TOF Tofutti Brands Inc - 10-K

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

The closing of the principal production facility for our non-dairy cheeses raises substantial doubt about our ability to continue as a going concern .

We learned in February 2026 that the owner of our primary co-packer for our key products intends to close its plant effective July 31, 2026. The products this facility produces represented approximately 80% of our sales for the year ended December 27, 2025. While management is actively searching for an alternative co-packer, there is no assurance a suitable replacement can be found. In addition, the Company has recurring losses from operations, cash used in operations and declining revenues. These conditions result in substantial doubt about our ability to continue as a going concern.

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.

In fiscal 2025 and 2024 we incurred net losses of $778,000 and $860,000, respectively and had negative cash flow from operations of $98,000 and $358,000, respectively. At December 27, 2025, we had $347,000 in cash and our working capital was $2,126,000 as compared to $462,000 in cash and $2,893,000 of working capital at December 28, 2024. 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.

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 fifty-two weeks ended December 27, 2025 and December 28, 2024, we purchased approximately 50% and 41%, 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 9% and 13%, respectively, of our finished goods from College Circle Creamery, 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, import tariffs, 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 and it might be at higher cost.

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 compete effectively in the highly competitive dairy free frozen dessert, cheese and health food markets.

The plant-based, 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.

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. Commodity price changes and tariffs 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.

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 74), 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.

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 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, 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 2025, approximately 15% 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.

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.

A weak or declining economy or political disruption, including any international trade disputes, or changes in laws or policies governing the terms of international trade, and in particular increased trade restrictions, tariffs or taxes on exports to countries where we sell our products, such as Canada and the EU could reduce our international sales, resulting in a material adverse effect on financial condition and results of operations.

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.

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 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 not effective as of December 27, 2025 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 49% 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 OTCQB 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.

On October 24, 2016, our common stock began being 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. Subsequent to fiscal year 2023, on January 2, 2024, our common stock was downgraded to the OTCQB 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 common stock, 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 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, 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 fulfilment 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 receivable are due from distributors (domestic and international) and retailers. Credit is extended based on evaluation of a customer’s 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 credit losses and 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 a 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 and Adoption

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 November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), and in January 2025, the FASB issued ASU 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company will present the additional required disclosures when it adopts the standard. The Company plans to adopt this standard in fiscal 2027 and will provide the additional disclosures required by ASU 2024-03.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) – Improvements to Income Tax Disclosures (ASU 2023-09). ASU 2023-09 requires that an entity, on an annual basis, disclose additional income tax information, primarily related to the rate reconciliation and income taxes paid. The amendment in the ASU is intended to enhance the transparency and decision usefulness of income tax disclosures. The ASU’s amendments are effective for annual periods beginning after December 15, 2024. We adopted this standard in fiscal year 2025 by providing additional disclosures required.

In July 2025, the FASB issued ASU No. 2025-05, “Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets”, which provides all entities, including public business entities, with a practical expedient, which allows the entity to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset when developing reasonable and supportable forecasts as part of estimating expected credit losses. The amendments in ASU No. 2025-05 should be applied prospectively and are effective for all entities for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. The Company does not anticipate the adoption of this standard to have a material impact on the financial statements.

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.”

The closing of the principal production facility for our non-dairy cheeses raises substantial doubt about our ability to continue as a going concern .

We learned in February 2026 that the owner of our primary co-packer for our key products intends to close its plant effective July 31, 2026. The products this facility produces represented approximately 80% of our sales for the year ended December 27, 2025. While management is actively searching for an alternative co-packer, there is no assurance a suitable replacement can be found. In addition, the Company has recurring losses from operations, cash used in operations and declining revenues. These conditions result in substantial doubt about our ability to continue as a going concern.

The ability to continue as a going concern is defined as the ability of a company to meet its obligations for at least twelve months from the date these financial statements are issued. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

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 reported a net loss of $778,000 in fiscal 2025, and have not been consistently profitable in recent years. Our cash decreased to $347,000 as of December 27, 2025, from $462,000 as of December 28, 2024 and our working capital decreased to $2,126,000 as of December 27, 2025 from $2,893,000 as of December 28, 2024. 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.

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.

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 52% and 33% of our net sales for the fifty-two weeks ended December 27, 2025 and December 28, 2024, 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 27, 2025 and December 28, 2024, we purchased approximately 50% and 41%, 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 9% and 13%, respectively, of our finished goods from College Circle Creamery, 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, 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 in 2021, our continued success is significantly dependent on the services of Steven Kass (age 74), 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.

Fifty-Two Weeks Ended December 27, 2025 Compared with Fifty-Two Weeks Ended December 28, 2024

We operate on a fiscal year ending on the Saturday closest to December 31. Net sales for the fifty-two weeks ended December 27, 2025 were $7,776,000, a decrease of $1,044,000 or 12%, from net sales of $8,820,000 for the fifty-two weeks ended December 28, 2024. Sales of plant-based cheese products decreased to $6,668,000 in the fifty-two weeks ended December 27, 2025 from $7,428,000 in the fifty-two weeks ended December 28, 2024. Sales of our plant-based cheese products were significantly negatively impacted by increased competition with the introduction of new vegan cheese products by a number of other companies with significantly greater resources than us. Our future product sales of plant-based cheese products could be negatively impacted by the entry of new competitors and by the further introduction of other competitive products. Sales of our frozen dessert product lines decreased to $1,108,000 in the fifty-two weeks ended December 27, 2025 from $1,392,000 in fiscal 2024. Sales of our frozen dessert products, which are part of the ice cream food category, have been negatively impacted by the industry-wide decline in ice cream sales.

Our gross profit for the year ended December 27, 2025, decreased by $203,000 to $2,048,000 from $2,251,000 for the fifty-two weeks ended December 28, 2024. Our gross profit percentage for each of the fifty-two weeks ended December 27, 2025 and December 28, 2024 was 26%. Additionally, sales promotion and allowance expense decreased by $107,000 or 12% to $758,000 for the fifty-two weeks ended December 27, 2025 compared to $865,000 for the fifty-two weeks ended December 28, 2024 due to the decrease in sales. Our sales promotion and allowance expense includes items such as off-invoice sales allowances, manufacturer charge backs (MCBs), early pay cash discount, coupons and slotting fees. Historically, our total sales promotion and allowance expense averages between 10% - 12% annually. Sales promotion and allowance expense was 10% of net sales for both fiscal periods.

Freight out expense decreased significantly by $108,000 to $574,000 for the fifty-two weeks ended December 27, 2025 compared with $682,000 for the fifty-two weeks ended December 28, 2024 due to the significant reduction in sales. Freight out expense as a percentage of sales was 7% and 8% for the fifty-two weeks ended December 27, 2025 and December 28, 2024, respectively. While the effects of the ongoing crisis in the Middle East are as of yet unknown, we anticipate that our freight out expense as a percentage of sales will increase in 2026.

Selling and warehousing expenses increased by $21,000, or 25%, to $890,000 for the fifty-two weeks ended December 27, 2025 from $869,000 for the fifty-two weeks ended December 28, 2024. This increase was primarily attributable to increases in commission expense of $48,000 and travel, entertainment, and auto expense of $18,000. These increases were partially offset by decreases in meetings and conventions expense of $37,000, outside warehouse rental expense of $8,000, and bad debt expense of $7,000. The increase in commission expense represented the cost of a retainer fee to a new independent broker.

Marketing expenses increased in the fifty-two weeks ended December 27, 2025 by $31,000, or 7%, to $447,000 compared to $416,000 in the fiscal period ended December 28, 2024 due to increases in artwork and plate expenses of $15,000 and promotions expense of $38,000, which were partially offset by a decrease in advertising expense of $20,000.

Product development expenses increased by $24,000, or 18 %, to $156,000 in the fifty-two weeks ended December 27, 2025 from $132,000 in the fifty-two weeks ended December 28, 2024. The increase was primarily attributable to an increase in professional fees and outside services expense of $18,000 and lab costs and supplies expense of $18,000 which were partially offset by decreases in utilities expense of $9,000 and depreciation expense of $4,000.

General and administrative expenses decreased by $113,000, or 8%, to $1,328,000 for the fifty-two weeks ended December 27, 2025 from $1,441,000 for the fifty-two weeks ended December 28, 2024. The decrease was primarily due to decreases in office supplies expense of $21,000, stock compensation expense of $54,000, security and fire alarm expense of $12,000, building rent expense of $32,000, real and personal property tax expense of $13,000, waste removal expenses of $14,000, and telephone expense of $6,000. These decreases were partially offset by increases in payroll expense of $15,000, travel and entertainment expense of $8,000, IT expense of $10,000, and general insurance expense of $11,000.

Overall, total operating expenses decreased by $37,000, or 1%, to $2,821,000 for the fifty-two weeks ended December 27, 2025 compared to total operating expenses of $2,858,000 for the fifty-two weeks ended December 28, 2024. We expect our operating expenses in fiscal 2026 will be consistent with those of fiscal 2025.

As a result of the foregoing we recorded an operating loss of $773,000 for the fifty-two weeks ended December 27, 2025 as compared with an operating loss of $607,000 for the fifty-two weeks ended December 28, 2024.

Loss before income taxes for the fifty-two weeks ended December 27, 2025 was $774,000 compared to loss before income taxes of $609,000 for the fifty-two weeks ended December 28, 2024.

Income taxes for the fifty-two weeks ended December 27, 2025 was $4,000 compared to income taxes of $251,000 for the fifty-two weeks ended December 28, 2024 . The income tax expense in fiscal year 2024 was the result of writing off the deferred tax asset balance.

As a result of the foregoing we recorded a net loss of $778,000 for the fifty-two weeks ended December 27, 2025 as compared with a net loss of $860,000 in the fifty-two weeks ended December 28, 2024.

Liquidity and Capital Resources

At December 27, 2025, we had approximately $347,000 in cash, and our working capital was $2,126,000 as compared to $462,000 and $2,893,000 at December 28, 2024. We principally operate our business on the cash flows from our operations and currently have no borrowings.

Cash Flows

Fifty-Two Weeks Ended

December 27, 2025

December 28, 2024

(In thousands)

Net cash (used in) provided by operating activities

Net cash used in financing activities

Net (decrease) increase in cash

Cash at beginning of year

Cash at end of year

Cash used in operating activities for the fifty-two weeks ended December 27, 2025 was $98,000 compared to $358,000 used in operating activities for the fifty-two weeks ended December 28, 2024. Cash used in operating activities was primarily due to the net loss of $778,000, which was partially offset by a reduction in inventory of $150,000, a reduction in accounts receivable of $74,000, a reduction in prepaid expenses of $20,000, and an increase in accounts payable and accrued expenses of $412,000.

Cash used in investing activities was $0 for both the fifty-two weeks ended December 27, 2025 and December 28, 2024 periods, respectively.

Cash used in financing activities was $17,000 for the fifty-two weeks ended December 27, 2025, and $17,000 in the fifty-two weeks ended December 28, 2024. Cash used in financing activities was due to payments made on our finance lease for a copier and mail machine.

As a result of the foregoing, our cash decreased to $347,000 at December 27, 2025 from $462,000 at December 28, 2024.

Contractual Obligations

We had no material contractual obligations at December 27, 2025 other than our lease in Edison, New Jersey.

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

When available, 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 all our export sales are transacted in U.S. dollars. We did not enter into any foreign exchange contracts in the year ended December 27, 2025.

Off-Balance Sheet Arrangements

None.