,000 for the current fiscal period
from  $1,003,000  for the  comparable  1997  period.  The  primary  cause of the
increase was increased warehouse,  freight and commission expenses. The increase
in warehouse  expense is attributable to an increase in inventory to support the
Company's  increased level of operations.  The increased  freight and commission
expenses  are  attributable  to the  increase  in  sales.  Marketing  and  sales
promotion  expenses increased 9% in 1998 to $188,000 from $172,000 in 1997. This
increase was due  principally to artwork and plate expenses  associates with new
package design for the Company's new products,  which was partially  offset by a
reduction in the Company's trade magazine and newspaper advertising.

     Research and development expenses increased to $342,000 in 1998 as compared
to $273,000 in 1997.  This  increase was due to the hiring of two  employees and
additional  research and development  expenses associated with the Company's new
products. These additional expenses consist mainly of start-up costs incurred at
new  co-packing  facilities,  including  additional  Kosher  supervision  costs.
Management expects that research and development costs will continue at the same
level for 1999. General and  administrative  expenses were $853,000 for the 1998
period as compared with $794,000 for the comparable  period in 1997. The $59,000
increase was due in part to increased salary and public relation expenses.

     Interest  expense was $7,000 for the fifty-two  week periods ended December
26, 1998 and December 27, 1997.

     As a result of  reductions  in the  valuation  allowance  on  deferred  tax
assets,  the Company recorded income tax benefits of $45,000 and $83,000 in 1998
and 1997, respectively.

Income Taxes

     The  Company's tax year ends on July 31st,  its former fiscal year.  Due to
the timing  difference  between the end of the fiscal and tax year, the Company,
on its quarterly and year end reports,  must make  estimates as to its state and
federal tax liabilities.

     Beginning in 1999,  to the extent the Company  generates  future income for
financial  reporting  purposes,  the Company will be required to provide federal
and state tax expense.



                                      -11-

<PAGE>



Although the Company  will begin paying state income taxes in 1999,  the Company
will not be required  to pay  federal  income tax until such time as it utilizes
its remaining federal net operating loss carryforwards and tax credits.

Liquidity and Capital Resources

     At December 26, 1998,  the Company's  working  capital was  $1,990,000,  an
increase of $512,000  from  December  27, 1997.  At December 26, 1998,  accounts
receivable increased by $66,000 from December 27, 1997,  principally  reflecting
the increase in sales.  At December 26, 1998,  inventories  increased by $72,000
from December 27, 1997,  reflecting the  additional  inventory for the Company's
new products.  Prepaid  expenses  increased by $6,000 to $13,000 at December 26,
1998 from December 27, 1997 due to a prepaid 1999 New Jersey income tax payment.
Deferred tax assets increased  $65,000 at December 26, 1998 compared to December
27, 1997  primarily as a result of a reduction in the  valuation  allowance.  At
December 26, 1998,  accounts payable decreased slightly to $85,000 from $94,000,
while accrued expenses increased to $240,000 from $194,000 in 1997. The increase
in income taxes payable of $5,000 to $19,000 at December 26, 1998  represents an
additional provision for state income taxes.

     The Company does not have any material capital commitments and contemplates
no material capital expenditures in the foreseeable future. Although the Company
has operated on a profitable  basis in recent years,  it has not had  sufficient
funds to fully implement the marketing of its new products. Despite this lack of
financing, the Company has succeeded in increasing the sales of its products and
introducing  new  products.  The  Company  believes  it will be able to fund its
operations  during 1999 from its current  resources;  however,  any  substantial
increase in its operations may require additional working capital.  Although the
Company has had  discussions  and  intends to have  future ones with  interested
parties  concerning  additional  financing for the Company,  no assurance can be
given that such working capital will be available, if required.

Bad Debt Write-off

     During  1998,  the Company  wrote off against its  allowance  for  doubtful
accounts  $473,000 of accounts  receivable it deemed to be  uncollectible.  This
amount  represented  balances owed by some of the Company's  foreign  customers,
which had been reserved for in prior years.

Inflation and Seasonality

     The  Company  does  not  believe  that  its  operating  results  have  been
materially  affected by inflation  during the preceding two years. The can be no
assurance, however, that the Company's operating results will not be affected by
inflation in the future.  The Company's  business is not subject to  substantial
seasonal variations.

