Liquidity and Capital Resources

6 Months Ended

Jun. 29, 2019

Liquidity and Capital Resources [Abstract]

Liquidity and Capital Resources

Note 1: Liquidity and Capital Resources

At June 29, 2019, Tofutti Brands, Inc. (“Tofutti” or the “Company”) had approximately $893 in cash compared to $558 at December 29, 2018. Net cash provided by operating activities was @364 for the twenty-six weeks ended June 29, 2019 compared to $867 used in operating activities for the twenty-six weeks ended June 30, 2018. Cash provided by operating activities for the twenty-six weeks ended June 29, 2019 was primarily a result of a decrease in accounts receivable, increases in accounts payable and accrued expenses, which was partially offset by an increase in inventory and the net loss. Net cash used in investing activities was $29 for the twenty-six weeks ended at June 29, 2019 compared to $0 used in investing activities for the twenty-six weeks ended June 30, 2018. Net cash used in financing activities was $0 for the twenty-six weeks ended at June 29, 2019 compared to $10 used in financing activities for the twenty-six weeks ended June 30, 2018.

The Company has historically financed operations and met capital requirements primarily through positive cash flow from operations. However, due to net losses and cash used in operations in prior years in order to provide the Company with additional working capital, on January 6, 2016, David Mintz, the Company’s Chairman and Chief Executive, provided it with a loan of $500. 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 the Company’s common stock at a conversion price of $4.01 per share, the closing price of its common stock on the NYSE MKT on the date the promissory note was entered into. In any event of default, as defined in the promissory note, without any action on the part of Mr. Mintz, the interest rate will increase to 12% per annum and the entire principal and interest balance under the loan, and all of the Company’s other obligations under the loan, will be immediately due and payable, and Mr. Mintz will be entitled to seek and institute any and all remedies available to him. Initially due December 31, 2017, the loan has been extended until December 31, 2020.

The Company’s ability to introduce successful new products may be adversely affected by a number of factors, such as unforeseen cost and expenses, economic environment, increased competition, and other factors beyond the Company’s control. Management cannot provide assurance that the Company will operate profitably in the future, or that it will not require significant additional financing in order to accomplish or exceed the objectives of its business plan. Consequently, the Company’s historical operating results cannot be relied on to be an indicator of future performance, and management cannot predict whether the Company will obtain or sustain positive operating cash flow or generate net income in the future.