# EDGAR Filing Document

**Accession Number:** 0000730349
**File Stem:** 0001493152-23-010281
**Filing Date:** 2023-3
**Character Count:** 256511
**Document Hash:** f897facb7b2a901726ab17629e5b59e0
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001493152-23-010281.hdr.sgml**: 20230331

**ACCESSION NUMBER**: 0001493152-23-010281

**CONFORMED SUBMISSION TYPE**: 10-K

**PUBLIC DOCUMENT COUNT**: 61

**CONFORMED PERIOD OF REPORT**: 20221231

**FILED AS OF DATE**: 20230331

**DATE AS OF CHANGE**: 20230331

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** TOFUTTI BRANDS INC
- **CENTRAL INDEX KEY:** 0000730349
- **STANDARD INDUSTRIAL CLASSIFICATION:** ICE CREAM & FROZEN DESSERTS [2024]
- **IRS NUMBER:** 133094658
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 10-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-09009
- **FILM NUMBER:** 23787895

**BUSINESS ADDRESS:**
- **STREET 1:** 50 JACKSON DR
- **STREET 2:** PO BOX 786
- **CITY:** CRANFORD
- **STATE:** NJ
- **ZIP:** 07016
- **BUSINESS PHONE:** 9082722400

**MAIL ADDRESS:**
- **STREET 1:** 50 JACKSON DRIVE
- **STREET 2:** PO BOX 786
- **CITY:** CRANFORD
- **STATE:** NJ
- **ZIP:** 07016

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** TOFU TIME INC
- **DATE OF NAME CHANGE:** 19860619

?xml version="1.0" encoding="utf-8"?

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION** **Washington, D.C. 20549**

**Form 10-K**

---

| | |
|:---|:---|
| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
|  | For the fiscal year ended December 31, 2022 |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |

---

**Commission File Number: 1-9009**

**TOFUTTI BRANDS INC.**

(Exact name of registrant as specified in its charter)

---

| | |
|:---|:---|
| **Delaware** | **13-3094658** |
| (State or other jurisdiction<br> of incorporation or organization) | (I.R.S. Employer<br> Identification No.) |

---

---

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

---

**(908) 272-2400**

(Registrant's telephone number, including area code)

**Securities registered pursuant to Section 12(b) of the Act: None**

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

---

| | | |
|:---|:---|:---|
| **Title of each class** | **Trading Symbol(s)** | **Name of each exchange on which registered** |
| Common Stock, par value $0.01 per share | TOFB |  |

---

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

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

Large accelerated filer ☐ Accelerated filer ☐ <br> Non-accelerated filer ☐ (Do not check if a smaller reporting company) <br> Smaller reporting company ☒ Emerging growth company ☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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

Yes ☐ No ☒

The aggregate market value of the voting stock held by non-affiliates of the Registrant as of the most recently completed second fiscal quarter: $4,794,953

As of March 31, 2023, the issuer had 5,153,706 shares of common stock, par value $0.01, outstanding.

**TABLE OF CONTENTS**

---

| | | |
|:---|:---|:---|
|  |  | **Pages** |
| **[PART I](#ds_001)** |  | 4 |
| &nbsp;&nbsp;&nbsp;Item 1. | [Business.](#ds_002) | 4 |
| &nbsp;&nbsp;&nbsp;Item 1A. | [Risk Factors.](#ds_003) | 9 |
| &nbsp;&nbsp;&nbsp;Item 1B. | [Unresolved Staff Comments.](#ds_004) | 17 |
| &nbsp;&nbsp;&nbsp;Item 2. | [Properties.](#ds_005) | 17 |
| &nbsp;&nbsp;&nbsp;Item 3. | [Legal Proceedings.](#ds_006) | 17 |
| &nbsp;&nbsp;&nbsp;Item 4. | [Mine Safety Disclosures.](#ds_007) | 17 |
| **[PART II](#ds_008)** |  | 17 |
| &nbsp;&nbsp;&nbsp;Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.](#ds_009) | 17 |
| &nbsp;&nbsp;&nbsp;Item 6. | [Reserved.](#ds_010) | 18 |
| &nbsp;&nbsp;&nbsp;Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of Operations.](#ds_011) | 18 |
| &nbsp;&nbsp;&nbsp;Item 7A. | [Quantitative and Qualitative Disclosures about Market Risk.](#ds_012) | 23 |
| &nbsp;&nbsp;&nbsp;Item 8. | [Financial Statements and Supplementary Data.](#ds_013) | 24 |
| &nbsp;&nbsp;&nbsp;Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.](#ds_014) | 25 |
| &nbsp;&nbsp;&nbsp;Item 9A. | [Controls and Procedures.](#ds_015) | 25 |
| &nbsp;&nbsp;&nbsp;Item 9B. | [Other Information.](#ds_016) | 26 |
| &nbsp;&nbsp;&nbsp;Item 9C. | [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.](#ds_017) | 26 |
| **[PART III](#ds_018)** |  | 27 |
| &nbsp;&nbsp;&nbsp;Item 10. | [Directors, Executive Officers and Corporate Governance.](#ds_019) | 27 |
| &nbsp;&nbsp;&nbsp;Item 11. | [Executive Compensation.](#ds_020) | 29 |
| &nbsp;&nbsp;&nbsp;Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.](#ds_021) | 31 |
| &nbsp;&nbsp;&nbsp;Item 13. | [Certain Relationships and Related Transactions, and Director Independence.](#ds_022) | 32 |
| &nbsp;&nbsp;&nbsp;Item 14. | [Principal Accounting Fees and Services.](#ds_023) | 32 |
| [**PART IV**](#part_001) |  |  |
| &nbsp;&nbsp;&nbsp;Item 15. | [Exhibits, Financial Statement Schedules.](#ds_024) | 33 |
| &nbsp;&nbsp;&nbsp;Item 16. | [Form 10-K Summary.](#ds_025) | 34 |
| [SIGNATURES](#ds_026) | [SIGNATURES](#ds_026) | 35 |

---

INTRODUCTION

We are engaged in the development, production and marketing of TOFUTTI<sup>®</sup> brand plant-based, dairy free vegan frozen desserts, cheeses and other food products. TOFUTTI products are soy and other vegetable protein-based, plant-based, dairy free vegan products which contain no butterfat, cholesterol or lactose.

As used in this annual report, the terms "we," "us" and "our" mean Tofutti Brands Inc., unless otherwise indicated. Statements made in this annual report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this annual report or to any previous filling with the Securities and Exchange Commission, you may read the document itself for a complete recitation of its terms.

Except for the historical information contained in this annual report, the statements contained in this annual report are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act, as amended, and the Private Securities Litigation Reform Act of 1995, as amended, with respect to our business, financial condition and results of operations. Such forward-looking statements reflect our current view with respect to future events and financial results. We urge you to consider that statements which use the terms "anticipate," "believe," "do not believe," "expect," "plan," "intend," "estimate," "anticipate" and similar expressions are intended to identify forward-looking statements. We remind readers that forward-looking statements are merely predictions and therefore inherently subject to uncertainties and other factors and involve known and unknown risks that could cause the actual results, performance, levels of activity, or our achievements, or industry results, to be materially different from any future results, performance, levels of activity, or our achievements expressed or implied by such forward-looking statements. Such forward-looking statements are also included in Item 1. "Business" and Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations." Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update or revise any forward-looking statements to reflect new information, future events or circumstances, or otherwise after the date hereof. We have attempted to identify significant uncertainties and other factors affecting forward-looking statements in the Risk Factors section that appears in Item 1A. "Risk Factors."

We operate on a fiscal year ending on the Saturday closest to December 31. Fiscal years for the financial statements included herein are the fifty-two week periods ended December 31, 2022 (fiscal 2022) and January 1, 2022 (fiscal 2021).

**PART I**

**Item 1.** **Business.**

GENERAL

We are engaged in the development, production and marketing of TOFUTTI<sup>®</sup> brand plant-based, dairy free vegan frozen dessert and cheese products. All TOFUTTI products are plant-based, dairy free vegan, contain no butterfat or cholesterol and use soy and other vegetable proteins. Our products are 100% dairy free, but offer consumers the same texture and full-bodied taste as their dairy counterparts. Our cholesterol free products derive their fat from corn and palm oils, each naturally lower in saturated fat than dairy products. All of our products are completely vegan and our vegan cheese products are gluten free as well. In addition, all of our products are certified kosher-parve and all of our vegan cheese products are also certified halal.

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

STRATEGY

Our objective is to be a leading provider of plant-based, dairy free vegan food products, primarily cheese products and frozen desserts, to supermarkets, health food stores, and food service customers in the United States and abroad. We intend to continue to introduce new plant-based products that offer good taste while containing no butterfat, cholesterol or dairy to these markets.

We focus our marketing efforts towards those consumers who find our products essential to their everyday diets because of health, lifestyle or religious reasons. As part of this strategy, we seek to achieve brand awareness through product innovation, eye-catching packaging, trade advertising and promotion, and a strong word-of-mouth marketing program. We believe that our ability to offer a wide range of dairy free, vegan, and kosher-parve products will continue to provide us with a competitive advantage.

TOFUTTI PRODUCT LINE

We offer a broad product line of plant-based, dairy free vegan products that use soy or other vegetable-based proteins. Our dairy free products include spreads, frozen desserts, and cheese slices.

***Dairy Free Vegan Cheese Products***

♦ **BETTER THAN CREAM CHEESE<sup>®</sup>** is similar in taste and texture to traditional cream cheese, but is dairy free, butterfat-free,
 gluten-free and contains no cholesterol. It is as versatile as real cream cheese, whether spread on a bagel, used as a dip for snack
 items, such as crackers or chips, or used in any favorite recipe. **BETTER THAN CREAM CHEESE** comes in three flavors, plain,
 Herb & Chives, and Garlic & Herb that are available in 8 oz. retail packages. The plain comes in 5 lb. containers and 30
 lb. bulk boxes for food service customers.

♦ **TOFUTTI WHIPPED BETTER THAN CREAM CHEESE** is the whipped version of our original **BETTER THAN CREAM CHEESE** available in a 14 oz.
 container. It is available in many supermarkets and health food stores.

♦ **BETTER THAN SOUR CREAM<sup>®</sup>** is similar in taste and texture to traditional sour cream, but is dairy free, butterfat-free,
 gluten-free and contains no cholesterol. **BETTER THAN SOUR CREAM** has the versatility of sour cream with the added benefit of
 being dairy free. The 12 oz. retail packages are available in plain and guacamole. The plain version is also available in 5 lb. containers
 for food service customers. Like **BETTER THAN CREAM CHEESE, BETTER THAN SOUR CREAM** is available nationally in many health food
 stores, select supermarkets and food service outlets.

♦ **TOFUTTI DIPPITY DO DAH DIPS** incorporate our **BETTER THAN SOUR CREAM** with three exciting flavors for use as dips for snacking. Those
 flavors are Roasted Garlic, Garden Cucumber, and French Onion and are available in 12 oz. retail containers.

♦ **TOFUTTI AMERICAN VEGAN CHEESE SLICES**™ offer consumers a delicious dairy free, gluten-free, vegan alternative to regular cheese
 slices and contain no trans fatty acids. Available as individually wrapped slices in 8 oz. packages, **TOFUTTI AMERICAN VEGAN CHEESE SLICES** are sold in most health food stores and select supermarkets.

♦ **BETTER THAN RICOTTA CHEESE<sup>®</sup>,** our dairy free ricotta cheese alternative, offers consumers a dairy-free and gluten-free
 alternative that tastes and works just like real ricotta cheese in all their favorite recipes. Available in 14 oz. retail containers, **BETTER THAN RICOTTA** is available nationally in supermarkets and health food stores.

***Frozen Desserts***

♦ Premium **TOFUTTI<sup>®</sup>** dairy free frozen dessert, available in pre-packed pints, three-gallon cans, and soft serve mix, is
 sold nationally in supermarkets, health food stores, retail shops, and restaurants. Premium **TOFUTTI** was the first dairy free
 frozen dessert to be marketed to the general public through supermarkets. We currently offer six flavors of premium, hard frozen **TOFUTTI** in pints, three flavors in three-gallon bulk cans and one soft-serve flavor.

♦ **TOFUTTI CUTIES<sup>®</sup>**, our best-selling frozen dessert product, are bite size frozen sandwiches combining a choice of one of
 three different fillings between two chocolate wafers. Half the size of traditional ice cream sandwiches, **TOFUTTI CUTIES** offer
 consumers a portion-controlled treat. Unlike ice cream sandwiches, **CUTIES** are totally dairy free, without butterfat or cholesterol,
 yet with the same great taste that makes ice cream sandwiches one of the bestselling novelties in the freezer case. Tofutti Cuties
 come in three flavors: vanilla, chocolate and mint chocolate chip.

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. Our products are sold by independent unaffiliated food brokers to distributors and sometimes on a direct basis to retail chain accounts or to warehouse accounts that directly service chain accounts. Such direct accounts include Safeway/Albertsons, Fred Meyer, DeMoulas/Market Basket, and Wakefern Food Corp. Food brokers act as our agents within designated territories or for specific accounts and receive commissions, which average 5% of net collected sales. Certain key domestic, kosher, and food service accounts and all international accounts are handled directly by us. Our products are also sold in approximately twelve other countries.

We currently sell our dairy-free vegan cheese products and frozen dessert products in most major markets in the United States, including Atlanta, Baltimore, Boston, Charlotte, Chicago, Cincinnati, Cleveland, Dallas, Denver, Detroit, Houston, Jacksonville, Kansas City, Los Angeles, Miami, Milwaukee, Minneapolis, Nashville, New York, Orlando, Philadelphia, Phoenix, Portland, Richmond, Salt Lake City, San Diego, San Francisco, Seattle, St. Louis, Tampa and Washington, D.C.

We currently distribute most of our products by allowing customers to pick-up products from outside storage facilities. We do not own, lease or otherwise maintain any vehicles involved in the shipping of our products. From our co-packing facilities, we either ship direct to our customers or we ship to outside public storage facilities from where our customers are able to pick up their orders. Use of outside storage facilities in several key locations in the United States allows us to provide our customers with products in a timely fashion. Currently, we use one warehouse in New jersey for our cheese products and one warehouse in Pennsylvania for our frozen desert products. We use one warehouse in northern California for both categories of products.

In addition to ice cream and cheese distributors, our products are handled by most major national and regional natural and/or gourmet specialty distributors in the country. We distribute our products through approximately forty (40) distributors to the national health food market.

Our sales to health food accounts in fiscal 2022 increased to $6,527,000 from approximately $6,404,000 in fiscal 2021. Sales to health food accounts in fiscal 2022 and 2021 was 51% of total sales. Sales to foreign distributors decreased slightly to $1,572,000, or 12% of sales, in fiscal 2022, from $1,594,000, or 13% of sales, in fiscal 2021. Our sales to the kosher market decreased to $745,000 in fiscal 2022, from sales of approximately to $789,000 in fiscal 2021. Sales to kosher market markets in fiscal 2022 and 2021 were 6% of sales.

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

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Fiscal Year ended**<br> **December 31, 2022** | **Fiscal Year ended**<br> **December 31, 2022** | **Fiscal Year ended**<br> **January 1, 2022** | **Fiscal Year ended**<br> **January 1, 2022** |
|  | **Sales** | **% of total Sales** | **Sales** | **% of total Sales** |
|  | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** | **(Dollars in thousands)** |
| Metropolitan New York | $2391 | 19% | $2368 | 19% |
| California | 2011 | 16% | 1934 | 15% |
| Midwest | 1854 | 14% | 1756 | 14% |
| Northwest | 870 | 7% | 832 | 7% |
| New England | 870 | 7% | 576 | 5% |
| Upstate New York | 695 | 5% | 574 | 5% |
| Mid-Atlantic | 605 | 5% | 793 | 6% |
| Southwest | 598 | 5% | 570 | 5% |
| Florida | 442 | 3% | 712 | 6% |
| Southeast | 360 | 3% | 410 | 3% |
| Rocky Mountains | 286 | 2% | 258 | 2% |

---

During fiscal 2022, we shipped our products to distributors in Australia, Canada, Egypt, the UK, France, Israel, Mexico, and Panama. Sales to foreign distributors decreased slightly to $1,572,000, or 12% of sales, in fiscal 2022, from $1,594,000, or 13% of sales, in fiscal 2021. Our export business has continued to be negatively impacted by the bankruptcy in December 2019 of our long-term UK distributor and various post COVID-19 supply chain issues in certain foreign countries. We conduct all of our foreign business in U.S. dollars. Accordingly, our future export sales could be adversely affected by an increase in the value of the U.S. dollar against local currencies, which could increase the local currency price of our products.

COMPETITION

TOFUTTI frozen desserts compete with all forms of ice cream products, yogurt-based desserts and other plant-based frozen desserts. Other plant-based frozen dessert products are presently being sold throughout the United States by established distributors of ice cream and other frozen dessert products. Similarly, our cheese products compete with all types of cheese products, both plant-based and dairy. The cheese and frozen dessert categories are highly competitive and most companies with whom we compete are substantially larger and have significantly greater resources than us. Our products face substantial competition from dairy free and dairy products marketed by companies with significantly greater resources than we have.

In most product categories, we compete not only with widely advertised branded products, but also with generic and private label products that are generally sold at lower prices. Competition in our product categories is based on product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing, promotional activity, and the ability to identify and satisfy consumer preferences. Our market share and ability to grow our revenue could also be adversely impacted if we are not successful in introducing innovative products in response to changing consumer demands or by new product introductions of our competitors. If we are unable to build and sustain brand equity by offering recognizably superior product quality, we may be unable to maintain premium pricing over competitive products. We believe that we are able to compete effectively due to our ability to offer an array of plant-based, dairy free vegan cheese and frozen dessert products that contain no butterfat, cholesterol or dairy, yet offer the same texture and full-bodied taste as their dairy counterparts.

PRODUCT DEVELOPMENT

All of our current products were developed by us in our own laboratory. In fiscal 2022 and 2021, our product development expenses were approximately $143,000 and $124,000, respectively. We currently do not intend to reopen the laboratory to its previous level of operations. However, all required quality control requirements are still being performed as needed. All product development costs are expensed as incurred and are recorded as operating expenses in our financial statements.

PRODUCTION

We believe that all of our products are produced under the strictest quality control procedures that are available in each manufacturing facility used by us. These quality control procedures include, but are not limited to, the cleaning processes utilized prior to running our products; spot line inspections during production; in-house laboratory testing as required by government agencies; supervision of all our production by our kosher supervisory service; supervision of all our vegan cheese production by our halal supervisory service; and random testing by outside independent laboratories to ensure that our internal quality control procedures, guidelines, ingredients, and nutritional reporting requirements are being properly followed.

All of our products are produced by co-packers to whom we supply certain key ingredients and packaging for the manufacturing processes. Our co-packing facilities are fully licensed and must comply with all state and federal laws and regulations. Additionally, our production facilities are certified as SQF facilities. The Safe Quality Food (SQF) Program is a rigorous and credible safety and quality program of on-going audits and certifications that is being required by more and more food distributors and retailers before they will accept a new food product into their facility or store. We currently utilize four co-packers, all of whom were able to continue the production of our products during the course of the COVID-19 pandemic. Our co-packers manufacture and package our products and, in certain instances, warehouse such products pending shipment. For certain key product categories, such as dairy free vegan cheeses and dairy free frozen desserts, we have more than one co-packer. In selecting an appropriate co-packer, we take into account all of the preceding factors, plus cost considerations such as product processing fees and freight and warehouse expenses.

For the fiscal years ended December 31, 2022 and January 1, 2022, we purchased approximately 49% and 50% of our finished goods, respectively, from Franklin Foods, our co-packer for our **BETTER THAN CREAM CHEESE, WHIPPED BETTER THAN CREAM CHEESE, SOUR SUPREME,** and **BETTER THAN RICOTTA** products, and 14% and 11%, respectively, of our finished goods from Luke's Ice Cream, our frozen dessert novelty co-packer.

**Relationships with Co-Packers**

We do not have any written production agreements with our co-packers and do not anticipate that we would encounter any material difficulty in obtaining alternative production sources, at a comparable cost, if one or all of our co-packers decide to terminate their relationships with us. Nevertheless, any disruption in supply could have a material adverse effect on our company.

In order to protect our formulas, we have entered into confidentiality arrangements with our co-packers and some of our co-packers' employees. All of our employees, including officers, sign similar confidentiality agreements. There can be no assurance that such confidentiality arrangements can or will be maintained, or that our trade secrets, know-how and marketing ability cannot be obtained by others, or that others do not now possess similar or even more effective capabilities.