The Year 2000 Issue

     The Company has completed a comprehensive review of its computer systems to
identify  the systems  that could be affected  by the Year 2000  ("Y2K")  issue.
Substantially  all of the Company's  manufacturing  is performed by  third-party
co-packers, and the Company's financial systems are PC-based purchased software.
The Company is in the process of replacing its



                                      -12-

<PAGE>



existing   financial  systems  with  Y2K  compliant  software  and  expects  the
conversion  to be completed  by June 1999.  Consequently,  management  presently
believes  that  due  to  the  lack  of  date  sensitive   computer  systems  and
applications  currently  in  use,  the  Y2K  issue  will  not  pose  significant
operational problems for the Company's computer systems.  Therefore, the Company
to date has not nor does it expect to develop any contingency  plans relating to
the Y2K issue.  Costs of addressing the Y2K issue have not been material to date
and, based on information gathered to date from the Company and its vendors, are
not  currently  expected  to have a  material  adverse  impact on the  Company's
financial position, results of operations or cash flows.

     In addition,  the Company has  contacted  its major  suppliers  and vendors
seeking information about their internal  compliance  efforts.  Upon review, the
Company  believes that most of its major  suppliers and  co-packers  will be Y2K
compliant and any non-compliance by its suppliers and co-packers will not have a
significant adverse effect upon the Company's operations.

     The Company is in the process of developing  business  contingency plans to
mitigate  the risk of a potential  non-compliant  vendor or system.  The Company
will  continue to assess its exposure to Y2K  problems or possible  disruptions.
Based upon the information it has developed to date, management believes that no
disruptions  will occur in the  Company's  operations.  However,  the Company is
subject to risks should the Company or a third party vendor or service  provider
be unable to resolve issues related to the Y2K.

Other Matters

     In June 1997, the Financial  Accounting Standards Board (the "FASB") issued
Statement of Financial  Accounting Standards ("SFAS") No. 131, "Disclosure about
Segments  of an  Enterprise  and Related  Information"  ("SFAS  131").  SFAS 131
establishes standards for the way public business enterprises report information
about operating segments in annual financial  statements and requires that those
enterprises  report selected  information about operating  segments in financial
reports issued to shareholders.  It also  establishes  standards for disclosures
about products and services,  geographic areas and major customers.  SFAS 131 is
effective for financial statements for fiscal years beginning after December 15,
1997.  Financial  statement  disclosures  for prior  periods are  required to be
restated. The adoption of SFAS 131 has had no impact on the Company's results of
operations,  financial  position  or cash  flows.  The  Company  operates in one
business  segment,  the  development,  production and marketing of TOFUTTI brand
non-dairy frozen desserts and other food products.  Management does not receive,
nor does the Company  generate,  discrete  financial  operating  results for any
portion of the business other than for product sales.



                                      -13-

<PAGE>



Item 7.  Financial Statements


                          Index to Financial Statements


     Independent Auditors' Report........................................F-1

     Financial Statements:

          Balance Sheets
             December 26, 1998 and December 27, 1997.....................F-2

          Statements of Operations and Accumulated Deficit
             Fifty-two weeks ended
             December 26, 1998 and December 27, 1997.....................F-3

          Statements of Cash Flows
             Fifty-two weeks ended
             December 26, 1998 and December 27, 1997.....................F-4

          Notes to Financial Statements..................................F-5







                                      -14-

<PAGE>



                          Independent Auditors' Report





The Board of Directors and Stockholders
Tofutti Brands Inc.:

We have audited the  accompanying  balance  sheets of Tofutti  Brands Inc. as of
December  26,  1998  and  December  27,  1997,  and the  related  statements  of
operations  and  accumulated  deficit,  and cash  flows for the  fifty-two  week
periods then ended.  These financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  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 26, 1998 and December  27, 1997 and the results of its  operations  and
its cash flows for the fifty-two  week periods then ended,  in  conformity  with
generally accepted accounting principles.




                                  /s/KPMG LLP


Short Hills, New Jersey
March 16, 1999



                                       F-1

<PAGE>



                               TOFUTTI BRANDS INC.
                                 BALANCE SHEETS
               (000's omitted except for share and per share data)


<TABLE>
<CAPTION>
                                                                               December 26,           December 27,
                                                                                  1998                   1997
                                                                                  ----                   ----
<S>                                                                            <C>                     <C>                       
Assets
Current assets:
     Cash                                                                      $   407                 $   54
     Accounts receivable, net of allowance for doubtful
        accounts of $120 in 1998 and  $458 in 1997
       (Note 2)                                                                    985                    919
     Inventories (Note 3)                                                          613                    541
     Prepaid expense                                                                13                      7
     Deferred Income Taxes                                                         335                    276
                                                                                  ----                    ---
                Total current assets                                             2,353                  1,797

Fixed assets, net (Note 4)                                                          --                     --
Deferred income taxes (Note 9)                                                     180                    174
Other assets (Note 5)                                                              119                     97
                                                                                  ----                 ------
                Total assets                                                   $ 2,652                 $2,068
                                                                               =======                 ======

Liabilities and Stockholders' Equity

Current liabilities:
     Note payable - current portion                                               $ 19                 $   17
     Accounts payable                                                               85                     94
     Accrued expenses (Note 6)                                                     240                    194
     Income taxes payable                                                           19                     14
                                                                                   ---                    ---
                  Total current liabilities                                        363                    319

Note payable                                                                        29                     49
                                                                                   ---                    ---
                  Total liabilities                                                392                    368

Stockholders' equity (Note 7):
     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 6,183,567 shares at December 26, 1998
       and December 27, 1997                                                        62                     62

     Paid-in capital                                                             3,631                  3,631
     Accumulated deficit                                                        (1,433)                (1,993)
                                                                                ------                 ------
                  Total stockholders' equity                                     2,260                  1,700
                                                                                 -----                 ------

Commitments and contingencies (Note 8)

                 Total liabilities and stockholders' equity                    $ 2,652                 $2,068
                                                                               =======                 ======
</TABLE>

                 See accompanying notes to financial statements.



                                       F-2

<PAGE>



                               TOFUTTI BRANDS INC.
                STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
                    (000's omitted except for per share data)

<TABLE>
<CAPTION>
                                                                   Fifty-two weeks              Fifty-two weeks
                                                                        ended                        ended
                                                                  December 26, 1998            December 27, 1997
                                                                  -----------------            -----------------

<S>                                                                   <C>                          <C>   
Net sales                                                             $ 8,991                      $ 7,440
Cost of sales                                                           5,818                        4,739
                                                                        -----                       ------
                  Gross profit                                          3,173                        2,701

Operating expenses:
  Selling                                                               1,268                        1,003
  Marketing and sales promotion                                           188                          172
  Research and development                                                342                          273
  General and administrative                                              853                          794
                                                                          ---                        -----
                                                                        2,651                        2,242
                                                                        -----                        -----

                  Operating income                                        522                          459

Interest expense                                                            7                            7
                                                                        -----                        -----
                  Income before income tax benefit                        515                          452

Income tax benefit (Note 9)                                                45                           83
                                                                        -----                        -----

                  Net income                                              560                          535

Accumulated deficit, beginning of year                                 (1,993)                      (2,528)
                                                                       ------                       ------

Accumulated deficit, end of year                                      $(1,433)                     $(1,993)
                                                                      =======                      =======

Net income per share:                                                                      
   Basic                                                                 $.09                        $ .09
   Diluted                                                                .08                          .08
                                                                         ====                          ===

</TABLE>




                 See accompanying notes to financial statements.



                                       F-3

<PAGE>



                               TOFUTTI BRANDS INC.
                            STATEMENTS OF CASH FLOWS
                                 (000's omitted)

<TABLE>
<CAPTION>
                                                                             Fifty-two                Fifty-two
                                                                            weeks ended              weeks ended
                                                                            December 26,             December 27,
                                                                                1998                     1997
                                                                                ----                     ----
<S>                                                                           <C>                       <C>
Cash flows from operating activities:
   Net income                                                                 $ 560                     $ 535
   Adjustments to reconcile net income to net
    cash provided by (used in) operating activities:
   Deferred taxes                                                               (65)                     (139)
   Provision for bad debts                                                      135                       163
   Change in assets and liabilities:
       Increase in accounts receivable                                         (201)                     (105)
       Increase in inventories                                                  (72)                     (190)
       (Increase) decrease in prepaid expense                                    (6)                        3
       Decrease in accounts payable                                              (9)                     (410)
       Increase in accrued expenses                                              46                        79
       Increase in income taxes payable                                           5                        14
                                                                                ---                      ----

   Net cash provided by (used in) operating activities                          393                       (50)
                                                                                ---                      ----

Cash flows from financing activities:
   Repayment of note payable                                                    (18)                      (15)
   Increase in other assets                                                     (22)                      (21)
   Issuance of common stock                                                      --                       129
                                                                                ---                      ----
   Net cash (used in) provided by financing activities                          (40)                       93
                                                                                ---                       ---

Net increase in cash                                                            353                        43

Cash at beginning of period                                                      54                        11
                                                                               ----                       ---
Cash at end of period                                                         $ 407                     $  54
                                                                              =====                     =====

Supplemental  disclosures  of cash flow  information:  
   Cash paid during the year for:
     
   Interest                                                                     $ 7                        $ 7
                                                                                ===                        ===
   Income taxes                                                                  15                          1
                                                                                ===                        ===

</TABLE>



                 See accompanying notes to financial statements.



                                       F-4

<PAGE>


                               TOFUTTI BRANDS INC.
                          NOTES TO FINANCIAL STATEMENTS
               (000's omitted except for share and per share data)

(1)  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 non-dairy frozen desserts
and other food products.

Revenue Recognition

The  Company  recognizes  revenue  when goods are  shipped  from its  production
facilities or outside warehouses.

Common Stock

Effective  December  31,  1997,  the  Company  adopted  Statement  of  Financial
Accounting  Standards  ("SFAS") No. 128 "Earnings per Share",  which  requires a
dual presentation of earnings per share - basic and diluted.  Basic earnings per
common share has been  computed by dividing  net income by the weighted  average
number of common shares  outstanding of 6,184,000 in 1998 and 6,086,000 in 1997.
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, of 6,610,000 in 1998 and 6,404,000 in 1997.

The Company  accounts for  stock-based  compensation  using the intrinsic  value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock  Issued  to   Employees,"   and  related   Interpretations.   Accordingly,
compensation  cost for stock  options is measured as the excess,  if any, of the
quoted  market  price at the date of the grant over the amount an employee  must
pay to acquire the stock. Because the Company grants options at a price equal to
the market price of the stock at the date of grant, no  compensation  expense is
recorded.  As required by Statement of Financial  Accounting  Standards No. 123,
"Accounting for Stock-Based  Compensation" (SFAS No. 123), the Company discloses
pro forma net income and earnings per share as if the fair value method had been
applied (see Note 7).

Inventories

Inventories are stated at the lower of cost or market. Cost is determined by the
first-in, first-out method.

Fixed Assets

Fixed  assets  are  carried  at  cost.   Depreciation   is  computed  using  the
straight-line method. When assets are retired or otherwise disposed of, the cost
and related  accumulated  depreciation  are removed from the  accounts,  and any
resulting gain or loss is recognized in income for the period.



                                       F-5

<PAGE>


                               TOFUTTI BRANDS INC.
                          NOTES TO FINANCIAL STATEMENTS
               (000's omitted except for share and per share data)

The  cost  of  maintenance  and  repairs  is  charged  to  income  as  incurred;
significant renewals and betterments are capitalized.

Income Taxes

Income taxes are accounted for under the asset and  liability  method.  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carry  forwards.  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.

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,  accounts  receivable,  accounts payable,  accrued expenses,  income taxes
payable and note  payable as of  December  26,  1998 and  December  27, 1997 are
stated at their carrying  values.  The carrying  amounts  approximate fair value
because of the short-term  maturity of those instruments or because the interest
rates approximate market rates of interest.

Risks and Uncertainties

The Company  performs  ongoing credit  evaluations  of its customers'  financial
conditions and, generally, requires no collateral from its customers.

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles  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. Actual results could differ from those estimates.

Reclassifications

Certain  reclassifications  of the 1997 financial  statements  have been made to
conform to the 1998 presentation.




                                       F-6

<PAGE>


                               TOFUTTI BRANDS INC.
                          NOTES TO FINANCIAL STATEMENTS
               (000's omitted except for share and per share data)

(2)  Accounts Receivable

Activity in the allowance for doubtful accounts is set forth below:



                                           Fifty-two weeks       Fifty-two weeks
                                                ended                 ended
                                            December 26,          December 27,
                                                 1998                  1997
                                                 ----                  ----

Beginning balance                               $ 458                 $ 295
Additions charged to expense                      135                   163
Less: Write offs                                  473                    --
                                                -----                 -----
                                                $ 120                 $ 458
                                                =====                 =====

(3)  Inventories

Inventories consist of the following:

                                             December 26,           December 27,
                                                 1998                   1997
                                                 ----                   ----

Finished products                                $382                   $342
Raw materials and packaging                       231                    199
                                                 ----                   ----
                                                 $613                   $541
                                                 ====                   ====

(4)  Fixed Assets

Fixed assets consist of the following:


                                     December 26,     December 27,     Useful
                                         1998             1997         Lives
                                        ------           ------        -----
Machinery and equipment                  $ 30            $ 30           5 yr
Leasehold improvements                     29              29           5 yr
                                           --              --
                                           59              59

Less accumulated depreciation              59              59
                                           --              --
                                         $ --           $  --
                                         ====           =====








                                       F-7

<PAGE>


                               TOFUTTI BRANDS INC.
                          NOTES TO FINANCIAL STATEMENTS
               (000's omitted except for share and per share data)

(5)  Other Assets

On October 17,  1994,  the  Company's  Board of  Directors  adopted a resolution
wherein  the  Corporation  was  authorized  to  purchase a $1,000  split  dollar
insurance  plan on the life of a member of David  Mintz's  family.  Mr. Mintz is
Chairman and  President of the Company.  The purpose of this  transaction  is to
provide the Mintz  estate with funds  sufficient  to pay any estate taxes levied
upon the transfer of Mr.  Mintz's  Tofutti  stock,  which would  otherwise  have
necessitated a sale of the stock. The sale of such stock might have the negative
effect  of  significantly  decreasing  the  market  price  of the  stock  to the
detriment  of  other  shareholders.  Upon  the  death of the  family  member  or
termination  of the policy prior to death,  the Company is to receive a complete
refund of all its premiums paid plus interest at 4%.


