PART
III
Item
10. Directors, Executive Officers and Corporate Governance.
Directors
and Executive Officers
The following table discloses our directors and executive officers as of May 14, 2018.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Carl
Wolf
|
|
74
|
|
Chief
Executive Officer and Chairman of the Board of Directors
|
|
|
|
|
|
Matthew
Brown
|
|
49
|
|
President
and Director
|
|
|
|
|
|
Lawrence
Morgenstein
|
|
67
|
|
Chief
Financial Officer
|
|
|
|
|
|
Steven
Burns
|
|
57
|
|
Director
|
|
|
|
|
|
Alfred
D’Agostino
|
|
64
|
|
Director
|
|
|
|
|
|
Thomas
Toto
|
|
63
|
|
Director
|
|
|
|
|
|
Dean
Janeway
|
|
74
|
|
Director
|
Carl
Wolf
has over 35 years of experience in the management and operations of companies in the food industry. Mr. Wolf
has served as Chief Executive Officer and Chairman of the Board of MamaMancini’s from February 2010 through the Present.
Mr. Wolf was the founder, majority shareholder, Chairman of the Board, and CEO of Alpine Lace Brands, Inc., a NASDAQ-listed public
company with over $125 million in wholesale sales. He also founded, managed, and sold MCT Dairies, Inc., a $60 million international
dairy component resource company. Other experience in the food industry includes his role as Co-chairman of Saratoga Beverage Company,
a publicly traded (formerly NASDAQ: TOGA) bottled water and fresh juice company prior to its successful sale to a private equity
firm. Mr. Wolf served an advisor to Mamma Sez Biscotti, a snack and bakery product company (which was sold in a later period to
Nonnis, the largest biscotti company in the United States) from 2002 to 2004. Previously he served as Director and on the Audit
and Development committees of American Home Food Products, Inc. a publically traded marketer Artisanal Brand Cheeses, from 2007
to 2009. Mr. Wolf also served as Chairman of the Board of Media Bay, which was a NASDAQ-listed public company which ally traded
direct seller of spoken word through its audio book club and old-time radio classic activities and download spoken content, from
2002 to 2004.
Mr.
Wolf received his B.A. in 1965 from Rutgers University (Henry Rutgers Scholar) and his M.B.A. in 1966 from the University of Pittsburgh
(with honors).
In
evaluating Mr. Wolf’s specific experience, qualifications, attributes and skills in connection with his appointment to our
board, we took into account his numerous years of experience in the food industry, as a serial entrepreneur in growing business,
his knowledge of publicly traded companies, and his proven track record of success in such endeavors.
Matthew
Brown
has over 20 years of experience in the sales and marketing of products in the food industry. Beginning in February 2010
through the present, he has served as President of MamaMancini’s. From April 2001 until January of 2012, he served as the
President of Hors D’oeuvres Unlimited, overseeing the day to day operations of their food manufacturing business. He previously
worked as a marketing associate from September 1993 to December 1998 at Kraft Foods, Inc., where he dealt with numerous aspects
of the company’s marketing of their food products.
Mr.
Brown received his B.A. from the University of Michigan in 1991 and his M.B.A. from the University of Illinois in 1993.
In
evaluating Mr. Brown’s specific experience, qualifications, attributes and skills in connection with his appointment to
our board, we took into account his numerous years of experience in sales and marketing, and his proven track record of success
in such endeavors.
Lawrence
Morgenstein
has been Chief Financial Officer of the Company since April 1, 2018. He has been previously employed as Controller
for Emerging Power, Inc. from July 7, 2016 through January 12, 2018. He was also employed by Elaut USA, Inc. from April 4, 2013
through July 3, 2016.
Steven
Burns
has over 20 years of experience in the management and operations of various companies. Mr. Burns has served as a director
of MamaMancini’s from February 2010 through the present. Beginning in June 2011 and still presently, he serves as the Chairman
of the Board of Directors of Meatball Obsession, LLC. Additionally, beginning in 2006 and still Presently he works as the President
and CEO of Point Prospect, Inc., where he oversees the day to day operations of the company, which primarily deal with investments
and services in real estate, clean and efficient energy sources, high-quality and healthy food services, and healthcare technology.
Prior to that, for a period of 24 years he worked at and was senior executive at Accenture where he led the U.S. Health Insurance
Industry Program comprised of approximately 600 professionals. He also has sat on various financial committees and boards of directors
throughout his career.
Mr.
