MamaMancini’s Holdings, Inc. — FY2021 Form 10-K
Business context and reporting period. The registrant is MamaMancini’s Holdings, Inc. (ticker MMMB), a manufacturer and distributor of prepared foods. This annual report covers the fiscal year ended January 31, 2021; it does not provide standalone fourth-quarter results. The company sells primarily through retail chains and distributors, with QVC also a sales channel.
Financial performance and position
| Metric | FY ended Jan. 31, 2021 | FY ended Jan. 31, 2020, revised |
|---|---|---|
| Net sales | $40.76 million | $33.75 million |
| Gross profit / margin | $12.74 million / about 31.2% | $9.98 million / about 29.6% |
| Operating income | $3.48 million | $2.08 million |
| Net income | $4.07 million | $1.53 million |
| Basic / diluted EPS | $0.12 / $0.12 | $0.05 / $0.04 |
| Cash from operations | $3.70 million | $1.81 million |
| Cash at year-end | $3.19 million | $0.39 million |
| Working capital | $4.83 million | $1.41 million |
| Total liabilities | $5.74 million | $9.54 million |
Net sales increased about 21%. Management attributed improved gross margin to plant efficiencies and process improvements, partly offset by higher beef prices. Net income also benefited from a $744,973 income tax benefit and lower interest expense. Operating expenses were $9.26 million in FY2021; the audited statements report $7.90 million for FY2020, including research and development, while the MD&A summary table presents $7.79 million. The filing does not reconcile this presentation difference.
Operating cash flow was $3.70 million; investing cash use was $451,940, mainly for equipment and leasehold improvements. Financing cash use was $449,723. The company repaid its M&T term loan and line of credit, and related-party notes; their reported balances were zero at year-end. Lease obligations remained: $665,297 for finance leases and $1.37 million for operating leases. The $4.0 million M&T revolving credit facility matures June 30, 2022 and had no balance at year-end. Cash proceeds from warrant exercises were $3.77 million; the company issued 3,588,490 shares upon warrant exercises and 24,000 upon option exercises.
Changes, outlook and risks
- FY2020 comparative results were revised to reclassify $1,086,982 of promotion expenses from general and administrative expenses to a reduction of revenue. The revision reduced reported sales and gross profit but did not change operating income or net income.
- COVID-19 contributed to consumer food stockpiling and retailer inventory builds early in the year, while slowing new product placements in the third quarter. Management expected placements to return to normal levels in the second and third quarters of FY2022. It believed cash resources would cover requirements through FY2022, while noting that additional funding might be needed for growth and might not be available on acceptable terms.
- A December 2020 plant fire damaged a spiral oven, which returned to service in late February 2021. The estimated loss was about $656,700; approximately $93,870 of property damage had been reimbursed, and the remaining insurance claim was pending. The filing says final approved loss amounts were not available.
- Customer concentration is significant: two customers represented about 54% of FY2021 gross sales and 37% of year-end gross receivables. The filing also identifies food-price volatility, competition, customer demand, and pandemic-related supply, staffing, and delivery disruptions as risks.
- A $744,973 net deferred tax asset and corresponding tax benefit were recognized. The auditor identified valuation of the deferred tax asset and accounting for customer consideration payable as critical audit matters. The financial statement audit opinion was unmodified; the auditor was not engaged to audit internal control. Management concluded disclosure controls and internal control over financial reporting were effective.
Investor verification priorities
- Confirm the FY2020 operating-expense comparison: audited statements show $7.90 million, while the MD&A table shows $7.79 million; also note an MD&A sales figure differs from the audited comparative.
- Track whether the remaining plant-fire insurance claim is approved and collected, and whether any final loss differs from the estimate.
- Assess customer concentration and the sustainability of sales growth, retailer placements, and gross-margin improvement.
- Verify continued liquidity, use and availability of the M&T credit facility, lease commitments, and any need for new financing.
- Review the assumptions supporting realization of the deferred tax asset and the potential effect of ownership changes on net operating loss carryforwards.
- Account for dilution: common shares outstanding rose to 35.60 million at January 31, 2021; the filing reported 869,000 options outstanding, with no warrants outstanding at that date.