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Item 2. Management’s Discussion and Analysis

2025-06-03 compared with 2024-12-16 · 64 added, 84 removed, 42 unchanged (78% of the section changed)

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 OUR MOST RECENT ANNUAL REPORT ON FORM 10-K, OTHER PRIOR COMPANY FILINGS.

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.

Mama’s Creations, Inc.

(“Mama’s,” “Mama’s Creations” the “Company”, "we", "our", or "us") is a leading marketer and manufacturer of fresh deli prepared foods, found in over 8,000 grocery, mass, club and convenience stores nationally.

(“Mama’s,” “Mama’s Creations,” the “Company,” "we," "our," or "us") is a leading marketer, manufacturer, and distributor of fresh deli prepared foods, found in over 10,000 grocery, mass, club and convenience stores nationally.

The Company’s broad product portfolio, born from MamaMancini’s rich history in Italian foods, now consists of a variety of high-quality, fresh, clean and easy-to-prepare foods to address the needs of both our consumers and retailers.

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.

Results of Operations for the Three Months Ended October 31, 2024 and 2023

The following table sets forth the summary of the Condensed Consolidated Statements of Operations for the three months ended October 31, 2024 and 2023 (in thousands):

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this report are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Exchange Act.

The forward-looking statements involve substantial risks and uncertainties.

All statements, other than statements related to present facts or current conditions or of historical facts, contained in this report, including statements regarding our strategy, future operations, future financial position, future revenues, and projected costs, prospects, plans and objectives of management, are forward-looking statements.

Accordingly, these statements involve estimates, assumptions and uncertainties which could cause actual results to differ materially from those expressed in them.

The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or the negative of these terms or other comparable terminology are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

Forward-looking statements are not guarantees of future performance and our actual results could differ materially from the results discussed in the forward-looking statements.

Factors that could cause actual results to differ materially from those in the forward-looking statements include:

• the adequacy of our liquidity to pursue our business objectives;

• reliance on a limited number of customers;

• pricing pressures in the market and lack of control over the pricing of raw materials and freight;

• adverse economic conditions or intense competition;

• entry of new competitors and products;

• adverse federal, state and local government regulation (including, but not limited to, the Food and Drug Administration);

• liability related to the consumption of our products;

• supply chain disruptions due to global economic uncertainty, weather, natural disaster, fire, terrorism, pandemic, strikes, or otherwise;

• loss or retirement of key executives, including prior to identifying a successor;

• ability to secure placement of our products in key retail locations;

• maintenance of quality control;

• wage and price inflation;

• issues related to the enforcement of our intellectual property rights.

For more information regarding these risks and uncertainties as well as certain additional risks that we face, you should refer to “Item 1A.

Risk Factors” in our most recent Annual Report on Form 10-K, and to subsequent reports filed from time to time with the SEC.

We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date on which we issued this report.

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):

For the Three Months Ended

October 31, 2024 October 31, 2023

April 30, 2025 April 30, 2024

Net sales $ 35,255 $ 29,838

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Net Income $ 1,237 $ 553

For the three months ended October 31, 2024 and 2023, the Company reported net income of approximately $0.4 million and $2.0 million respectively.

The change in net income between the three months ended October 31, 2024 and 2023 is due to the changes in net sales, costs of sales and operating expenses described below.

Net Sales increased by approximately 10% to $31.5 million during the three months ended October 31, 2024, from $28.6 million during the three months ended October 31, 2023.

The increase in sales is due to volume gains and successful pricing actions.

Volume gains were driven by increased demand at existing customers, successful trade and marketing promotions, same-customer cross-selling of new items, and new customer door expansion.

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.

Costs of sales:

Costs of sales increased by approximately 22% to $24.4 million, or 77% of Net Sales, during the three months ended October 31, 2024, from $20 million, or 70% of Net Sales, during the three months ended October 31, 2023.

The increase in Costs of sales as a percentage of Net Sales is due to increases in commodity costs, primarily the cost of chicken, and the non-recurring impact from construction surrounding the now completed installation of strategic capital equipment projects, partially offset by improvements in procurement, manufacturing and labor efficiencies.

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.

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 23% and 30% for the three months ended October 31, 2024 and 2023, respectively.

The decrease in gross profit margin between the three months ended October 31, 2024 and 2023 is due to increased commodity costs and construction-related inefficiencies as noted above, which were partially offset by customer price increases, improvements in procurement, and manufacturing efficiencies.