**Kosher Certification**

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

**Halal Certification**

In early 2013, we completed a halal certification process at Franklin Foods, the co-packer of our **BETTER THAN CREAM CHEESE**, **WHIPPED BETTER THAN CREAM CHEESE, BETTER THAN SOUR CREAM** and **BETTER THAN RICOTTA** products and at Whitehall Specialties, the co-packer of our vegan cheese slices. This certification is provided by the Islamic Food and Nutrition Council of America (IFANCA) of Park Ridge, Illinois and currently applies only to those products manufactured by Franklin Foods and Whitehall Specialties. Before IFANCA will permit its certification to be placed on a product, which is evidenced by its symbol, IFANCA must approve both the ingredients contained in the product and the facility processing the product. Approval of the manufacturing facilities we use includes periodic inspections. There is a yearly renewal fee for certification. All TOFUTTI<sup>®</sup> vegan cheese products meet the requirements for certification as halal.

TRADEMARKS AND PATENTS

We have registered our trademark, TOFUTTI<sup>®</sup>, and other trademarks for our frozen desserts and other products in the United States and approximately thirty-two foreign countries. We believe our trademarks are an important means of establishing consumer recognition for our products and we will vigorously oppose any unauthorized use of our trademarks. We are not currently involved in any trademark litigation.

Although we believe that our formulas and processes are proprietary, we have not sought patent protection for such technology. Instead, we are relying on the complexity of our technology, on trade secrecy laws and on confidentiality agreements. We believe that our technology has been independently developed and does not infringe the patents of others.

GOVERNMENT REGULATION

Companies engaged in the manufacture, packaging and distribution of food items are subject to extensive regulation by various government agencies which, pursuant to statutes, rules, and regulations, prescribe quality, purity, manufacturing and labeling requirements. Food products are often subject to "standard of identity" requirements, which are promulgated at either the Federal or state level to determine the permissible qualitative and quantitative ingredient content of food. To the extent that any product that we seek to market does not conform to an applicable standard, special permission to market such a product is required.

Our United States product labels are subject to regulation by the United States Food and Drug Administration, or the FDA. Such regulations include standards for product descriptions, nutritional claims, label format, minimum type sizes, content and location of nutritional information panels, nutritional comparisons, and ingredient content panels. Our labels, ingredients and manufacturing processes are subject to inspection by the FDA. During 2022, we re-designed all our packaging including updating our nutritional and ingredient panels to conform to the labeling requirements of the Food Safety Modernization Act. We believe that we are in compliance with current labeling requirements and conduct periodic reviews to make certain that such compliance is on-going.

The Food, Drug and Cosmetic Act, the Food Safety Modernization Act and rules and regulations promulgated by the FDA thereunder, contain no specific Federal standard of identity which is applicable to our products. Our 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. Additionally, many of our major customers now require that any food products that they purchase be produced in Safe Quality Food, or SQF, manufacturing facilities. The SQF program is recognized by the Global Food Safety Initiative and provides a rigorous system to manage food safety risks and provide safe products use by companies in the food industry. All of our current co-packers are SQF certified or have completed the certification process and are awaiting final approval by the certifying organization.

Food manufacturing facilities are subject to inspections by various safety, health and environmental regulatory authorities. A finding of a failure to comply with one or more regulatory requirements can result in the imposition of sanctions including the closing of all or a portion of a company's facilities, subject to a period during which the company can remedy the alleged violations. Our Cranford, New Jersey facility is subject to inspection by the New Jersey-Kosher Enforcement Bureau and the New Jersey Environmental Health Services. We believe that we, our distributors and our co-packers are in compliance in all material respects with governmental regulations regarding our current products and have obtained the material governmental permits, licenses, qualifications and approvals required for our operations. Our compliance with Federal, state and local environmental laws has not materially affected us either economically or in the manner in which we conduct our business. However, there can be no assurance that our company, our distributors and our co-packers will be able to comply with such laws and regulations in the future or that new governmental laws and regulations will not be introduced that could prevent or temporarily inhibit the development, distribution and sale of our products to consumers.

New government laws and regulations may be introduced in the future that could result in additional compliance costs, seizures, confiscations, recalls or monetary fines, any of which could prevent or inhibit the development, distribution and sale of our products. If we fail to comply with applicable laws and regulations, we may be subject to civil remedies, including fines, injunctions, recalls or seizures, as well as potential criminal sanctions, which could have a material adverse effect on our business, results of operations and financial condition.

EMPLOYEES

We have successfully operated our business with a limited number of employees for over a decade. We employed five persons as of December 31, 2022. In fiscal 2021 we employed five persons on a full-time basis. We consider our employees to be among the most valuable assets of our company.

We believe that an engaged workforce is key to maintaining our ability to innovate. During fiscal 2021, we took the necessary precautions in response to the recent COVID-19 outbreak, including offering our employees flexibility to work from home and mandatory social distancing requirements in the workplace. We are committed to providing a safe work environment for our employees in compliance with applicable regulations.

We do not have any collective bargaining agreements with our employees.

---

| | |
|:---|:---|
| **Item 1A.** | **Risk Factors.** |

---

*Investing in our common stock involves a high degree of risk and uncertainty. You should carefully consider the risks and uncertainties described below before investing in our common stock. If any of the following risks actually occur, our business prospects, financial condition and results of operations could be harmed. In that case, the value of our common stock could decline, and you could lose all or part of your investment.*

**Risks Related to Our Business**

***David Mintz, our founder, Chairman of the Board, Chief Executive Officer and the developer of all of our products died in February 2021 and we may be unable to adequately replace him.***

On February 24, 2021, David Mintz, our founder, Chief Executive Officer and Chairman of the Board of Directors, passed away. Steven Kass, Chief Financial Officer, was appointed CEO by our Board of Directors and was confirmed as permanent CEO by the Board on April 27, 2021. We presently do not intend to employ a successor to Mr. Mintz in his role as our head of research and development. The loss of his services could have a material adverse effect on our business and results of operations.

***We depend on a limited number of suppliers for ingredients, packaging materials and the production of our products.***

We depend on a limited number of suppliers for ingredients, packaging materials and the production of our products. We do not produce any of our own products. For the fiscal years ended December 31, 2022 and January 1, 2022, we purchased approximately 49% and 50%, respectively, of our finished goods from Franklin Foods, including our **BETTER THAN CREAM CHEESE, WHIPPED BETTER THAN CREAM CHEESE, BETTER THAN SOUR CREAM,** and **BETTER THAN RICOTTA** products, and purchased approximately 14% and 11%, respectively, of our finished goods from Luke's Ice Cream, our frozen dessert novelty co-packer. Any disruption in supply could have a material adverse effect on our company.

We have little control over the suppliers of ingredients to our co-packers. Disruptions in these relationships may reduce our sales and revenues. Overall difficulty of suppliers meeting product demand, interruptions in the supply chain, obstacles or delays in the process of renegotiating or renewing agreements with preferred suppliers, financial difficulties experienced by suppliers, or the deficiency, lack, or poor quality of alternative suppliers could adversely impact our sales which, in turn, would adversely affect our business and operating results. We believe that, if necessary, we could obtain available alternative sources of supply for each of our products. Depending on the product, that might entail using more than one source of supply.

***Our operations may be adversely affected by failure to maintain or renegotiate distribution, supply or manufacturing agreements on favorable terms.***

We have a number of distribution, supply and co-packing agreements for our suppliers and products. These agreements vary depending on the particular supplier and/or product. There can be no assurance that we will be able to renew these agreements on favorable terms or that these agreements will not be terminated. Termination of these agreements or failure to renew these agreements on favorable terms could have a negative effect on our results of operations and financial condition.

***We may not be able to achieve and maintain profitable operations in the future. We may not have sufficient working capital to fund our operations in the future.***

We incurred a net loss of $525,000 in the fiscal year ended December 31, 2022. As of December 31, 2022, we had $1,072,000 in cash and our working capital was $3,625,000 as compared to $1,698,000 and $4,326,000 at January 1, 2022. The lack of sufficient working capital in the past has negatively impacted our ability to introduce and adequately promote new products. To the extent that we incur operating losses in the future or are unable to generate free cash flows from our business, we may not have sufficient working capital to fund our operations and will be required to obtain additional financing. Such financing may not be available, or, if available, may not be on terms satisfactory to us. If adequate funds are not available to us, our business, and results of operations and financial condition will be adversely affected.

***Our operating costs are subject to fluctuations which could affect our business results.***

The principal raw materials that we use are commodities that experience price volatility caused by external conditions such as weather, product scarcity, limited sources of supply, commodity market fluctuations, currency fluctuations, changes in governmental agricultural and energy policies and regulations, and more recently by potential residual COVID-19 supply chain disruption. Commodity price changes may result in unexpected increases in raw material, packaging, and energy costs. Therefore, our success is dependent, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings projects and sourcing decisions. In the manufacturing and general overhead areas, we need to maintain key manufacturing and supply arrangements, including any key sole supplier and manufacturing plant arrangements.

***Our business and results of operations may be negatively impacted by the spread of COVID-19.***

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

The residual uncertainty regarding the length of the pandemic's effects could have negative consequences for our company. To date, the effects of the pandemic have affected certain aspects of our operations. All of our co-packing facilities operated and continue to operate normally, and the pandemic did not constrain any of our production requirements. The cost of certain key ingredients and packaging has increased substantially due to short and long-term supply issues related to COVID-19. We continue to be able to schedule trucks for delivery and a large majority of our customers are still operating and ordering our products as before. Additionally, our freight costs have increased due to a driver shortage caused by COVID-19. In response to these cost increases and the potential for additional cost increases affecting various aspects of our operations, we initiated a series of sales price increases commencing in the fourth quarter of 2021 which continued into 2022 to help offset these cost increases. If such costs continue to increase during 2023, it may necessitate additional selling price increases, which could have a negative effect on our sales. The pandemic has had a negative impact on our sales, specifically with respect to our food service sales to retail outlets, such as restaurants and small food shops, which have historically accounted for a small part of our total business and with respect to our inability to regain our level of export sales to certain foreign jurisdictions.

Our ability to handle customer and consumer communications, schedule production, and order ingredients necessary for our production has not been materially impacted. Nor have we experienced a significant change in the timeliness of payments of our invoices and our cash position of approximately $968,000 as of March 27, 2023 has improved since our fiscal year end.

***Successful customer relationships are vital to our business and continued growth.***

We must maintain strong relationships with our existing customers and build relationships with new customers in order to ensure our products are well presented to our consumers and available for purchase in major markets. The strength of our customer relationships also affects our ability to obtain pricing and competitive trade terms. Failure to maintain strong relationships with customers could negatively impact our terms of business with affected customers and reduce the availability of our products to consumers.

***We rely on Steven Kass, our Chief Executive and Financial Officer to manage our business.***

Our future success is significantly dependent on the services of Steven Kass (age 71), our Chief Executive and Financial Officer. The loss of his services would have a material adverse effect on our business and results of operations.

 ****

***As a branded goods business, our success depends on the value and relevance of our brand and products to consumers and on our ability to innovate and remain competitive.***

Consumer tastes, preferences and behaviors are constantly changing and our ability to anticipate and respond to these changes and to continue to maintain loyalty to our brand and products is vital to our business. If we are unable to innovate effectively, our sales or margins could be materially adversely affected.

The successful introduction of innovative products and packaging on a periodic basis has become increasingly important to our ability to maintain and grow our sales. Accordingly, the continued acceptance of our current products and the future degree of market acceptance of any of products, which may be accompanied by significant promotional expenditures, is likely to have an important impact on our future financial results.

***Our suppliers are subject to federal, state and local government regulations that could adversely affect our business and financial position.***

Virtually all food manufacturing operations are subject to regulation by various federal, state and local government entities and agencies. As producers of food products for human consumption, our suppliers are subject to stringent production, packaging, quality, labeling and distribution standards, including regulations mandated by the Federal Food, Drug and Cosmetic Act, the Food Safety Modernization Act, the FDA, OSHA, the EPA and the USDA. Future regulation by various federal, state or local governmental entities or agencies could, among other things, increase our suppliers' cost of production, cause them to incur unexpected expenditures or encumber productivity, any of which may adversely affect our business and financial results.

***We may not be able to compete effectively in the highly competitive frozen dessert, dairy free cheese food and health food markets.***

The plant-based, vegan and dairy free frozen dessert, cheese and health food markets are highly competitive. In addition, many of our principal competitors are large, diversified companies with resources significantly greater than ours. We expect strong competition to continue, including competition for adequate distribution and competition for the limited shelf space for the dairy free frozen dessert and dairy free cheese food categories in supermarkets and other retail food outlets. Competition in our product categories is based on product innovation, product quality, price, brand recognition and loyalty, effectiveness of marketing, promotional activity, and the ability to identify and satisfy consumer preferences. Our market share and ability to grow our revenue could also be adversely impacted if we are not successful in introducing innovative products in response to changing consumer demands or by new product introductions of our competitors. If we are unable to build and sustain brand equity by offering recognizably superior product quality, we may be unable to maintain premium pricing over competitive products.

From time to time, we and our customers experience price pressure in some of our markets as a result of competitors' promotional pricing practices as well as general market conditions. Our failure to match or exceed our competitors' cost reductions through innovative products and other improvements could weaken our competitive position. Competition is based on product quality, reliability, food safety, distribution effectiveness, brand loyalty, price, effective promotional activities, the ability to identify and satisfy emerging consumer preferences and the ability to provide ancillary support services. We may not be able to compete effectively with these larger, more diversified companies.

***A material change in consumer demand for our products could have a significant impact on our business.***

We are a consumer food products company and rely on continued demand for our products. To achieve business goals, we must develop and sell products that appeal to consumers. If demand and growth rates fall substantially below expected levels or our market share declines significantly in these businesses, our results could be negatively impacted. This could occur due to unforeseen negative economic or political events or to changes in consumer trends and habits.

 ****

 ****

***Breaches of network or information technology security could have an adverse effect on our business.***

We rely heavily on IT systems to manage critical functions such as operations, data storage and retrieval, revenue recognition, budgeting, forecasting, financial reporting and other administrative functions. Cyber-attacks or other breaches of network or information technology, or IT, may cause equipment failures or disrupt our systems and operations. In particular, both unsuccessful and successful cyber-attacks on companies have increased in frequency, scope and potential harm in recent years. A party who is able to compromise the security measures on our networks or the security of our infrastructure could, among other things, misappropriate our proprietary information and the personal information of our customers and employees, cause interruptions or malfunctions in our or our customers' operations, cause delays or interruptions to our ability to meet customer needs, cause us to breach our legal, regulatory or contractual obligations, create an inability to access or rely upon critical business records or cause other disruptions in our operations. These breaches may result from human errors, equipment failure, or fraud or malice on the part of employees or third parties. Our exposure to cybersecurity threats and negative consequences of cybersecurity breaches will likely increase as we store increasing amounts of customer data. While no actual or attempted attacks have had a material impact on our operations or financial condition, we cannot provide any assurance that our business operations will not be negatively materially affected by such attacks in the future.

We seek to protect against such threats and may be required to expend significant financial resources to alleviate problems caused by physical, electronic, and cyber security breaches. As techniques used to breach security are growing in frequency and sophistication and are generally not recognized until launched against a target, regardless of our protection efforts, we may not be able to implement security measures in a timely manner or, if and when implemented, these measures could be circumvented. Any breaches that may occur could expose us to increased risk of lawsuits, loss of existing or potential future customers, harm to our reputation and increases in our security costs, which could have a material adverse effect on our financial performance and operating results.

In the event of a breach resulting in loss of data, such as personally identifiable information or other such data protected by data privacy or other laws, we may be liable for damages, fines and penalties for such losses under applicable regulatory frameworks despite not handling the data. Furthermore, if a high-profile security breach or cyber-attack occurs with respect to another provider of mission-critical data center facilities, our customers and potential customers may lose trust in the security of these business models generally, which could harm our reputation and brand image as well as our ability to retain existing customers or attract new ones. In addition, the regulatory framework around data custody, data privacy and breaches vary by jurisdiction and is an evolving area of law. We may not be able to limit our liability or damages in the event of such a loss.

While we maintain insurance coverage for some of these events, the potential liabilities associated with these events could exceed the insurance coverage we maintain. A failure to protect the privacy of customer and employee confidential data against breaches of network or IT security could result in damage to our reputation. Any of these occurrences could result in a material adverse effect on our results of operations and financial condition.

***Economic conditions adversely affecting consumer discretionary spending may negatively impact our business and operating results.***

We believe that our revenues and profitability are strongly correlated to consumer discretionary spending, which is influenced by general economic conditions, unemployment levels, and the availability of discretionary income. In an economic downturn or in the event of the renewed spread of COVID-19, our business and results of operations could be materially and adversely affected.

***Our operating results vary quarterly.***

**S**ales to our major customers fluctuate widely from period to period and there is no way to accurately predict that their sales pattern from one year will be repeated in the corresponding period of the next fiscal year. Due to the foregoing factors, in some future quarter our operating results may be below the expectations of investors. In such event, it is likely that the price of our common stock would be materially adversely affected.

***Global climate change and legal, regulatory, or market measures to address climate change, may negatively affect our business, operations and financial results.***

 ****

We are subject to risks associated with the long-term effects of climate change on the global economy and on our industry in particular. Extreme weather and natural disasters within or outside the United States, such as drought, wildfires, storms, changes in ocean currents and flooding, could make it more difficult and costly for us to manufacture and deliver our products to our customers, obtain raw materials from our suppliers, or perform other critical corporate functions. In particular, if such climate change impacts negatively affect agricultural productivity, we may be subject to decreased availability or less favorable pricing from certain commodities that are necessary for our products. Adverse weather conditions and natural disasters could reduce crop size and crop quality, which could reduce our supplies of raw materials, lower recoveries of usable raw materials, increase the prices of our raw materials, increase our costs of storing and transporting raw materials, or disrupt production schedules.

There is a growing societal concern that carbon dioxide and other greenhouse gases in the atmosphere may have an adverse effect on global temperatures, weather patterns and the frequency and severity of natural disasters. The increasing concern over climate change could result in new domestic or international legal requirements for us to reduce greenhouse gas emissions and other environmental impacts of our operations, improve our energy efficiency, or undertake sustainability measures that exceed those we currently pursue. Furthermore, such measures may result in the taxation of greenhouse gas emissions. Any such regulatory requirements could cause disruptions in the manufacture of our products and result in increased capital, procurement, manufacturing and distribution costs. Our reputation and brand could be harmed if we fail, or are seen as having failed, to respond responsibly and effectively to changes in legal and regulatory measures adopted to address climate change.

In addition, changing customer preferences may result in increased demands regarding packaging materials and other components in our products and their environmental impact on sustainability. Further, customers may place increasing importance on purchasing products that are sustainably grown and made.. These demands may cause us to incur additional costs or make other changes to other operations to respond to such demands, which could adversely affect our financial results.

***We have no registered patents. The absence of patent protection could adversely affect our results of operations.***

We rely upon the confidentiality of our formulas and our know-how rather than upon patent protection. There is no assurance that such confidentiality can or will be maintained or that our know-how cannot be obtained by others or that others do not now possess similar or even more effective capabilities. The failure to maintain the confidentiality of our know-how could adversely affect our operating results.

 ****

***Unanticipated business disruptions could adversely affect our ability to provide our products to our customers.***

We have a complex network of suppliers, co-manufacturing locations, distribution networks, and information systems that support our ability to consistently provide our products to our customers. Factors that are hard to predict or beyond our control, such as weather, raw material shortages, natural disasters, fires or explosions, terrorism, or health pandemics, such as the coronavirus, COVID-19, could damage or disrupt our operations or our suppliers', co-manufacturers' or distributors' operations. These disruptions may require additional resources to restore our supply chain or distribution network. If we cannot respond to disruptions in our operations, whether by finding alternative suppliers or replacing capacity at key manufacturing or distribution locations, or if we are unable to quickly repair damage to our information, production, or supply systems, we may be late in delivering, or be unable to deliver, products to our customers and may also be unable to track orders, inventory, receivables, and payables. If that occurs, our customers' confidence in us and long-term demand for our products could decline. Any of these events could materially and adversely affect our product sales, financial condition, and operating results.

***We are subject to risks associated with international operations*.**

In fiscal 2022, approximately 12% of our revenues were from international sales. Although we intend to expand our international operations, we cannot be certain that we will be able to maintain or increase international market demand for our products. To the extent that we cannot do so in a timely manner, our business, operating results and financial condition will be adversely affected. International operations are subject to inherent risks, including the following:

● different
 and changing regulatory requirements in the jurisdictions in which we currently operate or may operate in the future;

● the
 impact of possible recessionary environments in multiple foreign markets;

● export
 restrictions, tariffs and other trade barriers;

● difficulties
 in managing and supporting foreign operations;

● longer
 payment cycles;

● difficulties
 in collecting accounts receivable;

● political
 and economic changes, hostilities and other disruptions in regions where we currently sell our products or may sell our products
 in the future;

● seasonal
 reductions in business activities; and

● on-going
 or newly imposed Covid-19 restrictions imposed by foreign governments.