Burns received his B.S. in Business Management from Boston College in 1982.
In
evaluating Mr. Burns’ specific experience, qualifications, attributes and skills in connection with his appointment to our
board, we took into account his numerous years of experience in serving on board of directors, his knowledge of running and managing
companies, and his proven track record of success in such endeavors.
Alfred
D’Agostino
has over 34 years of experience in the management and ownership of food brokerage and food distribution companies.
Mr. D’Agostino has served as a director of MamaMancini’s from February 2010 through the Present. Beginning in March
2001 and still presently, he serves as the President for World Wide Sales Inc., a perishable food broker that services the New
York / New Jersey Metropolitan and Philadelphia marketplace. Prior to this he worked from September 1995 until February 2001 as
Vice- President of the perishable business unit at Marketing Specialists, a nationwide food brokerage. Previously, from February
1987 until August 1995 he worked as a Partner for the perishable division of Food Associates until its merger with Merket Enterprises.
In
evaluating Mr. D’Agostino’s specific experience, qualifications, attributes and skills in connection with his appointment
to our board, we took into account his numerous years of experience in the food brokerage and other food related industries, his
knowledge of running and managing companies, and his proven track record of success in such endeavors.
Mr.
D’Agostino received his B.S. in Business Management from the City College of New York in 1974.
Thomas
Toto
has over 32 years of experience in the management and ownership of food brokerage and food distribution companies.
Mr. Toto has served as a director of MamaMancini’s from February 2010 through the Present. Beginning in June 2009 and still
presently, he serves as the Senior Business manager for World Wide Sales Inc., a perishable food broker that services the New York
/ New Jersey Metropolitan and Philadelphia marketplace. Prior to this he worked from September 2007 until May 2009 as a Division
President for DCI Cheese Co., a company that imported and distributed various kinds of cheeses. Previously from March 1993 until
September 2007 he was the President and owner of Advantage International Foods Corporation, where he ran the day-to-day operations
of importing and distributing cheeses around the world.
Mr.
Toto received his B.A. from Seton Hall University in 1976 and his M.B.A. from Seton Hall University in 1979.
In
evaluating Mr. Toto’s specific experience, qualifications, attributes and skills in connection with his appointment to our
board, we took into account his numerous years of experience in the food brokerage and other food related industries, his knowledge
of running and managing companies, and his proven track record of success in such endeavors.
Dean
Janeway
has served as a director of MamaMancini’s since 2012. Mr. Janeway is an executive with more than 40 years of
broad leadership skills and extensive experience in the areas of corporate strategy, business development, operational oversight
and financial management. From 1966 through 2011, Mr. Janeway served in various positions at Wakefern Food Corp., the largest
retailer- owned cooperative in the United States. From 1966 through 1990, Mr. Janeway advanced through various positions of increasing
responsibility including positions in Wakefern’s accounting, merchandising, dairy-deli, and frozen foods divisions. From
1990 through 1995 Mr. Janeway provided oversight for all of Wakefern’s procurement, marketing, merchandising, advertising
and logistics divisions. From 1995 until his retirement in 2011, Mr. Janeway served as President and Chief Operating Officer of
“Wakefern” providing primary oversight for the company’s financial and treasury functions, human resources,
labor relations, new business development, strategic acquisitions, government relations, corporate social responsibility, sustainability
initiatives and member relations. Mr. Janeway previously served as the chairman for the National Grocers Association from 1993
through 2001. From 2009 through the present, Mr. Janeway has served as the Chairman of the Foundation for the University of Medicine
and Dentistry of New Jersey.
The
Board of Directors determined that Mr. Janeway’s qualifications to serve as a director include his notable business and
leadership experience in the all areas of management, particularly in the food industry. He also has experience in the area of
whole sale wholesale distribution, due to his past position at Wakefern and his knowledge of running and managing companies and
his proven track record of success in such endeavors will be invaluable to the Company going forward.
Mr.
Janeway received his B.A. in Marketing from Rutgers University, and his M.B.A from Wharton School of Business, University of Pennsylvania.
Family
Relationships
Mr.
Matthew Brown, our President, is the son-in-law of Mr. Carl Wolf, our Chief Executive Officer.
Board
Committees and Charters
Our
board of directors has established the following committees: an audit committee, a compensation committee and a nominating/corporate
governance committee. Copies of each committee’s charter are posted on our website, www.mamamancini’s.com. Our board
of directors may from time to time establish other committees.