(6)  Accrued Expenses

Accrued expenses consist of the following:


                                  December 26,           December 27,
                                      1998                   1997
                                      ----                   ----
Professional fees                    $  30                  $  31
Selling                                147                    130
Inventory purchases                     52                     30
Other                                   11                      3
                                     -----                  -----
               Total                 $ 240                  $ 194
                                     =====                  =====



(7)  Stock Options

The 1993 Stock  Option Plan (the "1993  Plan")  provides for the granting 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 granting of non-qualified
to key employees and consultants. The 1993 Plan is currently administered by the
Board of Directors,  which  determines  the terms and  conditions of the options
granted  under the 1993 Plan,  including  the exercise  price,  number of shares
subject to the option and the  exercisability  thereof.  Options  are  generally
exercisable in cumulative installments of 33-1/3% or 50% per year commencing one
year after the date of grant and annually  thereafter,  with  contract  lives of
generally  five years from the date of grant.  A total of 2,900,000  shares have
been reserved for issuance under the 1993 Plan. At December 26, 1998,  1,214,000
shares were subject to outstanding options and 1,506,000  additional shares were
available for future grant.





                                       F-8

<PAGE>


                               TOFUTTI BRANDS INC.
                          NOTES TO FINANCIAL STATEMENTS
               (000's omitted except for share and per share data)

The  following is a summary of stock option  activity  from December 28, 1996 to
December 26, 1998:

<TABLE>
<CAPTION>
                                                           INCENTIVE OPTIONS               NON-QUALIFIED OPTIONS
                                                           -----------------               ---------------------

                                                                       Weighted                            Weighted
                                                                        Average                             Average
                                                                       Exercise                            Exercise
                                                         Shares          Price              Shares           Price
                                                         ------          -----              ------           -----
<S>                                                   <C>                <C>               <C>              <C>
Outstanding and exercisable at
  December 28, 1996                                      83,000          $.681              55,000          $.625
Granted in 1997                                       1,118,000           .765             102,000           .790
Exercised in 1997                                       (75,000)          .6875            (55,000)          .625
Canceled in 1997                                         (8,000)          .625                  --             --
                                                      ---------                             ------
Outstanding at December 27, 1997                      1,118,000           .765             102,000           .790
Canceled in 1998                                         (6,000)          .6875                 --             --
Outstanding at December 26, 1998                      1,112,000           .766             102,000           .790
                                                      =========                            =======
Exercisable at December 26, 1998                        404,000           .764              41,000           .790
                                                        =======                             ======
Exercisable at December 27, 1997                             --             --                 --              --

</TABLE>

The Company did not grant any stock options  during 1998.  The weighted  average
fair value of both the incentive and  non-qualified  options granted during 1997
was $.39.  The fair market  value of each stock option  granted  during 1997 was
estimated on the date of grant using the Black-Scholes option pricing model with
the following  assumptions:  expected life of 4.0 years;  expected volatility of
62.0%; expected dividend yield of 0%; and a risk free interest rate of 5.5%

The following table summarizes  information about the stock options  outstanding
at December 26, 1998:

<TABLE>
<CAPTION>
                               OPTIONS OUTSTANDING
                               -------------------

                                                               Weighted Average                 Weighted
           Range of                      Number                 Remaining Life                   Average
       Exercise Prices                Outstanding                 (in years)                 Exercise Price
       ---------------                -----------                 ----------                 --------------
        <S>                            <C>                            <C>                         <C>   
        $.6875--$1.031                 1,214,000                      3.3                         $.768


</TABLE>



                                       F-9

<PAGE>


                               TOFUTTI BRANDS INC.
                          NOTES TO FINANCIAL STATEMENTS
               (000's omitted except for share and per share data)


Set forth below are the Company's net income and net income per share, presented
both "as reported" and "pro forma," as if compensation  cost had been determined
consistent with the fair value provisions of SFAS 123:




                                                         1998            1997
                                                         ----            ----
Net income available for common stockholders:
   As reported                                           $560            $535
   Pro forma                                              390             392
Basic earnings per share:
   As reported                                            .09             .09
   Pro forma                                              .06             .06
Diluted earnings per share:
   As reported                                            .08             .08
   Pro forma                                              .06             .06
 

(8)  Commitments and Contingencies

The Company  leases a warehouse  and  administrative  facility in Cranford,  New
Jersey  under an  operating  lease  expiring  on July 1,  1999.  The  Company is
currently in negotiations to extend the lease beyond its current expiration date
and management  believes that such lease  extension,  which will not exceed five
years, will be consummated. The Company's annual rental under its existing lease
was $74, with $37 being due for the period January through June 1999. Management
does not expect its future rental expense to be materially  different  after the
expected consummation of the aforementioned extension.

Annual net rental expenses  aggregated $74 and $68  respectively for each of the
fifty-two week periods ended December 26, 1998 and December 27, 1997.

In the normal  course of business,  the Company from time to time may be a party
to various  litigation,  claims or  assessments.  Management  believes  that the
ultimate  outcome  of  these  matters  will not have a  material  affect  on the
Company's financial position or results of operations.









                                      F-10

<PAGE>


                               TOFUTTI BRANDS INC.
                          NOTES TO FINANCIAL STATEMENTS
               (000's omitted except for share and per share data)

(9)  Income Taxes

The  components of income tax expense  (benefit) for the fifty-two  week periods
ended December 26, 1998 and December 27, 1997 are as follows:


                                                     1998             1997
                                                     ----             ----
Current:                                                   
           Federal                                   $ --            $ --
           State                                       20              56
                                                       --              --
                                                       20              56
                                                       --              --
Deferred:
           Federal                                    (50)           (124)
           State                                      (15)            (15)
                                                      ----            ----
                                                      (65)            139
                                                      ----            ---

Total income tax benefit                             $(45)           $(83)
                                                     ====            ====



Deferred tax assets at December 26, 1998 and December 27, 1997 are as follows:



                                                      1998                 1997
                                                      ----                 ----
Allowance for doubtful accounts                       $ 48                 $183
Inventories                                             12                   12
Note payable                                            20                   26
Other accruals                                          64                   53
Loss carry forwards and tax credits                    371                  435
                                                       ---                  ---
Gross deferred tax assets                              515                  709
Valuation allowance                                     --                  259
                                                       ---                  ---

Net deferred tax assets                               $515                 $450
                                                       ===                 ====

Based upon the level of  projected  future  taxable  income  over the periods in
which the net  operating  loss carry  forwards  and tax credits are  deductible,
management  believes it is more likely than not the Company will realize its net
deferred tax assets at December  26, 1998.  The amount of the deferred tax asset
considered  realizable,  however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced.

The Company has net operating loss carry forwards of approximately $1,004, which
will expire in 2005.  The Company  also has unused tax credits of  approximately
$30.



                                      F-11

<PAGE>


                               TOFUTTI BRANDS INC.
                          NOTES TO FINANCIAL STATEMENTS
               (000's omitted 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 benefit for the fifty-two week periods
ended December 26, 1998 and December 27, 1997 is as follows:


                                                   1998                   1997
                                                   ----                   ----
Expected tax expense                              $ 175                  $ 154
Non-deductible expenses                               7                      8
State income taxes, net of federal
    income tax benefit                               31                     27
Change in valuation allowance                      (259)                  (236)
Other                                                 1                    (36)
                                                    ---                  ------
             Income tax benefit                   $ (45)                 $ (83)
                                                  ======                 ======


(10)  Business Concentrations

During the fifty-two week periods ended December 26, 1998 and December 27, 1997,
the  Company  derived  approximately  88% of its  net  sales  domestically.  The
remaining sales in both periods were exports to various other countries.  During
1998 and 1997,  the Company had sales to two individual  customers  representing
16% and 10%, and 14% and 11%, respectively, of net sales.





                                      F-12

<PAGE>



Item 8.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosure

     None.


                                    PART III

Item 9.  Directors and Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act

         The Directors and Executive Officers of the Company are:


Name                        Age          Position
----                        ---          --------

David Mintz................  67          Chairman of the Board of Directors,
                                         Chief Executive Officer
Steven Kass................  47          Chief Financial Officer, Secretary and
                                         Treasurer
Reuben Rapoport............  68          Director of Product Development and
                                         Director
Franklyn Snitow............  52          Director
Bernard Koster.............  64          Director

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

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

     Reuben Rapoport has been the Director of Product Development of the Company
since January 1984 and a Director of the Company since July 1983.

     Franklyn  Snitow has been a Director of the Company since 1987. He has been
a partner in the New York City law firm of Snitow & Cunningham (the successor to
Snitow & Pauley), the Company's general counsel, since 1985.

     Bernard  Koster has been a Director of the Company since March 1993.  Since
February 1990, Mr. Koster has acted as an independent  business  consultant.  He
has also been counsel to the New Jersey law firm of Litwin and  Holsinger  since
March 1993.

     All  Directors of the Company 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



                                      -13-

<PAGE>



Board of  Directors.  There are no family  relationships  between  Directors and
executive  officers of the Company.  All of the executive  officers devote their
full time to the operations of the Company.