The gross profit margin was 26% and 25% for the three months ended April 30, 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 $622 thousand during the three months ended October 31, 2024, as compared to the three months ended October 31, 2023.

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

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

• Advertising expenses increased by approximately $282 thousand du e to new strategies and enhanced focus to drive increased velocities of our existing products;

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

• Commission and royalty expenses increased by approximately $508 thousand due to increased sales;

• Professional fees and director fees increased by approximately $76 thousand mainly related to increase in corporate activity in the current year;

• Freight-related expenses decreased by approximately $146 thousand mainly related to a greater focus on full truckload sales versus less than full truckload sales as well as stronger supplier management of carriers;

• Insurance expense decreased by approximately $40 thousand mainly related to updated terms of coverage;

• Other operating expenses increased by approximately $50 thousand due to additional travel and office expenses.

Other Expenses, net:

Other expenses, net decreased by approximately $105 thousand to $25 thousand for the three months ended October 31, 2024, as compared to $130 thousand for the three months ended October 31, 2023.

The decrease is primarily due to interest income of approximately $37 thousand and decreased interest expense of approximately $249 thousand due to a lower debt balance .

Results of Operations for the Nine Months Ended October 31, 2024 and 2023

The following table sets forth the summary of the Condensed Consolidated Statements of Operations for the nine months ended October 31, 2024 as compared to the nine months ended October 31, 2023 (in thousands):

For the Nine Months Ended

October 31, 2024 October 31, 2023

Net Sales $ 89,743 $ 76,559

Costs of Sales $ 68,288 $ 54,047

Gross Profit $ 21,455 $ 22,512

Operating Expenses $ 18,507 $ 15,587

Other Expenses, net $ (129) $ (473)

Income Tax Expense $ (708) $ (1,522)

Income from equity method investment in Chef Inspirational Foods, LLC $ — $ 223

Net Income $ 2,111 $ 5,153

For the Nine months ended October 31, 2024 and 2023, the Company reported net income of approximately $2.1 million and $5.2 million, respectively.

The change in net income between the nine months ended October 31, 2024 and 2023 is due to the changes in net sales, costs of sales and operating expenses described below.

Net Sales increased by approximately 17.2% to $89.7 million during the nine months ended October 31, 2024, from $76.6 million during the nine months ended October 31, 2023.

The increase in sales is due to volume gains, successful pricing actions, and the acquisition of CIF in June 2023.

Volume gains were driven by increased demand at existing customers, successful trade and marketing promotions, same-customer cross-selling of new items, and new customer door expansion.

Costs of sales:

Costs of sales increased by approximately 26% to $68.3 million, or 76% of Net Sales, during the nine months ended October 31, 2024, from $54.0 million, or 71% of Net Sales, during the nine months ended October 31, 2023.

The increase in costs of sales as a percentage of Net Sales is due to increases in commodity costs, primarily the cost of chicken, and the non-recurring impact from construction surrounding the now completed installation of strategic capital equipment projects, partially offset by improvements in procurement, manufacturing and labor efficiencies.

Gross Profit Margin:

The gross profit margin was 24% and 29% for the nine months ended October 31, 2024 and 2023, respectively.

The decrease in gross profit margin between the nine months ended October 31, 2024 and 2023 is due to increased commodity costs and construction-related inefficiencies, as noted above, partially offset by customer price increases and manufacturing efficiencies.

Operating Expenses:

Operating expenses increased by 19% during the nine months ended October 31, 2024, as compared to the nine months ended October 31, 2023.

The $2.9 million increase in total operating expenses is primarily attributable to the following:

• One-time legal settlement expense of approximately $900 thousand, due to the Settlement Agreement with directors;

• Advertising expenses increased by approximately $701 thousand due to new strategies and enhanced focus to drive increased velocities of our existing products;

• Amortization of intangible assets increased by approximately $508 thousand due to the acquisition of CIF, which was completed in June 2023;

• Other operating expenses increased by ap proximately $435 thousand mainly due to increased spend on travel, and computer and information technology software and systems expense.

• Commission and royalty expenses increased by approximately $381 thousand due to increased sales;

• Professional fees and director fees increased by approximately $170 thousand, mainly related to increase in corporate activity in the current year;

• Payroll and Related Expenses inclusive of stock-based compensation increased by approximately $85 thousand, mainly related to new executive hires and variable compensation arrangements;

• Insurance expense decreased by approximately $206 thousand, mainly related to updated terms of our coverage;

• Freight-related expenses decreased by approximately $114 thousand, mainly related to a greater focus on full truckload sales versus less than full truckload sales as well as stronger supplier management of carriers.

