Mama's Creations, Inc. 10-Q

Item 1. Financial Statements. 1 Table of Contents Mama’s Creations, Inc. Condensed Consolidated Balance Sheets (In thousands, except share and per share data) April 30, 2025 January 31, 2025 (Unaudited) Assets: Current Assets: Cash and cash equivalents $ 12,011 $ 7,150 Accounts receivable, net 5,805 8,131 Inventories, net 5,287 4,817 Prepaid expenses and other current assets 1,124 1,779 Total Current Assets 24,227 21,877 Property, plant, and equipment, net 9,446 9,387 Intangible assets, net 3,067 3,436 Goodwill 8,633 8,633 Operating lease right of use assets, net 6,788 3,376 Deferred tax asset 469 258 Deposits 95 95 Total Assets $ 52,725 $ 47,062 Liabilities and Stockholders’ Equity: Liabilities: Current Liabilities: Accounts payable and accrued expenses $ 13,526 $ 12,052 Term loan, net of unamortized debt discount of $ 19 and $ 22 , respectively 1,533 1,530 Operating lease liabilities 1,085 848 Finance leases payable 321 345 Promissory notes – related parties 2,250 2,250 Total Current Liabilities 18,715 17,025 Term loan – net of current 839 1,342 Operating lease liabilities – net of current 5,612 2,600 Finance leases payable – net of current 1,121 1,199 Total long-term liabilities 7,572 5,141 Total Liabilities 26,287 22,166 Commitments and contingencies (Notes 10 and 11) Stockholders’ Equity: Series A Preferred stock, $ 0.00001 par value; 120,000 shares authorized; 23,400 issued, 0 shares outstanding - - Series B Preferred stock, $ 0.00001 par value; 200,000 shares authorized; 0 and 0 issued or outstanding - - Preferred stock, $ 0.00001 par value; 19,680,000 shares authorized; 0 shares issued or outstanding - - Common stock, $ 0.00001 par value; 250,000,000 shares authorized; 37,834,000 and 37,826,000 shares issued as of April 30, and January 31, 2025, respectively, 37,604,000 and 37,596,000 shares outstanding as of April 30, and January 31, 2025, respectively - - Additional paid-in capital 25,187 24,882 Retained earnings 1,401 164 Less: Treasury stock, 230,000 shares at cost ( 150 ) ( 150 ) Total Stockholders’ Equity 26,438 24,896 Total Liabilities and Stockholders’ Equity $ 52,725 $ 47,062 See accompanying notes to the Condensed Consolidated Financial Statements. 2 Table of Contents Mama’s Creations, Inc. Condensed Consolidated Statements of Operations (Unaudited) (in thousands, except per share data) For the Three Months Ended April 30, 2025 2024 Net sales $ 35,255 $ 29,838 Costs of sales 26,071 22,375 Gross profit 9,184 7,463 Operating expenses: Research and development 73 104 Selling, general and administrative expenses 7,533 6,586 Total operating expenses 7,606 6,690 Income from operations 1,578 773 Other income (expenses) Interest expense ( 88 ) ( 127 ) Interest income 30 92 Amortization of debt discount ( 3 ) ( 6 ) Total other expenses ( 61 ) ( 41 ) Net income before income tax provision 1,517 732 Income tax expense ( 280 ) ( 179 ) Net income $ 1,237 $ 553 Net income per common share – basic $ 0.03 $ 0.01 – diluted $ 0.03 $ 0.01 Weighted average common shares outstanding – basic 37,597 37,259 – diluted 39,378 39,328 See accompanying notes to the Condensed Consolidated Financial Statements. 3 Table of Contents Mama’s Creations, Inc. Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) (in thousands) For the Period from February 1, 2025 through April 30, 2025 Series A Preferred Stock Series B Preferred Stock Common Stock Treasury Stock Additional Paid In Retained Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Capital Earnings Equity Balance, February 1, 2025 - $ - - $ - 37,826 $ - ( 230 ) $ ( 150 ) $ 24,882 $ 164 $ 24,896 Stock based compensation - - - - 8 - - - 305 - 305 Net income - - - - - - - - - 1,237 1,237 Balance, April 30, 2025 - $ - - $ - 37,834 $ - ( 230 ) $ ( 150 ) $ 25,187 $ 1,401 $ 26,438 4 Table of Contents For the Period from February 1, 2024 through April 30, 2024 Series A Preferred Stock Series B Preferred Stock Common Stock Treasury Stock Additional Paid In Accumulated Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Capital Deficit Equity Balance, February 1, 2024 - $ - - $ - 37,488 $ - ( 230 ) $ ( 150 ) $ 23,278 $ ( 3,547 ) $ 19,581 Stock based compensation - - - - - - - - 205 - 205 Stock issued for the exercise of options - - - - - - - - 7 - 7 Net income - - - - - - - - - 553 553 Balance, April 30, 2024 - $ - - $ - 37,488 $ - ( 230 ) $ ( 150 ) $ 23,490 $ ( 2,994 ) $ 20,346 See accompanying notes to the Condensed Consolidated Financial Statements. 5 Table of Contents Mama’s Creations, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) For the Three Months Ended April 30, 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,237 $ 553 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 554 292 Amortization of debt discount 3 6 Amortization of right of use assets 293 134 Amortization of intangibles 370 380 Stock-based compensation 305 205 Change in deferred tax asset ( 211 ) 172 Changes in operating assets and liabilities: Accounts receivable 2,326 ( 220 ) Inventories ( 470 ) 293 Prepaid expenses and other current assets 382 145 Accounts payable and accrued expenses 1,473 1,832 Operating lease liability ( 257 ) ( 151 ) Net Cash Provided by Operating Activities 6,005 3,641 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets ( 539 ) ( 1,144 ) Net Cash (Used in) Investing Activities ( 539 ) ( 1,144 ) CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of term loan ( 503 ) ( 388 ) Repayment of finance lease obligations ( 102 ) ( 95 ) Proceeds from exercise of stock options - 7 Net Cash (Used in) Financing Activities ( 605 ) ( 476 ) Net Increase in Cash 4,861 2,021 Cash and cash equivalents at beginning of period 7,150 11,022 Cash and cash equivalents at end of period $ 12,011 $ 13,043 SUPPLEMENTARY CASH FLOW INFORMATION: Cash paid during the period for: Income taxes $ 5 $ - Interest $ 82 $ 114 SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: Finance lease asset additions $ - $ 169 Right of use asset recognized $ 4,156 $ 873 Write-off of right of use asset $ 451 $ 897 Receipt of fixed assets for deposits previously paid $ 74 $ - See accompanying notes to the Condensed Consolidated Financial Statements. 