Mama's Creations, Inc. 10-Q

10-Q 1 form10-q.htm UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended: October 31, 2020 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from ___________ to ____________ Commission File Number: 000-54954 MamaMancini’s Holdings, Inc. (Exact name of Registrant as specified in its charter) Nevada 27-067116 (State or other jurisdiction of incorporation) (IRS Employer I.D. No.) 25 Branca Road East Rutherford, NJ 07073 (Address of principal executive offices and zip Code) (201) 531-1212 (Registrant’s telephone number, including area code) Securities Registered Pursuant to Section 12(g) of the Act: Title of Each Class Trading Symbol Name of Each Exchange on which registered Common Stock, par value $0.00001 MMMB OTCQB 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 past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] 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 [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act: Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of December 10, 2020, there were 35,591,682 shares outstanding of the registrant’s common stock. TABLE OF CONTENTS Page PART I – FINANCIAL INFORMATION Item 1. Financial Statements. F-1 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 2 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 6 Item 4. Controls and Procedures. 6 PART II – OTHER INFORMATION Item 1. Legal Proceedings. 7 Item 1A. Risk Factors. 7 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 7 Item 3. Defaults Upon Senior Securities. 7 Item 4. Mine Safety Disclosures. 7 Item 5. Other Information 7 Item 6. Exhibits. 8 Signatures 9 1 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. MAMAMANCINI’S HOLDINGS, INC. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS October 31, 2020 Page(s) Condensed Consolidated Balance Sheets as of October 31, 2020 (unaudited) and January 31, 2020 F-2 Condensed Consolidated Statements of Operations for the Three and Nine Months ended October 31, 2020 and 2019 (unaudited) F-3 Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Period from August 1, 2020 through October 31, 2020 and the Period from August 1, 2019 to October 31, 2019 (unaudited) F-4 Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Period from February 1, 2020 through October 31, 2020 and the Period from February 1, 2019 to October 31, 2019 (unaudited) F-5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended October 31, 2020 and 2019 (unaudited) F-6 Notes to Condensed Consolidated Financial Statements (unaudited) F-7 F- 1 MamaMancini’s Holdings, Inc. Condensed Consolidated Balance Sheets October 31, 2020 January 31, 2020 (unaudited) Assets Current Assets: Cash $ 1,792,843 $ 393,683 Accounts receivable, net 3,687,912 3,727,887 Inventories 1,560,287 1,246,417 Prepaid expenses 291,052 252,268 Total current assets 7,332,094 5,620,255 Property and equipment, net 3,022,169 2,805,843 Intangibles 87,639 - Operating lease right of use assets, net 1,387,851 1,490,794 Deposits 20,177 20,177 Total Assets $ 11,849,930 $ 9,937,069 Liabilities and Stockholders’ Equity Liabilities: Current Liabilities: Accounts payable and accrued expenses $ 3,513,121 $ 3,552,790 Term loan - 423,799 Operating lease liability 142,286 126,516 Finance leases payable 182,428 105,126 Total current liabilities 3,837,835 4,208,231 Line of credit – net 650,000 2,997,348 Operating lease liability – net 1,256,832 1,372,349 Finance leases payable – net 528,757 315,234 Notes payable - related party - 641,844 Total long-term liabilities 2,435,589 5,326,775 Total Liabilities 6,273,424 9,535,006 Commitments and contingencies Stockholders’ Equity: Series A Preferred stock, $0.00001 par value; 120,000 shares authorized; 23,400 issued as of October 31, 2020 and January 31, 2020, 0 and 0 shares outstanding as of October 31, 2020 and January 31, 2020 - - Preferred stock, $0.00001 par value; 19,880,000 shares authorized; no shares issued and outstanding - - Common stock, $0.00001 par value; 250,000,000 shares authorized; 34,767,841 and 31,991,241 shares issued and outstanding as of October 31, 2020 and January 31, 2020 348 321 Additional paid in capital 19,489,657 16,695,352 Accumulated deficit (13,763,999 ) (16,144,110 ) Less: Treasury stock, 230,000 shares at cost, respectively (149,500 ) (149,500 ) Total Stockholders’ Equity 5,576,506 402,063 Total Liabilities and Stockholders’ Equity $ 11,849,930 $ 9,937,069 See accompanying notes to the condensed consolidated financial statements F- 2 MamaMancini’s Holdings, Inc. Condensed Consolidated Statements of Operations (unaudited) For the Three Months Ended October 31, For the Nine Months Ended October 31, 2020 2019 2020 2019 Sales-net of slotting fees and discounts $ 9,898,991 $ 9,267,036 $ 31,384,394 $ 24,731,305 Costs of sales 6,773,662 6,366,084 21,317,384 16,767,903 Gross profit 3,125,329 2,900,952 10,067,010 7,963,402 Operating expenses: Research and development 30,765 32,744 86,103 82,579 General and administrative 2,307,436 2,364,608 7,411,060 6,446,715 Total operating expenses 2,338,201 2,397,352 7,497,163 6,529,294 Income from operations 787,128 503,600 2,569,847 1,434,108 Other expenses Interest (45,822 ) (89,635 ) (171,872 ) (293,531 ) Amortization of debt discount (7,164 ) (5,350 ) (17,864 ) (17,988 ) Total other expenses (52,986 ) (94,985 ) (189,736 ) (311,519 ) Net income before income tax provision 734,142 408,615 2,380,111 1,122,589 Income tax provision - - - - Net income $ 734,142 $ 408,615 $ 2,380,111 $ 1,122,589 Net income per common share – basic $ 0.02 $ 0.01 $ 0.07 $ 0.04 – diluted $ 0.02 $ 0.01 $ 0.07 $ 0.04 Weighted average common shares outstanding – basic 34,225,446 31,991,241 32,832,450 31,935,837 – diluted 35,725,984 32,091,210 34,322,988 32,035,806 See accompanying notes to the condensed consolidated financial statements F- 3 MamaMancini’s Holdings, Inc. Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) For the Period from August 1, 2020 through October 31, 2020 Series A Preferred Stock Common Stock Treasury Stock Additional Paid In Accumulated Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance, August 1, 2020 - $ - 33,517,101 $ 336 (230,000 ) $ (149,500 ) $ 18,229,615 $ (14,498,141 ) $ 3,582,310 Stock options issued for services - - - - - - 1,460 - 1,460 Common stock issued for exercise of warrants - - 1,250,740 12 - - 1,258,852 - 1,258,594 Net income - - - - - - - 734,142 734,142 Balance, October 31, 2020 - $ - 34,767,841 $ 348 (230,000 ) $ (149,500 ) $ 19,489,657 $ (13,763,999 ) $ 5,576,506 For the Period from August 1, 2019 through October 31, 2019 Series A Preferred Stock Common Stock Treasury Stock Additional Paid In Accumulated Stockholders’ Equity Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balance, August 1, 2019 - $ - 31,991,241 $ 321 (230,000 ) $ (149,500 ) $ 16,642,259 $ (16,866,281 ) $ (373,201 ) Stock options issued for services - - - - - - 27,646 - 27,646 Net income - - - - - - - 408,615 408,615 Balance, October 31, 2019 - $ - 31,991,241 $ 321 (230,000 ) $ (149,500 ) $ 16,669,905 $ (16,457,666 ) $ 63,060 See accompanying notes to the condensed consolidated financial statements F- 4 MamaMancini’s Holdings, Inc. Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) For the Period from February 1, 2020 through October 31, 2020 Series A Preferred Stock Common Stock Treasury Stock Additional Paid In Accumulated Stockholders’ Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance, February 1, 2020 - $ - 31,991,241 $ 321 (230,000 ) $ (149,500 ) $ 16,695,352 $ (16,144,110 ) $ 402,063 Stock options issued for services - - - - - - 51,435 - 51,435 Common stock issued for exercise of options - - 12,000 - - - 7,200 - 7,200 Common stock issued for exercise of warrants - - 2,764,600 27 - - 2,735,670 - 2,735,697 Net income - - - - - - - 2,380,111 2,380,111 Balance, October 31, 2020 - $ - 34,767,841 $ 348 (230,000 ) $ (149,500 ) $ 19,489,657 $ (13,763,999 ) $ 5,576,506 For the Period from February 1, 2019 through October 31, 2019 Series A Preferred Stock Common Stock Treasury Stock Additional Paid In Accumulated Stockholders’ Equity Shares Amount Shares Amount Shares Amount Capital Deficit (Deficit) Balance, February 1, 2019 - $ - 31,866,241 $ 320 (230,000 ) $ (149,500 ) $ 16,547,287 $ (17,580,255 ) $ (1,182,148 ) Stock options issued for services - - - - - - 50,744 - 50,744 Common stock issued for services - - 125,000 1 - - 71,874 - 71,875 Net income - - - - - - - 1,122,589 1,122,589 Balance, October 31, 2019 - $ - 31,991,241 $ 321 (230,000 ) $ (149,500 ) $ 16,669,905 $ (16,457,666 ) $ 63,060 See accompanying notes to the condensed consolidated financial statements F- 5 MamaMancini’s Holdings, Inc. Condensed Consolidated Statements of Cash Flows (unaudited) For the Nine Months Ended October 31, 2020 October 31, 2019 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 2,380,111 $ 1,122,589 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 489,109 495,005 Amortization of debt discount 17,864 17,988 Share-based compensation 51,435 67,857 Amortization of right of use assets 102,943 75,747 Changes in operating assets and liabilities: Accounts receivable 39,975 (599,207 ) Other receivable - (163,983 ) Inventories (313,870 ) (254,924 ) Prepaid expenses (38,784 ) (138,098 ) Accounts payable and accrued expenses (111,024 ) 422,971 Operating lease liability (99,747 ) (70,097 ) Net Cash Provided by Operating Activities 2,518,012 975,848 CASH FLOWS FROM INVESTING ACTIVITIES: Cash paid for fixed assets (304,048 ) (163,186 ) Cash paid for intangible assets (16,284 ) - Net Cash Used in Investing Activities (320,332 ) (163,186 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of related party notes payable (641,844 ) - Proceeds from term loan - 41,917 Repayments of term loan (441,663 ) (1,075,253 ) Proceeds from promissory note 330,505 - Repayment of promissory note (330,505 ) - Borrowings (repayments) of line of credit, net (2,347,348 ) 285,314 Repayment of capital lease obligations (110,562 ) (63,475 ) Proceeds from exercise of options 7,200 - Proceeds from exercise of warrants 2,735,697 - Net Cash Used in Financing Activities (798,520 ) (811,497 ) Net Increase in Cash 1,399,160 1,165 Cash - Beginning of Period 393,683 609,409 Cash - End of Period $ 1,792,843 $ 610,574 SUPPLEMENTARY CASH FLOW INFORMATION: Cash Paid During the Period for: Income taxes $ - $ - Interest $ 174,735 $ 363,519 SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Operating lease liability $ - $ 1,599,830 Finance lease asset additions $ 401,387 $ 293,479 Common stock issued for services to be rendered $ - $ 71,875 Acquisition of software via contract liability $ 71,355 $ - See accompanying notes to the condensed consolidated financial statements F- 6 MamaMancini’s Holdings, Inc. Notes to Condensed Consolidated Financial Statements October 31, 2020 Note 1 - Nature of Operations and Basis of Presentation Nature of Operations MamaMancini’s Holdings, Inc. (the “Company”), (formerly known as Mascot Properties, Inc.) was organized on July 22, 2009 as a Nevada corporation. The Company has a year-end of January 31. The Company is a manufacturer and distributor of beef meatballs with sauce, turkey meatballs with sauce, beef meat loaf, chicken parmesan and other similar meats and sauces. In addition, the Company continues to diversify its product line by introducing new products such as ready to serve dinners, single-size Pasta Bowls, bulk deli, packaged refrigerated and frozen products. The Company’s products were submitted to the United States Department of Agriculture (the “USDA”) and approved as all natural. The USDA defines all natural as a product that contains no artificial ingredients, coloring ingredients or chemical preservatives and is minimally processed. The Company’s customers are located throughout the United States, with large concentrations in the Northeast and Southeast. Note 2 - Summary of Significant Accounting Policies Basis of Presentation The condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“ US GAAP ”) and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The unaudited financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. This report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended January 31, 2020 filed on April 23, 2020. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The condensed consolidated balance sheet at January 31, 2020 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the interim periods presented are not necessarily indicative of results for the year ending January 31, 2021. Principles of Consolidation The condensed consolidated financial statements include all accounts of the entities as of the reporting period ending date(s) and for the reporting period(s). All inter-company balances and transactions have been eliminated. Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following: allowance for doubtful accounts, inventory obsolescence and the fair value of share-based payments. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the condensed consolidated financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates. F- 7 Risks and Uncertainties The Company operates in an industry that is subject to intense competition and change in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure. The Company has experienced, and in the future expects to continue to experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the grocery industry, (ii) general economic conditions in the various local markets in which the Company competes, including a potential general downturn in the economy, and (iii) the volatility of prices pertaining to food and beverages in connection with the Company’s distribution of the product. These factors, among others, make it difficult to project the Company’s operating results on a consistent basis. Cash The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company held no cash equivalents at October 31, 2020 and January 31, 2020. The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At October 31, 2020, the Company had $1,522,862 in cash balances that exceed federally insured limits. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. As of October 31, 2020 and January 31, 2020, the Company had reserves of $2,000. Inventories Inventories are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) valuation method. Inventory was comprised of the following at October 31, 2020 and January 31, 2020: October 31, 2020 January 31, 2020 Raw Materials $ 794,944 $ 893,204 Work in Process 147,966 37,764 Finished goods 617,377 315,449 $ 1,560,287 $ 1,246,417 Property and Equipment Property and equipment are recorded at cost net of depreciation. Depreciation expense is computed using straight-line methods over the estimated useful lives. Asset lives for financial statement reporting of depreciation are: Machinery and equipment 2-7 years Furniture and fixtures 3 years Leasehold improvements * (*) Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever period is shorter. F- 8 Upon sale or retirement of property and equipment, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the consolidated statements of operations. Intangible Assets The Company accounts for acquired internal-use software licenses and certain costs within the scope of ASC 350-40, Intangibles - Goodwill and Other - Internal-Use Software as intangible assets. Acquired internal-use software licenses are amortized over the term of the arrangement to the line item within the consolidated statements of operations that reflects the nature of the license. Additionally, the Company evaluates its accounting for fees paid in an agreement to determine whether it includes a license to internal-use software. If the agreement includes a software license, the Company accounts for the software license as an intangible asset. Acquired software licenses are recognized and measured at cost, which includes the present value of the license obligation if the license is to be paid for over time. If the agreement does not include a software license, the Company accounts for the arrangement as a service contract (hosting arrangement) and hosting costs are generally expensed as incurred. The Company did not record amortization for the software license since the license has yet to be implemented as of October 31, 2020. Leases In February 2016, the FASB issued ASU 2016-02 “ Leases” (Topic 842) which amended guidance for lease arrangements to increase transparency and comparability by providing additional information to users of financial statements regarding an entity’s leasing activities. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection of lease guidance is referred to as ASC 842. The revised guidance seeks to achieve this objective by requiring reporting entities to recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements. On February 1, 2019, the Company adopted ASC 842 using the modified retrospective approach and recognized a right of use (“ROU”) asset and liability in the consolidated balance sheet in the amount of $1,599,830 related to the operating lease for office and warehouse space. As part of the adoption the Company elected the practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to: 1. Not separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. 2. Not to apply the recognition requirements in ASC 842 to short-term leases. 3. Not record a right of use asset or right of use liability for leases with an asset or liability balance that would be considered immaterial. Fair Value of Financial Instruments For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments. Research and Development Research and development is expensed as incurred. Research and development expenses for the three months ended October 31, 2020 and 2019 were $30,765 and $32,744, respectively. Research and development expenses for the nine months ended October 31, 2020 and 2019 were $86,103 and $82,579, respectively. Shipping and Handling Costs The Company classifies freight billed to customers as sales revenue and the related freight costs as general and administrative expenses. Revenue Recognition In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . ASU 2014-09 supersedes the revenue recognition requirements under Topic 605, Revenue Recognition , and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients . This update clarifies the objectives of collectability, sales and other taxes, noncash consideration, contract modifications at transition, completed contracts at transition and technical correction. The amendments in this update affect the guidance in ASU 2014-09. In September 2017, the FASB issued additional amendments providing clarification and implementation guidance. F- 9 The Company adopted this guidance and related amendments as of the first quarter of fiscal 2019, applying the full retrospective transition method. As the underlying principles of the new standard, relating to the measurement of revenue and the timing of recognition, are closely aligned with the Company’s current business model and practices, the adoption of ASU 2014-09 did not have a material impact on the consolidated financial statements. In addition, the adoption of ASC 606 did not impact the previously reported financial statements in any prior period nor did it result in a cumulative effect adjustment to retained earnings. The Company’s sales predominantly are generated from the sale of finished products to customers, contain a single performance obligation and revenue is recognized at a single point in time when ownership, risks and rewards transfer. Typically, this occurs when the goods are shipped to the customer. Revenues are recognized in an amount that reflects the net consideration the Company expects to receive in exchange for the goods. The Company reports all amounts billed to a customer in a sale transaction as revenue. Under the new revenue guidance, the Company elected to treat shipping and handling activities as fulfillment activities, and the related costs are recorded as selling expenses in general and administrative expenses on the consolidated statement of operations. The Company promotes its products with advertising, consumer incentives and trade promotions. These programs include discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives. Customer trade promotion and consumer incentive activities are recorded as a reduction to the transaction price based on amounts estimated as being due to customers and consumers at the end of a period. The Company derives these estimates principally on historical utilization and redemption rates. The Company does not receive a distinct service in relation to the advertising, consumer incentives and trade promotions. Payment terms in the Company’s invoices are based on the billing schedule established in contracts and purchase orders with customers. The Company generally recognizes the related trade receivable when the goods are shipped. Expenses such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows: For the Three Months Ended October 31, 2020 October 31, 2019 Gross Sales $ 10,016,932 $ 9,518,515 Less: Slotting, Discounts, Allowances 117,941 251,479 Net Sales $ 9,898,991 $ 9,267,036 For the Nine Months Ended October 31, 2020 October 31, 2019 Gross Sales $ 31,833,423 $ 25,176,596 Less: Slotting, Discounts, Allowances 449,029 445,291 Net Sales $ 31,384,394 $ 24,731,305 Disaggregation of Revenue from Contracts with Customers. The following table disaggregates gross revenue by significant geographic area for the three and nine months ended October 31, 2020 and 2019: For the Three Months Ended October 31, 2020 October 31, 2019 Northeast $ 3,304,422 $ 3,174,637 Southeast 2,894,971 2,570,289 Midwest 1,204,936 1,061,847 West 1,475,143 1,543,411 Southwest 1,137,460 1,168,340 Total revenue $ 10,016,932 $ 9,518,515 For the Nine Months Ended October 31, 2020 October 31, 2019 Northeast $ 10,558,410 $ 8,266,248 Southeast 8,863,856 5,982,856 Midwest 3,819,765 3,607,441 West 4,381,561 4,241,811 Southwest 4,209,831 3,078,240 Total revenue $ 31,833,423 $ 25,176,596 F- 10 Cost of Sales Cost of sales represents costs directly related to the production and manufacturing of the Company’s products. Costs include product development, freight-in, packaging, and print production costs. Advertising Costs incurred for producing and communicating advertising for the Company are charged to operations as incurred. Producing and communicating advertising expenses for the three months ended October 31, 2020 and 2019 were $314,093 and $517,940 respectively. Producing and communicating advertising expenses for the nine months ended October 31, 2020 and 2019 were $984,193 and $1,274,735, respectively. Stock-Based Compensation The Company accounts for stock-based compensation in accordance with ASC Topic 718, “ Compensation – Stock Compensation” ( “ASC 718” ), which establishes financial accounting and reporting standards for stock-based employee compensation. It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. The Company accounts for compensation cost for stock option plans in accordance with ASC 718. The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest. Share-based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock-based compensation expenses are included in cost of goods sold or selling, general and administrative expenses, depending on the nature of the services provided, in the condensed consolidated statement of operations. Share-based payments issued to placement agents are classified as a direct cost of a stock offering and are recorded as a reduction in additional paid in capital. For the three months ended October 31, 2020 and 2019, share-based compensation amounted to $1,460 and $37,914, respectively. For the nine months ended October 31, 2020 and 2019, share-based compensation amounted to $51,435 and $67,857, respectively. For the nine months ended October 31, 2020 and 2019, when computing fair value of share-based payments, the Company has considered the following variables: October 31, 2020 October 31, 2019 Risk-free interest rate 0.37 % 1.52 - 2.29 % Expected life of grants 3 - 3.5 years 3 - 3.5 years Expected volatility of underlying stock 125 % 127 - 150 % Dividends 0 % 0 % The expected option term is computed using the “simplified” method as permitted under the provisions of ASC 718-10-S99. The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The expected stock price volatility for the Company’s stock options was estimated using the historical volatilities of the Company’s common stock. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods. F- 11 Earnings (Loss) Per Share Earnings per share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to Section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants. The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income attributable to common stockholders per common share. For the Three Months Ended October 31, 2020 October 31, 2019 Numerator: Net income attributable to common stockholders $ 734,142 408,615 Effect of dilutive securities: — — Diluted net income $ 734,142 $ 408,615 Denominator: Weighted average common shares outstanding - basic 34,225,446 31,991,241 Dilutive securities (a): Series A Preferred - - Options 575,139 99,969 Warrants 925,399 - Weighted average common shares outstanding and assumed conversion – diluted 35,725,984 32,091,210 Basic net income per common share $ 0.02 $ 0.01 Diluted net income per common share $ 0.02 $ 0.01 (a) - Anti-dilutive securities excluded: - 6,579,164 F- 12 For the Nine Months Ended October 31, 2020 October 31, 2019 Numerator: Net income attributable to common stockholders $ 2,380,111 1,122,589 Effect of dilutive securities: — - Diluted net income $ 2,380,111 $ 1,122,589 Denominator: Weighted average common shares outstanding - basic 32,832,450 31,935,837 Dilutive securities (a): Series A Preferred - - Options 575,139 99,969 Warrants 925,399 - Weighted average common shares outstanding and assumed conversion – diluted 34,322,988 32,035,806 Basic net income per common share $ 0.07 $ 0.04 Diluted net income per common share $ 0.07 $ 0.04 (a) - Anti-dilutive securities excluded: - 6,579,164 Income Taxes Income taxes are provided in accordance with ASC No. 740, “ Accounting for Income Taxes ”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the period of deferred tax assets and liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The Company is no longer subject to tax examinations by tax authorities for years prior to 2017. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“ CARES Act ”) was signed into law in March 2020. The CARES Act lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (“ 2017 Tax Act ”). Corporate taxpayers may carryback net operating losses ( “NOLs ”) originating between 2018 and 2020 for up to five years, which was not previously allowed under the 2017 Tax Act. The CARES Act also eliminates the 80% of taxable income limitations by allowing corporate entities to fully utilize NOL carryforwards to offset taxable income in 2018, 2019 or 2020. Taxpayers may generally deduct interest up to the sum of 50% of adjusted taxable income plus business interest income (30% limit under the 2017 Tax Act) for 2019 and 2020. The CARES Act allows taxpayers with alternative minimum tax credits to claim a refund in 2020 for the entire amount of the credits instead of recovering the credits through refunds over a period of years, as originally enacted by the 2017 Tax Act. In addition, the CARES Act raises the corporate charitable deduction limit to 25% of taxable income and makes qualified improvement property generally eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act did not result in any material adjustments to the income tax provision. Related Parties The Company follows subtopic ASC 850-10 for the identification of related parties and disclosure of related party transactions. Pursuant to Section 850-10-20, the related parties include: (a) affiliates of the Company (“Affiliate” means, with respect to any specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act); (b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity; (c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests. F- 13 Recent Accounting Pronouncements In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of the new standard did not have a significant impact on the Company’s condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. This update is to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each entity’s financial statements. The amendments in this update apply to all entities that are required, under existing U.S. GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard did not have a significant impact on the Company’s condensed consolidated financial statements. In August 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” . The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this guidance on February 1, 2020 on a prospective basis. Since the adoption of ASU 2018-15 on February 1, 2020, the Company evaluates upfront costs including implementation, set-up or other costs (collectively, implementation costs) for hosting arrangements under the internal-use software framework. Costs related to preliminary project activities and post implementation activities are expensed as incurred, whereas costs incurred in the development stage are generally capitalized. Capitalized implementation costs are amortized on a straight-line basis over the expected term of the hosting arrangement, which includes consideration of the non-cancellable contractual term and reasonably certain renewals. In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, “ Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ”). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods. The Company is currently evaluating the potential impact of this guidance on its condensed consolidated financial statements. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying condensed consolidated financial statements. Subsequent Events The Company evaluates subsequent events and transactions that occur after the balance sheet date for potential recognition or disclosure. Any material events that occur between the balance sheet date and the date that the financial statements were issued are disclosed as subsequent events, while the financial statements are adjusted to reflect any conditions that existed at the balance sheet date. Subsequent to October 31, 2020, warrant holders exercised 823,890 warrants at $1.50 per share into 823,890 shares of common stock. The Company received aggregate proceeds of $1,124,724 upon exercise. F- 14 Note 3 - Property and Equipment: Property and equipment on October 31, 2020 and January 31, 2020 are as follows: October 31, 2020 January 31, 2020 Machinery and Equipment $ 3,714,010 $ 3,176,638 Furniture and Fixtures 107,256 89,443 Leasehold Improvements 3,084,115 2,933,865 6,905,381 6,199,946 Less: Accumulated Depreciation 3,883,212 3,394,103 $ 3,022,169 $ 2,805,843 Depreciation expense charged to income for the three months ended October 31, 2020 and 2019 amounted to $170,031 and $124,953, respectively. Depreciation expense charged to income for the nine months ended October 31, 2020 and 2019 amounted to $489,109 and $495,005, respectively. Note 4 - Investment in Meatball Obsession, LLC During 2011, the Company acquired a 34.62% interest in Meatball Obsession, LLC (“MO”) for a total investment of $27,032. This investment is accounted for using the equity method of accounting. Accordingly, investments are recorded at acquisition cost plus the Company’s equity in the undistributed earnings or losses of the entity. At December 31, 2011, the investment was written down to $0 due to losses incurred by MO. The Company’s ownership interest in MO has decreased due to dilution. At October 31, 2020 and January 31, 2020, the Company’s ownership interest in MO was 0% and 12%, respectively. As of December 31, 2019, MO had wound down and ceased operations. Major accounts were transitioned to the Company as a part of the wind down. Note 5 - Related Party Transactions Meatball Obsession, LLC A current director of the Company is the chairman of the board and shareholder of Meatball Obsession LLC (“MO”). For the three months ended October 31, 2020 and 2019, the Company generated approximately $0 and $20,474 in revenues from MO, respectively. For the nine months ended October 31, 2020 and 2019, the Company generated approximately $0 and $53,723 in revenues from MO, respectively. As of October 31, 2020 and January 31, 2020, the Company had a receivable of $0 and $1,604 due from MO, respectively. WWS, Inc. Alfred D’Agostino and Tom Toto, two directors of the Company, are affiliates of WWS, Inc. For the three months ended October 31, 2020 and 2019, the Company recorded $6,000 and $12,000 in commission expense from WWS, Inc. generated sales, respectively. For the nine months ended October 31, 2020 and 2019, the Company recorded $30,000 and $36,000 in commission expense from WWS, Inc. generated sales, respectively. Notes Payable – Related Party During the year ended January 31, 2016, the Company received aggregate proceeds of $125,000 from notes payable with the CEO of the Company. The