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Item 2. Management’s Discussion and Analysis

2025-09-08 compared with 2025-06-03 · 88 added, 37 removed, 69 unchanged (64% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following management's discussion and analysis should be read in conjunction with our annual report on Form 10-K for the fiscal year ended January 31, 2025, as well as our subsequent reports on Form 10-Q and Form 8-K and any amendments to such reports.

The following management's discussion and analysis should be read in conjunction with our annual report on Form 10-K for the fiscal year ended January 31, 2025, the Condensed Consolidated Financial Statements and notes thereto contained in this report, as well as our subsequent reports on Form 10-Q and Form 8-K and any amendments to such reports.

Mama’s Creations, Inc.

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Our vision is to become a one-stop-shop deli solutions platform, leveraging vertical integration and a diverse family of brands to offer a wide array of prepared foods to meet the changing demands of the modern consumer.

Acquisition of Crown 1 Business

After the end of the period covered by this report, on September 2, 2025, Jubilee Acquisition, Inc., a wholly-owned subsidiary of the Company, completed an acquisition (the "Acquisition") of substantially all of the assets of Crown 1 Enterprises Inc.

("Crown 1"), a full-service manufacturer of value-added proteins and ready-to-eat meals and a wholly-owned subsidiary of Sysco Corporation, for $17.5 million in cash, subject to certain adjustments (including a customary working capital adjustment).

The Acquisition is expected to be accretive, provide supplemental revenue, increase the Company's sales base, and broaden our customer reach.

The Acquisition also adds new strategic capabilities, such as a recently upgraded and expanded USDA-certified production facility in Bay Shore, New York, complete with incremental grill capacity on familiar equipment and approximately 200 additional employees.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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• maintenance of quality control;

• ability to timely realize the expected benefits of recent acquisitions and unanticipated or higher than anticipated integration expenses

• wage and price inflation;

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We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements to reflect new information or future events or for any other reason.

Results of Operations for the Three Months Ended April 30, 2025 and 2024

The following table sets forth the summary of the Condensed Consolidated Statements of Operations for the three months ended April 30, 2025 and 2024 (in thousands):

Results of Operations for the Three Months Ended July 31, 2025 and 2024

The following table sets forth the summary of the Condensed Consolidated Statements of Operations for the three months ended July 31, 2025 and 2024 (in thousands):

For the Three Months Ended

April 30, 2025 April 30, 2024

July 31, 2025 July 31, 2024

Net sales $ 35,203 $ 28,382

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Net Income $ 1,277 $ 1,148

For the three months ended April 30, 2025 and 2024, the Company reported net income of approximately $1.2 million and $0.6 million, respectively.

The change in net income between the three months ended April 30, 2025 and 2024 is due to the changes in net sales, costs of sales and operating expenses described below.

Net Sales increased by approximately 18% to $35.3 million during the three months ended April 30, 2025, from $29.8 million during the three months ended April 30, 2024.

The increase in sales is primarily due to volume gains, which were driven by new products sold into existing customers, and successful trade and marketing promotions, which drove velocity acceleration, and initial entry into new customers.

For the three months ended July 31, 2025 and 2024, the Company reported net income of approximately $1.3 million and $1.1 million, respectively.

The change in net income between the three months ended July 31, 2025 and 2024 is due to the changes in net sales, costs of sales and operating expenses described below.

Net Sales increased by approximately 24% to $35.2 million during the three months ended July 31, 2025, from $28.4 million during the three months ended July 31, 2024.

The increase in sales is primarily due to volume gains, which were driven by successful trade and marketing promotions, which drove velocity acceleration, as well as the introduction of new products into existing customers and the introduction of new customers.

Costs of sales:

Costs of sales increased by approximately 17% to $26.1 million, or 74% of Net Sales, during the three months ended April 30, 2025, from $22.4 million, or 75% of Net Sales, during the three months ended April 30, 2024.

Costs of sales increased by approximately 23% to $26.4 million, or 75% of Net Sales, during the three months ended July 31, 2025, from $21.5 million, or 76% of Net Sales, during the three months ended July 31, 2024.

The increase in cost of sales is due to higher sales and higher commodity prices, particularly of chicken, offset by increased operational efficiencies driven by increased labor and procurement efficiency.