6 Table of Contents Mama’s Creations, Inc. Notes to Condensed Consolidated Financial Statements April 30, 2025 Note 1 - Nature of Operations and Basis of Presentation Nature of Operations Mama's Creations, Inc. (together with its subsidiaries, the “Company”, "we', "us" or "our"), (formerly known as MamaMancini's Holdings, Inc. and Mascot Properties, Inc.) was organized on July 22, 2009 as a Nevada corporation. The Company has a fiscal year-end of January 31. Our subsidiary, MamaMancini’s Inc. (“MamaMancinis”), is a marketer, manufacturer and distributor of beef and turkey meatballs with sauce, grilled, roasted and breaded chicken; sausage and peppers; 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 meals, single-size pasta and rice bowls, bulk deli, and packaged refrigerated protein products. MamaMancini's products feature many all-natural meals that 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. Our Subsidiary T&L Acquisition Corp. ("T&L") is a premier gourmet food manufacturer based in New York. T&L doing business as T&L Creative Salads and Olive Branch, offers a full line of foods for retail food chains and club stores, delis, bagel stores, caterers and provision distributors. Our Creative Salads brand uses high-quality meats, seafood and vegetables, prepared to meet the standards set forth by the USDA and the Food and Drug Administration ("FDA"). Our Olive Branch brand concentrates on selling olives, olive mixes, and savory products to large retail customers, primarily in pre-packaged containers. On June 28, 2022, the Company acquired a 24 % minority interest in Chef Inspirational Foods, LLC (“CIF”), a leading developer, innovator, marketer and sales company selling prepared foods, for an investment of $ 1.2 million. The investment consists of $ 500 thousand in cash and $ 700 thousand in the Company’s common stock. The acquisition of the interest in CIF was accounted for under the equity method of accounting for investments until the Company acquired the remaining interest of CIF. On June 28, 2023, the Company completed the acquisition of the remaining 76 % of CIF, in accordance with the terms of the Membership Interest Purchase Agreement dated June 28, 2023 by and among the Company, Siegel Suffolk Family, LLC, and R&I Loeb Family, LLC (the “Sellers”) for approximately $ 3.7 million, including approximately $ 1 million in cash at closing and a $ 2.7 million promissory note (the "CIF Acquisition"). The promissory note required a principal payment of $ 1.2 million in cash on the first anniversary of the closing date (which was made during the year ended January 31, 2025) and requires a payment of $ 1.5 million in common stock of the Company on the second anniversary of the closing date. Note 2 - Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The results of operations for any interim period are not necessarily indicative of results for the full year. Certain amounts in the prior years have been reclassified to conform to the current year presentation. The accompanying unaudited Condensed Consolidated Financial Statements of the Company have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC"), including the instructions to Form 10-Q and Article 10 of Regulation S-X. Certain information and footnote disclosures normally included in the Company's Consolidated Financial Statements in an annual report on Form 10-K have been condensed or omitted. The Condensed Consolidated Balance Sheet as of January 31, 2025 has been derived from the audited Consolidated Financial Statements as of that date but does not include all disclosures required for audited annual financial statements. For further information, please refer to and read these interim unaudited Condensed Consolidated Financial Statements in conjunction with the 7 Table of Contents Company's audited Consolidated Financial Statements included in the Company's annual report on Form 10-K for the fiscal year ended January 31, 2025. Use of Estimates The preparation of the Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Such estimates and assumption s impact, among other items, the following: allowance for credit losses, the fair value of stock-based compensation, inventory reserves, impairment of goodwill and intangible assets, and estimates for unrealized returns, discounts, and other variable considerations that are netted against revenue. 