Audit
Committee
The
purpose of the Audit Committee is to oversee the processes of accounting and financial reporting of the Company and the audits
and financial statements of the Company. The Audit Committee’s primary duties and responsibilities are to:
|
●
|
Monitor
the integrity of the Company’s financial reporting process and systems of internal controls regarding finance, accounting
and legal compliance.
|
|
|
|
|
●
|
Monitor
the independence and performance of the Company’s independent auditors and the Company’s accounting personnel.
|
|
|
|
|
●
|
Provide
an avenue of communication among the independent auditors, management, the Company’s accounting personnel, and the Board.
|
|
|
|
|
●
|
Appoint
and provide oversight for the independent auditors engaged to perform the audit of the financial statements.
|
|
|
|
|
●
|
Discuss
the scope of the independent auditors’ examination.
|
|
|
|
|
●
|
Review
the financial statements and the independent auditors’ report.
|
|
●
|
Review
areas of potential significant financial risk to the Company.
|
|
|
|
|
●
|
Monitor
compliance with legal and regulatory requirements.
|
|
|
|
|
●
|
Solicit
recommendations from the independent auditors regarding internal controls and other matters.
|
|
|
|
|
●
|
Make
recommendations to the Board.
|
|
|
|
|
●
|
Resolve
any disagreements between management and the auditors regarding financial reporting.
|
|
|
|
|
●
|
Prepare
the report required by Item 407(d) of Regulation S-K, as required by the rules of the Securities and Exchange Commission (the
“SEC”).
|
|
|
|
|
●
|
Perform
other related tasks as requested by the Board.
|
The
Audit Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities, and it has direct
access to the independent auditors as well as anyone in the organization. The Committee has the ability to retain, at the Company’s
expense, special legal, accounting, or other consultants or experts it deems necessary in the performance of its duties.
Our
Audit Committee consists of Mr. Burns and Mr. Toto. Mr. Toto serves as the Chairman of our Audit Committee. Mr. Burns is our Audit
Committee financial expert as currently defined under applicable SEC rules.
Compensation
Committee
The
Compensation Committee’s responsibilities include, but are not limited to, the responsibilities which are required under
the corporate governance rules of NASDAQ, including the responsibility to determine compensation of the Chairman of the Board,
the Chief Executive Officer (“CEO”), the President and all other executive officers. The Compensation Committee’s
actions shall generally be related to overall considerations, policies and strategies.
The
following are specific duties and responsibilities of the Compensation Committee:
|
●
|
Review
the competitiveness of the Company’s executive compensation programs to ensure (a) the attraction and retention of corporate
officers, (b) the motivation of corporate officers to achieve the Company’s business objectives, and (c) the alignment
of the interests of key leadership with the long-term interests of the Company’s stockholders.
|
|
●
|
Review
and determine the annual salary, bonus, stock options, other equity-based incentives, and other benefits, direct and indirect,
of the Company’s executive officers, including development of an appropriate balance between short-term pay and long-term
incentives while focusing on long-term stockholder interests.
|
|
|
|
|
●
|
Determine
salary increases and bonus grants for the Chairman of the Board, the CEO, the President and all other executive officers of
the Company.
|
|
|
|
|
●
|
Review
and approve corporate goals and objectives for purposes of bonuses and long- term incentive plans.
|
|
|
|
|
●
|
Review
and approve benefit plans, including equity incentive plans, and approval of individual grants and awards.
|
|
|
|
|
●
|
Review
and approve employment or other agreements relating to compensation for the Chairman of the Board, the CEO, the President
and the other executive officers of the Company.
|
|
|
|
|
●
|
Review
and discuss with management the Company’s CD&A and recommend to the Board that the CD&A be included in the annual
report on Form 10-K and/or proxy statement in accordance with applicable SEC rules.
|
|
|
|
|
●
|
If
required by SEC rules, provide a Compensation Committee Report on executive compensation to be included in the Company’s
annual proxy statement in accordance with applicable SEC rules.
|
|
|
|
|
●
|
Perform
an annual evaluation of the performance of the Chairman of the Board, the CEO, the President and the other executive officers.
|
|
|
|
|
●
|
Perform
an annual review of non-employee director compensation programs and recommend changes thereto to the Board when appropriate.
|
|
|
|
|
●
|
Plan
for executive development and succession.
|
|
|
|
|
●
|
Review
and approve all equity-based compensation plans and amendments thereto, subject to any stockholder approval under the listing
standards of NASDAQ.