notes bear interest at a rate of 4% per annum and matured on December 31, 2016. The notes were subsequently extended until January 2024. As of October 31, 2020 and January 31, 2020, the outstanding principal balance of the notes was $0 and $109,844, respectively. The Company received advances from the CEO of the Company which bear interest at 8%. The advances were due on January 2024. At October 31, 2020 and January 31, 2020, there was $0 and $400,000 of principal outstanding, respectively. The Company received advances from an entity 100% owned by the CEO of the Company, which bear interest at 8%. The advances were due on January 2024. At October 31, 2020 and January 31, 2020, there was $0 and $132,000 of principal outstanding, respectively. F- 15 For the three months ended October 31, 2020 and 2019, the Company recorded interest expense of $0 and $11,775, respectively, related to the above related party notes payable. For the nine months ended October 31, 2020 and 2019, the Company recorded interest expense of $23,550 and $34,544, respectively, related to the above related party notes payable. At October 31, 2020 and January 31, 2020, there was $0 and $2,863, respectively, of accrued interest on the above related party notes. Other Related Party Transactions During the three months ended October 31, 2020 and 2019, the Company reimbursed an entity 100% owned by the CEO of the Company for certain investor relation conference expenses totaling $0 and $0, respectively. During the nine months ended October 31, 2020 and 2019, the Company reimbursed an entity 100% owned by the CEO of the Company for certain investor relation conference expenses totaling $14,570 and $15,722, respectively. During the nine months ended October 31, 2020, members of the board of directors and the CEO exercised 940,807 warrants with exercise price of $1 in exchange for 940,807 shares of common stock. Note 6 - Loan and Security Agreement M&T Bank Effective, January 4, 2019, the Company entered into a $2.5 million five-year note with M&T Bank at LIBOR plus four points with repayments in equal payments over 60 months. The new facility is supported by a first priority security interest in all of the Company’s business assets and is further subject to various affirmative and negative financial covenants and a limited Guaranty by the Company’s Chief Executive Officer, Carl Wolf. The Company recorded $89,321 as a debt discount and will be amortized over the remaining life of the note using the effective interest method. There was unamortized debt discount of $0 and $17,864 as of October 31, 2020 and January 31, 2020, respectively. The outstanding balance on the term loan was $0 and $441,663 as of October 31, 2020 and January 31, 2020, respectively. Effective, January 4, 2019, the Company has arranged a new $3.5 million working capital line of credit with M&T Bank at LIBOR plus four points with a two-year expiration. On January 29, 2020, the facility was amended to increase the total available balance to $4.0 million as well as extend the maturity date to June 30, 2022. The facility is supported by a first priority security interest in all of the Company’s business assets and is further subject to various affirmative and negative financial covenants and a limited Guaranty by the Company’s Chief Executive Officer, Carl Wolf. Advances under the line of credit are limited to eighty percent (80%) of eligible accounts receivable (which is subject to an agreed limitation and is further subject to certain asset concentration provisions) and fifty percent (50%) of eligible inventory (which is subject to an agreed dollar limitation). All advances under the line of credit are due upon maturity. The outstanding balance on the line of credit was $650,000 and $2,997,348 as of October 31, 2020 and January 31, 2020, respectively. Future maturities of all debt (excluding debt discount discussed above in Note 6) are as follows: For the Twelve Months Ending October 31, 2021 $ - 2022 650,000 $ 650,000 Note 7 – Promissory Note On April 21, 2020, the Company entered into a term note with its principal bank, M&T, with a principal amount of $330,000 pursuant to the Paycheck Protection Program (“ PPP Term Note ”) under the Coronavirus Aid, Relief, and Economic Security Act (the “ CARES Act ”). The PPP Loan is evidenced by a promissory note. The PPP Term Note bears interest at a fixed annual rate of 1.00%, with the first six months of interest deferred. The Company returned the $330,505 received from the Paycheck Protection Program on May 6, 2020, inclusive of interest. F- 16 Note 8 - Concentrations Revenues During the nine months ended October 31, 2020, the Company earned revenues from two customers representing approximately 45% and 11% of gross sales. As of October 31, 2020, these two customers represented approximately 30% and 11% of total gross outstanding receivables, respectively. During the nine months ended October 31, 2019, the Company earned revenues from three customers representing approximately 47%, 10% and 10% of gross sales. As of October 31, 2019, these three customers represented approximately 41%, 14% and 6% of total gross outstanding receivables, respectively. Note 9 - Stockholders’ Equity (A) Options The following is a summary of the Company’s option activity: Options Weighted Average Exercise Price Outstanding – January 31, 2020 914,000 $ 0.77 Exercisable – January 31, 2020 779,000 $ 0.71 Granted 7,500 $ 1.16 Exercised (12,000 ) $ 0.60 Forfeited/Cancelled - $ - Outstanding – October 31, 2020 909,500 $ 0.71 Exercisable – October 31, 2020 899,500 $ 0.70 Options Outstanding Options Exercisable Exercise Price Number Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $ 0.39 – 1.38 909,500 1.90 $ 0.71 899,500 $ 0.70 At October 31, 2020, the total intrinsic value of options outstanding and exercisable was $1,131,611 and $1,121,523, respectively. In June 2020, two employees exercised a total of 12,000 options at an exercise price of $0.60 per share for aggregate proceeds of $7,200. No options were exercised during the nine months ended October 31, 2019. During the nine months ended October 31, 2020, the Company issued to 7,500 options to an employee. The options have an exercise price of $1.16 per share, a term of 5 years, and 2-year vesting. The options have an aggregated fair value of approximately $7,617 that was calculated using the Black-Scholes option-pricing model based on the assumptions discussed above in Note 2. For the nine months ended October 31, 2020 and 2019, the Company recognized share-based compensation related to options of an aggregate of $51,435 and $49,975, respectively. At October 31, 2020, unrecognized share-based compensation was $3,393. F- 17 (B) Warrants The following is a summary of the Company’s warrant activity: Warrants Weighted Average Exercise Price Outstanding – January 31, 2020 6,056,664 $ 1.21 Exercisable – January 31, 2020 6,056,664 $ 1.21 Granted - $ - Exercised (2,807,843 ) $ 1.00 Forfeited/Cancelled (37,037 ) $ 1.00 Outstanding – October 31, 2020 3,211,784 $ 1.39 Exercisable – October 31, 2020 3,211,784 $ 1.39 Warrants Outstanding Warrants Exercisable Exercise Price Number Outstanding Weighted Average Remaining Contractual Life (in years) Weighted Average Exercise Price Number Exercisable Weighted Average Exercise Price $ 1.00 – 1.50 3,211,784 0.03 $ 1.39 3,211,784 $ 1.39 During the nine months ended October 31, 2020, warrant holders exercised a total of 2,807,843 warrants and the Company issued 2,764,600 shares of common stock as a result of these exercises and received gross proceeds of $2,735,697. Of the 2,807,843 exercised warrants, 80,000 warrants were exercised on a cashless basis by Spartan Capital and the Company issued 36,757 shares of common stock. At October 31, 2020, the total intrinsic value of warrants outstanding and exercisable was $1,804,528 and $1,804,528 , respectively. Note 10 - Commitments and Contingencies Litigation, Claims and Assessments From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results. Licensing and Royalty Agreements On March 1, 2010, the Company was assigned a Development and License agreement (the “Agreement”). Under the terms of the Agreement the Licensor shall develop for the Company a line of beef meatballs with sauce, turkey meatballs with