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. Risks and Uncertainties The Company operates in an industry that is subject to intense competition and changes in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks and 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 and Cash Equivalents The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The majority of the Company’s cash and cash equivalents are held at one financial institution, which at April 30, 2025, exceeded insured amounts by approximately $ 11.0 million. The Company believes it mitigates such risk by having this cash and cash equivalents held by a major financial institution. Accounts Receivable and Allowance for Credit Losses 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. Estimated product returns are immaterial. Management assesses the collectability of outstanding customer invoices and maintains an allowance resulting from the expected non-collection of customer receivables. In estimating this allowance for credit losses, management considers factors such as historical collection experience, customer creditworthiness, specific customer risk, and current and expected general economic conditions. Customer balances are written off after all collection efforts are exhausted. The allowance for credit losses was approximately $ 93 thousand as of April 30, 2025 and January 31, 2025. During the three months ended April 30, 2025 and April 30, 2024, the Company did not write off any accounts deemed uncollectible. Inventories The Company values its inventory at the lower of cost or net realizable value (“NRV”). NRV is defined as estimated selling prices less costs of completion, disposal, and transportation. The cost of inventory is determined on the first-in, first-out basis. The cost of finished goods inventories includes ingredients, direct labor, freight-in for ingredients, and indirect production and overhead costs. The Company monitors its inventory to identify excess or obsolete items on hand. The Company reviews inventory quantities on hand and records a provision for excess and obsolete inventory based primarily on selling prices, indications from customers based upon current price negotiations, and purchase orders. In addition, and as necessary, specific reserves for future known or anticipated events may be established. As of April 30, 2025 and January 31, 2025, the reserve for obsolete inventory was approximately $ 95 thousand. 8 Table of Contents Inventories by major category are as follows (in thousands): April 30, 2025 January 31, 2025 Raw materials and packaging $ 2,501 $ 1,654 Work in process 469 723 Finished goods 2,317 2,440 Total $ 5,287 $ 4,817 Property, Plant and Equipment Property, plant, and equipment are recorded at cost net of accumulated depreciation. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. Asset lives for financial statement reporting of depreciation are: Machinery and equipment 2 - 7 years Furniture and fixtures 3 - 5 years Leasehold improvements * (*) Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever period is shorter. 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 Condensed Consolidated Statements of Operations. The Company reviews the recoverability of property, plant and equipment when circumstances indicate that the carrying value of an asset or asset class may not be recoverable. Indicators of impairment could include, among other factors, significant changes in the business environment, the planned closure of a facility, or deterioration in operating cash flows. Considerable management judgment is necessary to evaluate the impact of operating changes and to estimate future cash flows. Expenditures for repairs and maintenance that do not substantially improve or extend the useful life of an asset are expensed as incurred. Goodwill and Other Intangible Assets Goodwill Goodwill represents the excess of the purchase price over the fair values of the underlying net assets of an acquired business. The Company tests goodwill for impairment on an annual basis during the fourth quarter of its fiscal year, or immediately if conditions indicate that an impairment could exist. The Company evaluates qualitative factors to determine if it is more likely than not that the fair value is less than the carrying value and whether it is necessary to perform goodwill impairment testing. As of April 30, 2025 and April 30, 2024, there were no impairment losses recognized for goodwill. Other Intangible Assets Other intangible assets consist of trademarks, trade names and customer relationships. Intangible asset lives for financial statement reporting of amortization are: Tradenames and trademarks 3 years Customer relationships 4 – 5 years Fair Value of Financial Instruments Fair value is an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. 9 Table of Contents The carrying values of the Company’s short-term financial instruments, such as cash and cash equivalents, accounts receivable, and accounts payable, approximate fair value due to the immediate or short-term maturity of these instruments. The interest rate on the Company’s line of credit and notes payable has a variable component, which is reflective of the market for such instruments at any given date, and as such the carrying value of the debt approximates its fair value. Assets and liabilities recorded at fair value are measured using the fair value hierarchy, which prioritizes the inputs used in measuring fair value. The levels of the fair value hierarchy are: Level 1: observable inputs such as quoted prices in active markets; Level 2: inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3: unobservable inputs for which little or no market data exists, therefore requiring the Company to develop its own assumptions. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company's financial assets that were accounted for at fair value on a recurring basis as of April 30, 2025 and January 31, 2025 were as follows (in thousands): April 30, 2025 January 31, 2025 Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total Cash equivalents $ 11,382 $ — $ — $ 11,382 $ 6,842 $ — $ — $ 6,842 Total $ 11,382 $ — $ — $ 11,382 $ 6,842 $ — $ — $ 6,842 Research and Development Research and development is expensed as incurred. Research and development expenses were $ 73 thousand and $ 104 thousand for the three months ended April 30, 2025 and April 30, 2024, respectively. Revenue Recognition The Company recognizes revenue in accordance with Financial Accounting Standards Board ("FASB") Topic 606, Revenue from Contracts with Customers (Topic 606) . The Company’s sales are primarily generated from the sale of finished products to customers. Revenue is recognized when the performance obligation is satisfied, and the promised goods have been transferred. Control transfers when the product is shipped or delivered based upon applicable shipping terms. For each contract, the Company considers the transfer of product to be the performance obligation. Although some payment terms may be extended, generally the Company’s payment terms are approximately 15- 30 days. Accordingly, there are no significant financing components to consider when determining the transaction price. The Company elected to treat shipping and handling activities as fulfillment activities, and the related costs are recorded as selling expenses in selling, general and administrative expenses on the Condensed Consolidated Statements of Operations. The Company promotes its products with trade incentives and promotions. These programs include discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives. The trade incentives and promotions are recorded as a reduction to the transaction price based on amounts estimated as being due to customers at the end of the period. The Company derives these estimates based on historical experience. The Company does not receive a distinct service in relation to the trade incentives and promotions. The Company’s contracts are all short-term in nature; therefore, there are no unsatisfied performance obligations requiring disclosure as of April 30, 2025 and January 31, 2025. 10 Table of Contents Reductions in the transaction price attributable to items such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows (in thousands): For the Three Months Ended April 30, 2025 April 30, 2024 Gross Sales $ 37,504 $ 30,398 Less: Trade Incentives and Promotions 2,249 560 Net Sales $ 35,255 $ 29,838 Disaggregation of Revenue from Contracts with Customers. The following table disaggregates gross revenue by significant geographic area for the three months ended April 30, 2025 and 2024 (in thousands): For the Three Months Ended April 30, 2025 April 30, 2024 Northeast $ 9,917 $ 9,567 Southeast 8,508 7,697 Midwest 9,319 6,384 West 9,760 6,750 Total gross sales $ 37,504 $ 30,398 Costs of Sales Costs of sales represents costs directly related to the production and manufacturing of the Company’s products. Advertising Costs incurred for producing and communicating advertising for the Company are charged to operations as incurred and are included in selling, general and administrative expenses. Advertising expenses for the three months ended April 30, 2025 and April 30, 2024 were $ 814 thousand and $ 476 thousand, respectively. St ock-Based Compensation The Company provides compensation benefits in the form of performance stock units, restricted stock units, stock options, and warrants. The cost of the stock-based compensation is recorded at fair value on the date of grant and expensed in our Condensed Consolidated Statement of Operations over the requisite service period. The Company has granted performance awards in the form of Performance Stock Units ("PSUs") to certain executive officers. Each performance stock unit award entitles the participant to earn shares of common stock upon the attainment of certain market conditions and/or certain performance goals over the applicable performance period. The recognition of the compensation expense for the performance stock awards is based upon the probable outcome of the market condition and performance conditions and is based on the fair value of the award on the date of grant. To determine the value of PSUs with market conditions for stock-based compensation purposes, the Company used a Monte Carlo simulation valuation model. Forfeitures are recognized when they occur. The Company's performance against the defined goals is re-evaluated on a quarterly basis throughout the performance period and the recognition of the compensation expense is adjusted for subsequent changes in the estimated or actual outcome. The Company values stock options and warrants using the Black-Scholes option pricing model. Grants of stock-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the stock-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service period, 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. The Company has granted restricted stock units ("RSUs") that entitle the participant to earn shares of common stock so long as they continuously provide service to the Company through a given date. The Company values RSUs by multiplying the underlying shares of common stock by the closing stock price on the date of the grant, and the related expense is recognized ratably over the vesting period of the awards. 