Gross Profit Margin:

The gross profit margin was 26% and 25% for the three months ended April 30, 2025 and 2024, respectively.

The gross profit margin was 25% and 24% for the three months ended July 31, 2025 and 2024, respectively.

The year-over-year improvement was driven by labor and procurement efficiency as well as improved fixed overhead absorption.

Operating Expenses:

Operating expenses increased approximately $916 thousand during the three months ended April 30, 2025, as compared to the three months ended April 30, 2024.

Operating expenses increased approximately $1.8 million during the three months ended July 31, 2025, as compared to the three months ended July 31, 2024.

The change in total operating expenses is primarily attributable to the following:

• Payroll and Related Expenses inclusive of stock-based compensation increased by approximately $563 thousand mainly related to new executive hires and variable compensation arrangements;

• Payroll and Related Expenses inclusive of stock-based compensation increased by approximately $1.1 million mainly related to new executive hires and variable compensation arrangements;

• Advertising expenses increased by approximately $305 thousand du e to new marketing strategies and enhanced distribution of our existing products;

• Freight-related expenses increased by approximately $206 thousand mainly due to increased sales;

• Professional fees increased by approximately $100 thousand, primarily due to increased corporate development activity in the current year;

• Commission and royalty expenses increased by approximately $89 thousand due to increased sales;

• Advertising expenses increased by approximately $338 thousand du e to new strategies and enhanced distribution of our existing products;

• Freight-related expenses increased by approximately $71 thousand mainly due to increased sales, partially offset by a greater focus on full truckload sales versus less than full truckload sales as well as stronger supplier management of carriers;

• Insurance expense increased by approximately $24 thousand mainly related to increased sales;

• Other operating expenses increased by approximately $61 thousand due to additional travel, IT, and office expenses.

• Professional fees and director related expenses decreased by approximately $623 thousand primarily due to a one-time legal settlement with certain directors of approximately $900 thousand in the prior year, offset by higher professional fees due to increased corporate activity in the current year.

Other Expenses, net:

Other expenses, net increased by approximately $20 thousand to $61 thousand for the three months ended April 30, 2025, as compared to $41 thousand for the three months ended April 30, 2024.

The increase is primarily due to lower interest income, offset by a lower interest expense, which is due to a lower debt balance .

Other expenses, net decreased by approximately $8 thousand to $55 thousand for the three months ended July 31, 2025, as compared to $63 thousand for the three months ended July 31, 2024.

The decrease is primarily due to lower interest expense, which is due to a lower debt balance .

Results of Operations for the Six Months Ended July 31, 2025 and 2024

The following table sets forth the summary of the Condensed Consolidated Statements of Operations for the three months ended July 31, 2025 and 2024 (in thousands):

For the Six Months Ended

July 31, 2025 July 31, 2024

Net Sales $ 70,458 $ 58,220

Costs of Sales 52,503 43,878

Gross Profit 17,955 14,342

Operating Expenses 14,677 11,957

Other Expenses, net (116) (104)

Income Tax Expense (648) (580)

Net Income $ 2,514 $ 1,701

For the six months ended July 31, 2025 and 2024, the Company reported net income of approximately $2.5 million and $1.7 million, respectively.

The change in net income between the six months ended July 31, 2025 and 2024 is due to the changes in net sales, costs of sales and operating expenses described below.

Net Sales increased by approximately 21% to $70.5 million during the six months ended July 31, 2025, from $58.2 million during the six months ended July 31, 2024.

Costs of sales:

Costs of sales increased by approximately 20% to $52.5 million, or 75% of Net Sales, during the six months ended July 31, 2025, from $43.9 million, or 75% of Net Sales, during the six months ended July 31, 2024.

Gross Profit Margin:

The gross profit margin remained consistent at 25% for the six months ended July 31, 2025 and 2024, respectively.

The gross profit margin remained consistent due to year-over-year improvement primarily driven by labor and procurement efficiency, as well as improved fixed overhead absorption offset by higher commodity costs and promotional activities.

Operating Expenses:

Operating expenses increased approximately $2.7 million during the six months ended July 31, 2025, as compared to the six months ended July 31, 2024.