sauce and other similar meats and sauces for commercial manufacture, distribution and sale (each a “Licensor Product” and collectively the “Licensor Products”). Licensor shall work with Licensee to develop Licensor Products that are acceptable to Licensee. Upon acceptance of a Licensor Product by Licensee, Licensor’s trade secret recipes, formulas methods and ingredients for the preparation and production of such Licensor Products (the “Recipes”) shall be subject to this Development and License Agreement. The Exclusive Term began on January 1, 2009 (the “Effective Date”) and ends on the 50th anniversary of the Effective Date. The Royalty Rate shall be: 6% of net sales up to $500,000 of net sales for each Agreement year; 4% of Net Sales from $500,000 up to $2,500,000 of Net Sales for each Agreement year; 2% of Net Sales from $2,500,000 up to $20,000,000 of Net Sales for each Agreement year; and 1% of Net Sales in excess of $20,000,000 of Net Sales for each Agreement year. F- 18 In order to continue the Exclusive term, the Company shall pay a minimum royalty with respect to the preceding Agreement year as follows: Agreement Year Minimum Royalty to be Paid with Respect to Such Agreement Year 1 st and 2 nd $ - 3 rd and 4 th $ 50,000 5 th , 6 th and 7 th $ 75,000 8 th and 9 th $ 100,000 10 th and thereafter $ 125,000 The Company incurred $111,568 and $98,656 of royalty expenses for the three months ended October 31, 2020 and 2019, respectively. The Company incurred $399,013 and $319,502 of royalty expenses for the nine months ended October 31, 2020 and 2019, respectively. Royalty expenses are included in general and administrative expenses on the condensed consolidated statement of operations. Agreements with Placement Agents and Finders The Company entered into a fourth Financial Advisory and Investment Banking Agreement with Spartan Capital Securities, LLC (“Spartan”) effective April 1, 2015 (the “Spartan Advisory Agreement”). Pursuant to the Spartan Advisory Agreement, the Company shall pay to Spartan a non-refundable monthly fee of $10,000 through October 1, 2015. The monthly fee shall survive any termination of the Agreement. Additionally, (i) if at least $4,000,000 is raised in the Financing, the Company shall pay to Spartan a non-refundable fee of $5,000 per month from November 1, 2015 through October 2017; and (ii) if at least $5,000,000 is raised in the Financing, the Company shall pay to Spartan a non-refundable fee of $5,000 per month from November 1, 2017 through October 2019. If $10,000,000 or more is raised in the Financing, the Company shall issue to Spartan shares of its common stock having an aggregate value of $5,000 (as determined by reference to the average volume weighted average trading price for the last five trading days of the immediately preceding month) on the first day of each month during the period from November 1, 2015 through October 1, 2019. The Company, upon closing of the Financing, shall pay consideration to Spartan, in cash, a fee in an amount equal to 10% of the aggregate gross proceeds raised in the Financing and 3% of the aggregate gross proceeds raised in the Financing for expenses incurred by Spartan. The Company shall grant and deliver to Spartan at the closing of the Financing, for nominal consideration, five-year warrants to purchase a number of shares of the Company’s common stock equal to 10% of the number of shares of common stock (and/or shares of common stock issuable upon exercise of securities or upon conversion or exchange of convertible or exchangeable securities) sold at such closing. The warrants shall be exercisable at any time during the five-year period commencing on the closing to which they relate at an exercise price equal to the purchase price per share of common stock paid by investors in the Financing or, in the case of exercisable, convertible, or exchangeable securities, the exercise, conversion or exchange price thereof. If the Financing is consummated by means of more than one closing, Spartan shall be entitled to the fees provided herein with respect to each such closing. If the Company enters into a change of control transaction during the term of the agreement through October 1, 2022, the Company shall pay to Spartan a fee equal to 3% of the consideration paid or received by the Company and/or its stockholders in such transaction. Advisory Agreement The Company entered into an Advisory Agreement with Spartan effective June 1, 2019 (the “Advisory Agreement”). Pursuant to the agreement, the Company shall pay to Spartan a non-refundable monthly fee of $5,000 over a 21-month period. Additionally, the Company granted Spartan 125,000 shares of common stock which are considered fully-paid and non-assessable upon execution of the agreement. During the term or this Agreement, the Consultant will provide non-exclusive consulting services related to general corporate matters, including, but not limited to (i) advice and input with respect to raising capital and potential M&A transactions, (ii) identifying suitable personal for management and Board positions (iii) developing corporate structure and finance strategies, (iv) assisting the Company with strategic introductions, (v) assisting management with enhancing corporate and shareholder value, and (vi) introducing the Company to potential investors (collectively, the “Advisory Services”). The advisory agreement was terminated according to its terms on March 31, 2020. Advisory Agreement The Company entered into an Advisory Agreement with B. Riley Securities, Inc. effective September 25, 2020 (the “B. Riley Advisory Agreement”). Pursuant to the agreement, the Company shall pay to B. Riley a non-refundable fee of $175,000 upon delivery of a fairness opinion in the event a transaction has value over $50 million ($125,000 if a transaction has a value less than $50 million). In addition, additional fees may be paid to B. Riley based on the terms of the agreement and transactions consummated. During the term or this Agreement, the Consultant will provide non-exclusive consulting services related to general corporate matters, including, but not limited to (i) advice and input with respect to raising capital and potential M&A transactions, (ii) identifying potential purchasers or targets, (iii) soliciting proposals from purchasers or targets, (iv) assisting the Company with strategic introductions and negotiations, (v) evaluating proposals, and (vi) other financial advisory and investment banking services (collectively, the “B. Riley Advisory Services”). Note 11 – Subsequent Events The Company has evaluated subsequent events through the date the financial statements were available to be issued. Based on this evaluation, the Company has identified the following reportable subsequent events other than those disclosed elsewhere in these financials. Subsequent to October 31, 2020, warrant holders exercised 823,890 warrants at $1.50 per share into 823,890 shares of common stock. The Company received aggregate proceeds of $1,124,724 upon exercise. F- 19 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. THE FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD- LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND “RISK FACTORS” DETAILED IN PRIOR COMPANY FILINGS AND THOSE INCLUDED ELSEWHERE IN THIS REPORT. Results of Operations for the Three Months ended October 31, 2020 and 2019 The following table sets forth the summary statements of operations for the three months ended October 31, 2020 and 2019: Three Months Ended October 31, 2020 October 31, 2019 Sales - Net of Slotting Fees and Discounts $ 9,898,991 $ 9,267,036 Gross Profit $ 3,125,329 $ 2,900,952 Operating Expenses $ (2,338,201 ) $ (2,397,352 ) Other Expenses $ (52,986 ) $ (94,985 ) Net Income $ 734,142 $ 408,615 For the three months ended October 31, 2020 and 2019, the Company reported net income of $734,142 and $408,615, respectively. The change in net income between the three months ended October 31, 2020 and 2019 was primarily attributable to an increase in sales of 7% and an increase in gross profit (32% of sales as discussed below) and in addition to a decrease in interest expense and only a modest decrease in operating expenses (24% of sales as discussed below). Sales: Sales, net of slotting fees and discounts increased