Negative developments in any of these areas in one or more countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, difficulty in collecting receivables, and a higher cost of doing business, any of which could adversely affect our business, results of operations or financial condition.

***We may be adversely affected by fluctuations in currency exchange rates.***

Our foreign transactions are always in U.S. dollars. Therefore, our future export sales could be adversely affected by an increase in the value of the U.S. dollar, which could increase the local currency price of our products. There can be no assurance such fluctuations in the future will not materially and adversely affect our revenues from international sales and, consequently, our business, operating results and financial condition.

***Incidents involving food-borne illnesses, food tampering, or food contamination involving our products or our supply chain could create negative publicity and significantly harm our operating results.***

While we, our ingredient suppliers and our co-packers dedicate substantial resources to food safety matters to enable customers to enjoy safe, quality food products, food safety events, including instances of food-borne illness (such as salmonella or E. Coli), have occurred in the food industry in the past, and could occur in the future. Instances or reports, whether true or not, of food-safety issues, such as food-borne illnesses, food tampering, food contamination or mislabeling, either during the growing, manufacturing, packaging, storing, or preparation of products, have in the past severely injured the reputations of companies in the frozen desert and dairy sectors and could affect us as well. Any report linking us, our suppliers or co-packers to food-borne illnesses or food tampering, contamination, mislabeling, or other food-safety issues could damage the value of our brands immediately and severely hurt sales of our products and possibly lead to product liability claims, litigation (including class actions), or other damages. In addition, food safety incidents, whether or not involving our brands, could result in negative publicity for the industry or market segments in which we operate. Increased use of social media could create and/or amplify the effects of negative publicity. This negative publicity may reduce demand for our products.

***Food safety and food-borne illness incidents may materially adversely affect our business by exposing us to lawsuits, product recalls or regulatory enforcement actions, increasing our operating costs and reducing demand for our product offerings.***

 ****

Selling food for human consumption involves inherent legal and other risks, and there is increasing governmental scrutiny of and public awareness regarding food safety. Unexpected side effects, illness, injury or death related to allergens, food-borne illnesses or other food safety incidents caused by products we sell, or involving our suppliers or co-manufacturers, could result in the discontinuance of sales of these products or our relationships with such suppliers or co-manufacturers, or otherwise result in increased operating costs, regulatory enforcement actions or harm to our reputation. Shipment of adulterated or misbranded products, even if inadvertent, can result in criminal or civil liability. Such incidents could also expose us to product liability, negligence or other lawsuits, including consumer class action lawsuits. Any claims brought against us may exceed or be outside the scope of our existing or future insurance policy coverage or limits. Any judgment against us that is more than our policy limits or not covered by our policies or not subject to insurance would have to be paid from our cash reserves, which would reduce our capital resources.

The occurrence of food-borne illnesses or other food safety incidents could also adversely affect the price and availability of affected ingredients, resulting in higher costs, disruptions in supply and a reduction in our sales. Furthermore, any instances of food contamination or regulatory noncompliance, whether or not caused by our actions, could compel us, our suppliers, our distributors or our customers, depending on the circumstances, to conduct a recall in accordance with FDA regulations, comparable state laws or foreign laws. Food recalls could result in significant losses due to their costs, the destruction of product inventory, lost sales due to the unavailability of the product for a period of time and potential loss of existing distributors or customers and a potential negative impact on our ability to attract new customers due to negative consumer experiences or because of an adverse impact on our brand and reputation. The costs of a recall could exceed or be outside the scope of our existing or future insurance policy coverage or limits.

In addition, food companies have been subject to targeted, large-scale tampering as well as to opportunistic, individual product tampering, and we, like any food company, could be a target for product tampering. Forms of tampering could include the introduction of foreign material, chemical contaminants and pathological organisms into consumer products as well as product substitution. FDA regulations require companies like us to analyze, prepare and implement mitigation strategies specifically to address tampering (i.e., intentional adulteration) designed to inflict widespread public health harm. If we do not adequately address the possibility, or any actual instance, of intentional adulteration, we could face possible seizure or recall of our products and the imposition of civil or criminal sanctions, which could materially adversely affect our business, financial condition and operating results.

***Product liability suits, if brought, could have a material adverse effect on our business.***

From time to time in the normal course of our business, we become subject to product liability claims. If a product liability claim exceeding our insurance coverage were to be successfully asserted against us, it could harm our business. We cannot assure you that such coverage will be sufficient to insure against claims which may be brought against us, or that we will be able to maintain such insurance or obtain additional insurance covering existing or new products. As a marketer of food products, we are subject to the risk of claims for product liability. We maintain general product liability and umbrella insurance coverages and generally require that our co-packers maintain product liability insurance naming us as a co-insured. Similarly, most of our customers require us to name them as additional insureds as well, and in some cases we are required to sign hold harmless and indemnification agreements.

***Our failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could have an adverse effect on our financial results and the market price of our common stock.***

The Sarbanes-Oxley Act of 2002 imposes certain duties on us and our executives and directors. Our efforts to comply with the requirements of Section 404 have resulted in increased general and administrative expense and a diversion of management time and attention, and we expect these efforts to require the continued commitment of resources. Section 404 of the Sarbanes-Oxley Act requires us to provide management's annual review and evaluation of our internal control over financial reporting in connection with the filing of our Annual Report on Form 10-K for each fiscal year. Based on our evaluation under the frameworks described above, our chief executive and financial officer concluded that our internal control over financial reporting was ineffective as of December 31, 2022 because of the following material weaknesses in internal controls over financial reporting:

● a continuing lack of sufficient resources and an insufficient level of monitoring and oversight, which may restrict our ability to gather, analyze and report information relative to the financial statements, including but not limited to accounting estimates, reserves, allowances, and income tax matters, in a timely manner.

● The limited size of the accounting department makes it impracticable to achieve an optimum separation of duties and monitoring of internal controls.

Our failure to maintain effective internal controls over financial reporting could result in investigation or sanctions by regulatory authorities and could have a material adverse effect on our operating results, investor confidence in our reported financial information, and the market price of our common stock.

**Risks Relating to Our Common Stock**

***Our principal shareholder has the ability to control the policies and management of our company.***

The estate of our founder, former Chairman of the Board and Chief Executive Officer, David Mintz, holds 2,630,440 shares of common stock representing approximately 51.0% of the outstanding shares. As long as the estate maintains a controlling interest in our company, it will have the ability to exercise a controlling influence over our business and affairs, including any determinations with respect to potential mergers or other business combinations involving us, our acquisition or disposition of assets, our incurrence of indebtedness, our issuance of any additional common shares or other equity securities, our repurchase or redemption of common shares and our payment of dividends. Similarly, as long as the estate of Mr. Mintz has a controlling interest in our company, it will have the power to determine the outcome of matters submitted to a vote of our shareholders, including the power to elect all of the members of our board of directors and prevent an acquisition or any other change in control of us.

***Trading on the OTCQX tier of the OTC Markets may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.***

Since October 24, 2016, our common stock has been quoted on the OTCQB tier of the electronic quotation system operated by OTC Markets. On January 10, 2022, our common stock was upgraded to the OTCQX tier. Trading in stock quoted on the OTC Markets is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. This volatility could depress the market price of our common stock for reasons unrelated to operating performance. Moreover, the OTC Markets is not a stock exchange, and trading of securities on the OTC Markets is often more sporadic than the trading of securities listed on a quotation system like NASDAQ or a stock exchange like the NYSE MKT. Accordingly, shareholders may have difficulty reselling any of their shares and the lack of liquidity may negatively impact our ability to pursue strategic alternatives.

***Penny stock rules will limit the ability of our stockholders to sell their stock.***

The Securities and Exchange Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and "accredited investors." The term "accredited investor" refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer's account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer's confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

***The Financial Industry Regulatory Authority, or FINRA, has adopted sales practice requirements which may also limit a shareholder's ability to buy and sell our stock.***

In addition to the penny stock rules described above, FINRA has adopted rules that require that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for its shares.

***Volatility of the market price of our common stock could adversely affect our shareholders and us.***

The market price of our common stock has been subject to fluctuations in the past and may be subject to wide fluctuations in response to numerous factors, including the following:

● actual or anticipated variations in our quarterly operating results or those of our competitors;

● announcements by us or our competitors of new and enhanced products;

● developments or disputes concerning proprietary rights;

● introduction and adoption of new industry standards;

● market conditions or trends in our industry;

● announcements by us or our competitors of significant acquisitions;

● entry into strategic partnerships or joint ventures by us or our competitors;

● additions or departures of key personnel;

● political and economic conditions, such as a recession or interest rate or currency rate fluctuations or political events; and

● other events or factors in any of the countries in which we do business, including those resulting from war, incidents of terrorism, natural disasters, pandemics or responses to such events.

In addition, in recent years the stock market has been highly volatile. Many of these factors are beyond our control and may materially adversely affect the market price of our ordinary shares, regardless of our performance. In the past, following periods of market volatility, shareholders have often instituted securities class action litigation relating to the stock trading and price volatility of the company in question. If we were involved in any securities litigation, it could result in substantial cost to us to defend and divert resources and the attention of management from our business.

***We do not intend to pay cash dividends.***

Our policy is to retain earnings, if any, for use in our business and, for this reason, we do not intend to pay cash dividends on our shares of common stock in the foreseeable future.

---

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

---

None.

**Item 2.** **Properties.**

Our facilities are located in a one-story facility in Cranford, New Jersey. The 6,200 square foot facility houses our administrative offices, a warehouse, walk-in freezer and refrigerator, and a product development laboratory and test kitchen. Our lease agreement expired in 1999, but we continue to occupy the premises under the terms of that agreement, subject to a six-month notification period from us and the landlord with respect to any changes. We currently have no plans to enter into a long-term lease agreement for the facility. Our rent expense was $86,000 in fiscal 2022 and $79,000 in fiscal 2021. Our management believes that the Cranford facility will continue to satisfy our space requirements. We rent warehouse storage space at various outside facilities. Outside warehouse expenses amounted to $363,000 and $459,000 during fiscal 2022 and 2021, respectively.

**Item 3.** **Legal Proceedings.** 

We are not a party to any material litigation.

**Item 4.** **Mine Safety Disclosures.**

Not applicable.

**PART II**

**Item 5.** **Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.**

Our common stock was listed on the American Stock Exchange, or the AMEX, on October 29, 1985 and traded on the AMEX or its successor, NYSE MKT, under the symbol TOF**,** until October 24, 2016 when our common stock began to be quoted on the OTCQB tier of the electronic quotation system operated by OTC Markets under the symbol TOFB. On January 10, 2022, our stock was upgraded to the OTCQX tier.

**Holders of Record**

As of March 27, 2023, there were approximately 290 direct holders of record of our common stock.

**Dividends**

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

**2014 Equity Incentive Plan**

Our shareholders adopted our 2014 Equity Incentive Plan (the "Plan") on June 10, 2014. 250,000 non-qualified option awards were granted in the fiscal year ended December 31, 2022, which remain outstanding as of December 31, 2022. No option awards were granted in the fiscal year ended January 1, 2022.

The Plan provides for grants of various types of awards ("Awards") that are designed to attract and retain highly qualified employees and directors who will contribute to the success of the company and to provide incentives to participants in this Plan that are linked directly to increases in shareholder value which will, therefore, inure to the benefit of all of our shareholders. The Plan will expire on June 9, 2024. The Plan makes 250,000 shares of our common stock available for Awards under the Plan. The Plan also permits performance-based Awards paid under the Plan to be tax deductible to the company as "performance-based compensation" under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code").

**Administration**

The Plan is administered in accordance with the requirements of Section 162(m) of the Code (but only to the extent necessary and desirable to qualify Awards under the Plan as "performance-based compensation" under Section 162(m)) and, to the extent applicable, Rule 16b-3 under the Exchange Act ("Rule 16b-3"), by the Board or, at the Board's sole discretion, by the compensation or any other committee of the Board, as appointed by the Board (the "Administrator").

**Eligible Participants**

Incentive stock options, or ISOs, may be granted only to employees (including officers and directors who are also employees) of the company. Options and stock appreciation rights may be granted only to eligible participants as to whom company shares constitute "service recipient stock," within the meaning of the regulations under Section 409A of the Code. All other Awards may be granted to employees, officers and directors of the company. An Eligible Participant may be granted more than one Award under the Plan.

The Plan allows us to grant ISOs to our employees and non-statutory stock options, stock appreciation rights, restricted stock, performance grants, stock bonuses and any other types of equity-based awards to our employees, officers and directors. We believe that our ability to grant this broad array of equity incentives is critical to secure, retain and motivate our employees and directors and to respond to market conditions and best practices, while at the same time balancing such issuances and the potential dilution to our stockholders.

No options or stock appreciation rights were exercised in the two fiscal years ended December 31, 2022. There are currently 250,000 outstanding non-qualified stock options.

**Sales of Unregistered Securities**

There were no sales of unregistered securities during fiscal 2022.

**Purchase of Equity Securities by the Issuer and Affiliates**

We did not purchase any shares of our common stock in the thirteen weeks ended December 31, 2022 (the fourth quarter of fiscal 2022).

**Item 6.** **Reserved.**

**Item 7.** **Management's Discussion and Analysis of Financial Condition and Results of Operations.**

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

**Critical Accounting Policies**

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The policies discussed below are considered by management to be critical to an understanding of our financial statements because their application places the most significant demands on management's judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. Specific risks for these critical accounting policies are described in the following paragraphs. For all of these policies, management cautions that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.

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

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

*Accounts Receivable*. The majority of our accounts receivables are due from distributors (domestic and international) and retailers. Credit is extended based on evaluation of a customers' financial condition and, generally, collateral is not required. Accounts receivable are most often due within 30 to 90 days and are stated at amounts due from customers net of an allowance for doubtful accounts and reserve for sales promotions. Accounts outstanding longer than the contractual payment terms are considered past due. We determine whether an allowance is necessary by considering a number of factors, including the length of time trade accounts receivable are past due, our previous loss history, the customer's current ability to pay its obligation, and the condition of the general economy and the industry as a whole. We write-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the bad debt expense account. We do not accrue interest on accounts receivable past due.

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

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

**Recent Accounting Pronouncements**

Our company considers the applicability and impact of all Accounting Standard Updates ("ASUs"). ASUs not discussed below were assessed and determined to be either not applicable or are expected to have minimal impact on our balance sheets or statements of operations.

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

**Key Factors Affecting Our Business**

Our operations and the operating metrics discussed below have been and will likely continue to be affected by certain key factors as well as certain historical events and actions. The key factors affecting our business and results of operations include among others, our lack of sufficient working capital, dependence on a few key distributors for a significant portion of our sales, dependence on several key suppliers to produce our products, our reliance on a limited number of key executives to manage our business and significant competition from better capitalized competitors. For further discussion of the factors affecting our results of operations, see "Risk Factors."

*We may not be able to maintain profitability in the future and may not have sufficient working capital to fund our operations in the future.*

We incurred a loss in fiscal 2022 and have not been consistently profitable in recent years. Our cash decreased to $1,072,000 as of December 31, 2022 from $1,698,000 as of January 1, 2022 and our working capital decreased to $3,625,000 as of December 31, 2022 from $4,326,000 as of January 1, 2022. The lack of sufficient working capital in the future could negatively impact our ability to introduce and adequately promote new products. To the extent that we incur operating losses in the future or are unable to generate free cash flows from our business, we may not have sufficient working capital to fund our operations and will be required to obtain additional financing. Such financing may not be available, or, if available, may not be on terms satisfactory to us. If we are unable to maintain revenues, we may not be able sustain profitable operations in the future or generate positive cash flows from our operations.

 

 

*We depend on a few key distributors for a significant portion of our sales.*

A significant portion of our sales are to several key distributors, which are large distribution companies with numerous divisions and subsidiaries who act independently. Such distributors as a group accounted for 47% and 48% of our net sales for the fiscal years ended December 31, 2022 and January 1, 2022, respectively. Although we believe that the business associated with any of our primary distributors can be readily transferred to other distributors or directly to supermarket warehouses, if necessary, no assurance can be given that a change in distributors would not be disruptive to our business, which could have a material adverse effect on our business and results of operations.

*Interruptions in the supply of products from our co-packers and suppliers could adversely affect our revenues.*

We depend on a limited number of suppliers for ingredients, packaging materials and the production of our products. We do not produce any of our own products. For the years ended December 31, 2022 and January 1, 2022, we purchased approximately 49% and 50%, respectively, of our finished goods from Franklin Foods, including our **BETTER THAN CREAM CHEESE, WHIPPED BETTER THAN CREAM CHEESE, BETTER THAN SOUR CREAM,** and **BETTER THAN RICOTTA** products, and purchased approximately 14% and 11%, respectively, of our finished goods from Luke's Ice Cream, our frozen dessert novelty co-packer. Any disruption in supply could have a material adverse effect on our company.

We have little control over the suppliers of ingredients to our co-packers. Disruptions in these relationships may reduce our sales and revenues. Overall difficulty of suppliers meeting product demand, interruptions in the supply chain, obstacles or delays in the process of renegotiating or renewing agreements with preferred suppliers, financial difficulties experienced by suppliers, or the deficiency, lack, or poor quality of alternative suppliers could adversely impact our sales which, in turn, would adversely affect our business and operating results. We believe that, if necessary, we could obtain available alternative sources of supply for each of our products. Depending on the product, that might entail using more than one source of supply.

We have a complex network of suppliers, co-manufacturing locations, distribution networks, and information systems that support our ability to consistently provide our products to our customers. Factors that are hard to predict or beyond our control, such as weather, raw material shortages, natural disasters, fires or explosions, terrorism, or health pandemics, such as COVID-19, could damage or disrupt our operations or our suppliers', co-packers' or distributors' operations. These disruptions may require additional resources to restore our supply chain or distribution network. If we cannot respond to disruptions in our operations, whether by finding alternative suppliers or replacing capacity at key manufacturing or distribution locations, or if we are unable to quickly repair damage to our information, production, or supply systems, we may be late in delivering, or be unable to deliver, products to our customers and may also be unable to track orders, inventory, receivables, and payables. If that occurs, our customers' confidence in us and long-term demand for our products could decline. Any of these events could materially and adversely affect our product sales, financial condition, and operating results.

*We rely on Steven Kass to manage our business.*

Upon the death of Mr. Mintz, our continued success is significantly dependent on the services of Steven Kass (age 71), who is serving as our Chief Executive and Financial Officer. The loss of his services would have a material adverse effect on our business and results of operations.

*Competition.*

The plant-based, dairy free vegan frozen dessert, cheese and health food markets are highly competitive. In addition, many of our principal competitors are large, diversified companies with resources significantly greater than ours. We expect strong competition to continue, including competition for adequate distribution and competition for the limited shelf space for the frozen dessert and dairy free cheese food categories in supermarkets and other retail food outlets.

From time to time, we and our customers experience price pressure in some of our markets as a result of competitors' promotional pricing practices as well as general market conditions. Our failure to match or exceed our competitors' cost reductions through innovative products and other improvements could weaken our competitive position. Competition is based on product quality, reliability, food safety, distribution effectiveness, brand loyalty, price, effective promotional activities, the ability to identify and satisfy emerging consumer preferences and the ability to provide ancillary support services. We may not be able to compete effectively with these larger, more diversified companies.

**Recent Developments**

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

The residual uncertainty regarding the length of the pandemic's effects could have negative consequences for our company. To date, the effects of the pandemic have affected certain aspects of our operations. All of our co-packing facilities operated and continue to operate normally, and the pandemic did not constrain any of our production requirements. The cost of certain key ingredients and packaging has increased substantially due to short and long-term supply issues related to COVID-19. We continue to be able to schedule trucks for delivery and a large majority of our customers are still operating and ordering our products as before. Additionally, our freight costs have increased due to a driver shortage caused by COVID-19. In response to these cost increases and the potential for additional cost increases affecting various aspects of our operations, we had initiated a series of sales price increases commencing in the fourth quarter of 2021 which continued into 2022 to help offset these cost increases. The pandemic has had a negative impact on our sales, specifically with respect to our food service sales to retail outlets, such as restaurants and small food shops, which account for a small part of our total business and with respect to our inability to regain our level of export sales to certain foreign jurisdictions.

Our ability to handle customer and consumer communications, schedule production and order ingredients necessary for our production has not been materially impacted. Nor have we experienced a significant change in the timeliness of payments of our invoices and our cash position of approximately $968,000 as of March 27, 2022 has improved since our fiscal year end December 31, 2022.

**<u>Fiscal Year Ended December 31, 2022 Compared with Fiscal Year Ended January 1, 2022</u>**

We operate on a fiscal year ending on the Saturday closest to December 31. Fiscal years for the financial statements included in this report are the fifty-two week periods ended December 31, 2022 (fiscal 2022) and January 1, 2022 (fiscal 2021).

Net sales for the fiscal year ended December 31, 2022 were $12,827,000, a slight increase of $237,000 or 2%, from net sales of $12,590,000 for the fiscal year ended January 1, 2022 due to the price increases implemented by the Company in the fourth quarter of 2022. Sales of our frozen dessert and frozen food product lines increased slightly to $1,876,000 in the fiscal year ended December 31, 2022 from $1,829,000 in fiscal 2021. Sales of vegan cheese products also increased slightly to $10,951,000 in the fiscal year ended December 31, 2022 from $10,761,000 in the fiscal year ended January 1, 2022.

Our gross profit for the year ended December 31, 2022 decreased by $1,000,000 to $2,342,000 from $3,342,000 for the fiscal year ended January 1, 2022. Our gross profit percentage for the fiscal year ended December 31, 2022 was 18% compared to 27% for the fiscal year ended January 1, 2022. Sales promotion and allowance expense increased to $1,514,000 in the fiscal year ended December 31, 2022 from $1,487,000 in the fiscal year ended January 1, 2022. The decrease in both our gross profit and gross profit percentage was primarily caused by the substantial increases in the costs for certain ingredients, especially palm oil, gums and flavorings and the substantial increase in freight out expense. These substantial cost increases were due primarily to the lingering supply chain issues caused by the Covid-19 pandemic and the record high cost of petroleum. The high cost of petroleum directly impacted the costs of certain ingredients and packaging such as the plastic packaging we use for our spreadable cheese products.

Freight out expense increased by $100,000 or 9% to $1,159,000 for the year ended December 31, 2022 compared with $1,059,000, or 8%, for the year ended January 1, 2022. Freight out expense increased due to significant increases in freight rates across all methods of shipping due to increases in fuel costs and the reduction in vehicle availability due to the pandemic. Freight out cost as a percentage of sales was 9% and 8% for the years ended December 31, 2022 and January 1, 2022, respectively. Due to the continued high cost of petroleum, we anticipate that our freight out expense will continue at a high percentage of sales in 2023, similar to fiscal year 2022.

Selling and warehousing expenses decreased by $59,000, or 5%, to $1,147,000 for the fiscal year ended December 31, 2022 from $1,206,000 for the fiscal year ended January 1, 2022. This decrease was primarily attributable to decreases in payroll expense of $22,000, outside warehouse rental expense of $96,000, and commission expense of $19,000, which were partially offset by increases in messenger costs of $15,000 and meeting and convention expense of $57,000. We anticipate that our selling expense will continue at the same level in 2023. The increase in meeting and convention expense was due to the resumption of the Company's participation in trade and distribution shows.

Marketing expenses increased in the fiscal year ended December 31, 2022 by $283,000, or 101%, to $564,000 from $281,000 in the fiscal year ended January 1, 2022 due to increases in promotion expense of $86,000, non-capitalizable artwork and plate expense of $98,000, point of sale material expense of $33,000 and advertising expense of $61,000. In 2022, we completed the rebranding of our product line and introduced new packaging for our products, which along with other related marketing expenditures, accounted for a substantial increase in our marketing expenses. Because many of the expenditures were one-time expenses, we anticipate that our marketing expenses for 2023 will decrease significantly.

Research and development expenses increased by $19,000, or 15%, to $143,000 in the fiscal year ended December 31, 2022 from $124,000 in the fiscal year ended January 1, 2022. The increase was primarily attributable to an increase in professional fees and outside services expense of $39,000, which was partially offset by decreases in lab costs and supplies expense of $9,000 and depreciation expense of 10,000.

General and administrative expenses decreased by $85,000, or 6%, to $1,404,000 for the year ended December 31, 2022 from $1,489,000 for the year ended January 1, 2022. The decrease was primarily due to decreases in payroll expense of $42,000, professional fees and outside services expense of $73,000, equipment rental expense of $24,000 and the one-time $75,000 expense in fiscal 2021 relating to the sale of an asset, which were partially offset by increases in public relations expense of $67,000, stock-based compensation expense of $56,000, and building maintenance expense of $17,000. The decrease in payroll expense was due to no salary being paid to Mr. Mintz this period compared to the same period in the prior year. We anticipate that our total general and administrative expenses for fiscal 2023 will be consistent with those in fiscal 2022.

Overall, total operating expenses increased by $158,000, or 5%, to $3,258,000 for the year ended December 31, 2022 compared to total operating expenses of $3,100,000 in the year ended January 1, 2022. Due to the one-time nature of certain of our operating expenses in fiscal 2022, we anticipate a reduction in our operating expenses in fiscal 2023.

As a result of the foregoing we incurred an operating loss of $916,000 in the year ended December 31, 2022 as compared with operating income of $242,000 in the year ended January 1, 2022.

Loss before income taxes was $753,000 in the year ended December 31, 2022 as compared with income before income taxes of $217,000 in the year ended January 1, 2022.

Benefit from income taxes for the year ended December 31, 2022 was $228,000 compared to income tax expense of $74,000 for the year ended January 1, 2022 resulting from the lower pre-tax income during this period compared to prior year.

**Liquidity and Capital Resources**

At December 31, 2022, we had approximately $1,072,000 in cash, and our working capital was $3,625,000 as compared to $1,698,000 and $4,326,000 at January 1, 2022. We principally operate our business on the cash flows from our operations and currently have no borrowings. In order to provide our company with needed working capital, David Mintz, our former Chairman and Chief Executive Officer, provided our company with a convertible loan of $500,000 in January 2016. On December 22, 2021, the loan balance of $500,000 plus accrued interest of $25,000 was paid by the Company to Mr. Mintz's estate.

Cash Flows

---

| | | |
|:---|:---|:---|
|  | **Fiscal Year ended** | **Fiscal Year ended** |
|  | **December 31, 2022** | **January 1, 2022** |
|  | **(In thousands)** | **(In thousands)** |
| Net cash (used in) provided by operating activities | $(616) | $689 |
| Net cash provided by investing activities – sale and disposal of equipment |  | 50 |
| Net cash used in financing activities | (10) | (500) |
| Net (decrease) increase in cash | (626) | 239 |
| Cash at beginning of year | 1698 | 1459 |
| Cash at end of year | $1072 | $1698 |

---

Cash used in operating activities for the fiscal year ended December 31, 2022 was $616,000 compared to $689,000 provided by operating activities for the fiscal year ended January 1, 2022. Cash used in operating activities was primarily from our net loss of $525,000, SBA loan forgiveness of $165,000, a deferred tax asset increase of $255,000, an increase in inventories of $589,000, and a non-cash change in right of use assets and lease liabilities of $12,000, offset by stock-based compensation of $56,000, amortization of financing right-of-use asset of $9,000, provision for bad debts expense of $15,000, a decrease in accounts receivable of $16,000 and an increase in accounts payable and accrued expenses of $819,000.

Cash provided by investing activities was $0 for the fiscal year ended December 31, 2022 compared to cash provided by investing activities of $50,000 for the fiscal year ended January 1, 2022. Cash provided by investing activities in the fiscal year ended January 1, 2022 was due to proceeds from the sale of equipment.

Cash used in financing activities for the fiscal year ended December 31, 2022 was $10,000 compared to cash used of $500,000 for the fiscal year ended January 1, 2022. Cash used in financing activities for the fiscal year ended December 31, 2022 was due to payments made on our financing lease. Cash used in financing activities in the fiscal year ended January 1, 2022 was due to the repayment of a convertible note of $500,000 that had been provided to us by Mr. Mintz.

As a result of the foregoing, our cash decreased to $1,072,000 at December 31, 2022 from $1,698,000 at January 1, 2022.

We believe our existing cash on hand at December 31, 2022, our existing working capital, and our expected cash flows from operations will be sufficient to support our operating and capital requirements for at least the next twelve months dating from the issuance of the financial statements.

**Contractual Obligations**

We had no material contractual obligations at December 31, 2022.

**Inflation and Seasonality**

We do not believe that our operating results have been materially affected by inflation during the preceding two years. There can be no assurance, however, that our operating results will not be affected by inflation in the future. Our business is subject to minimal seasonal variations with slightly increased sales historically in the second and third quarters of the fiscal year. We expect to continue to experience slightly higher sales in the second and third quarters, and slightly lower sales in the fourth and first quarters, as a result of reduced sales of dairy free frozen desserts during those periods.

**Market Risk**

We will invest our excess cash, should there be any, in highly rated money market funds which are subject to changes in short-term interest rates. We do not believe that our foreign currency exposure is significant as our export sales are transacted in U.S. dollars. We did not enter into any foreign exchange contracts in the year ended December 31, 2022.

**Off-Balance Sheet Arrangements**

None.

---

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

---

Not applicable.

**Item 8.** **Financial Statements and Supplementary Data.**

**Index to Financial Statements**

---

| | |
|:---|:---|
| [Report of Independent Registered Accounting Firm](#ds_027) (*Mazars USA LLP, Edison, NJ, PCAOB ID 339)* | F-1 |
| Financial Statements: |  |
| [Balance Sheets](#ds_028) | F-3 |
| [Statements of Operations](#ds_029) | F-4 |
| [Statements of Changes in Stockholders' Equity](#ds_030) | F-5 |
| [Statements of Cash Flows](#ds_031) | F-6 |
| [Notes to Financial Statements](#ds_032) | F-7 |

---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Tofutti Brands Inc.

**Opinion on the Financial Statements**

We have audited the accompanying balance sheets of Tofutti Brands Inc (the "Company") as of December 31, 2022 and January 1, 2022, the related statements of operations, stockholders' equity, and cash flows, for the fiscal years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and January 1, 2022, and the results of its operations and its cash flows for the fiscal years then ended, in conformity with accounting principles generally accepted in the United States of America.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matter**

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

***Significant estimates of sales discounts and allowances***

As described in Note 1 to the financial statements, revenues are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates, or returns, are estimated at the time of the sale. The Company bases these estimates of expected amounts principally on historical utilization and redemption rates. Estimates that affect revenue and trade receivables, such as trade incentives and product returns, are monitored and adjusted each period until the incentives or product returns are realized. Considering the estimation and judgement required by management in determining these amounts, our audit of these estimates require a degree of auditor judgement regarding these qualitative factors.

*The primary procedures we performed to address this critical audit matter included:*

Our audit procedures related to significant estimates of sales discounts and allowances included the following, among others:

● We obtained an understanding of the Company's evaluation of the historical application of sales discounts and allowances.

● We performed audit procedures that included, among others, testing of the significant estimates surrounding sales discounts and allowance included an understanding of all sales promotions, and other discounts available during the year, analysis of credit memos, including those subsequent to year end, and an historical analysis of accrued sales allowances and discounts compared to the current trends.

We have served as the Company's auditor since 2021.

*/s/ Mazars USA LLP*

Edison, NJ

March 31, 2023

**TOFUTTI BRANDS INC.**

**BALANCE SHEETS**

(In thousands, except for share and per share data)

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **January 1, 2022** |
| **Assets** |  |  |
| Current assets: |  |  |
| Cash | $1072 | $1698 |
| &nbsp;&nbsp;&nbsp;Accounts receivable, net of allowance for doubtful accounts and sales promotions of $495 and $435, respectively | 1305 | 1336 |
| &nbsp;&nbsp;&nbsp;Inventories | 2463 | 1874 |
| &nbsp;&nbsp;&nbsp;Prepaid expenses and other current assets | 80 | 98 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current assets | 4920 | 5006 |
| Operating lease right-of-use assets | 158 | 203 |
| Finance lease right-of-use asset | 53 | - |
| Deferred tax assets | 367 | 112 |
| Other assets | 19 | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total assets | $5517 | $5342 |
| **Liabilities and Stockholders' Equity** |  |  |
| Current liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;SBA loan payable | $- | $165 |
| &nbsp;&nbsp;&nbsp;Income taxes payable | 41 | 46 |
| &nbsp;&nbsp;&nbsp;Accounts payable | 684 | 122 |
| &nbsp;&nbsp;&nbsp;Accrued expenses | 555 | 347 |
| &nbsp;&nbsp;&nbsp;Financing lease liability, current portion | 15 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total current liabilities | 1295 | 680 |
| Operating lease liabilities, net of current portion | 85 | 95 |
| Finance lease liability, net of current portion | 39 | - |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities | 1419 | 775 |
| Stockholders' equity: |  |  |
| &nbsp;&nbsp;&nbsp;Preferred stock – par value $.01 per share; authorized 100,000 shares, none issued and outstanding |  |  |
| &nbsp;&nbsp;&nbsp;Common stock – par value $.01 per share; authorized 15,000,000 shares, 5,153,706 shares issued and outstanding | 52 | 52 |
| &nbsp;&nbsp;&nbsp;Additional paid-in capital | 263 | 207 |
| &nbsp;&nbsp;&nbsp;Retained earnings | 3783 | 4308 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total stockholders' equity | 4098 | 4567 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total liabilities and stockholders' equity | $5517 | $5342 |

---

See accompanying notes to financial statements

**TOFUTTI BRANDS INC.**

**STATEMENTS OF OPERATIONS**

(In thousands, except for per share data)

---

| | | |
|:---|:---|:---|
|  | **Fiscal year**<br> **ended**<br> **December 31, 2022** | **Fiscal year**<br> **ended**<br> **January 1, 2022** |
| Net sales | $12827 | $12590 |
| Cost of sales | 10485 | 9248 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Gross profit | 2342 | 3342 |
| Operating expenses: |  |  |
| &nbsp;&nbsp;&nbsp;Selling and warehousing | 1147 | 1206 |
| &nbsp;&nbsp;&nbsp;Marketing | 564 | 281 |
| &nbsp;&nbsp;&nbsp;Product development costs | 143 | 124 |
| &nbsp;&nbsp;&nbsp;General and administrative | 1404 | 1489 |
| &nbsp;&nbsp;&nbsp;Total operating expenses | 3258 | 3100 |
| Income (loss) from operations | (916) | 242 |
| SBA loan forgiveness | 165 | - |
| Income (loss) before interest expense and income taxes | (751) | 242 |
| Interest expense | 2 | 25 |
| Income (loss) before provision for income taxes | (753) | 217 |
| (Benefit from) provision for income taxes | (228) | 74 |
| Net income (loss) | $(525) | $143 |
| Weighted average common shares outstanding: |  |  |
| &nbsp;&nbsp;&nbsp;Basic | 5154 | 5154 |
| &nbsp;&nbsp;&nbsp;Diluted | 5154 | 5154 |
| Net income (loss) per common share: |  |  |
| &nbsp;&nbsp;&nbsp;Basic | $(0.10) | $0.03 |
| &nbsp;&nbsp;&nbsp;Diluted | $(0.10) | $0.03 |

---

See accompanying notes to financial statements.

**TOFUTTI BRANDS INC.**

**STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**

**Fiscal Years ended December 31, 2022 and January 1, 2022**

(In thousands, except for share data)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | Common Stock | Common Stock | | | |
|  | Shares | Amount | Additional<br> Paid-In<br>Capital | Retained<br>Earnings | Total <br> Stockholders'<br>Equity |
| Balances January 2, 2021 | 5153706 | $52 | $207 | $4165 | $4424 |
| Net income | - | - | - | 143 | 143 |
| Balances January 1, 2022 | 5153706 | $52 | $207 | $4308 | $4567 |
| Stock-based compensation |  |  | 56 |  | 56 |
| Net income (loss) | - | - | - | (525) | (525) |
| Balances December 31, 2022 | 5153706 | $52 | $263 | $3783 | $4098 |

---

See accompanying notes to financial statements.

**TOFUTTI BRANDS INC.**

**STATEMENTS OF CASH FLOWS**

(In thousands)

---

| | | |
|:---|:---|:---|
|  | **Fiscal Year**<br> **ended<br> December 31, 2022** | **Fiscal Year**<br> **ended<br> January 1, 2022** |
| CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Net (loss) income | $(525) | $143 |
| &nbsp;&nbsp;&nbsp;Adjustments to reconcile net income to net cash flows provided by operating activities: |  |  |
| &nbsp;&nbsp;&nbsp;Depreciation |  | 10 |
| &nbsp;&nbsp;&nbsp;Stock-based compensation | 56 |  |
| &nbsp;&nbsp;&nbsp;SBA loan forgiveness | (165) |  |
| &nbsp;&nbsp;&nbsp;Non-cash change in right of use assets and lease liabilities | (12) | (7) |
| &nbsp;&nbsp;&nbsp;Amortization of finance lease right-of-use asset | 9 |  |
| &nbsp;&nbsp;&nbsp;Loss on sale and disposal of equipment |  | 75 |
| &nbsp;&nbsp;&nbsp;Provision for bad debts and sales promotions | 15 | 20 |
| &nbsp;&nbsp;&nbsp;Deferred taxes | (255) | (29) |
| &nbsp;&nbsp;&nbsp;Change in assets and liabilities: |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts receivable | 16 | 722 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Inventories | (589) | 123 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Prepaid expenses | 18 | (10) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other assets | 2 | (2) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income taxes payable | (5) | (71) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accounts payable and accrued expenses | 819 | (285) |
| &nbsp;&nbsp;&nbsp;Net cash flows (used in) provided by operating activities | (616) | 689 |
| CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Proceeds from sale of equipment | - | 50 |
| Net cash flows provided by investing activities | - | 50 |
| CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: |  |  |
| &nbsp;&nbsp;&nbsp;Payments of finance lease obligations | (10) |  |
| &nbsp;&nbsp;&nbsp;Payment of convertible note payable | - | (500) |
| Net cash flows (used in) provided by financing activities | (10) | (500) |
| NET CHANGE IN CASH | (626) | 239 |
| CASH AT BEGINNING OF YEAR | 1698 | 1459 |
| CASH AT END OF YEAR | $1072 | $1698 |
| SUPPLEMENTAL CASH FLOW INFORMATION: |  |  |
| &nbsp;&nbsp;&nbsp;Income taxes paid | $- | $180 |
| &nbsp;&nbsp;&nbsp;Interest paid - related party | $2 | $25 |
| &nbsp;&nbsp;&nbsp;Supplemental schedule of non-cash investing and financing activities: |  |  |
| &nbsp;&nbsp;&nbsp;Lease assets acquired in exchange for lease liabilities | $62 | $- |

---

See accompanying notes to financial statements.

**TOFUTTI BRANDS INC.**

**NOTES TO FINANCIAL STATEMENTS**

(In thousands, except for share and per share data)

**NOTE 1: DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

**Description of Business** – Tofutti is engaged in one business segment, the development, production and marketing of plant based, dairy vegan free frozen desserts and other food products.

**Operating Segments -** The Company reports on operating segments in accordance with standards for public companies to report information about operating segments and geographic distribution of sales in financial statements. The Company has determined that it has only one operating segment, which is the development, production and marketing of soy and other vegetable protein- based, dairy free cheese and frozen food products.

**Fiscal Year** - The Company operates on a fiscal year ending on the Saturday closest to December 31st. Fiscal years for the financial statements included herein are the fifty-two week and fifty-three week fiscal periods ended December 31, 2022 and January 1, 2022, fiscal 2022 and fiscal 2021, respectively.

**Estimates and Uncertainties** - The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include allowance for doubtful accounts and sales promotion accruals. Actual results could differ from those estimates.

**Accounts Receivable -** The majority of the Company's accounts receivables are due from distributors (domestic and international) and retailers. Credit is extended based on evaluation of a customers' financial condition and, generally, collateral is not required. Accounts receivable are most often due within 30 to 90 days and are stated at amounts due from customers net of an allowance for doubtful accounts and reserve for sales promotion. Accounts outstanding longer than the contractual payment terms are considered past due. The Company determines its allowance by considering a number of factors, including the length of time trade accounts receivable are past due, the Company's previous loss history, the customer's current ability to pay its obligation to the Company, and the condition of the general economy and the industry as a whole. The Company writes-off accounts receivable when they become uncollectible, and payments subsequently received on such receivables are credited to the bad debt expense. The Company does not accrue interest on accounts receivable past due.

**Inventories** - Inventory is stated at lower of cost or net realizable value determined by first in first out (FIFO) method. Inventories in excess of future demand or approaching expiration are written down and charged to the provision for inventories.

The Company purchased approximately 49% and 50% of its finished products from one supplier and 14% and 11% of its finished products from another supplier during the periods ended December 31, 2022 and January 1, 2022, respectively.

**Equipment, net –** Additions are recorded at cost. Depreciation is provided by charges to income using the straight-line method over the estimated useful life of the equipment, which is ten years. Ordinary maintenance and repair costs are expensed in the year incurred.

**Revenue Recognition** – The Company accounts for revenue recognition in accordance with accounting guidance codified as FASB ASC 606 "Revenue from Contracts with Customers" ("ASC 606"), as amended regarding revenue from contracts with customers. Under the standard an entity is required to recognize revenue to depict the transfer of promised goods to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods.

Under ASC 606, revenue is recognized as the customer obtains control of the goods and services promised in the contract (i.e., performance obligations). In evaluating our contracts with our customers under ASC 606, we have determined that there is no future performance obligation once delivery has occurred.

The Company primarily sells plant-based, dairy free vegan cheeses and frozen desserts. The Company recognizes revenue when control over the products transfers to its customers, deemed to be the performance obligation, which generally occurs upon delivery or shipment of the products. The Company accounts for product shipping, handling and insurance as fulfillment activities with revenues for these activities recorded within net revenue and costs recorded within cost of sales. Revenues are recorded net of trade and sales incentives and estimated product returns. Known or expected pricing or revenue adjustments, such as trade discounts, rebates or returns, are estimated at the time of sale. The Company bases these estimates of expected amounts principally on historical utilization and redemption rates. Estimates that affect revenue, such as trade incentives and product returns, are monitored and adjusted each period until the incentives or product returns are realized.

**TOFUTTI BRANDS INC.**

**NOTES TO FINANCIAL STATEMENTS**

(In thousands, except for share and per share data)

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

**Concentration of Credit/Sales Risk** - Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash and unsecured trade receivables. During the year, the Company's cash balance at one of the two financial institutions it utilizes exceeded the FDIC limit of $250.

The Company performs ongoing evaluations of its customers' financial condition and does not require collateral. Management believes that credit risk beyond the established allowances at December 31, 2022 is limited.

During the fiscal years ended December 31, 2022 and January 1, 2022, the Company derived approximately 88% and 87%, respectively, of its net sales domestically. The remaining sales in both periods were exports to foreign countries. The accounts receivable balance of two customers represented approximately 47% of total accounts receivable at December 31, 2022 and the accounts receivable balance of two customers represented approximately 55% of total accounts receivable at January 1, 2022. In addition, a significant portion of the Company's sales are to several key distributors, which are large distribution companies with numerous divisions and subsidiaries who act independently. Such distributors as a group accounted for 45% and 45% of the Company's net sales for the fiscal years ended December 31, 2022 and January 1, 2022, respectively.

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

**Earnings Per Share** - Basic earnings per common share ("EPS") applicable to common stockholders is computed by dividing earnings applicable to common stockholders by the weighted-average number of common shares outstanding. If there is a loss from operations, diluted EPS is computed in the same manner as basic EPS is computed.

SCHEDULE OF EARNINGS PER SHARE, BASIC AND DILUTED

---

| | | |
|:---|:---|:---|
|  | **Fiscal Year**<br> **Ended**<br> **December 31, 2022** | **Fiscal Year**<br> **Ended**<br> **January 1, 2022** |
| Net income (loss), numerator, basic computation | $(525) | $143 |
| Net income (loss), numerator, diluted computation | $(525) | $143 |
| Weighted average shares - denominator basic computation | 5154 | 5154 |
| Weighted average shares, as adjusted - denominator diluted computation | 5154 | 5154 |
| Earnings (loss) per common share: |  |  |
| Basic | $(0.10) | $0.03 |
| Diluted | $(0.10) | $0.03 |

---

**TOFUTTI BRANDS INC.**

**NOTES TO FINANCIAL STATEMENTS**

(In thousands, except for share and per share data)

The following are securities excluded from weighted-average shares used to calculate diluted earnings (loss) per common share, as the result of including them to calculate diluted EPS is anti-dilutive:

SCHEDULE OF WEIGHTED AVERAGE NUMBERS OF SHARES

---

| | | |
|:---|:---|:---|
|  | **Fiscal Year**<br> **Ended**<br> **December 31, 2022** | **Fiscal Year**<br> **Ended**<br> **January 1, 2022** |
| Shares subject to outstanding common stock options | 250000 |  |
| Shares subject to outstanding convertible note (repaid in full in fiscal year 2021) |  | 282486 |

---

**Fair Value of Financial Instruments** - The fair value of financial instruments, which primarily consist of cash, accounts receivable, SBA note payable, accounts payable and accrued expenses are stated at their carrying values. The carrying amounts approximate fair value because of the short-term nature of those instruments.

**Small Business Administration (SBA) Loan** - On May 2, 2020 the Company received from the SBA a loan of $165 from the Paycheck Protection Program at an interest rate of 1%. Interest and payments were deferred until March 4, 2021 The current portion of the loan was $165 as of January 1, 2022 and the loan would have expired on May 2, 2022. On January 12, 2022, the Company was informed by the SBA that the entire amount of the loan had been forgiven. The Company recorded forgiveness of debt income of $165 in fiscal year 2022 as SBA loan forgiveness on the statement of operations. See Note 4.

**Freight Costs** - Freight costs to ship inventory to customers and to outside warehouses amounted to $1,159 and $1,037 during the fiscal years ended December 31, 2022 and January 1, 2022, respectively. Such costs are included in costs of sales on the statements of income.

**Advertising Costs** - The Company expenses advertising costs as they are incurred. Advertising expenses amounted to $251 and $209 during the fiscal years December 31, 2022 and January 1, 2022, respectively, and are included in marketing on the statements of income.

**Product Development Costs** - Costs of new product development and product redesign are charged to expense as incurred. Product development costs amounted to $143 and $124 during the fiscal years ended December 31, 2022 and January 1, 2022, respectively.

**Stock-Based Compensation** - We account for our stock-based compensation under ASC 718 "Compensation - Stock Compensation" using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the shorter of the service period or the vesting period of the stock-based compensation. This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. The Company estimates the fair value of each stock option at the grant date by using the Black-Scholes option pricing model. Determining the fair value of stock-based compensation at the grant date under this model requires judgment, including estimating volatility, employee stock option exercise behaviors and forfeiture rates. The assumptions used in calculating the fair value of stock-based compensation represent the Company's best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

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

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments. The amendments in this Update require a new topic to be added (Topic 326) to the Accounting Standards Codification ("ASC") and removes the thresholds that entities apply to measure credit losses on financial instruments measured at amortized cost, such as loans, trade receivables, reinsurance recoverables, off-balance-sheet credit exposures, and held-to-maturity securities. Under current U.S. GAAP, entities generally recognize credit losses when it is probable that the loss has been incurred. The guidance under ASU 2016-13 will remove all current recognition thresholds and will require entities under the new current expected credit loss ("CECL") model to recognize an allowance for credit losses for the difference between the amortized cost basis of a financial instrument and the amount of amortized cost that an entity expects to collect over the instrument's contractual life. The new CECL model is based upon expected losses rather than incurred losses. Additionally, the credit loss recognition guidance for available-for-sale securities is amended and will require that credit losses on such debt securities should be recognized as an allowance for credit losses rather than a direct write-down of amortized cost balance. As the Company is a smaller reporting company, the ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The adoption of ASU 2016-13 is not expected to have a material impact on our consolidated financial statements.

**TOFUTTI BRANDS INC.**

**NOTES TO FINANCIAL STATEMENTS**

(In thousands, except for share and per share data)

**NOTE 2: INVENTORIES**

Inventories consist of the following:

SCHEDULE OF INVENTORIES

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **January 1, 2022** |
| Finished products | $1387 | $1218 |
| Raw materials and packaging | 1076 | 656 |
| Inventories, net | $2463 | $1874 |

---

**NOTE 3: EQUIPMENT**

During September 2021, the Company sold manufacturing equipment with a cost of $102 and accumulated depreciation of $15 for total proceeds of $50. As of the year ended January 1, 2022, the Company disposed of the remaining balance of the equipment due to the discontinuance of the frozen dessert products manufactured using this equipment. The $75 loss on this sale and disposal has been presented as a component of general and administrative expenses on the statements of income for the fiscal year ended January 1, 2022.

**NOTE 4: NOTES PAYABLE**

**<u>Small Business Administration (SBA) Loan</u>**

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

**<u>Related Party</u>**

On January 6, 2016, David Mintz, the Company's former Chairman and Chief Executive, provided the Company with a loan of $500. The loan was extended until December 31, 2021 and was, at the option of the holder, convertible into the Company's common stock at a conversion price of $1.77 per share, the closing price of the Company's common stock on the date of the extension of the promissory note. Interest expense incurred to the related party was $0 and $25 for fiscal years ended December 31, 2022 and January 1, 2022, respectively. On December 22, 2021, the entire loan of $500 plus accrued interest of $25 was paid by the Company to Mr. Mintz's estate.

**NOTE 5: STOCK-BASED COMPENSATION**

On June 10, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan (the "2014 Plan"). The 2014 Plan provides for grants of various types of awards that are designed to attract and retain highly qualified personnel who will contribute to the success of the Company and to provide incentives to participants in the 2014 Plan that are linked directly to increases in shareholder value which will therefore inure to the benefit of all shareholders of the Company. Such grants can be, but are not limited to, options, stock appreciation rights, restricted stock, performance grants, stock bonuses, and any other type of award that is consistent with the purposes of the 2014 Plan. Employees and officers of the Company are eligible to receive incentive stock options while corporate directors are only eligible to receive non-qualified options.

The 2014 Plan made 250,000 shares of common stock available for awards. The 2014 Plan also permits performance-based 2014 awards paid under it to be tax deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, as "performance-based compensation." 250,000 and 0 stock options were issued in 2022 and 2021, respectively, and 250,000 non-qualified options were outstanding as of December 31, 2022. The exercise price of all options granted in 2022 is $0.95 per share, the market price at the close of business on the date of the grant. 83,333 of the options vested at the respective grant date, 83,333 will vest in December 2023, and 83,334 will vest in December 2024. In the event of a sale of the Company at any time prior to December 22, 2024, all remaining unvested options shall vest immediately. All options expire on December 21, 2027.

**TOFUTTI BRANDS INC.**

**NOTES TO FINANCIAL STATEMENTS**

(In thousands, except for share and per share data)

The following is a summary of stock option activity from January 1, 2022 to December 31, 2022:

SCHEDULE OF STOCK OPTION ACTIVITY

---

| | | |
|:---|:---|:---|
|  | **NON-QUALIFIED OPTIONS** | **NON-QUALIFIED OPTIONS** |
|  | **Shares** | **Weighted Average**<br> **Exercise Price ($)** |
| Outstanding at January 1, 2022 |  |  |
| Granted | 250000 | 0.95 |
| Exercised |  |  |
| Outstanding at December 31, 2022 | 250000 | 0.95 |
| Exercisable at December 31, 2022 | 83333 | 0.95 |

---

The following table summarizes information about stock options outstanding at December 31, 2022:

SCHEDULE OF INFORMATION ABOUT STOCK OPTIONS

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Range of**<br> **Exercise Prices ($)** | **Number**<br> **Outstanding** | **Weighted Average Remaining Life**<br> **(in years)** | **Weighted Average**<br> **Exercise**<br> **Price($)** | **Number**<br> **Exercisable** |
| $0.95 | 250000 | 5.00 | $0.95 | 83333 |

---

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing formula. Expected volatilities and risk-free interest rates are based upon the expected life of the grant. The interest rates used are the U.S. Treasury yield curve in effect at the time of the grant.

During fiscal 2022, 250,000 options were granted, with 83,333 of the options vesting at the respective grant date, 83,333 vesting in December 2023, and 83,334 vesting in December 2024. At the date of grant, expected volatility was 82.65%, a risk-free rate of 3.79%, 0% expected dividends, and an expected term of five years.

As of December 31, 2022, the intrinsic value of the options outstanding and exercisable options was $60 and $20 respectively, and there was $105 of total unrecognized compensation cost. Total stock-based compensation for the year ended December 31, 2022 was $56, which is recorded in general and administrative expenses on the statement of operations.

250,000 options will expire on December 22, 2027 if not exercised by that date.

**NOTE 6: REVENUE**

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

Revenues by geographical region are as follows:

SCHEDULE OF DISAGGREGATION REVENUE

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **January 1, 2022** |
| Revenues by geography: |  |  |
| Americas | $12110 | $11864 |
| Europe | 170 | 183 |
| Middle East | 494 | 334 |
| Asia Pacific and Africa | 53 | 209 |
| Revenues | $12827 | $12590 |

---

**TOFUTTI BRANDS INC.**

**NOTES TO FINANCIAL STATEMENTS**

(In thousands, except for share and per share data)

Approximately 88% in fiscal 2022 and 87% in fiscal 2021 of the Americas revenue is attributable to the United States. All of the Company's assets are located in the United States.

Net sales by major product category:

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **January 1, 2022** |
| Cheeses | $10951 | $10761 |
| Frozen Desserts and Foods | 1876 | 1829 |
|  | $12827 | $12590 |

---

**NOTE 7: LEASES**

The Company's facilities are located in a one-story facility in Cranford, New Jersey. The 6,200 square foot facility houses its administrative offices, a warehouse, walk-in freezer and refrigerator, and a product development laboratory and test kitchen. The Company's original lease agreement expired on July 1, 1999, but it continues to occupy the premises on a monthly basis. Any changes by either the landlord or the Company remains subject to a six-month notification period. The Company currently has no plans to enter into a long-term lease agreement for the facility. Rent expense was $86 in fiscal 2022 and $79 in fiscal 2021. The Company's management believes that the Cranford facility will continue to satisfy its space requirements for the foreseeable future and if necessary, such space can be replaced without a significant impact to the business. The Company rents warehouse storage space at various outside facilities. Outside warehouse expenses amounted to $363 and 459 for the fiscal years ended December 31, 2022 and January 1, 2022, respectively. The Company rents copiers under finance leases. In 2022, the Company terminated two copier leases, and entered into one additional lease, which exists as of December 31, 2022. Payments for copiers amounted to $10 and $35 for the fiscal years ended December 31, 2022 and January 1, 2022, respectively.

Under Topic 842, operating lease expense is generally recognized evenly over the term of the lease. The Company has operating leases primarily consisting of facilities with remaining lease terms of approximately two to four years. The Company does not have the option to terminate the leases early. The standard requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease. The current portion of lease liabilities is included in accrued expenses on the balance sheets.

Under Topic 842, finance lease cost includes amortization, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method. The Company has a finance lease consisting of a copier lease with a term of four years. The standard requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease.

Leases with an initial term of twelve months or less are not recorded on the balance sheet. For lease agreements entered into or reassessed after the adoption of Topic 842, the Company has combined the lease and non-lease components in determining the lease liabilities and ROU assets.

The Company's lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments. The Company used the incremental borrowing rates on of between 5.5% and 6.5% for all leases.

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

---

| | | |
|:---|:---|:---|
|  | <br>**As of**<br>**December 31, 2022** | **As of**<br>**January 1, 2022** |
| Operating lease right-of-use assets | $158 | $203 |
| Current portion of lease liabilities | 74 | 123 |
| Operating lease liabilities, net of current portion | 85 | 95 |
| &nbsp;&nbsp;&nbsp;Total lease liabilities | $159 | $218 |
| Weighted average remaining lease term (in years) | 2.1 | 3.0 |
| Weighted average discount rate | 5.5% | 5.5% |

---

**TOFUTTI BRANDS INC.**

**NOTES TO FINANCIAL STATEMENTS**

(In thousands, except for share and per share data)

ROU lease asset and lease liability for our finance lease were recorded in the balance sheet as follows:

---

| | | |
|:---|:---|:---|
|  | <br>**As of**<br>**December 31, 2022** | **As of**<br>**January 1, 2022** |
| Finance lease right-of-use asset | $53 | $- |
| Current portion of lease liabilities | 15 |  |
| Operating lease liabilities, net of current portion | 39 | - |
| &nbsp;&nbsp;&nbsp;Total lease liabilities | $54 | $- |
| Weighted average remaining lease term (in years) | 3.4 |  |
| Weighted average discount rate | 6.5% | -% |

---

Future lease payments included in the measurement of lease liabilities on the balance sheet as of December 31, 2022, for the following three fiscal years and thereafter are as follows:

SCHEDULE OF FUTURE LEASE PAYMENTS

---

| | | | |
|:---|:---|:---|:---|
|  | **Operating lease liabilities** | **Finance lease liability** | **Total** |
| 2023 | $&nbsp;&nbsp;&nbsp;&nbsp; 81 | $&nbsp;&nbsp;&nbsp;&nbsp;17 | $98 |
| 2024 | 81 | 17 | 98 |
| 2025 | 7 | 17 | 24 |
| 2026 | - | 8 | 8 |
| &nbsp;&nbsp;&nbsp;Total future minimum lease payments | 169 | 59 | 228 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Present value adjustment | (10) | (5) | (15) |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Total | $159 | $54 | $213 |

---

**TOFUTTI BRANDS INC.**

**NOTES TO FINANCIAL STATEMENTS**

(In thousands, except for share and per share data)

**NOTE 8: INCOME TAXES**

The components of income tax expense for the fiscal years ended December 31, 2022 and January 1, 2022 are as follows:

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)

---

| | | | |
|:---|:---|:---|:---|
| | | **December 31, 2022** | **January 1, 2022** |
| Current: | Federal | $- | $64 |
|  | State | 26 | 39 |
|  |  | 26 | 103 |
| Deferred: | Federal | (190) | (22) |
|  | State | (64) | (7) |
|  |  | (254) | (29) |
| Total income tax (benefit) expense |  | $(228) | $74 |

---

A reconciliation between the expected federal tax expense at the statutory tax rate of 21% and the Company's actual tax expense for the fiscal years ended December 31, 2022 and January 1, 2022, respectively, follows:

SCHEDULE OF RECONCILIATION BETWEEN THE EXPECTED FEDERAL TAX EXPENSE AT STATUTORY TAX RATE

---

| | | |
|:---|:---|:---|
|  | **December 31, 2022** | **January 1, 2022** |
| Federal income tax | $(157) | $46 |
| State income taxes, net of federal income tax benefit | (64) | 18 |
| Nontaxable forgiveness of PPP loan | (35) |  |
| Permanent items | 2 | 3 |
| Other | 26 | 7 |
| Total income tax expense | $(228) | $74 |

---

Deferred tax assets for the fiscal years ended December 31, 2022 and January 1, 2022 consist of the following components:

SCHEDULE OF DEFERRED TAX ASSETS

---

| | | |
|:---|:---|:---|
|  | **December 31,<br> 2022** | **January 2,<br> 2021** |
| Allowance for doubtful accounts | $105 | $88 |
| Right of use asset | (59) | (57) |
| Lease liabilities | 60 | 61 |
| Inventory | 1 | 1 |
| Net operating loss carryforward | 189 |  |
| Stock options | 16 |  |
| Research and development | 36 |  |
| Fixed assets | 19 | 19 |
| Deferred tax asset, net | $367 | $112 |

---

**TOFUTTI BRANDS INC.**

**NOTES TO FINANCIAL STATEMENTS**

(In thousands, except for share and per share data)

At December 31, 2022 the Company had $786 federal net operating loss carryforwards and $673 of state operating loss carryforwards.

The Company will recognize a tax provision in the financial statements for an uncertain tax position only if management's assessment is that the position is "more likely than not" (i.e., a likelihood greater than 50 percent) to be sustained by the tax jurisdiction based solely on the technical merits of the position. The term "tax position" refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.

The following table indicates the changes to the Company's uncertain tax positions for the fiscal years ended December 31, 2022 and January 1, 2022:

SCHEDULE OF CHANGES TO COMPANY'S UNCERTAIN TAX POSITIONS

---

| | |
|:---|:---|
| Balance at January 2, 2021 | $172 |
| Increase due to reserves and tax positions related to current year | 8 |
| Balance at January 1, 2022 | $180 |
| Increase due to reserves and tax positions related to current year | 26 |
| Balance at December 31, 2022 | $206 |

---

The Company accounts for penalties or interest related to uncertain tax positions as part of its provision for income taxes. The amount of uncertain tax positions that would affect the effective tax rate if they were recognized is $206. The liability at December 31, 2022 of uncertain tax positions is included in accrued expenses. The Company is no longer subject to federal and state examinations for fiscal years before 2020.

**NOTE 9: COMMITMENTS AND CONTINGENCIES**

The Company sells its products throughout the United States and in approximately twelve foreign countries and may be impacted by public health crises beyond its control. This could disrupt its operations and negatively impact sales of its products. The Company's customers, suppliers and co-packers may experience similar disruption. In December 2019, a novel strain of the Coronavirus, COVID-19, was reported to have surfaced in Wuhan, China, which has evolved into a pandemic. This situation and preventative or protective actions that governments have taken to counter the effects of the pandemic have resulted in a period of business disruption, including delays in shipments of products and raw materials. To the extent the impact of COVID-19 continues or worsens, the demand for the Company's products may be negatively impacted, and it and its co-packers may have difficulty obtaining the materials necessary for the production of its products. In addition, the production facilities of the Company's co-packers may be closed for sustained periods of time and industry-wide shipment of products may be negatively impacted. COVID-19 has also impacted the Company's sales efforts as its ability to make sales calls is constrained. The Company's ability to promote sales through promotional activities has also been constrained as many supermarkets are understaffed and unable to change pricing for items in stock, resulting in the cancelation of all sales promotional discounts for the foreseeable future. The length and severity of the pandemic could also affect the Company's regular sales, which could in turn result in reduced sales and a lower gross margin.

**Item 9.** **Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.**

None.

---

| | |
|:---|:---|
| **Item 9A.** | **Controls and Procedures.** |

---

**Evaluation of Disclosure Controls and Procedures**

*Evaluation of Disclosure Controls and Procedures.* As of December 31, 2022, our company's chief executive and financial officer conducted an evaluation regarding the effectiveness of our company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act. Based upon the evaluation of these controls and procedures, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were not effective with respect to the material weaknesses, as described below in our internal control over financial reporting, that have not been fully remediated as of the end of the fiscal year 2021.

*Disclosure Controls and Internal Controls.* As provided in Rule 13a-14 of the General Rules and Regulations under the Securities and Exchange Act of 1934, as amended, Disclosure Controls are defined as meaning controls and procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed, designed and reported within the time periods specified by the SEC's rules and forms. Disclosure Controls include, within the definition under the Exchange Act, and without limitation, controls and procedures to ensure that information required to be disclosed by us in our reports is accumulated and communicated to our management, including our chief executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure. Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper use; and (3) our transactions are properly recorded and reported, all to permit the preparation of our financial statements inconformity with generally accepted accounting principles.

**Management's Annual Report on Internal Control Over Financial Reporting**

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of the Chief Executive and Financial Officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management's evaluation of internal control over financial reporting includes using the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, framework, an integrated framework (2013) for the evaluation of internal controls issued by COSO, to identify the risks and control objectives related to the evaluation of our control environment.

On February 24, 2021 David Mintz, our founder, Chief Executive Officer and Chairman of the Board of Directors, passed away. Steven Kass, Chief Financial Officer, was appointed interim CEO by our Board of Directors and was confirmed as permanent CEO by the Board on April 27, 2021.

Based on the evaluation under the frameworks described above, Mr. Kass, our chief executive and financial officer, has concluded that our internal control over financial reporting was ineffective as of December 31, 2022 because of the following material weaknesses in internal controls over financial reporting:

● A continuing lack of sufficient resources and an insufficient level of monitoring and oversight, which may restrict our ability to gather, analyze and report information relative to the financial statements, including but not limited to accounting estimates, reserves, allowances, and income tax matters, in a timely manner.

● The limited size of the accounting department makes it impracticable to achieve an optimum separation of duties and monitoring of internal controls.

**Remediation**

To date, we have been unable to remediate these weaknesses, which stem from our small workforce. As of the date of this filing we employ five people.

**Changes in Internal Control over Financial Reporting**

No change in our internal control over financial reporting occurred during the quarter ended December 31, 2022 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management's report in this annual report.

---

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

---

None.

---

| | |
|:---|:---|
| **Item 9C.** | **Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.** |

---

Not applicable.

**PART III**

**Item 10.** **Directors, Executive Officers and Corporate Governance.**

Our directors and executive officers are:

---

| | | |
|:---|:---|:---|
| Name | Age | Position |
| Steven Kass | 71 | Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer |
| Joseph N. Himy | 52 | Director |
| Scott Korman | 62 | Director |
| Efraim Mintz | 53 | Director |
| Franklyn Snitow | 75 | Director |

---

Steven Kass has been our Chief Financial Officer since November 1986 and Secretary and Treasurer since January 1987. Mr. Kass assumed the position of interim Chief Executive Officer in March 2021, and was confirmed as permanent CEO by the Board on April 27, 2021.

Joseph N. Himy was elected to serve as a member of our Board of Directors and the Audit Committee on October 30, 2013 by our Board of Directors. He resigned as a member of our Audit Committee on August 16, 2021. He has been Managing Director of The CFO Squad, a financial and business advisory firm providing outsourced CFO advisory and regulatory consulting services primarily for public companies since August 2011. From May 2008 until August 2011, Mr. Himy was Chief Financial Officer of Vyteris, Inc., manufacturer of the first active transdermal patch approved by the U.S. Food and Drug Administration for the pain associated with blood draws, intravenous cannulations and laser ablation of superficial skin lesions. Prior to May 2008 and from October 2004, Mr. Himy held various other positions at Vyteris, including Corporate Controller and VP of Finance. Mr. Himy received a B.S. degree in Accounting from Brooklyn College of the City University of New York and is a certified public accountant. Mr. Himy's accounting and financial and corporate governance experience background enhances the breadth of experience of the board of directors.

Scott Korman has served as a member of our Board of Directors since December 2011 and is a member of our Audit Committee. Mr. Korman founded Nashone, Inc., a private equity firm, in 1984 and is its President. Nashone is also involved in financial advisory, turnaround and general management assignments. Mr. Korman previously served as Chairman of Da-Tech Corporation, a Pennsylvania based contract electronics manufacturer. He previously served as Chairman and CEO of Best Manufacturing Group LLC., a leading manufacturer and distributor of uniforms, napery, service apparel, and hospitality and healthcare textiles. Mr. Korman also served as President and CEO of Welsh Farms Inc., a full-service dairy, processing and distributing milk, ice cream mix and ice cream products. Mr. Korman received a B.S. degree in Economics from the University of Pennsylvania Wharton School in 1977. He also serves on the boards of various not-for-profit groups and was the founder of the Englewood Business Forum. Mr. Korman's experience as a CEO of a frozen dessert company enhances the breadth of experience of the board of directors.

Efraim Mintz was elected to serve as a member of our Board of Directors on December 29, 2020 by our Board of Directors. He was also appointed to serve on the Audit Committee. He is the founding Executive Director of the Rohr Jewish Learning Institute (JLI), the largest network of adult education, providing accredited courses, seminars, and multiple educational offerings in 2,000 chapters across the globe since 1999. He is also the founder of the Wellness Institute, offering mental health educational offerings and trainings for social workers, educators, and parents. He oversees a network of trained and certified course developers and instructors delivering courses accredited by the American Medical Association (AMA), the American Bar Association (in over 35 states), and the American Psychological Association (APA). He oversees a staff of 70 program coordinators, faculty members, department heads, creative marketing and web developers and directs a network of education departments for teens, university students, women's studies, online learning and accredited continuing professional education.

Franklyn Snitow has been a director since 1987 and was appointed to serve on the Audit Committee on August 16, 2021. He has been a partner in the New York City/Baltimore law firm of Offit Kurman since and previously was a partner in the New York City law firm Snitow Kanfer & Holtzer, LLP, since 1985. Mr. Snitow's legal and corporate governance background enhances the breadth of experience of the board of directors.

All directors hold office until the next Annual Meeting of Stockholders and until their successors have been elected and qualified. Officers serve at the pleasure of the Board of Directors. All of the executive officers devote their full time to our operations.

**Employment Agreements**

There are currently no employment agreements between us and any of our officers.

**Family Relationships**

There are no family relationships between any of our directors and executive officers. Mr. David Mintz was the uncle of Efraim Mintz, a member of our Board of Directors.

**Involvement in Legal Proceedings**

From time to time we may be subject to various claims and contingencies in the ordinary course of business, including those related to litigation, business transactions, employee-related matters and taxes, and others. When we are aware of a claim or potential claim, we assess the likelihood of any loss or exposure. If it is probable that a loss will result and the amount of the loss can be reasonably estimated, we will record a liability for the loss. In addition to the estimated loss, the recorded liability includes probable and estimable legal costs associated with the claim or potential claim. There is no assurance that such matters will not materially and adversely affect our business, financial position, and results of operations or cash flows.

**Audit Committee and Audit Committee Financial Expert**

The Audit Committee of the Board of Directors is comprised of Mr. Snitow, Mr. Korman and Mr. Mintz. The Board of Directors has determined that Messrs. Snitow and Korman are independent directors, as that term is defined under the enhanced independence standards for audit committee members in the Exchange Act. The Board of Directors has also determined that Mr. Korman is an Audit Committee Financial Expert as that term is defined in rules issued pursuant to the Sarbanes-Oxley Act of 2002.

**Nominating and Corporate Governance Matters**

Our board of directors does not currently have a nominating and corporate governance committee or other committee performing a similar function, nor do we have any formal written policies outlining the factors and process relating to the selection of nominees for consideration for membership on our board of directors by our directors or our stockholders.

**Section 16(a) Beneficial Ownership Compliance**

Section 16(a) of the Exchange Act, as amended, requires our executive officers, directors and persons who own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of common stock and other of our equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by Commission regulations to furnish us with copies of all Section 16(a) reports they file.

To our knowledge, based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no additional forms were required for those persons, we believe that during fiscal 2022 all persons subject to these reporting requirements filed the required reports on a timely basis.

**Code of Ethics**

We have adopted a Code of Business Conduct and Ethics, which applies to directors, officers, employees and agents of our company. We have also adopted a Code of Ethics for Senior Officers, which applies to our chief executive officer, and all senior financial officers of our company, including the chief financial officer, chief accounting officer or controller, or persons performing similar functions. The Code of Business Conduct and Ethics and the Code of Ethics for Senior Officers are publicly available on our website at www.tofutti.com and printed copies are available upon request. If we make any substantive amendments to the Code of Business Conduct and Ethics or the Code of Ethics or grant any waivers, including any implicit waiver, from a provision of these codes to our chief executive officer, chief financial officer or corporate controller or our directors, we will disclose the nature of such amendment or waiver on our website.

**Item 11.** **Executive Compensation.**

The following table sets forth information concerning the total compensation during the last three fiscal years for our named executive officers whose total salary in fiscal 2022 totaled $100,000 or more:

**Summary Compensation Table**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name and Principal Position** | **Fiscal**<br> **Year** | **Salary ($)** | **Bonus ($)** | **Stock Awards ($)** | **Option Awards ($)** | **Non-Equity Incentive Plan Compensation ($)** | **All Other Compensation ($)** | **Total($)** |
| Steven Kass | 2022 | 200000 |  |  | 32183 |  |  | 232183 |
| Chief Financial Officer and Chief Executive Officer\* | 2021 | 151000 |  |  |  |  |  | 151000 |
| David Mintz\*\* | 2021 | 104000 |  |  |  |  |  | 104000 |
| Chief Executive Officer and Director |  |  |  |  |  |  |  |  |

---

\* Mr. Kass was appointed Chief Executive Officer in April 2021.

\*\* Mr. Mintz ceased to be an executive officer upon his death in February 2021.

The aggregate value of all other perquisites and other personal benefits furnished to each of these executive officers was less than $10,000 in both the 2022 and 2021 fiscal years.

**Employment Agreements**

We do not currently have any employment agreements with our executive officers. We do not anticipate having employment contracts with executive officers and key personnel in the future.

**Grants of Plan-Based Awards for Fiscal 2022**

During the fiscal year ended December 31, 2022, 250,000 options were granted under our 2014 Equity Incentive Plan.

**Outstanding Equity Awards at Fiscal Year End**

As of December 31, 2022 there were 250,000 outstanding equity awards.

**Director Compensation**

Our non-employee directors earned director compensation in fiscal year ended December 31, 2022 based on the number of meetings attended. The chairman of the audit committee receives $2,000 per audit committee meeting and other members of the audit committee receive $1,000 per meeting attended. All other non-employee directors are entitled to $500 per meeting attended.

The following table sets forth the compensation received by each of the Company's non-employee directors for the year ended December 31, 2022. Each non-employee director is deemed to be independent under the Exchange Act Rule 10A-3.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **Name** | **Fees Earned or Paid in Cash ($)** | **Stock Awards ($)** | **Option Awards ($)** | **Non-Equity Incentive Plan Compensation ($)** | **Nonqualified Deferred Compensation ($)** | **All Other Compensation ($)** | **Total ($)** |
| Joseph N. Himy | 4000 | – | 32183 |  |  |  | 36183 |
| Scott Korman | 31000 | – | 32183 |  |  |  | 63183 |
| Efraim Mintz | 12000 | – | 32183 |  |  |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;44183 |
| Franklyn Snitow | 10000 | – | 32183 |  |  |  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;42183 |

---

**Item 12.** **Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.**

The following tables set forth as of March 25, 2023 certain information regarding the ownership of our common stock, $0.01 par value, for each person known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock, for each executive officer named in the Summary Compensation Table, for each of our directors and for our executive officers and directors as a group:

**Security Ownership of Certain Beneficial Owners and Management**

---

| | | | |
|:---|:---|:---|:---|
| Name and<br> Address of Beneficial Owner(1) | Amount and<br> Nature of Beneficial Owner(2) |  | Percent of<br> Class(3) |
| Estate of David Mintz | 2630440 | (4) | 51.0% |
| Steven Kass | 234666 | (5) | 4.4% |
| Franklyn Snitow | 49766 | (5) | \* |
| Joseph N. Himy | 16666 | (5) | \* |
| Scott Korman | 16666 | (5) | \* |
| Efraim Mintz | 16666 | (4)(5) | \* |
| All Executive Officers and Directors as a group (5 persons in fiscal 2021) | 334430 | (6) | 6.4% |

---

\* Less than 1%.

(1) The
 address of the Estate of Mr. David Mintz and Messrs. Joseph Himy, Steven Kass, and Efraim Mintz is c/o Tofutti Brands Inc., 50 Jackson
 Drive, Cranford, New Jersey 07016. The address of Mr. Snitow is 590 Madison Avenue, 6<sup>th</sup> Floor, New York, New York 10022.
 The address of Mr. Korman is c/o Nashone, Inc., 175 Elm Road, Englewood, NJ 07361. Each of these persons has sole voting and/or investment
 power of the shares attributed to him.

(2) Beneficial
 ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment
 power with respect to securities. Shares of common stock relating to options currently exercisable or exercisable within 60 days
 of March 25, 2022 are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding
 for computing the percentage of any other person. Except as indicated by footnote, and subject to community property laws where applicable,
 the persons named in the table above have sole voting and investment power with respect to all shares shown as beneficially owned
 by them.

(3) Based
 on 5,153,706 shares issued and outstanding as of March 25, 2023.

(4) Mr.
 Mintz is acting as the executor of the Estate of David Mintz, but disclaims any beneficial interest in the shares of common stock
 held by the Estate.

(5) Includes
 currently exercisable stock options to purchase 16,666 shares of common stock.

(6) Includes
 currently exercisable stock options to purchase 83,330 shares of common stock..

**Item 13.** **Certain Relationships and Related Transactions, and Director Independence.**

In order to provide our company with additional working capital, on January 6, 2016, David Mintz, our then Chairman and Chief Executive, provided us with a loan of $500,000, which has been extended to come due on December 31, 2022. Commencing March 31, 2016, interest of 5% is payable on a quarterly basis without compounding. The loan may be prepaid in whole or in part at any time without premium or penalty. The loan is convertible into our common stock at a conversion price of $1.77 per share, the closing price of our common stock on the OTCQB on the date the promissory note was extended. On December 22, 2021, the entire loan of $500,000 plus accrued interest of $25,000 was paid by the Company to Mr. Mintz's estate, for which Mr. Efraim Mintz acts as executor.

During fiscal 2022 and 2021, we paid The CFO Squad $19,000 and $4,000, respectively, for financial services. Mr. Himy is the Managing Director of The CFO Squad.

**Item 14.** **Principal Accounting Fees and Services.**

Set forth below are the aggregate fees billed by Mazars, our independent registered accounting firm, for the fiscal years ended December 31, 2022 and January 1, 2022 for services rendered by them as our independent registered accounting firm for such years.

---

| | | |
|:---|:---|:---|
|  | **Fiscal 2022** | **Fiscal 2021** |
| Audit fees | $150000 | $115000 |
| Audit-related fees | - | - |
| &nbsp;&nbsp;&nbsp;Total Audit & Audit-related fees | $150000 | $115000 |
| Tax fees |  |  |
| All other fees | - | - |
| &nbsp;&nbsp;&nbsp;Total fees | $150000 | $115000 |

---

In addition, set forth below are the aggregate fees billed by EisnerAmper LLP, our former independent registered accounting firm, for the fiscal year ended January 1, 2022 for services rendered by them as our independent registered accounting firm for such years.

---

| | |
|:---|:---|
|  | **Fiscal 2021** |
| Audit fees | $60000 |
| Audit-related fees | - |
| &nbsp;&nbsp;&nbsp;Total Audit & Audit-related fees | $60000 |
| Tax fees |  |
| All other fees | - |
| &nbsp;&nbsp;&nbsp;Total fees | $60000 |

---

Audit fees consist of fees billed for services rendered for the audit of our financial statements and review of our financial statements included in our quarterly reports on Form 10-Q and services provided in connection with other statutory or regulatory filings.

Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and not reported under Audit fees. No such fees were billed in fiscal 2022 or 2021.

Tax fees consist of fees billed for professional services related to the preparation of our U.S. federal and state income tax returns and tax advice. No such fees were billed by Mazars in fiscal 2022 or 2021. The Audit Committee pre-approved all Audit-related fees. After considering the provision of services encompassed within the above disclosures about fees, the Audit Committee has determined that the provision of such services is compatible with maintaining Mazars' independence.

The Audit Committee's policy is to pre-approve all audit and non-audit related services, tax services and other services. Pre-approval is generally provided for up to one year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The Audit Committee has delegated the pre-approval authority to its chairperson when expedition of services is necessary. The independent registered public accounting firm and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with this pre-approval and the fees for the services performed to date.

**PART IV**

---

| | |
|:---|:---|
| **Item 15.** | **Exhibits, Financial Statement Schedules.** |
| **(a)** | **Financial Statements** |
|  | See Item 8. |
| **(b)** | **Financial Statement Schedules** |
|  | None. |

---

---

| | |
|:---|:---|
| **(c)** | **Exhibits** |
| 3.1 | [Certificate of Incorporation, as amended through June 1993(1)](https://www.sec.gov/Archives/edgar/data/730349/000149315218004145/ex3-1.htm) |
| 3.2 | [By-laws(2)](https://www.sec.gov/Archives/edgar/data/730349/000149315218004145/ex3-2.htm) |
| 4.1 | [Tofutti Brands Inc. 2014 Equity Incentive Plan as amended by Board Resolution August 16, 2021](ex4-1.htm) |
| 23.1 | [Consent of Mazars USA LLP](ex23-1.htm) |
| 31.1 | [Certification by Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended](ex31-1.htm) |
| 31.2 | [Certification by Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended](ex31-2.htm) |
| 32.1 | [Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](ex32-1.htm) |
| 32.2 | [Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002](ex32-2.htm) |
| 101.INS | Inline XBRL Instance Document |
| 101.SCH | Inline XBRL Schema Document |
| 101.CAL | Inline XBRL Calculation Linkbase Document |
| 101.DEF | Inline XBRL Definition Linkbase Document |
| 101.LAB | Inline XBRL Labels Linkbase Document |
| 101.PRE | Inline XBRL Presentation Linkbase Document |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

---

(1) Filed
 as Exhibit 3.1 to the Registrant's Form 10-K for the fiscal year ended December 30, 2017 and hereby incorporated by reference
 thereto.

(2) Filed
 as Exhibit 3.2 to the Registrant's Form 10-K for the fiscal year ended December 30, 2017 and hereby incorporated by reference
 thereto.

**Item 16.** **Form 10-K Summary**

We have elected not to provide summary information.

**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 31, 2023.

---

| | |
|:---|:---|
|  | **TOFUTTI BRANDS INC.** |
|  | (Registrant) |
| | */s/ Steven Kass* |
|  | Steven Kass |
|  | Chief Executive Officer |

---

In accordance with the Securities Exchange Act of 1934, this Report has been signed below on March 31, 2023 by the following persons on behalf of the Registrant and in the capacities indicated.