• 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 $56 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 decreased by approximately $344 thousand to $129 thousand for the nine months ended October 31, 2024, as compared to $473 thousand for the nine months ended October 31, 2023.

The decrease is primarily due to interest income in the current year of approximately $192 thousand, and a decrease of interest expense of approximately $114 thousand, due to a lower debt balance.

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 .

Liquidity and Capital Resources

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Working Capital

The following table summarizes total current assets, liabilities and working capital at October 31, 2024 compared to January 31, 2024 (in thousands):

October 31, 2024 January 31, 2024 Change

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

Current Assets $ 24,227 $ 21,877 $ 2,350

1 unchanged sentence

Working Capital $ 5,512 $ 4,852 $ 660

As of October 31, 2024, we had working capital of approximately $3.2 million as compared to working capital of approximately $6.9 million as of January 31, 2024.

The decrease in working capital is primarily attributable to a decrease in cash and cash equivalents of approximately $1.7 million, a decrease in inventory of approximately $0.1 million, an increase in accounts payable and accrued expenses of approximately $1.4 million, and an increase in promissory notes - related parties of $0.3 million, partially offset by an increase in accounts receivable of approximately $0.7 million.

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 October 31, 2024, we had no borrowings outstanding under our Credit Agreement and approximately $1.6 million outstanding under our Term Loan Agreement with M&T Bank.

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 payments of $750 thousand (plus accrued interest) due on December 29, 2024 and 2025 pursuant to the promissory notes issued to the sellers of T&L and Olive Branch, as discussed in Item 1, Note 5.

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, as discussed in Item 1.

The following table summarizes the key components of our cash flows for the nine months ended October 31, 2024 and 2023 (in thousands).

For the Nine Months Ended October 31,

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,

Net Cash Provided by Operating Activities $ 6,005 $ 3,641

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Net Cash (Used in) Financing Activities (605) (476)

Net (Decrease) Increase in cash (1,703) 1,247

Net Increase in cash 4,861 2,021

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

1 unchanged sentence

Operating activities

Net cash provided by operating activities for the nine months ended October 31, 2024 was approximately $6.0 million, which consisted of (i) net income of approximately $2.1 million, (ii) non-cash expenses of approximately $3.0 million, and (iii) a decrease in operating assets and liabilities of approximately $1.0 million.

Net cash provided by operating activities for the nine months ended October 31, 2023 was approximately $4.9 million, which consisted of (i) net income of approximately $5.2 million, (ii) non-cash expenses of approximately $2.1 million, and (iii) a decrease in operating assets and liabilities of approximately $2.5 million.

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.

Investing activities

Net cash used in investing activities for the nine months ended October 31, 2024 was approximately $5.0 million and consisted of purchases of fixed assets.

Net cash used in investing activities for the nine months ended October 31, 2023 was approximately $1.3 million and consisted of approximately $0.7 million purchases of fixed assets and $0.6 million for the purchase of the remaining interest in CIF.

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.

Financing activities

Net cash used in financing activities for the nine months ended October 31, 2024 was approximately $2.7 million and consisted of approximately $1.2 million of payments of related party promissory notes, approximately $1.3 million of payments on the Term Loan and approximately $0.3 million payments on finance leases.

Net cash used in financing activities for the nine months ended October 31, 2023 was approximately $2.3 million and consisted of approximately $1.3 million of payments on the Term Loan, approximately $0.9 million of payments on the line of credit, and approximately $0.2 million payments on finance leases.

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.

Liquidity and capital requirements outlook

Although the expected revenue growth and control of expenses leads management to believe that it is probable that the Company’s cash resources will be sufficient to meet its cash requirements through at least the next twelve months, based on current and projected levels of operations, the Company may require additional funding to finance growth or achieve its

strategic objectives.

If such financing is required, there can be no assurance that financing will be available in amounts or on terms acceptable to the Company, if at all.

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Critical Accounting Estimates and Policies

As of the filing date of this report, there were no significant changes in our critical accounting estimates from those discussed in our 2024 Form 10-K.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

As of the filing date of this report, there were no significant changes in our critical accounting estimates from those discussed in our annual report on Form 10-K for the most recent completed fiscal year.

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