11 Table of Contents Earnings Per Share Basic net income or loss per share attributable to common stockholders excludes dilution and is computed by dividing net income during the period by the weighted average number of common shares outstanding during the period. Diluted net income or loss per share reflects potential dilution and is computed by dividing net income attributable to common stockholders by the weighted average number of common shares outstanding during the period, which is increased by the number of additional common shares that would have been outstanding if the potential common shares had been issued. However, if the effect of any additional securities is anti-dilutive (i.e., resulting in a higher net income per share or lower net loss per share), they are excluded from the dilutive net income computation. The dilutive effect of stock options, warrants, and restricted stock is calculated using the treasury stock method. The following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income per common share (in thousands, except per share data): For the Three Months Ended April 30, 2025 April 30, 2024 Numerator: Net income $ 1,237 $ 553 Effect of dilutive securities: — — Diluted net income $ 1,237 $ 553 Denominator: Weighted average common shares outstanding – basic 37,597 37,259 Dilutive securities (a): Restricted stock 281 351 Performance stock units 1,450 1,650 Options 50 68 Weighted average common shares outstanding and assumed conversion – diluted 39,378 39,328 Basic net income per common share $ 0.03 $ 0.01 Diluted net income per common share $ 0.03 $ 0.01 (a) – Anti-dilutive securities excluded — — Income Taxes Income taxes are provided in accordance with ASC 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 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 are adjusted for the effects of changes in tax laws and rates on the date of enactment. As of April 30, 2025 and January 31, 2025, the Company recognized a deferred tax asset of $ 469 thousand and $ 258 thousand, respectively, which is included in other long-term assets on the Condensed Consolidated Balance Sheets. The Company regularly evaluates the need for a valuation allowance related to the deferred tax assets. Recent Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, " Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. " The new guidance is intended to improve reportable segment disclosure requirements primarily 12 Table of Contents through enhanced disclosures about significant segment expenses. The amendment is effective retrospectively for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Adoption of this standard led to enhanced segment reporting disclosures but did not impact the Company's results of operations, cash flows, or financial condition. The Company adopted ASU 2023-07 during the fiscal year ended January 31, 2025. See Note 13, Segment Information in the accompanying notes to the Condensed Consolidated Financial Statements for further detail. In December 2023, the FASB issued ASU No. 2023-09, " Income Taxes (Topic 740): Improvements to Income Tax Disclosures. " The new guidance is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in the ASU address investor requests for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. The amendment is effective retrospectively for fiscal years beginning after December 15, 2024. This ASU is effective on a prospective basis for the Company in the fiscal year ending January 31, 2026 and will result in additional disclosures being included in the Consolidated Financial Statements for the Company's Form 10-K for the year ended January 31, 2026. In November 2024, the FASB issued ASU No. 2024-03, " Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures " (Subtopic 220-40): Disaggregation of Income Statement Expenses." Additionally, in January 2025, the FASB issued ASU No. 2025-01 to clarify the effective date of ASU No. 2024-03. The new guidance aims to enhance disclosures about a public business entity's expenses by providing more specific information about certain costs and expenses at each interim and annual reporting period, enabling investors to better understand the entity’s overall performance, including its cost structure, and assess potential future cash flows. This guidance is effective for fiscal years beginning after December 15, 2026 and interim periods within annual reporting periods beginning after December 15, 2027, on a retrospective or prospective basis, with early adoption permitted. The Company is in the process of evaluating the impact that this guidance will have on the Consolidated Financial Statements and related disclosures. In November 2024, the FASB issued ASU No. 2024-04, " Debt - Debt with Conversion and Other Options " (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments." The new guidance clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion or extinguishment of convertible debt. The new standard is effective for fiscal years beginning after December 31, 2025 and interim periods within those annual periods. Early adoption is permitted. The Company is in the process of evaluating the impact that the adoption of ASU No. 2024-04 will have on the Consolidated Financial Statements and related disclosures. Note 3 – Property Plant and Equipment, Net: Property plant and equipment, net, on April 30, 2025 and January 31, 2025 were as follows (in thousands): April 30, 2025 January 31, 2025 Machinery and Equipment $ 8,568 $ 7,982 Furniture and Fixtures 242 242 Leasehold Improvements 5,884 5,875 14,694 14,099 Less: Accumulated Depreciation 5,248 4,712 Total $ 9,446 $ 9,387 Depreciation expense was approximately $ 554 thousand and $ 292 thousand for the three months ended April 30, 2025 and April 30, 2024, respectively . 