     Compliance  with Section  16(a) of The Exchange  Act.  Section 16(a) of the
Securities Exchange Act of 1934, as amended, requires the Company's officers and
directors,  and persons who own more than  ten-percent  of its Common Stock,  to
file initial  statements of  beneficial  ownership  (Form 3), and  statements of
changes in beneficial ownership (Forms 4 or 5), of Common Stock and other equity
securities  of the Company  with the  Securities  and Exchange  Commission  (the
"SEC") and the American  Stock  Exchange.  Officers,  directors and greater than
ten-percent  stockholders  are required by SEC regulation to furnish the Company
with copies of all such forms they file.

     To the  Company's  knowledge,  based  solely on its review of the copies of
such forms  received by it, or written  representations  from certain  reporting
persons that no additional  forms were required for those  persons,  the Company
believes  that  during  fiscal  1998 all  persons  subject  to  these  reporting
requirements filed the required reports on a timely basis.

Item 10.  Executive Compensation

     The  following   table  sets  forth   information   concerning   the  total
compensation  during the last three  fiscal  years for the  Company's  executive
officers whose total salary in fiscal 1998 totaled $100,000 or more:

                           SUMMARY COMPENSATION TABLE
                           --------------------------

                                              Annual             Long-Term
                                           Compensation        Compensation
                                           ------------        ------------
                                                           Securities Underlying
Name and Principal Position     Year        Salary ($)          Options (#)
---------------------------     ----        ----------          -----------
David Mintz                     1998        $225,000(1)                --
Chief Executive Officer         1997         180,000(2)           480,000
  and Chairman of the Board     1996         155,000(3)                --
                                                           
Steven Kass                     1998         145,000(1)                --
Chief Financial Officer         1997         117,500(2)           430,000
  Secretary and Treasurer       1996         100,000(3)                --
---------------                                          
(1)      Includes  bonuses of $50,000 and  $35,000  for Messrs.  Mintz and Kass,
         respectively, accrued at year-end and payable April 1, 1999.
(2)      Includes  bonuses of $30,000 and  $20,000  for Messrs.  Mintz and Kass,
         respectively, accrued at year-end and payable April 1, 1998.
(3)      Includes  bonuses of $30,000 and  $15,000  for Messrs.  Mintz and Kass,
         respectively, accrued at year-end and payable April 1, 1997.




                                      -14-

<PAGE>



     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.

     On October 17, 1994, the Company's Board of Directors  adopted a resolution
wherein the  Corporation  was  authorized to purchase a $1,000,000  split dollar
insurance  plan on the life of a member of David  Mintz's  family.  Mr. Mintz is
Chairman  and Chief  Executive  Officer  of the  Company.  The  purpose  of this
transaction  is to provide  the Mintz  estate with funds  sufficient  to pay any
estate taxes levied upon the transfer of Mr. Mintz's Tofutti stock,  which would
have otherwise  necessitated  a sale of the stock.  The sale of such stock might
have a negative effect of significantly decreasing the market price of the stock
to the detriment of other  shareholders.  Upon the death of the family member or
termination  of the policy prior to death,  the Company is to receive a complete
refund of all its premiums paid plus interest at 4%.

     There are currently no employment agreements between the Company and any of
its  officers.  Neither  Mr.  Snitow  nor  Mr.  Koster  has  received  any  cash
remuneration  from the  Company  for his service as a Director in the last three
years.

STOCK OPTIONS

     The  following  table  provides  information   concerning  the  grants  and
exercising of stock options during the Company's last fiscal year to each of the
officers named above in the Summary Compensation Table.

<TABLE>
<CAPTION>
                                  OPTIONS GRANTED IN LAST FISCAL YEAR
                       ---------------------------------------------------------
                                                 Percent of      
                                 Number of         Total
                                    Shares        Options
                                 Underlying      Granted to
                                   Options      Employees in
Name                             Granted (#)     Fiscal Year      Exercise Price ($/SH)         Expiration Date
----                             -----------     -----------      ---------------------         ---------------
<S>                                  <C>              <C>                  <C>                         <C>         
David Mintz,                         --               --                   $ --                        --
Chief Executive Officer                         
  and Chairman of the                           
  Board                                         
                                                
Steven Kass,                         --               --                     --                        --
  Chief Financial Officer,                                                                   
  Secretary and Treasurer                       
                                             

</TABLE>





                                      -15-

<PAGE>





     The following table provides  information  concerning stock options held in
1998 by each of the executive  officers named above in the Summary  Compensation
Table.

<TABLE>
<CAPTION>
                       AGGREGATED OPTION EXERCISES IN LAST
                  FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
                  ---------------------------------------------
                                                                             Number of Shares              Value of Unexercised
                                    Shares                                Underlying Unexercised           in the Money Options
                                  Acquired on             Value           Options at FY-End (#)               at FY-End ($)
Name                              Exercise (#)        Realized ($)      Exercisable/Unexercisable       Exercisable/Unexercisable
----                              ------------        ------------      -------------------------       -------------------------
<S>                                     <C>               <C>                  <C>                             <C>        
David Mintz,                             --               $ --                 174,000 (E)                     $32,696 (E)(1)
Chief Executive Officer                                                         306,000(U)                      64,904 (U)(1)
  and Chairman of the                                                                                  
  Board

Steven Kass,                             --                --                   155,000(E)                      39,687 (E)(1)
  Chief Financial Officer,                                                      275,000(U)                      77,187 (U)(1)
  Secretary and Treasurer
</TABLE>

-----------------------
 (E)     Exercisable options
 (U)     Unexercisable options
 (1) Calculated by subtracting option exercise price from year-end market price.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The following  table sets forth as of March 10, 1999,  certain  information
regarding the Company's  Common Stock,  $.01 par value, for each person known by
the Company to be the beneficial owner of more than 5% of the outstanding shares
of the Company's Common Stock,  for each executive  officer named in the Summary
Compensation  Table,  for each of the Company's  Directors and for the executive
officers and directors of the Company as a group:


                                            Amount of
Name                                  Beneficial Ownership      Percent of Class
----                                  --------------------      ----------------
David Mintz.......................       3,454,440 (1)               49.7%
Steven Kass.......................         275,000 (2)                4.0%
Reuben Rapoport...................          85,000 (3)                *
Franklyn Snitow...................          50,000 (4)                *
Bernard Koster....................          25,000 (5)                *
All Executive Officers and
Directors as a group (5 persons)..       3,889,440 (6)               55.9%
_______________



                                      -16-

<PAGE>



     The  address of all  individuals  except  Messrs.  Koster and Snitow 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 and the address
of Mr. Koster is 7 Old Smith Road, Tenafly, New Jersey 07670. Each person listed
above has sole voting and/or investment power of the shares attributed to him.

*        Less than 1%.

(1)  Includes 307,000 shares issuable upon the exercise of currently exercisable
     stock options.

(2)  Issuable upon the exercise of currently 275,000 exercisable stock options.

(3)  Includes 65,000 shares issuable upon the exercise of currently  exercisable
     stock options.

(4)  Includes 30,000 shares issuable upon the exercise of currently  exercisable
     stock options.

(5)  Issuable upon the exercise of 25,000 currently exercisable stock options.

(6)  Includes 702,000 shares issuable upon the exercise of currently exercisable
     stock options.

Item 12.  Certain Relationships and Related Transactions

     NONE

Item 13.  Exhibits and Reports on Form 8-K

(a)      Exhibits

3.1*              Certificate of Incorporation.

3.1.1**           March 1986 Amendment to Certificate of Incorporation.

3.2*              By-laws of Registrant.

4.1***            Copy of the Registrant's Amended 1993 Stock Option Plan.

23.1              Consent of Independent Auditors.

27                Financial Data Schedule.

______________

*        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.




                                      -17-

<PAGE>



**       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.

***      Filed as an exhibit to the Registrant's Form S-8 (Registration No. 333-
         48605) filed March 25, 1998 and hereby incorporated by reference 
         thereto.


(b) Reports on Form 8-K filed during the last  quarter of the period  covered by
this report:

     None.



                                      -18-

<PAGE>




                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 25, 1999.

                                             TOFUTTI BRANDS INC.
                                               (Registrant)

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



     In accordance  with the  Securities  Exchange Act of 1934,  this Report has
been signed below on March 25, 1999, by the  following  persons on behalf of the
Registrant and in the capacities indicated.


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

/s/Steven Kass                              
--------------                              
Steven Kass
Secretary, Treasurer and
Chief Financial Officer

/s/Bernard Koster                          
-----------------                          
Bernard Koster
Director

/s/Reuben Rapoport                           
------------------                           
Reuben Rapoport
Director

/s/Franklyn Snitow                           
------------------                           
Franklyn Snitow
Director



                                      -19-

<PAGE>



                                  EXHIBIT INDEX


Exhibit                                                                     Page

3.1*      Certificate of Incorporation, as amended through February 1986.

3.1.1**   March 1986 Amendment to Certificate of Incorporation.

3.2*      By-laws of the Registrant.

4.1***    Copy of the Registrant's Amended 1993 Stock Option Plan.

23.1      Consent of Independent Auditors.

27        Financial Data Schedule



*        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.

**       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.

***      Filed as an exhibit to the Registrant's Form S-8 (Registration No. 333-
         48605) filed March 25, 1998 and hereby incorporated by reference 
         thereto.