by approximately 7% to $9,898,991 during the three months ended October 31, 2020, from $9,267,036 during the three months ended October 31, 2019. During the three months ended October 31, 2020, the Company was able to increase its sales through new customers as well as its existing customer base. The effect of COVID-19 slowed new placements in the third quarter and are expected to resume in the fourth quarter. Gross Profit: The gross profit margin was 32% for the three months ended October 31, 2020 compared to 31% for the three months ended October 31, 2019. Gross margin increased due to plant operating efficiencies. Operating Expenses: Operating expenses decreased by 2% during the three months ended October 31, 2020, as compared to the three months ended October 31, 2019. Operating expenses decreased as a percentage of sales from 26% in three months ended October 31, 2019 to 24% in three months ended October 31, 2020. The $59,151 change in total operating expenses is primarily attributable to the following increases in operating expenses: ● Postage and freight of $111,881 due to increased sales and slightly lower freight costs over the prior year, ● Payroll and related expenses of $64,609 due to the addition of a Senior Executive in February 2020, ● Commission expense of $55,865 directly related to increased sales, and 2 These expense increases were offset by a decrease in the following as well as minimal decreases in other expense categories: ● Advertising and promotion of $203,847 due to lower promotional expenses for merchandising, offset by higher spending on a Sirius Radio Campaign, and ● Professional fees of $34,153 due to a decrease in investor relations activities in comparison to the prior year. Other Expense: Other expenses decreased by $41,999 to $52,986 for the three months ended October 31, 2020 as compared to $94,985 during the three months ended October 31, 2019. For three months ended October 31, 2020, other expenses consisted of $45,822 in interest expense incurred on the Company’s financing arrangements. In addition, the Company recorded $7,164 of amortization expense related to the debt discount. For three months ended October 31, 2019, other expenses consisted of $89,635 in interest expense incurred on the Company’s financing arrangements. In addition, the Company recorded $5,350 of amortization expense related to the debt discount. Results of Operations for the Nine Months ended October 31, 2020 and 2019 The following table sets forth the summary statements of operations for the nine months ended October 31, 2020 and 2019: Nine Months Ended October 31, 2020 October 31, 2019 Sales - Net of Slotting Fees and Discounts $ 31,384,394 $ 24,731,305 Gross Profit $ 10,067,010 $ 7,963,402 Operating Expenses $ (7,497,163 ) $ (6,529,294 ) Other Expenses $ (189,736 ) $ (311,519 ) Net Income $ 2,380,111 $ 1,122,589 For the nine months ended October 31, 2020 and 2019, the Company reported net income of $2,380,111 and $1,122,589, respectively. The change in net income between the nine months ended October 31, 2020 and 2019 was primarily attributable to an increase in sales of 27% and stable gross profit (32% of sales as discussed below) in addition to a decrease in interest expense offset by increases in operating expenses (24% of sales, a 2% decrease from the prior year, as discussed below). Sales: Sales, net of slotting fees and discounts increased by approximately 27% to $31,384,394 during the nine months ended October 31, 2020, from $24,731,305 during the nine months ended October 31, 2019. During the nine months ended October 31, 2020, the Company was able to increase its sales through new customers as well as its existing customer base. COVID-19 had the effect of, consumer hoarding of food and increasing inventory build at retailers in the first quarter of the year but slowed new placements in the third quarter. The Company expects new placements to revert back to normal levels in the fourth quarter of this fiscal year. Gross Profit: The gross profit margin was 32% for the nine months ended October 31, 2020 compared to 32% for the nine months ended October 31, 2019. Gross margins remained the same as a percentage of sales, due to short term higher beef raw material prices, offset by higher plant operations efficiency. Operating Expenses: Operating expenses increased by 15% during the nine months ended October 31, 2020, as compared to the nine months ended October 31, 2019. Operating expenses decreased as a percentage of sales from 26% in 2019 to 24% in 2020. The $967,869 increase in total operating expenses is primarily attributable to the following increases in operating expenses: ● Postage and freight of $503,432 due to increased sales and change of customer mix; ● Commission expense of $263,760 directly related to increased sales; ● Payroll and related expenses of $221,653 due to the addition of a Senior Executive in February 2020; ● Professional fees of $107,453 due to an increase in investor relations and investment banking activities; and ● Royalty expenses of $79,511 due to the increase in sales. 3 These expense increases were offset by decrease in the following as well as minimal decreases in other expense categories: ● Advertising and promotion of $289,041 due to lower promotional expenses for merchandising activity related to higher sales, and increased spending on a Sirius Radio advertising campaign; and ● Trade show and travel expenses of $65,609 due to reduced need for travel and the elimination of in person trade shows due to COVID-19. Other Expense: Other expenses decreased by $121,783 to $189,736 for the nine months ended October 31, 2020 as compared to $311,519 during the nine months ended October 31, 2019. For nine months ended October 31, 2020, other expenses consisted of $171,872 in interest expense incurred on the Company’s financing arrangements. In addition, the Company recorded $17,864 of amortization expense related to the debt discount. For nine months ended October 31, 2019, other expenses consisted of $293,531 in interest expense incurred on the Company’s financing arrangements. In addition, the Company recorded $17,988 of amortization expense related to the debt discount. Liquidity and Capital Resources The following table summarizes total current assets, liabilities and working capital at October 31, 2020 compared to January 31, 2020: October 31, 2020 January 31, 2020 Increase Current Assets $ 7,332,094 $ 5,620,255 $ 1,711,839 Current Liabilities $ 3,837,835 $ 4,208,231 $ 370,396 Working Capital $ 3,494,259 $ 1,412,024 $ 2,082,235 As of October 31, 2020, we had working capital of $3,494,259 as compared to a working capital of $1,412,024 as of January 31, 2020, an increase of $2,082,235. In addition to the increase in sales and net income, the increase in working capital is primarily attributable to an increase in cash of $1,399,160, an increase in inventories of $313,870, an increase in prepaid expenses of $38,784, a decrease in accounts payable and accrued expenses $39,669 and a net decrease of $330,727 in the current portion of lease and debt obligations. These amounts were offset by a decrease in accounts receivable of $39,975. Net cash provided by operating activities for the nine months ended October 31, 2020 and 2019 was $2,518,012 and $975,848, respectively. Cash provided by operations is primarily attributable to the net income for the nine months ended October 31, 2020 and 2019 of $2,380,111 and $1,122,589, respectively. Net cash used in all investing activities for the nine months ended October 31, 2020 was $320,332 as compared to $163,186 for the nine months ended October 31, 2019, respectively, to acquire new machinery and equipment and leasehold improvements. Our capital expenditures are attributed to a Plant Expansion Project in progress since mid-2017 to expand plant capacity and efficiency to meet growing demand. Net cash used in all financing activities for the nine months ended October 31, 2020 was $798,520 as compared to $811,497 for the nine months ended October 31, 2019. During the nine months ended October 31, 2020, the Company received proceeds of $330,505 from the Paycheck Protection Program promissory note and proceeds of $2,742,897 from the exercise of options and warrants. The Company returned the $330,505 received from the Paycheck Protection Program in May 2020. These cash in-flows were offset by payments on its line of credit of $2,347,348, payments on its term loan of $441,663, payments of $641,844 on the related party loans and $110,562 paid for capital lease payments. During the nine months ended October 31, 2019, the Company made net borrowings on the line of credit of $285,314. These cash in-flows were offset by net payments of term loan of $1,033,336 and $63,475 paid for capital lease payments. As reflected in the accompanying consolidated financial statements, the Company has net income and net cash provided by operations of $2,380,111 and $2,518,012, respectively, for the nine months ended October 31, 2020. Although the expected revenue growth and control of expenses lead management to believe that it is probable that the Company’s cash resources will be sufficient to meet its cash requirements through the fiscal year ending January 31, 2021 based on current and projected levels of operation, the Company may require additional funding to finance growth and achieve its strategic objectives. If such financing is required, there can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In the event funding is not available on reasonable terms, the Company might be required to change its growth strategy and/or seek funding on an alternative basis, but there is no guarantee it will be able to do so. Because of the rapidly changing environment in response to COVID-19, the current expectations of the Company may be altered as conditions change. 4 Recent Accounting Pronouncements In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The adoption of the new standard did not have a significant impact on the Company’s condensed consolidated financial statements. In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”. This update is to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each entity’s financial statements. The amendments in this update apply to all entities that are required, under existing U.S. GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard did not have a significant impact on the Company’s condensed consolidated financial statements. In August 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-15, “Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract” . The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this guidance on February 1, 2020 on a prospective basis. In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, “ Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ”). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods. The Company is currently evaluating the potential impact of this guidance on its consolidated financial statements. Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements. Critical Accounting Policies Our condensed consolidated financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements. Our significant accounting policies are summarized in Note 2 of our condensed consolidated financial statements. 5 COVID-19 Pandemic In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to a number of other countries, including the United States. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of the time of the filing of this Annual Report on Form 10-K, several states in the United States, including New Jersey, where the Company is headquartered, have declared states of emergency, and several countries around the world, including the United States, have taken steps to restrict travel. While all of the Company’s operations are located in the United States, it participates in a global supply chain, and the existence of a worldwide pandemic, the fear associated with COVID-19, or any pandemic, and the reactions of governments around the world in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact its ability to conduct normal business operations, which could adversely affect the Company’s results of operations and liquidity. Disruptions to the Company’s supply chain and business operations, or to its suppliers’ or customers’ supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of its suppliers’ or customers’ products, any of which could have adverse ripple effects on the Company’s manufacturing output and delivery schedule. If the Company needs to close any of its facilities or a critical number of our employees become too ill to work, the production ability could be materially adversely affected in a rapid manner. Similarly, if the Company’s customers experience adverse business consequences due to COVID-19, or any other pandemic, demand for its products could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which the Company or its suppliers and customers operate. Any of these uncertainties could have a material adverse effect on the business, financial condition or results of operations. In addition, a catastrophic event that results in the destruction or disruption of the Company’s data centers or its critical business or information technology systems would severely affect the ability to conduct normal business operations and, as a result, the operating results would be adversely affected. Off Balance Sheet Arrangements We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs). Item 3. Quantitative and Qualitative Disclosures About Market Risk We do not hold any derivative instruments and do not engage in any hedging activities. Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures Based on evaluation as of the end of the period covered by this Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange Act) are not effective to ensure that information required to be disclosed by us in report that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure. (b) Changes in Internal Control over Financial Reporting There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 6 PART II - OTHER INFORMATION Item 1. Legal Proceedings. We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect. Item 1A. Risk Factors. Smaller reporting companies are not required to provide the information required by this item. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During the period between February 1, 2020 and December 10, 2020, the Company had the following transactions in its common stock: On May 11, 2020, Spartan Capital Securities, LLC did a cashless exercise of an aggregate of 80,000 warrants to purchase common shares at a price of $1.00 per share. Given a $1.85 per share price at the date of exercise, the exercise netted Spartan 36,757 shares. The Company did not receive any proceeds on the exercise of these warrants. In June 2020, two employees exercised a total of 12,000 options at an exercise price of $0.60 for aggregate proceeds of $7,200. During the period from May 2020 through December 14, 2020, warrant holders exercised 2,933,398 warrants at $1.00 per share into 2,933,398 shares of common stock. The Company received aggregate proceeds of $2,933,398 upon exercise. In addition, during the period from October 2020 through December 14, 2020, warrant holders exercised 618,335 warrants at $1.50 per share into 618,335 shares of common stock. The Company received aggregate proceeds of $927,502 upon exercise. Item 3. Defaults upon Senior Securities. 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. Item 4. Mine Safety Disclosures. Not applicable. Item 5. Other Information. There is no other information required to be disclosed under this item which was not previously disclosed. 7 Item 6. Exhibits. Exhibit No. Description 31.1 Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002* 31.2 Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002* 32.1 Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* 32.2 Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002* 101.INS XBRL Instance Document** 101.SCH XBRL Taxonomy Extension Schema Document** 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document** 101.DEF XBRL Taxonomy Extension Definition Linkbase Document** 101.LAB XBRL Taxonomy Extension Label Linkbase Document** 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document** * Filed herewith. ** Furnished herewith. 8 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MAMAMANCINI’S HOLDINGS, INC. Date: December 14, 2020 By: /s/ Carl Wolf Name: Carl Wolf Title: Chief Executive Officer (Principal Executive Officer) 9