13 Table of Contents Note 4 – Intangible Assets, Net Intangible assets, net, consisted of the following at April 30, 2025 (dollars in thousands): Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Life (years) Customer relationships $ 6,418 $ ( 3,351 ) $ 3,067 2.06 Tradename and trademarks 79 ( 79 ) — 0.00 Total intangible assets $ 6,497 $ ( 3,430 ) $ 3,067 Intangible assets, net consisted of the following at January 31, 2025 (dollars in thousands): Gross Carrying Amount Accumulated Amortization Net Carrying Amount Weighted Average Remaining Life (years) Customer relationships $ 6,418 $ ( 2,982 ) $ 3,436 2.29 Tradename and trademarks 79 ( 79 ) — 0.00 Total intangible assets $ 6,497 $ ( 3,061 ) $ 3,436 Amortization expense was approximately $ 370 thousand and $ 380 thousand for the three months ended April 30, 2025 and April 30, 2024, respectively. We expect the estimated aggregate amortization expense for each of the succeeding fiscal years to be as follows (in thousands): 2026 (Remaining) $ 1,144 2027 1,464 2028 459 Total $ 3,067 Note 5 – Accounts Payable and Accrued Expenses Accounts payable and accrued expenses are composed of the following (in thousands): April 30, 2025 January 31, 2025 Trade accounts payable $ 9,178 $ 9,051 Accrued promotions 593 485 Accrued employee compensation 2,127 1,391 Accrued commissions and royalties 1,127 686 Other accrued expenses 252 439 Accrued income taxes 249 — Total accounts payable and accrued expenses $ 13,526 $ 12,052 Note 6 – Related Party Transactions Promissory Notes Upon consummation of the acquisition of the T&L Creative Salads business in December 2021, the Company executed a $ 3 million promissory note with the sellers, which consist of Anthony Morello, Jr., President of Creative Salads and Olive Branch, as well as individuals related to Mr. Morello. The promissory note requires annual principal payments of $ 750 thousand, payable on each anniversary of the closing, together with accrued interest at a rate of three and one-half percent ( 3.5 %) per annum. As of both April 30, and January 31, 2025, the outstanding balance under the note was $ 750 thousand, which was recorded as Promissory notes – related parties in the Company’s Condensed Consolidated 14 Table of Contents Balance Sheets. Interest expense related to this note was approximately $ 7 thousand and $ 13 thousand for the three months ended April 30, 2025 and April 30, 2024, respectively. As of April 30, 2025 and January 31, 2025, accrued interest was approximately $ 9 thousand and $ 2 thousand, respectively. Lease The Company leases 20,188 square feet in a fully contained facility in Farmingdale, NY from 148 Allen Blvd LLC for production and distribution of Creative Salads and Olive Branch products. 148 Allen Blvd LLC is owned by Mr. Morello and various individuals related to Mr. Morello. This lease term is through November 30, 2031 with the option to extend the lease for two additional ten-year terms with base rent of approximately $ 20 thousand per month through December 31, 2026, increasing after that date to approximately $ 24 thousand per month through the end of the initial lease term. The exercise of optional renewal is uncertain and, therefore, excluded from the calculation of the right of use asset. Rent expense and other ancillary charges pursuant to the lease for the three months ended April 30, 2025 and April 30, 2024 were approximately $ 84 thousand and $ 77 thousand, respectively. Note 7 – Loan and Security Agreements M&T Bank The Company has a working capital line of credit with M&T Bank for a maximum principal amount of $ 5.5 million (the "Credit Agreement") , which is scheduled to mature on November 30, 2027 . The principal outstanding bears interest at a variable rate per annum based on the Company’s Senior Funded Debt/EBITDA Ratio (as defined in the Credit Agreement), established with respect to the Company as of the date of any advance under the Credit Agreement as follows: if the Senior Funded Debt/EBITDA ratio is: (i) greater than 2.25 , 3.25 percentage point(s) above the applicable one-day (i.e. overnight) SOFR (as defined); (ii) greater than 1.50 but less than 2.25 , 2.75 percentage points above the one-day SOFR; (iii) less than or equal to 1.50 , 2.25 percentage points above the one-day SOFR. 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. The Company was in compliance with the covenants as of April 30, and January 31, 2025. 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. There were no outstanding balances on the line of credit as of April 30, or January 31, 2025. During the three months ended April 30, 2025 and April 30, 2024, the Company incurred no interest on the working capital line. On December 29, 2021, the Com pany entered into a loan with M&T Bank for the original principal amount of $ 7.5 million, payable in equal monthly principal installments over a 60 -month amortization period (the “Acquisition Note”). All of the proceeds of the loan were used to fund a portion of the consideration for the acquisition of the Creative Salads and Olive Branch businesses. The Acquisition Note is scheduled to mature on January 17, 2027. The outstanding balance under the Acquisition Note accrues interest based on the Senior Funded Debt/EBITDA Ratio (as defined in the Acquisition Note). If the Senior Funded Debt/EBITDA ratio is: (i) greater than 2.25 , 3.5 percentage point(s) above the applicable Variable Loan Rate; (ii) greater than 1.50 but less than or equal to 2.25 , 3.0 percentage points of the applicable Variable Loan Rate; or (iii) less than or equal to 1.50 , 2.5 percentage points above the applicable Variable Loan Rate; provided that in all events the rate shall not be less than the recited percentage point margin over 0 %. As of April 30, 2025 , the outstanding balance and unamortized discount of the Acquisition Note were approximately $ 2.4 million and $ 19 thousand, respectively. As of January 31, 2025 , the outstanding balance and unamortized discount of the Acquisition Note were approximately $ 2.9 million and $ 22 thousand, respectively. During the three months ended April 30, 2025 and 2024 , the Company incurred interest of approximately $ 47 thousand, and $ 86 thousand, respectively. Note 8 – Concentrations Revenues For the three months ended April 30, 2025, two customers accounted for approximately 36 % and 27 % of gross revenue, respectively. For the three months ended April 30, 2024, one customer accounted for approximately 43 % of gross revenue. Receivables As of April 30, 2025, two customers represented approximately 16 % and 13 % of the total gross outstanding receivables, respectively. As of January 31, 2025, two customers represented approximately 38 % and 16 % of total gross outstanding receivables, respectively. 