The change in total operating expenses is primarily attributable to the following:

• Payroll and Related Expenses inclusive of stock-based compensation increased by approximately $1.6 million mainly related to new executive hires and variable compensation arrangements;

• Advertising expenses increased by approximately $706 thousand du e to new marketing strategies and enhanced distribution of our existing products;

• Freight-related expenses increased by approximately $273 thousand mainly due to increased sales;

• Professional fees and director-related expenses decreased by approximately $463 thousand primarily due to the $900 thousand director settlement in the prior year, partially offset by increased corporate development activity in the current year, and

• Commission and royalty expenses increased by approximately $582 thousand due to increased sales.

Other Expenses, net:

Other expenses, net increased by approximately $12 thousand to $116 thousand for the six months ended July 31, 2025, as compared to $104 thousand for the six months ended July 31, 2024.

The decrease is primarily due to lower interest income .

Liquidity and Capital Resources

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Working Capital

The following table summarizes total current assets, liabilities and working capital at April 30, 2025 compared to January 31, 2025 (in thousands):

April 30, 2025 January 31, 2025 Change

The following table summarizes total current assets, liabilities and working capital at July 31, 2025 compared to January 31, 2025 (in thousands):

July 31, 2025 January 31, 2025 Change

Current Assets $ 23,438 $ 21,877 $ 1,561

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Working Capital $ 8,602 $ 4,852 $ 3,750

As of April 30, 2025, we had working capital of approximately $5.5 million as compared to working capital of approximately $4.9 million as of January 31, 2025.

The increase in working capital is primarily attributable to an increase in cash and cash equivalents of approximately $4.9 million, and an increase in inventory of approximately $0.5 million, partially offset by an increase in accounts payable and accrued expenses of approximately $1.5 million and a decrease in accounts receivable of approximately $2.3 million.

Long-Term Requirements

As of April 30, 2025, we had no borrowings outstanding under our Credit Agreement and approximately $2.4 million outstanding under our Term Loan Agreement with M&T Bank.

The Term Loan Agreement has a maturity date of January 17, 2027.

In addition, we have a payment of $750 thousand (plus accrued interest) due on December 29, 2025, pursuant to the promissory notes issued to the sellers of T&L and Olive Branch, as discussed in Item 1, Note 1.

In addition, we have a payment of $1.5 million in common stock due to the sellers of CIF on June 28, 2025.

We also have operating leases for offices and other facilities used for our operations and finance leases comprised primarily of machinery and equipment leases, as discussed in Item 1.

The following table summarizes the key components of our cash flows for the three months ended April 30, 2025 and 2024 (in thousands);

For the Three Months Ended April 30,

As of July 31, 2025, we had working capital of approximately $8.6 million as compared to working capital of approximately $4.9 million as of January 31, 2025.

The increase in working capital is primarily attributable to an increase in cash and cash equivalents of approximately $2.2 million, and an increase in inventory of approximately $1.6 million, partially offset by an decrease in accounts payable and accrued expenses of approximately $0.9 million, a decrease in accounts receivable of approximately $1.4 million, a decrease in related party promissory notes of approximately $1.5 million, and an increase in operating lease liabilities of $265k.

The following table summarizes the key components of our cash flows for the six months ended July 31, 2025 and 2024 (in thousands);

For the Six Months Ended July 31,

Net Cash Provided by Operating Activities $ 4,334 $ 1,234

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Net Cash Used in Financing Activities (1,047) (2,128)

Net Increase in cash 4,861 2,021

Net Increase (Decrease) in Cash 2,234 (3,634)

Cash and cash equivalents, beginning of period 7,150 11,022

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Operating activities

Net cash provided by operating activities for the three months ended April 30, 2025 was approximately $6.0 million, which consisted of (i) net income of approximately $1.2 million, (ii) non-cash expenses of approximately $1.3 million, and (iii) an increase in operating assets and liabilities of approximately $3.5 million.

Net cash provided by operating activities for the three months ended April 30, 2024 was approximately $3.6 million, which consisted of (i) net income of approximately $0.6 million, (ii) non-cash expenses of approximately $1.2 million, and (iii) an increase in operating assets and liabilities of approximately $1.9 million.

Net cash provided by operating activities for the six months ended July 31, 2025 was approximately $4.3 million, which consisted of net income of approximately $2.5 million and non-cash expenses of approximately $2.9 million, partially offset by an increase in operating assets and liabilities of approximately $1.0 million.

