MamaMancini’s Holdings, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended January 31, 2022; comparisons are with the year ended January 31, 2021. This is an annual report, not a standalone fourth-quarter results filing. The company makes and distributes specialty prepared foods, including meatballs, salads, olives and related products.
Key financial results
| Metric | FY2022 | FY2021 |
|---|---|---|
| Net sales, after slotting fees and discounts | $47.08 million | $40.76 million |
| Gross profit | $11.85 million | $12.74 million |
| Gross margin | 25% | 31% |
| Operating expenses | $11.77 million | $9.26 million |
| Income from operations | $82,767 | $3.48 million |
| Net income (loss) | ($251,926) | $4.07 million |
| Basic and diluted EPS | ($0.01) | $0.12 |
| Cash from operating activities | $909,841 | $3.70 million |
Revenue increased approximately 16%. Management attributed growth to stronger sales across national and regional grocery chains and club stores; $3.37 million of the increase came from the December acquisitions. Higher raw-material, packaging and inbound-freight costs outpaced price increases, reducing gross margin by about six percentage points. Operating expenses also rose, including acquisition-related professional and investment-banking fees. FY2022 included a $296,472 income-tax provision, versus a $744,973 tax benefit in FY2021.
Cash flow, debt and liquidity
- Cash was $850,598 at year-end, down $2.34 million from $3.19 million. Investing activities used $11.27 million, principally for the acquisitions and fixed assets. Financing activities provided $8.02 million.
- Current assets were $11.64 million and current liabilities $8.99 million, leaving working capital of $2.65 million, down from $4.83 million a year earlier.
- At year-end, the company had a $7.5 million M&T Bank acquisition term loan, a $765,000 line-of-credit balance and a seller promissory note with a reported balance of $3.01 million including accrued interest. The term loan is payable over 60 months, matures January 17, 2027 and bears variable interest tied to SOFR and the company’s leverage ratio. The seller note requires $750,000 annual principal payments plus 3.5% interest.
- Operating lease liabilities totaled $3.63 million and finance lease liabilities $594,171. Management said current and projected cash resources should meet requirements through May 27, 2023, but additional funding may be needed to finance growth; availability on acceptable terms is not assured.
Material changes, outlook and risks
- Acquisitions: On December 29, 2021, the company acquired T&L Creative Salads and Olive Branch for $14 million: $11 million cash and a $3 million seller note. The cash portion was funded with cash on hand and the $7.5 million M&T loan. Purchase-price allocation remained preliminary; the balance sheet recorded $8.63 million of goodwill. The auditor identified valuation of acquired intangible assets as a critical audit matter. The acquired businesses contributed $3.51 million of revenue and $56,701 of pretax income from acquisition through year-end.
- Management outlook: Management expected price increases to catch up with higher material and service costs by the end of the second quarter of FY2023. It also cited sales growth and expense control in its cash-resource assessment. No numerical sales or earnings guidance was provided.
- Risks: The company cited inflation and volatility in food, packaging and freight costs; competition and changing consumer demand; customer concentration; and potential COVID-19-related disruption to labor, supply chains, production or demand. Three customers generated approximately 58% of FY2022 gross sales.
- Financial reporting controls: Management concluded disclosure controls and internal control over financial reporting were not effective, citing insufficient accounting staffing and segregation of duties, and inadequate experience with the new ERP system. Remediation actions included adding staff and outside accounting support, NetSuite expertise and plans to recruit a corporate controller. The acquired companies were excluded from the year-end control assessment under the acquisition transition relief.
- Contingencies and unusual items: The company reported no material pending litigation. FY2022 included $661,293 of acquisition closing costs. It also reported insurance recoveries related to a prior plant fire. The independent auditor gave an unqualified opinion on the financial statements; it did not audit or opine on internal-control effectiveness.
Most important facts for investors to verify
- Whether pricing actions have restored gross margin after cost inflation, and whether freight and input costs remain elevated.
- Post-acquisition sales, profitability, integration progress and the assumptions supporting preliminary intangible-asset and goodwill valuations.
- Debt service, variable-rate exposure, line-of-credit availability and compliance with M&T Bank covenants; the filing says covenants were waived for FY2022.
- Cash conversion and working-capital trends, particularly receivables and inventory growth, and whether liquidity remains adequate as management projected.
- Progress in remediating material weaknesses and whether subsequent reporting demonstrates effective controls.
- Customer concentration and dependence on a small number of large accounts.