15 Table of Contents Note 9 – Stockholders’ Equity Restricted Stock Units RSUs generally vest on a graded basis over three years to four years of service. The terms of the RSUs include vesting provisions based solely on continued service. The following is a summary of the Company’s RSU activity: Restricted Stock Units Weighted Average Grant Date Fair Value Non-vested restricted stock units - February 1, 2025 367,557 $ 2.85 Granted 94,200 $ 6.37 Vested ( 8,010 ) $ 7.49 Forfeited ( 4,167 ) $ 6.00 Outstanding – April 30, 2025 449,580 $ 3.48 During the three months ended April 30, 2025, the Company recognized stock-based compensation expense related to restricted stock units of an aggregate of approximately $ 152 thousand, compared to approximately $ 114 thousand for the three months ended April 30, 2024. The restricted stock expense was recorded to selling, general and administrative expenses or cost of goods sold depending on the nature of the related employee's expense on the Condensed Consolidated Statement of Operations. As of April 30, 2025, there was unrecognized stock-based compensation of approximately $ 1.3 million related to future vesting of restricted stock units. Options The following is a summary of the Company’s option activity: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Life (in years) Aggregate Intrinsic Value (in thousands) Outstanding – February 1, 2025 103,806 $ 3.76 8.22 $ 409 Granted - $ - Exercised - $ - Expired/forfeited - $ - Outstanding – April 30, 2025 103,806 $ 3.76 7.97 $ 333 Exercisable – April 30, 2025 - $ - 0.00 $ - The Company values stock options using the Black-Scholes option pricing model. The grants are amortized on a straight-line basis over the requisite service period, 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. For the three months ended April 30, 2025, the Company recognized stock-based compensation expense related to options of approximately $ 22 thousand compared to $( 1 ) thousand for the three months ended April 30, 2024. The stock-based compensation expense related to the options is included in selling, general and administrative expenses on the accompanying Condensed Consolidated Statements of Operations. During the three months ended April 30, 2024, certain employees and contractors resigned from the Company, which resulted in the reversal of approximately $ 11 thousand of previously recognized stock-based compensation expense. At April 30, 2025, there was unrecognized stock-based compensation expense related to the issuance of options of approximately $ 169 thousand. Performance Stock Units During the three months ended April 30, 2025, the Company granted to its Chief Executive Officer PSUs with a target payout of 94,200 shares of common stock. The PSU award is eligible to vest and settle into between 50 % and 110 % of the 16 Table of Contents target shares based on the Company's actual performance against threshold, target, and maximum adjusted EBITDA. The PSUs were valued at approximately $ 600 thousand during the three months ending April 30, 2025. No outstanding PSUs vested in the three months ended April 30, 2025. During each of the three months ended April 30, 2025 and April 30, 2024, the Company recognized stock-based compensation expense related to PSUs of approximately $ 130 thousand. The stock-based compensation expense related to the PSUs is included in selling, general and administrative expenses on the accompanying Condensed Consolidated Statements of Operations. Equity issuances On May 15, 2024, the Company entered into a Settlement Agreement with directors Steven Burns, Alfred D’Agostino, Dean Janeway and Thomas Toto, relating to certain options purported to have been granted by the Company in 2018 and 2019 (the "Purported Options") under prior management that exceeded the availability under the Company’s equity plan at the time of the purported grants. In exchange for a release of any and all claims or rights related to the Purported Options, the Company agreed to issue each of the directors a payment of approximately $ 113 thousand and approximately 17 thousand shares of common stock. In connection with the Settlement Agreement and the issuance of the shares, the Company incurred a one-time charge of approximately $ 900 thousand within selling, general and administrative expense in the three months ended April 30, 2024. Note 10 - Commitments and Contingencies Litigation, Claims and Assessments From time to time, the Company may become involved in various lawsuits and legal proceedings that 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. Licensing and Royalty Agreements On March 1, 2010, the Company was assigned a Development and License agreement, dated January 1, 2009, with Daniel Dougherty (the “License Agreement”). Under the terms of the License Agreement, the royalty rate payable by the Company is 6 % of net sales up to $ 500 thousand of net sales (as defined in the agreement) for each year under the License Agreement; 4 % of net sales from $ 500 thousand up to $ 2.5 million of net sales for each year under the License Agreement; 2 % of net sales from $ 2.5 million up to $ 20 million of net sales for each year under the License Agreement; and 1 % of net sales in excess of $ 20 million of net sales for each year under the License Agreement. In order to continue exclusivity, the Company must pay a minimum royalty of $ 125,000 each year. The Company incurred approximately $ 357 thousand of royalty expenses for the three months ended April 30, 2025, compared to $ 182 thousand for the three months ended April 30, 2024. Royalty expenses are included in selling, general and administrative expenses on the Condensed Consolidated Statements of Operations. Purchase Commitments On December 20, 2024, the Company entered into a one year purchase commitment to buy six million eighty thousand pounds of chicken, to be delivered in equal weekly installments at a fixed price. Effective March 1, 2025, the Company entered into a six month purchase commitment to buy two million sixteen thousand pounds of beef, to be delivered in equal weekly installments at a fixed price. The Company recognizes liabilities for contingencies and commitments when a loss is deemed to be probable and estimable. No such liability was recognized for these arrangements during the period. Note 11 – Leases The Company accounts for leases in accordance with ASC 842 “ Leases ” (“ASC 842”). We determine whether an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys the right to control the use of an identified fixed asset explicitly or implicitly for a period of time in exchange for consideration. Effective February 1, 2025, the Company amended and extended its lease for 25 Branca Road, East Rutherford, NJ. The amended lease expands the space available to the Company, has a monthly rent starting at approximately $ 73 thousand increasing over time to approximately $ 84 thousand from February 1, 2025 to January 31, 2030, and required an initial direct payment of approximately $ 200 thousand. On the effective date of the lease amendment, the Company recognized a right of use asset and corresponding lease liability of approximately $ 4.2 million. 17 Table of Contents We have operating leases for offices and other facilities used for our operations. We also have finance leases relating primarily to machinery and equipment. Our leases have remaining lease terms of approximately 0.25 years to 6.6 years. Supplemental cash flow and other information related to leases was as follows (in thousands): April 30, 2025 April 30, 2024 Cash paid for amounts included in the measurement of lease liabilities Operating cash flows from operating leases $ 257 $ 151 Financing cash flows from finance leases 102 95 The following table shows the weighted average lease term and weighted average discount rate for our ROU lease assets: April 30, 2025 January 31, 2025 Weighted average remaining lease term (in years) Operating leases 5.08 5.32 Finance leases 4.38 4.53 Weighted average discount rate: Operating leases 6.37 % 6.38 % Finance leases 7.86 % 7.74 % Maturities of lease liabilities for each of the succeeding fiscal years are as follows (in thousands): For the fiscal years ended Finance Leases Operating Leases Total Maturities of Lease Liabilities 2026 remaining $ 322 $ 1,102 $ 1,424 2027 406 1,512 1,918 2028 398 1,591 1,989 2029 302 1,635 1,937 2030 179 1,486 1,665 Thereafter 117 519 636 Total undiscounted future lease payments 1,724 7,845 9,569 Less: imputed interest ( 282 ) ( 1,148 ) ( 1,430 ) Total present value of future lease liabilities $ 1,442 $ 6,697 $ 8,139 Note 12 - Income Tax Provision The Company’s effective tax rate for the three months ended April 30, 2025 and April 30, 2024 was 18.5 % and 24.5 %, respectively. Differences from the statutory rate primarily relate to state taxes. As of April 30, 2025, and January 31, 2025, the net deferred tax asset was approximately $ 469 thousand and $ 258 thousand, respectively. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. There was no valuation allowance on the Company's deferred tax assets as of April 30, 2025 or January 31, 2025. The Company evaluated the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the Company has taken or expects to take in its tax return. For those benefits 18 Table of Contents to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carryforward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740. Note 13 - Segment Information For the three months ended April 30, 2025 and April 30, 2024 the Company was managed as a single operating segment. The Chief Executive Officer, who is also the Company’s Chief Operating Decision Maker (“CODM”), reviews financial information on an aggregate basis for purposes of allocating resources and assessing financial performance, as well as for making strategic operational decisions and managing the organization. As such, the Company has one reportable segment. Additionally, all of the Company’s assets are maintained in the United States. Segment reporting for the three months ended April 30, (in thousands): For the Three Ended April 30, 2025 April 30, 2024 Net sales $ 35,255 $ 29,838 Costs of sales 26,071 22,375 Gross profit 9,184 7,463 Less: (A) Research and development 73 104 Direct Variable Costs (B) 2,433 1,853 Other selling, general, and administrative expenses 5,100 4,733 Total operating expenses 7,606 6,690 Income from operations 1,578 773 Interest expense ( 88 ) ( 127 ) Interest income 30 92 Amortization of debt discount ( 3 ) ( 6 ) Income tax expense ( 280 ) ( 179 ) Segment net income 1,237 553 Reconciliation of profit Adjustments and reconciling items — — Consolidated net income $ 1,237 $ 553 (A) The significant expense categories and amounts align with the information that is regularly provided to the Chief Operating Decision Maker. (B) This category contains commission expenses, royalty expenses, and freight-related expenses. 19 Table of Contents