Net cash provided by operating activities for the six months ended July 31, 2024 was approximately $1.2 million, which consisted of net income of approximately $1.7 million and non-cash expenses of approximately $2.3 million, partially offset by an increase in operating assets and liabilities of approximately $2.8 million.

Investing activities

Net cash used in investing activities for the three months ended April 30, 2025 was approximately $0.5 million and consisted of purchases of machinery and equipment.

Net cash used in investing activities for the three months ended April 30, 2024 was approximately $1.1 million, and consisted of purchases of machinery and equipment.

Net cash used in investing activities for the six months ended July 31, 2025 was approximately $1.1 million and consisted of purchases of fixed assets.

Net cash used in investing activities for the six months ended July 31, 2024 was approximately $2.7 million, and consisted of purchases of fixed assets.

Financing activities

Net cash used in financing activities for the three months ended April 30, 2025 was approximately $0.6 million and consisted of approximately $0.5 million of payments on the Term Loan and approximately $0.1 million payments on finance leases.

Net cash used in financing activities for the three months ended April 30, 2024 was approximately $0.5 million and consisted of approximately $0.4 million of payments on the Term Loan and approximately $0.1 million payments on finance leases.

Net cash used in financing activities for the six months ended July 31, 2025 was approximately $1.0 million and consisted of approximately $0.9 million of payments on the Term Loan and approximately $0.2 million payments on finance leases.

Net cash used in financing activities for the six months ended July 31, 2024 was approximately $2.1 million and consisted of approximately $1.2 million payment on a related party note, $0.8 million of payments on the Term Loan and approximately $0.2 million payments on finance leases.

Credit Facility

As of July 31, 2025, we had no borrowings outstanding under our Credit Agreement and approximately $2.0 million outstanding under our Term Loan Agreement with M&T Bank ("M&T").

The Term Loan Agreement has a maturity date of January 17, 2027.

We also have operating leases for offices and other facilities used for our operations and finance leases comprised primarily of machinery and equipment leases, as discussed in Item 1.

On August 28, 2025, the Company entered into an Amended and Restated Loan and Security Agreement (the “A&R Loan Agreement”) with M&T Bank (“M&T”).

The A&R Loan Agreement provides the Company with a senior secured credit facility (the “Credit Facility”) consisting of (i) an existing term loan in the outstanding principal amount of approximately $1.9 million, (ii) a $5.5 million revolving credit facility (the “Revolving Loan Facility”), and (iii) a $20.0 million non-revolving line of credit (the “PA Line”).

The Company made an initial draw on the PA Line on August 28, 2025 in the amount of $19.0 million to finance the Acquisition and related expenses.

The PA Line advances are subject to mandatory prepayment equal to 25% of annual Excess Cash Flow (as defined in the A&R Loan Agreement) within 150 days of fiscal year end.

The Company may use the proceeds of the Term Loan Facility and Revolving Loan Facility for working capital and general corporate purposes and the remaining proceeds of the PA Line for other permitted acquisitions.

The principal outstanding under the Credit Facility bears interest at a variable rate per annum based on the Company's Senior Funded Debt/EBITDA Ratio (as defined in the A&R Loan Agreement) with respect to the Company as of the date of any advance under the loans as follows:

if the Senior Funded Debt/EBITDA ratio is:

(i) greater than 2.25, 3.25 percentage points above the applicable index rate;

(ii) greater than 1.50 but less than 2.25, 2.75 percentage points above the applicable index rate;

and (iii) less than or equal to1.50, 2.25 percentage points above the applicable index rate.

The applicable index rate is daily simple SOFR for the Revolving Loan Facility, the Term Loan Facility and until the permanent loan period, the PA Line.

After any advance under the PA Line is converted to an amortizing term loan, the applicable index rate for such advance will be one month term SOFR.

Private Placement of Common Stock

On September 2, 2025, the Company entered into a securities purchase agreement with the purchasers named therein, for the private placement (the “Private Placement”) of 2,666,667 shares of the Company’s common stock, at a purchase price of $7.50 per share.

The Private Placement has closed and resulted in gross proceeds of approximately $20.0 million to the Company before deducting placement agent fees and offering expenses.

Liquidity and capital requirements outlook

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis