Mama’s Creations(MAMA) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion, and disclosures on controls Financial Statements This section presents MamaMancini's unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, and detailed notes Condensed Consolidated Balance Sheets As of October 31, 2022, Total Assets increased to $33.16 million from $30.03 million at January 31, 2022, driven by a significant rise in cash, while Total Liabilities grew to $22.72 million from $21.92 million, and Total Stockholders' Equity increased to $10.44 million from $8.11 million Condensed Consolidated Balance Sheet Highlights (in USD) | Balance Sheet Item | Oct 31, 2022 (unaudited) | Jan 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash | $3,479,287 | $850,598 | | Total Current Assets | $14,316,080 | $11,638,317 | | Total Assets | $33,163,542 | $30,032,229 | | Liabilities & Equity | | | | Total Current Liabilities | $11,151,225 | $8,985,128 | | Total Liabilities | $22,722,737 | $21,922,411 | | Total Stockholders' Equity | $10,440,805 | $8,109,818 | Condensed Consolidated Statements of Operations For the three months ended October 31, 2022, sales significantly increased to $25.69 million, yielding a net income of $1.10 million, a substantial improvement from a net loss in the prior year, while nine-month sales more than doubled to $70.37 million, though net income decreased to $0.46 million due to higher costs Three Months Ended October 31, (in USD) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Sales-net | $25,693,913 | $10,852,682 | | Gross Profit | $6,564,206 | $2,645,743 | | Income from Operations | $1,498,561 | $1,201 | | Net Income (Loss) | $1,097,940 | $(5,455) | | Diluted EPS | $0.03 | $(0.00) | Nine Months Ended October 31, (in USD) | Metric | 2022 | 2021 | | :--- | :--- | :--- | | Sales-net | $70,370,967 | $33,230,666 | | Gross Profit | $12,986,014 | $9,223,746 | | Income from Operations | $928,239 | $1,438,313 | | Net Income | $458,391 | $1,057,994 | | Diluted EPS | $0.01 | $0.03 | Condensed Consolidated Statements of Cash Flows For the nine months ended October 31, 2022, net cash provided by operating activities increased to $3.18 million, while net cash used in investing activities was $1.01 million, and net cash provided by financing activities was $0.45 million, resulting in a $2.63 million increase in the company's cash balance Cash Flow Summary for Nine Months Ended October 31, (in USD) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $3,184,020 | $2,132,797 | | Net Cash (Used in) Investing Activities | $(1,007,547) | $(657,607) | | Net Cash Provided by (Used in) Financing Activities | $452,216 | $(125,830) | | Net Increase in Cash | $2,628,689 | $1,349,360 | | Cash - End of Period | $3,479,287 | $4,539,920 | Notes to Condensed Consolidated Financial Statements The notes detail the company's operations, recent acquisitions, and accounting policies, including the December 2021 acquisitions of T&L Creative Salads and Olive Branch for $14.0 million and the June 2022 acquisition of a 24% interest in Chef Inspirational Foods for $1.2 million, alongside related party transactions, debt, customer concentrations, and equity details - The company acquired T&L Creative Salads, Inc. ("T&L") and Olive Branch, LLC ("OB") on December 29, 2021, for a combined purchase price of $14.0 million, consisting of $11.0 million in cash and a $3.0 million promissory note[24][29] - On June 28, 2022, the company acquired a 24% minority interest in Chef Inspirational Foods, Inc. ("CIF") for $1.2 million ($500,000 cash, $700,000 stock) and holds an option to purchase the remaining 76% within one year[25] - For the nine months ended October 31, 2022, the company's top three customers accounted for 26%, 13%, and 10% of gross sales, respectively, indicating significant customer concentration[100][101] - On September 13, 2022, the company closed the first round of a Series B Preferred Stock offering, raising gross proceeds of $1,180,000 from the sale of 47,200 shares[105] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes revenue growth to acquisitions, with Q3 2022 net income improving, while nine-month net income declined due to earlier cost inflation Results of Operations for the Quarter ended October 31, 2022 and 2021 Sales for the quarter ended October 31, 2022, increased by 137% to $25.7 million, driven by acquisitions and synergies, with gross profit margin improving to 