---

| | |
|:---|:---|
| */s/ Steven Kass* |  |
| Steven Kass |  |
| Chief Executive Officer, Secretary, Treasurer and Chief Financial and Principal Accounting Officer |  |
| */s/ Joseph Himy* |  |
| Joseph Himy |  |
| Director |  |
| */s/ Efraim Mintz* |  |
| Efraim Mintz |  |
| Director |  |
| */s/ Scott Korman* | |
| Scott Korman |  |
| Director |  |
| */s/ Franklyn Snitow* |  |
| Franklyn Snitow |  |
| Director |  |

---

## Exhibit 4.1

**Exhibit 4.1**

**TOFUTTI BRANDS, INC.**

**<u>2014 EQUITY INCENTIVE PLAN</u>**

**<u>As amended by a Board of Directors Resolution August 16, 2021</u>**

The following constitute the provisions of the Tofutti Brands, Inc. 2014 Equity Incentive Plan as adopted by the Board on March 26, 2014 (the "Adoption Date") and amended by resolution on August 16, 2021.

**ARTICLE 1**

**GENERAL PURPOSE OF PLAN; DEFINITIONS.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1. **<u>Purpose</u>**. The purposes of this 2014 Equity Incentive Plan are (a) to enable Tofutti Brands, Inc. (the "Company") to attract and retain highly qualified employees and directors who will contribute to the success of the Company and (b) to provide incentives to participants in this 2014 Equity Incentive Plan that are linked directly to increases in shareholder value which will therefore inure to the benefit of all shareholders of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2. **<u>Definitions</u>**. For purposes of this Equity Incentive Plan, except as otherwise defined, capitalized terms shall have the meanings assigned to them in this Section 1.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) "**<u>Administrator</u>**" means the Board or, if and to the extent the Board elects to delegate some or all of the administration of the Plan, the Committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) "**<u>Award</u>**" means any award described in Section 4.1 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) "**<u>Award Agreement</u>**" means, with respect to each Award, the agreement between the Company and the Participant setting forth the terms and conditions of the Award. An Award Agreement may be in an electronic medium, or may be limited to a notation on the Company's books or records, but shall be signed by a representative of the Company and the Participant, unless otherwise approved by the Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) **"<u>Beneficiary</u>"** means the surviving person or persons designated by a Participant in his or her most recent written and duly filed Beneficiary designation to receive any rights and payments to which such Participant may be entitled in respect of any Award in the event of such Participant's death. If no such designated Beneficiary is living on the date on which any right or amount becomes payable to such Beneficiary or if such designated Beneficiary cannot be located by the Administrator after reasonable search, the Participant's Beneficiary shall be deemed to be the legal representative of the Participant's estate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) "**<u>Board</u>**" means the Board of Directors of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) "**<u>Change of Control</u>**" shall have the meaning assigned to such term in Section 13.2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) "**<u>Code</u>**" means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) "**<u>Committee</u>**" means the Compensation Committee or other Board committee the Board may appoint to administer the Plan. To the extent necessary and desirable, the Committee shall be composed of individuals who are "non-employee directors" as defined in Rule 16b-3, and, if applicable, meet the independence requirements of the applicable exchange on which the Shares are traded.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) "**<u>Eligible Participant</u>**" means a common law employee, an officer or director of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) "**<u>Exchange Act</u>**" means the Securities Exchange Act of 1934, as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) "**<u>Exercise Price</u>**" means the per share price at which a holder of an Award may purchase the Shares issuable upon exercise of such Award, or in the case of a Stock Appreciation Right, the base price used for determining, upon exercise of such Stock Appreciation Right, the amount by which the Fair Market Value on the date when such right is exercised exceeds such base price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) ''**<u>Fair Market Value</u>**" as of a particular date shall mean the market value of a Share determined as follows: (i) the closing price of a Share on the NASDAQ Capital Market (or other principal national securities exchange on which the Shares are listed or admitted to trade, on such date), as reported by a reputable service, or if there is no trading of the Shares on such date, then the closing price of a Share as quoted on the NASDAQ Capital Market (or other principal national securities exchange) on the next preceding date on which there was trading in such Shares; or (ii) if the Shares are not listed or admitted to trade on a national securities exchange, the value established in good faith by the Administrator determined by the reasonable application of a reasonable valuation method in accordance with Treas. Regulation §1.409A-1(b)(5)(iv)(B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) "**<u>Incentive Stock Option</u>**" means any Option intended to be designated as an "incentive stock option" within the meaning of Section 422 of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) "**<u>Incumbent Board</u>**" means (i) the members of the Board of the Company on the Adoption Date, to the extent that they continue to serve as members of the Board, and (ii) any individual who becomes a member of the Board after the Adoption Date, if such individual's election or nomination for election as a director was approved by a vote of at least three-quarters of the then Incumbent Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) "**<u>Non-Qualified Stock Option</u>**" means any Option that is not an Incentive Stock Option, including, but not limited to, any Option that provides (as of the time such Option is granted) that it will not be treated as an Incentive Stock Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) "**<u>Option</u>**" means an option to purchase Shares granted pursuant to Article 5.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) "**<u>Participant</u>**" means any Eligible Participant selected by the Administrator, pursuant to the Administrator's authority, to receive grants of Options, Stock Appreciation Rights, awards of Restricted Stock, Performance Grants, other types of Awards, or any combination of the foregoing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) "**<u>Performance Grant</u>**" shall have the meaning assigned to the term in Article 8.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) "**<u>Plan</u>**" means the Tofutti Brands, Inc. 2014 Equity Incentive Plan as set forth herein and amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t) "**<u>Restricted Stock</u>**" means Shares subject to certain restrictions granted pursuant to Article 7.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u) **"<u>Rule 16b-3</u>"** means Rule 16b-3 of the Exchange Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) "**<u>Securities Act</u>**" means the Securities Act of 1933, as amended from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w) "**<u>Share(s)</u>**" means a share of common stock of the Company, par value $0.01, reserved for issuance under or issued pursuant to the Plan, as adjusted pursuant to Article 4.5, and any successor security.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) "**<u>Stock Appreciation Right</u>**" means the right pursuant to an Award granted under Article 6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y) "**<u>Stock Bonus</u>**" means an Award granted pursuant to Article 9.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z) "**<u>Ten Percent Shareholder</u>**" shall have the meaning assigned to it in Section 5.3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa) "**<u>Termination" or "Terminated</u>**" means, for purposes of the Plan with respect to a Participant, that such Participant has for any reason ceased to provide services as an employee, officer or director of the Company. A Participant will not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military leave, or (iii) any other leave of absence approved by the Administrator, provided, that such leave is for a period of not more than six months, or, if longer, so long as reemployment or reinstatement upon the expiration of such leave is guaranteed by contract or statute, or unless some other period is provided pursuant to formal policy adopted from time to time by the Company and communicated to Participants in writing. In the case of any Participant on an approved leave of absence, the Administrator may make such provisions respecting suspension of vesting of any Award previously granted to such Participant during the period of such leave as the Administrator may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Award Agreement with respect to such Option. The Administrator has sole discretion to determine whether a Participant has ceased to provide services and the applicable Termination Date, and, in the case of Awards that are subject to Section 409A of the Code, shall interpret the foregoing in a manner consistent with Treas. Reg. §1.409A-1(h).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb) "**<u>Termination Date</u>**" means the effective date of Termination, as determined by the Administrator.

**ARTICLE 2**

**ADMINISTRATION.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1. **<u>Administrator's Powers</u>**. Subject to the general purposes, terms and conditions of this Plan, the Administrator will have exclusive and full power to implement and carry out this Plan. Any determination with respect to the Plan or any Award made by the Administrator shall be final and binding on the Company and on all persons having an interest in any Award. Without limitation, the powers of the Administrator shall include the authority to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) construe and interpret the Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) prescribe, amend and rescind rules and regulations relating to this Plan or any Award;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) select persons to receive Awards;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) determine the form and terms of Awards, including any Exercise Price;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) determine the number of Shares or other consideration subject to Awards;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) grant waivers of Plan or Award conditions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) determine the vesting, exercisability and payment of Awards;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) correct any defect, supply any omission or reconcile any inconsistency in the Plan, any Award or any Award Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) make any adjustments necessary or desirable as a result of the granting of an Award to an Eligible Participant located outside the United States; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) determine whether an Award has been earned.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2. **<u>Administrator's Method of Acting; Liability</u>**. The Administrator may authorize any one or more of its members or any officer of the Company to execute and deliver documents or to take any other ministerial action on behalf of the Administrator with respect to Awards. No member of the Administrator and no officer of the Company shall be liable for anything done or omitted to be done by such member or officer, by any other member of the Administrator or by any officer of the Company in connection with the performance of duties under the Plan, except for such member's or officer's own willful misconduct or as expressly provided by law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3. **<u>Escrow</u>**. To enforce any conditions on Shares that are the subject of an Award, the Administrator may require the Participant to deposit all stock certificates evidencing Shares, together with stock powers or other instruments of transfer approved by the Administrator, appropriately endorsed in blank, with the Company or an agent designated by the Company to be held in escrow until such conditions have lapsed or are terminated and the Administrator may cause a legend or legends referencing such conditions to be placed on the certificates.

**ARTICLE 3**

**PARTICIPATION.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1. **<u>Participants</u>**. Incentive Stock Options shall be granted only to employees of the Company. Options and Stock Appreciation Rights shall be granted only to Eligible Participants with respect to whom Shares constitute "service recipient stock," as defined in Treas. Regulation §1.409A-1(b)(5)(iii). All other Awards may be granted to any Eligible Participant. An Eligible Participant may be granted more than one Award under the Plan.

**ARTICLE 4**

**AWARDS UNDER THE PLAN.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1. **<u>Types of Awards</u>**. Awards under the Plan may include, but need not be limited to, one or more of the following types, either alone or in any combination thereof:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Options;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Stock Appreciation Rights;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Restricted Stock;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Performance Grants;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Stock Bonuses; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) any other type of Award that is based on, related to or is in some form of Shares and deemed by the Administrator to be consistent with the purposes of the Plan (including, Awards to Participants who are foreign nationals or are employed or performing services outside the United States), which shall be in the form and have such conditions as the Administrator shall determine from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2. **<u>Number of Shares Available Under the Plan</u>**. Subject to Section 4.5, the total number of Shares reserved and available for grant and issuance pursuant to the Plan will be 250,000, all of which may be issued as Incentive Stock Options. Shares may consist, in whole or in part, of authorized and unissued Shares. Shares that are

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) subject to issuance upon exercise of an Option but that cease to be subject to such Option for any reason other than exercise of such Option,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) granted under an Award, but forfeited or repurchased by the Company,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) granted under an Award that otherwise terminates without such Shares being issued,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) withheld to pay withholding taxes in connection with the exercise or repayment of an Award, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) granted under an Award which is settled in cash

shall not be deemed to have been issued and will continue to be reserved for issuance and will be available for the grant of additional Awards under the Plan.

The number of Shares which are transferred to the Company by a Participant to pay the exercise or purchase price of an Award will be subtracted from the number of Shares issued with respect to such Award for the purpose of counting Shares used under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.3. **<u>Maximum Annual Award</u>**. The maximum number of Shares that may be issued as Awards in the aggregate in any one fiscal year, subject to adjustment as provided in Section 4.5, shall not exceed the total number of Shares reserved for grant and issuance pursuant to Section 4.2 reduced by the total number of Shares issued under outstanding Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.4. **<u>Reservation of Shares</u>**. At all times, the Company shall reserve and keep available a sufficient number of Shares as shall be required to satisfy the requirements of all outstanding Options granted under the Plan and all other outstanding but unexercised Awards granted under the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.5. **<u>Adjustment in Number of Shares Available Under the Plan</u>**. In the event of (a) a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination or exchange, reclassification or similar change in the capital structure of the Company without consideration, or (b) any merger, consolidation, spin-off, split-up, reorganization, partial or complete liquidation or other distribution of the assets of the Company (other than a normal cash dividend), or any other similar transaction, then (x) the number of Shares reserved for issuance under the Plan, (y) the Exercise Price applicable to outstanding Awards, and (z) the number and kind of shares (including shares of another issuer) subject to outstanding Awards will be proportionately adjusted by the Administrator, subject to any required action by the Board or the shareholders of the Company and compliance with applicable laws. The Administrator shall give each Participant notice of an adjustment hereunder and, upon notice, such adjustment shall be conclusive and binding for all purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.6. **<u>Fractional Shares</u>**. The Company shall not be required to issue any fractional shares pursuant to any Award or adjustment thereto. The Administrator may provide for the elimination of fractions or for the settlement thereof in cash.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.7. **<u>Rights with Respect to Shares</u>**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Unless otherwise determined by the Administrator in an Award Agreement, a Participant to whom an Award of Restricted Stock has been made (and any Beneficiary of such Participant) shall have voting and other ownership rights with respect to such Restricted Stock during the period such Award is subject to a substantial risk of forfeiture, and dividends and other distributions paid on such Restricted Stock shall be subject to the same restrictions as the Restricted Stock to which such dividends or other distributions relate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Unless otherwise determined by the Administrator in an Award Agreement, a Participant to whom a grant of any Award, other than an Award of Restricted Stock, has been made (and any Beneficiary of such Participant) shall have no rights as a shareholder with respect to any Shares issuable pursuant to any such Award until the date a stock certificate evidencing such Shares or other instrument of ownership, if any, is issued to such Participant. Except as provided in Section 4.5, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities, other property or other forms of consideration, or any combination thereof) for which the record date is prior to the date such stock certificate or other instrument of ownership, if any, is issued.

**ARTICLE 5**

**STOCK OPTIONS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.1. **<u>Grant: Form of Option Award Agreement</u>**. The Administrator may grant one or more Options to an Eligible Participant and will determine and set forth in an Award Agreement the following terms: (a) whether each such Option is intended to be an Incentive Stock Option or a Non-Qualified Stock Option, (b) the number of Shares subject to each such Option, (c) the Exercise Price of each such Option, (d) the period during which each such Option may be exercised, (e) the method of exercise of such Option, (f) any period of continuous employment or service to the Company of the Participant that is necessary before such Options shall become exercisable, and (g) any other terms and conditions, subject to the terms and conditions of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.2. **<u>Date of Grant</u>**. The date of grant of an Option will be the date on which the Administrator makes the determination to grant such Option, unless otherwise specified by the Administrator. Such date shall be stated in the Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.3. **<u>Exercise Period</u>**. Each Option shall be exercisable within the times or upon the occurrence of one or more events and/or conditions determined by the Administrator and set forth in the Award Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten years from the date the Option is granted; and provided, further, however, that no Incentive Stock Option granted to a person who directly or by attribution owns more than 10% of the total combined voting power of all classes of stock of the Company, as determined under Section 422 of the Code and regulations issued thereunder (each, a "Ten Percent Shareholder"), will be exercisable after the expiration of five years from the date such Incentive Stock Option is granted. The Administrator also may provide for an Option to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Administrator determines.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.4. **<u>Exercise Price</u>**. The Exercise Price of an Option will he determined by the Administrator when the Option is granted and shall be not less than 100% of the per share Fair Market Value of the Shares subject to such Option on the date of grant of such Option; provided, however, that the Exercise Price of any Incentive Stock Option granted to a Ten Percent Shareholder shall not be less than 110% of the per share Fair Market Value of such Shares on the date of such grant. Payment for the Shares purchased shall be made in accordance with Article 10 of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.5. **<u>Limitations on Incentive Stock Options</u>**. The aggregate Fair Market Value (as determined as of the date of grant) of Shares with respect to which Incentive Stock Option(s) are exercisable for the first time by a Participant during any calendar year (under the Plan or under any other incentive stock option plan of the Company) shall not exceed $100,000, or such other annual limitation established under Section 422 of the Code, and any Option granted in excess of such amount will be deemed to be a Non-Qualified Stock Option.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.6. **<u>Modification, Extension or Renewal</u>**. The Administrator may modify, extend or renew any outstanding Option and authorize the grant of one or more new Options in substitution thereof, provided that any such action may not, without the written consent of a Participant, impair any of such Participant's rights under any Option previously granted. Any outstanding Incentive Stock Option that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) and other applicable provisions of the Code. The Administrator may reduce the Exercise Price of any outstanding Option of a Participant without the consent of the Participant affected by delivering a written notice to the Participant; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 for Options granted on the date the action is taken to reduce such Exercise Price.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5.7. **<u>Disqualifying Dispositions of ISOs</u>**. As a condition to any Award of an Incentive Stock Option, each Participant in receipt thereof shall notify the Company in writing immediately after the date he or she makes a disqualifying disposition (as defined in Section 421(b) of the Code) of any Shares acquired pursuant to the exercise of such Incentive Stock Option.

**ARTICLE 6**

**STOCK APPRECIATION RIGHTS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.1. **<u>Grant of Stock Appreciation Rights</u>**. The Administrator may grant Participants Stock Appreciation Rights. A Stock Appreciation Right is the right of the Participant to receive an amount equal to the excess, if any, of (i) the aggregate Fair Market Value, as of the date such Stock Appreciation Right or portion thereof is surrendered, of the Shares covered by such right or such portion thereof, over (ii) the aggregate Exercise Price of such right or such portion thereof as established by the Administrator at the time of the grant of such Award, provided that such Exercise Price may not be less than 100% of the per share Fair Market Value of the Shares covered by such Award of Stock Appreciation Right on the date of such Award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.2. **<u>Terms</u>**. The Administrator may grant Stock Appreciation Rights to an Eligible Participant and will determine and set forth in an Award Agreement the following terms: (a) the number of Shares to be subject to such Award, (b) the date of grant of the Award, (c) the Exercise Price, (d) the period during which each such Stock Appreciation Right may be exercised, provided that no Stock Appreciation Right granted may be exercised more than ten years after its date of such Award, (e) any period of continuous employment or service to the Company of the Participant that is necessary before such Stock Appreciation Rights shall become exercisable, (f) whether such Stock Appreciation Right is being issued in conjunction with the grant of an Option or other Award, and (g) any other terms and conditions, subject to the terms and conditions of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6.3. **<u>Exercise</u>.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) An Award of Stock Appreciation Rights shall entitle the Participant to either (i) exercise such Award and receive payment in accordance with such Award or (ii) surrender unexercised, along with the Option (or other Award) to which the Stock Appreciation Right is attached (or any portion of such Option or other Award) to the Company and to receive from the Company in exchange therefore, without payment to the Company, that number of Shares having an aggregate value equal to the excess of the Fair Market Value of one Share, at the time of such exercise, over the Exercise Price per share, times the number of Shares subject to the Award of Stock Appreciation Rights or the Option (or other Award), or portion thereof, which is so exercised or surrendered, as the case may be.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Administrator shall be entitled to elect to settle the obligation arising out of the exercise of Stock Appreciation Rights by the payment of cash or other securities or property of the Company, or other forms of payment, or any combination thereof as determined by the Administrator, equal to the aggregate value of the Shares the Company would otherwise be obligated to deliver. Any such election by the Administrator shall be made as soon as practicable after the receipt by the Company of written notice of the exercise of such Stock Appreciation Rights. The value of a Share, other securities or property of the Company, or other forms of payment determined by the Administrator for this purpose shall be the Fair Market Value of a Share on the last business day next preceding the date of the election to exercise such Stock Appreciation Rights, unless the Administrator determined otherwise in the Award Agreement with respect to such Stock Appreciation Rights.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) An Award of Stock Appreciation Rights may provide that such Stock Appreciation Rights shall be deemed to have been exercised on the scheduled expiration date of such Stock Appreciation Rights or of any related Option (or other Award), if at such time such Stock Appreciation Right is exercisable and has a positive value. Such deemed exercise shall be settled or paid in the same manner as a regular exercise thereof as provided in Paragraph 6.3(a) and (b).

**ARTICLE 7**

**RESTRICTED STOCK.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.1. **<u>Grant</u>**. An Award of Restricted Stock is an immediate transfer of ownership of Shares to an Eligible Participant, subject to a substantial risk of forfeiture and/or restrictions on transfer of such Shares.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.2. **<u>Form of Restricted Stock Award</u>**. The Administrator may grant Restricted Stock to an Eligible Participant and will determine and set forth in an Award Agreement the following terms: (a) the number of Shares subject to the Award, (b) the Exercise Price, if any, to be paid as consideration for the Shares and the time and manner of such payment, (c) any period of continuous employment or service to the Company by the Participant that is necessary before the Shares become non-forfeitable and transferable, and (d) any other terms and conditions, subject to the terms and conditions of the Plan.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7.3. **<u>Exercise Price</u>**. The Exercise Price of Shares granted pursuant to an Award of Restricted Stock, if any, will be determined by the Administrator on the date of such Award. The Exercise Price may be less than the Fair Market Value of such Share on the date of the Award. Payment of the Exercise Price shall be made in accordance with Article 10 of the Plan.

