Mama’s Creations(MAMA) - 2023 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements for the quarter ended July 31, 2022, show increased total assets and nearly doubled net sales, but a net loss due to lower gross margins and higher expenses from acquisitions and inflation Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | July 31, 2022 | January 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $1,896,412 | $850,598 | | Accounts receivable, net | $6,877,758 | $7,627,717 | | Inventories | $4,193,726 | $2,890,793 | | Total current assets | $13,484,593 | $11,638,317 | | Total Assets | $32,810,796 | $30,032,229 | | Liabilities & Equity | | | | Accounts payable and accrued expenses | $7,649,420 | $6,479,140 | | Total current liabilities | $11,021,882 | $8,985,128 | | Total Liabilities | $24,601,944 | $21,922,411 | | Total Stockholders' Equity | $8,208,852 | $8,109,818 | Condensed Consolidated Statements of Operations Highlights (Unaudited) | Metric | Three Months Ended July 31, 2022 | Three Months Ended July 31, 2021 | Six Months Ended July 31, 2022 | Six Months Ended July 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Sales-net | $22,846,474 | $12,064,584 | $44,677,054 | $22,377,984 | | Gross profit | $2,726,612 | $3,369,284 | $6,586,875 | $6,713,637 | | Income (loss) from operations | $(831,295) | $584,913 | $(570,322) | $1,437,112 | | Net income (loss) | $(743,246) | $431,925 | $(639,549) | $1,063,449 | | Net income (loss) per share – basic | $(0.02) | $0.01 | $(0.02) | $0.03 | Condensed Consolidated Statements of Cash Flows Highlights (Unaudited) | Cash Flow Activity | Six Months Ended July 31, 2022 | Six Months Ended July 31, 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $232,978 | $1,618,610 | | Net Cash (Used in) Investing Activities | $(805,547) | $(481,295) | | Net Cash Provided by (Used in) Financing Activities | $1,618,383 | $(74,994) | | Net Increase in Cash | $1,045,814 | $1,062,321 | - On December 29, 2021, the Company acquired T&L Creative Salads, Inc. ("T&L") and Olive Branch, LLC ("OB")[23][24] - On June 28, 2022, the Company acquired a 24% minority interest in Chef Inspirational Foods, Inc. ("CIF") for $1.2 million, with an option to purchase the remaining 76%[23][24] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes 89% quarterly sales growth to acquisitions, but gross profit margin declined due to inflation and different business models, while operating expenses rose, with cash improving from financing activities despite decreased working capital - Quarterly net sales increased by 89% to $22.8 million, primarily due to the inclusion of sales from the acquisitions of T&L Creative Salads and Olive Branch LLC[132] - Gross profit margin for the quarter fell to 12% from 28% in the prior year, caused by the lower-margin business model of acquired companies and significant inflation in raw materials and freight costs, with management expecting margins to recover in the next quarter[133] - Quarterly operating expenses rose by 28% ($814,254) year-over-year, mainly due to increased freight charges, payroll from acquisitions, one-time legal fees, and higher sales commissions[134] Working Capital Analysis | Account | July 31, 2022 | January 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Current Assets | $13,484,593 | $11,638,317 | $1,846,276 | | Current Liabilities | $11,021,882 | $8,985,128 | $2,036,754 | | Working Capital | $2,462,711 | $2,653,189 | $(190,478) | - Net cash from financing activities was $1.62 million for the six months ended July 31, 2022, primarily from $1.725 million in borrowings on the line of credit and $515,000 from an initial sale of Series B Preferred Stock, offset by loan and lease repayments[143] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, MamaMancini's Holdings, Inc. is not required to provide the information for this item - Smaller reporting companies are not required to provide the information required by this item[166] Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective due to identified material weaknesses, including insufficient accounting staff and lack of experience with a new ERP system, hindering timely financial reporting - The principal executive officer and principal financial officer concluded that the company's disclosure controls and procedures are not effective[167] - Material weaknesses identified include: - Lacked sufficient accounting staff for appropriate segregation of duties and timely consolidation of new entities - Lacked sufficient experience with the new ERP system, hindering productivity and delaying financial statement reporting[178] - There were no changes in internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls[171] PART II – OTHER INFORMATION Legal Proceedings The company is not currently involved in any litigation expected to have a material adverse effect on its financial condition or results of operations - The company is not currently involved in any litigation that it believes could have a material adverse effect on its financial condition or results of operations[173] Risk Factors As a smaller reporting company, MamaMancini's Holdings, Inc. is not required to provide the information for this item - Smaller reporting companies are not required to provide the information required by this item[174] Unregistered Sales of Equity Securities and Use of Proceeds The company had no sales of unregistered securities during the period from February 1, 2022, to July 31, 2022 - During the period between February 1, 2022 and July 31, 2022, the Company had no sales of unregistered securities[175] Defaults Upon Senior Securities There have been no defaults in the payment of principal or interest, or any other material default, with respect to any of the company's indebtedness - There has been no default in payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company[176] Mine Safety Disclosures This item is not applicable to the company - Not applicable[177] Other Information There is no other information required to be disclosed under this item that was not previously disclosed - There is no other information required to be disclosed under this item which was not previously disclosed[178] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer, and Inline XBRL financial data files - The report includes CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[179] - Inline XBRL documents (Instance, Schema, Calculation, Definition, Label, Presentation) are furnished with the report[179]