26% and net income reaching $1.1 million, a significant turnaround from a prior-year net loss Quarterly Performance Comparison (in USD) | Metric | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Net Sales | $25,693,913 | $10,852,682 | | Gross Profit | $6,564,206 | $2,645,743 | | Gross Margin | 26% | 24% | | Net Income (Loss) | $1,097,940 | $(5,455) | - The increase in net income reflects strong sales, normalization of commodity and freight costs, and improved manufacturing efficiencies[135] Results of Operations for the Nine Months ended October 31, 2022 and 2021 For the nine months ended October 31, 2022, sales grew 112% to $70.4 million, including full results from recent acquisitions, but the gross profit margin decreased to 18% from 28% due to cost inflation outpacing price increases, leading to a decline in net income to $0.46 million Nine-Month Performance Comparison (in USD) | Metric | 9M 2022 | 9M 2021 | | :--- | :--- | :--- | | Net Sales | $70,370,967 | $33,230,666 | | Gross Profit | $12,986,014 | $9,223,746 | | Gross Margin | 18% | 28% | | Net Income | $458,391 | $1,057,994 | - The decline in net income was primarily due to cost inflation challenges in the first half of the fiscal year, which were offset by cost normalization and improved pricing in the third quarter[139][141] Liquidity and Capital Resources As of October 31, 2022, the company's working capital increased to $3.16 million from $2.65 million at January 31, 2022, driven by a $2.63 million increase in cash from operations and financing activities, with $1.01 million used in investing activities Working Capital (in USD) | Metric | Oct 31, 2022 | Jan 31, 2022 | | :--- | :--- | :--- | | Current Assets | $14,316,080 | $11,638,317 | | Current Liabilities | $11,151,225 | $8,985,128 | | Working Capital | $3,164,855 | $2,653,189 | - Net cash from operating activities for the nine months ended October 31, 2022, was $3,184,020, a significant increase from $2,132,797 in the prior-year period[145] 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[171] Controls and Procedures Management concluded disclosure controls were ineffective due to staffing and ERP system issues, with remediation efforts including new CFO and Corporate Controller hires - The company's principal executive and financial officers concluded that disclosure controls and procedures were not effective as of the end of the period[172] - Material weaknesses identified include insufficient accounting staff for segregation of duties and lack of experience with a new ERP system[172][174] - Remedial measures include the hiring of a new CFO (Anthony Gruber) and a Corporate Controller to review controls and oversee the implementation of a new financial reporting system[175] PART II – OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered equity sales, defaults on senior securities, and required exhibits Legal Proceedings 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 - The company reports no current involvement in litigation expected to have a material adverse effect on its business[178] 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[179] Unregistered Sales of Equity Securities and Use of Proceeds Between February 1, 2022, and December 12, 2022, the company issued 566,064 unregistered shares of common stock for an acquisition, option exercises, and employment agreements, and 54,600 shares of Series B Preferred Stock for gross proceeds of $1,360,000, with proceeds intended for general working capital and acquisitions - Issued 566,064 unregistered shares of common stock for an acquisition, option exercises, and employment agreements[180] - Issued 54,600 shares of Series B Preferred Stock, raising gross proceeds of $1,360,000[181] - Proceeds from these sales are intended for general working capital and potential acquisitions[182] Defaults Upon Senior Securities The company reports that there have been no defaults in payment of principal, interest, or any other material default with respect to any of its indebtedness - The company has not had any defaults on its senior securities[183] Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications from the Principal Executive Officer and Principal Financial Officer as required by the Sarbanes-Oxley Act, as well as Inline XBRL documents - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[187] - The filing also includes various Inline XBRL instance and taxonomy documents[187]