**ARTICLE 8**

**PERFORMANCE GRANTS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.1. **<u>Award</u>**. The Award of a Performance Grant to a Participant will entitle such Participant to receive a specified amount (the "Performance Grant Actual Value") upon satisfaction of specified corporate, division, departmental and/or individual goals as determined by the Administrator, subject to Section 8.1(b). Performance Grants may be issued in different classes or series having different names, terms and conditions. .

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.2. **<u>Terms</u>**. The Administrator may grant Performance Grants to an Eligible Participant and will determine and set forth in an Award Agreement the following terms, which need not be the same for each Participant:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the maximum value of each Performance Grant (the "Maximum Value"), which may be a fixed amount, an amount which varies from time to time based in whole or in part on the then current value of Shares or other securities or property of the Company, or an amount that is determinable from other criteria specified by the Administrator;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) whether such Performance Grant is granted in conjunction with an Award of Options, Stock Appreciation Rights, Restricted Stock or other type of Award, or any combination thereof under the Plan, concurrently or subsequently granted to such Participant (the "Associated Award"), and whether the Performance Grant shall be reduced on an appropriate basis to the extent that the Associated Award has been exercised, paid or otherwise received by the Participant;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the award period ("Performance Grant Award Period") over which the Maximum Value may be earned;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the performance objectives to be attained within the Performance Grant Award Period, which performance objectives shall be based on such measure or measures of performance as the Administrator shall determine, subject to Section 8.1(b), and may be applied on an absolute basis or relative to industry or other indices, or any combination thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) the extent to which the Performance Grant will be payable upon the Participant's Termination prior to the end of a Performance Grant Award Period or if the performance objectives are met in part; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) the time and manner of payment of the Performance Grant Actual Value.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.3. **<u>Adjustment of Performance Objectives</u>**. Unless otherwise provided in the Award Agreement, the Performance Grant Actual Value or the Performance Grant Maximum Value, or any combination thereof may be adjusted in any manner by the Administrator at any time and from time to time during or as soon as practicable after the Performance Grant Award Period, if it determines that such performance measures, the Performance Grant Actual Value or the Performance Grant Maximum Value, or any combination thereof, are not appropriate under the circumstances in light of the objectives of the Performance Grant.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.4. **<u>Determination of Performance Grant Actual Values</u>**. The Administrator shall determine whether the terms and conditions of a Performance Grant have been met and, if so, shall ascertain the Performance Grant Actual Value payable to the Participant. The Performance Grant Actual Value shall be equal to the Maximum Value of such Performance Grant only if the stated performance objectives are attained in full. If a Performance Grant has no Performance Grant Actual Value, such Performance Grant shall be deemed to have been canceled and the Associated Award, if any, may be canceled or permitted to continue in effect in accordance with such Associated Award's terms. If a Performance Grant has a Performance Grant Actual Value and (a) was not awarded in conjunction with an Associated Award, the Administrator shall cause an amount equal to the Performance Grant Actual Value of such Performance Grant to be paid to the Participant or the Participant's Beneficiary; or (b) was awarded in conjunction with an Associated Award, the Administrator shall determine, in accordance with the Award Agreement, whether to (i) cancel such Performance Grant, in which event no amount in respect thereof shall be paid to the Participant or the Participant's Beneficiary, and the Associated Award may be permitted to continue in effect in accordance with the Associated Award 's terms, (ii) pay the Performance Grant Actual Value to the Participant or the Participant' s Beneficiary, in which event such Associated Award may be canceled, or (iii) pay to the Participant or the Participant's Beneficiary, the Performance Grant Actual Value of only a portion of such Performance Grant, in which case a complimentary portion of the Associated Award may be permitted to continue in effect in accordance with its terms or be canceled, as determined by the Administrator.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8.5. **<u>Payment</u>**. Determination of the Performance Grant Actual Value shall be made as promptly as practicable following the end of the Performance Grant Award Period. Payment of any amount in respect of the Performance Grants which the Administrator determines to pay as provided in this Article 8 shall be made in cash, Shares, other securities or property of the Company, or other forms or payment, or any combination thereof or in such other manner, as determined by the Administrator.

**ARTICLE 9**

**STOCK BONUSES**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.1. **<u>Awards of Stock Bonuses</u>**. A Stock Bonus is an Award of Shares for past or future services rendered to the Company. A Stock Bonus shall be awarded pursuant to an Award Agreement (the "Stock Bonus Agreement") in such form as the Administrator will from time to time approve, and will comply with and be subject to the terms and conditions of the Plan. A Stock Bonus may be conditioned upon satisfaction of such service or other conditions as are set out in advance in the Award Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.2. **<u>Terms of Stock Bonuses</u>**. The Administrator will determine the number of Shares to be awarded to each Participant as a Stock Bonus and any consideration to be paid therefor, which consideration may be less than the Fair Market Value of Shares on the date of the Award of such Stock Bonus.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9.3. **<u>Form of Payment</u>**. The earned portion of a Stock Bonus may be paid currently or on a deferred basis with such interest or dividend equivalent, if any, as set forth in the Stock Bonus Agreement. Payment may be made in the form of cash or whole Shares or a combination thereof, either in a lump sum payment or in installments, all as the Administrator shall determine and set forth in the Stock Bonus Agreement.

**ARTICLE 10**

**PAYMENT FOR SHARE PURCHASES.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10.1. **<u>Payment</u>**. Payment for Shares purchased pursuant to this Plan may be made (a) in cash (by check); (b) by surrender of non-forfeitable, unrestricted Shares that either (i) have been owned by the Participant for more than six months and have been paid for within the meaning of Rule 144 promulgated under the Securities Act (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares) or (ii) were obtained by Participant in the public market; (c) by any combination of the foregoing; or (d) by any other lawful means as the Administrator, in its sole discretion, may determine. To the extent permitted by the Administrator and permitted by applicable law, regulation or rule, the Exercise Price of an Option may be satisfied from the proceeds of a sale through a bank or broker on the date of exercise of some or all of the Shares to which the exercise relates pursuant to a broker assisted exercise program provided by such bank or broker.

**ARTICLE 11**

**DEFERRED PAYMENT OF AWARDS**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11.1. **<u>Deferral Terms</u>**. To the extent permitted by law, the Administrator may specify in any Award Agreement, other than an Award Agreement providing for Options, Stock Appreciation Rights or Restricted Stock, that the payment of all or any portion of cash, Shares, other securities or property of the Company, or any other form of payment, or any combination thereof under an Award shall be deferred until a later date set forth in such Award Agreement. Deferrals shall be for such periods or until the occurrence of such events, and upon such terms, as the Administrator shall determine; provided, however, that such deferrals shall be made in accordance with the requirements of Section 409A of the Code. Deferred payments may be made subject to the performance of certain investment equivalents, together with such additional amounts of income equivalents (which may be compounded and may include, but need not be limited to, interest, dividends or other rates of return, or any combination thereof) as may accrue thereon until the date or dates of payment, such investment equivalents and such additional amounts of income equivalents to be determined by the Administrator and set forth in the Award Agreement.

**ARTICLE 12**

**AMENDMENT OR SUBSTITUTION OF AWARDS UNDER THE PLAN.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12.1. **<u>Amendments and Substitutions</u>**. The terms of any outstanding Award under the Plan may be amended from time to time by the Administrator in any manner that the Administrator deems appropriate (including, but not limited to, acceleration of the date of vesting of any Award and/or payments thereunder, or reduction of the Exercise Price of an Award); provided, however, that except to the extent that the Administrator determines that an amendment is necessary to avoid penalties or taxes under Section 409A of the Code or violation of any law or regulation, no such amendment shall adversely affect in a material manner any right of a Participant under such Award without the Participant's written consent. The Administrator may permit or require holders of Awards to surrender outstanding Awards as a condition precedent to the grant of new Awards under the Plan.

**ARTICLE 13**

**CHANGE IN CONTROL.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.1. **<u>Effect of a Change in Control</u>**. An Award Agreement shall determine the extent to which, in the case of a Change in Control, (a) a Participant's rights to each outstanding Stock Option and Stock Appreciation Right shall become exercisable, (b) restrictions with respect to Restricted Stock shall lapse, (c) outstanding Performance Grants shall be adjusted in respect of a shortened Performance Grant Award Period, and (d) deferred payments under Section 11.1 shall be payable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13.2. **<u>Change in Control</u>**. For this purpose, except as otherwise provided in an Award Agreement, a Change in Control shall he deemed to occur when any of the following events first occurs:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any person (as such term is used in Section 13(d) and 14(d) of the Exchange Act) who is not such on the day preceding a transaction becomes the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing at least 50.1% of the combined voting power of the voting securities entitled to vote generally in the election of directors ("Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition of such percentage of Voting Securities by or from the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company, (ii) any acquisition by an unrelated third party of such percentage of Voting Securities from a person who as of the Adoption Date was a controlling shareholder of the Company, (iii) any acquisition by an underwriter in any firm commitment underwriting of securities to be issued by the Company, or (iv) any acquisition by any corporation (or other entity) and the combined voting power of the then outstanding voting securities of such corporation (or other entity), are beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who, immediately prior to such acquisition, were the beneficial owners of the then outstanding Shares and the Voting Securities in substantially the same proportions, respectively, as their ownership immediately prior to the acquisition of the shares and voting shares;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) a change in the composition of the Incumbent Board during any 12-month period, as a result of which fewer than a majority of the directors are members of the Incumbent Board without the endorsement of the remaining members of the Incumbent Board;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the consummation of a merger (other than a merger where the Company is the survivor when there is no accompanying Change in Control under clause (a) of this Section 13.2), consolidation, liquidation or dissolution of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) the sale or other disposition by the Company, in one transaction or a series of related transactions within any period of 12 consecutive months, of assets of the Company that have a total gross fair market value equal to at least 45% of the total gross fair market value of all assets of the Company immediately prior to the acquisition of such assets; provided, however,

notwithstanding the foregoing, in the case of an Award that is subject to Section 409A of the Code, no event shall be determined to be a Change in Control unless such event also constitutes a "change in control event," as defined in Section 409A of the Code and regulations thereunder, as modified to reflect the foregoing percentages.

**ARTICLE 14**

**PLAN AMENDMENT OR SUSPENSION.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14.1. **<u>Plan Amendment or Suspension</u>**. The Plan may be amended or suspended in whole or in part at any time and from time to time by the Board, but no amendment shall be effective unless and until the same is approved by shareholders of the Company where the failure to obtain such approval would adversely affect the compliance of the Plan with Sections 422 of the Code, Rule 16b-3 and with other applicable law. In addition, the Board may condition any amendment on the approval of shareholders of the Company if such approval is deemed advisable by the Board, No amendment of the Plan shall adversely affect in a material manner any right of any Participant with respect to any Award theretofore granted without such Participant's written consent.

**ARTICLE 15**

**PLAN TERMINATION.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.1. **<u>Method of Plan Termination</u>**. The Plan shall terminate upon the earlier of the following dates or events to occur: (a) upon the adoption of a resolution of the Board terminating the Plan; or (b) the tenth anniversary of the Adoption Date; provided, however, that the Board may, prior to the expiration of such ten-year period, extend the term of the Plan for an additional period of up to five years for the grant of Awards other than Incentive Stock Options.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15.2. **<u>Effect of Termination on Outstanding Awards</u>**. No termination of the Plan shall materially alter or impair any of the rights or obligations of any person, without such person's consent, under any Award theretofore granted under the Plan, except that subsequent to termination of the Plan, the Administrator may make amendments permitted under Article 14.

**ARTICLE 16**

**SHAREHOLDER ADOPTION.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16.1. **<u>Shareholder Approval</u>**. The Plan shall be submitted to the shareholders of the Company for their approval at a meeting of the shareholders of the Company to be duly held before the first anniversary of the Adoption Date.

**ARTICLE 17**

**TRANSFERABILITY.**

**<u>Transferability</u>**. No Award granted shall be transferred, assigned, hypothecated, attached, pledged, garnished or otherwise encumbered in whole or in part by a Participant, other than by will or the laws of descent and distribution, and all Options and Stock Appreciation Rights shall be exercisable during a Participant 's lifetime only by such Participant, or in the event of the Participant's legal incapacity, by his or her guardian or legal representative acting in a fiduciary capacity on behalf of the Participant under state law. Notwithstanding the preceding sentence, the Administrator may expressly provide in an Award Agreement (or an amendment to an Award Agreement) that a Participant may transfer such Award (other than an Incentive Stock Option), in whole or in part, to a spouse or lineal descendant (a "Family Member"), a trust for the exclusive benefit of Family Members, a partnership or other entity in which all the beneficial owners are Family Members, or any other entity affiliated with the Participant that may be approved by the Administrator.

**ARTICLE 18**

**CERTIFICATES.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18.1. **<u>Legal Restrictions: Stock Legends</u>**. All Shares or other securities delivered under this Plan will be subject to such stock transfer orders and other restrictions as the Administrator may deem necessary or advisable, including restrictions under any applicable federal, state or foreign securities law, or any rules, regulations and other requirements promulgated under such laws or any stock exchange or automated quotation system upon which the Shares may be listed or quoted and each stock certificate evidencing such Shares and other certificates shall contain appropriate legends.

**ARTICLE 19**

**EXCHANGE AND BUYOUT OF AWARDS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.1. **<u>Exchange</u>**. The Administrator may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19.2. **<u>Buyout of Awards</u>**. The Administrator may, at any time or from time to time, authorize the Company to buy from a Participant an Award previously granted with payment in cash, Shares (including Restricted Stock) or other consideration, based on such terms and conditions as the Administrator and the Participant may agree.

**ARTICLE 20**

**LEGAL COMPLIANCE.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.1. **<u>Compliance with Applicable Laws</u>**. An Award will not be effective and no Shares shall be issued with respect to any Award unless counsel for the Company shall be satisfied that such Award or issuance is in compliance with all applicable federal and state securities laws, foreign legal requirements, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company shall have no obligation to issue or deliver stock certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Administrator determines are necessary or advisable; and (b) completing any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Administrator determines to be necessary or advisable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.2. **<u>Compliance with Rule 16b-3</u>**. It is the intent of the Company that the Plan comply in all respects with Rule 16b-3, that any ambiguities or inconsistencies in construction of the Plan be interpreted to give effect to such intention and that if any provision of the Plan is deemed not to be in compliance with Rule 16b-3, such provision shall be deemed null and void to the extent required to permit the Plan to comply with Rule 16b-3.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.3. **<u>Compliance with Non-Qualified Deferred Compensation Requirements</u>**. Notwithstanding any other provision of the Plan to the contrary, (a) to the extent that any payment of or in connection with an Award constitutes a payment under a "non-qualified deferred compensation plan," as defined in Section 409A of the Code, such payment shall be made in compliance with Section 409A of the Code, or, if applicable, Section 457A of the Code, and necessary requirements therefor shall be set forth in the applicable Award Agreement to the extent not provided in this Plan, (b) the Plan and Award shall be interpreted in a manner consistent with Section 409A and any provisions hereof that would cause a payment of non-qualified deferred compensation to be subject to taxation under Section 409A may be modified by the Administrator in an Award Agreement, and (c) any adjustment of Shares or prices per Share, substitution of Awards, or modification of Awards permitted under the Plan shall not cause the affected Award to fail to comply with the requirements of Section 409A of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20.4. **<u>No Obligation to Register Shares or Awards</u>**. The Company will be under no obligation to register the Shares under the Securities Act or to effect compliance with the registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so.

**ARTICLE 21**

**MISCELLANEOUS PROVISIONS.**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.1. **<u>No Right to Employment or Continuation of Relationship</u>**. Nothing in this Plan or any Award granted under the Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other service relationship with, the Company or limit in any way the right of the Company to terminate Participant's employment or other service relationship at any time, with or without cause.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.2. **<u>No Rights Unless Specifically Granted</u>**. No employee or other person shall have any claim or right to be granted an Award under the Plan, any contract, agreement or otherwise. Determinations made by the Administrator under the Plan need not be uniform and may be made selectively among Eligible Participants under the Plan, whether or not such Eligible Participants are similarly situated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.3. **<u>No Rights Until Written Evidence Delivered</u>**. No Participant or other person shall have any right with respect to the Plan, the Shares reserved for issuance under the Plan or in any Award, contingent or otherwise, until written evidence of the Award, in the form of an Award Agreement, shall have been delivered to the recipient and all the terms, conditions and provisions of the Plan and the Award applicable to such recipient (and each person claiming unclear or through such recipient) have been met.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.4. **<u>Right to Withhold Payments</u>**. The Company shall have the right to authorize deduction from any payment made under the Plan, all applicable federal, state, local or foreign income or other taxes required by law to be withheld with respect to such payment or may require the Participant or Beneficiary to pay to it such tax prior to and as a condition of the making of such payment. In accordance with any applicable administrative guidance it establishes, the Administrator may allow a Participant or Beneficiary to pay the amount of taxes required by law to be withheld from an Award by withholding from any payment of Shares due as a result of such Award, or by permitting the Participant or beneficiary to deliver to the Company Shares having a Fair Market Value, as determined by the Administrator, equal to the minimum amount of such required withholding taxes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.5. **<u>Expenses of Administration</u>**. The expenses of the Plan shall be borne by the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.6. **<u>Unfunded Plan</u>**. The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the payment of any Award under the Plan, and rights to the payment of Awards shall be no greater than the rights of the Company's general unsecured creditors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.7. **<u>No Guarantee of Tax Consequences</u>.** Notwithstanding any other provision of the Plan, no person connected with the Plan in any capacity, including, but not limited to, the Company and its directors, officers, agents and employees, makes any representation, commitment, or guarantee that any tax treatment, including, but not limited to, federal, state and local income, estate and gift tax treatment shall be applicable with respect to the tax treatment of any Award, any amounts deferred under the Plan, or paid to or for the benefit of a Participant under the Plan, or that such tax treatment shall apply to or be available to a Participant on account of participation in the Plan, or that any of the foregoing amounts shall not be subject to taxes and/or interest charges under Sections 83, 409A, 422, 457A or any other Section of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21.8. **<u>Validity, Construction: Interpretation</u>**. The validity, construction, interpretation, administration and effect of the Plan, and of its rules and regulations, and rights relating to the Plan and Award Agreements and to Awards granted under the Plan, shall be governed by the substantive laws, but not the choice of law rules, or the State of Delaware.

## Exhibit 23.1

**EXHIBIT 23.1**

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-198917) of Tofutti Brands, Inc. of our report dated March 31, 2023, related to the financial statements of Tofutti Brands, Inc. as of December 31, 2022 and January 1, 2022, and for the fiscal years then ended, appearing in this Annual Report on Form 10-K.

---

| |
|:---|
| /s/ Mazars USA LLP |
| Edison, New Jersey |
| March 31, 2023 |

---

## Exhibit 31.1

**Exhibit 31.1**

**CERTIFICATION PURSUANT TO**

**SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002**

I, Steven Kass, certify that:

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

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

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

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

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

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

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

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

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

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

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

Date: March 31, 2023

---

| | |
|:---|:---|
| */s/ Steven Kass \** | |
| Steven Kass |  |
| Chief Executive Officer |  |

---

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

## Exhibit 31.2

**Exhibit 31.2**

**CERTIFICATION PURSUANT TO**

**SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002**

I, Steven Kass, certify that:

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

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

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

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

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

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

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

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

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

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

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

Date: March 31, 2023

---

| | |
|:---|:---|
| */s/ Steven Kass \** | |
| Steven Kass |  |
| Chief Financial Officer |  |

---

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

## Exhibit 32.1

**Exhibit 32.1**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of Tofutti Brands Inc. (the "Company") on Form 10-K for the period ending December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steven Kass, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

---

| | |
|:---|:---|
| */s/ Steven Kass \** | |
| Steven Kass |  |
| Chief Executive Officer |  |
| Date: March 31, 2023 |  |

---

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

This certification accompanies this Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.

## Exhibit 32.2

**Exhibit 32.2**

**CERTIFICATION PURSUANT TO**

**18 U.S.C. SECTION 1350**

**AS ADOPTED PURSUANT TO**

**SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002**

In connection with the Annual Report of Tofutti Brands Inc. (the "Company") on Form 10-K for the period ending December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Steven Kass, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

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

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

---

| |
|:---|
| */s/ Steven Kass\** |
| Steven Kass |
| Chief Financial Officer |

---

Date: March 31, 2023

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

This certification accompanies this Annual Report on Form 10-K pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Company specifically incorporates it by reference.