|
|
|
|
|
●
|
Recommend
an appropriate method by which stockholder concerns about compensation may be communicated by stockholders to the Committee
and, as the Committee deems appropriate, to respond to such stockholder concerns
.
|
|
|
|
|
●
|
Perform
such duties and responsibilities as may be assigned by the Board to the Committee under the terms of any executive compensation
plan, incentive compensation plan or equity-based plan.
|
|
|
|
|
●
|
Review
risks related to the Company’s compensation policies and practices and review and discuss, at least annually, the relationship
between the Company’s risk management policies and practices, corporate strategy and compensation policies and practices.
|
Our
Compensation Committee consists of Mr. D’Agostino, and Mr. Dean Janeway. Mr. D’Agostino serves as the Chairman of
our Compensation Committee.
Nominating/Corporate
Governance Committee
The
Nominating/Corporate Governance Committee’s responsibilities include, but are not limited to, the responsibilities which
are required under the corporate governance rules of NASDAQ, including the responsibilities to identify individuals who are qualified
to become directors of the Company, consistent with criteria approved by the Board, and make recommendations to the Board of nominees,
including Stockholder Nominees (nominees whether by appointment or election at the Annual Meeting of Stockholders) to serve as
a directors of the Company. To fulfill its purpose, the responsibilities and duties of the Nominating/Corporate Governance Committee
are as follows:
|
●
|
Evaluate,
in consultation with the Chairman of the Board and Chief Executive Officer (“CEO”), the current composition, size,
role and functions of the Board and its committees to oversee successfully the business and affairs of the Company in a manner
consistent with the Company’s Corporate Governance Guidelines, and make recommendations to the Board for approval.
|
|
|
|
|
●
|
Determine,
in consultation with the Chairman of the Board and CEO, director selection criteria consistent with the Company’s Corporate
Governance Guidelines, and conduct searches for prospective directors whose skills and attributes reflect these criteria.
|
|
|
|
|
●
|
Assist
in identifying, interviewing and recruiting candidates for the Board.
|
|
|
|
|
●
|
Evaluate,
in consultation with the Chairman of the Board and CEO, nominees, including nominees nominated by stockholders in accordance
with the provisions of the Company’s Bylaws, and recommend nominees for election to the Board or to fill vacancies on
the Board.
|
|
|
|
|
●
|
Before
recommending an incumbent, replacement or additional director, review his or her qualifications, including capability, availability
to serve, conflicts of interest, and other relevant factors.
|
|
|
|
|
●
|
Evaluate,
in consultation with the Chairman of the Board and CEO, and make recommendations to the Board concerning the appointment of
directors to Board committees and the selection of the Chairman of the Board and the Board committee chairs consistent with
the Company’s Corporate Governance Guidelines.
|
|
|
|
|
●
|
Determine
the methods and execution of the annual evaluations of the Board’s and each Board committee’s effectiveness and
support the annual performance evaluation process.
|
|
|
|
|
●
|
Evaluate
and make recommendations to the Board regarding director retirements, director re-nominations and directors’ changes
in circumstances in accordance with the Company’s Corporate Governance Guidelines.
|
|
|
|
|
●
|
Review
and make recommendations to the Board regarding policies relating to directors’ compensation, consistent with the Company’s
Corporate Governance Guidelines.
|
|
|
|
|
●
|
As
set forth herein, monitor compliance with, and at least annually evaluate and make recommendations to the Board regarding,
the Company’s Corporate Governance Guidelines and overall corporate governance of the Company.
|
|
|
|
|
●
|
Assist
the Board and the Company’s officers in ensuring compliance with an implementation of the Company’s Corporate
Governance Guidelines.
|
|
|
|
|
●
|
Develop
and implement continuing education programs for all directors, including orientation and training programs for new directors.
|
|
|
|
|
●
|
Annually
evaluate and make recommendations to the Board regarding the Committee’s performance and adequacy of this Charter.
|
|
|
|
|
●
|
Review
the Code of Ethics periodically and propose changes thereto to the Board, if appropriate.
|
|
|
|
|
●
|
Review
requests from outside the Committee for any waiver or amendment of the Company’s Code of Business Conduct and Ethics
and recommend to the Board whether a particular waiver should be granted or whether a particular amendment should be adopted.
|
|
|
|
|
●
|
Oversee
Committee membership and qualifications and the performance of members of the Board.
|
|
|
|
|
●
|
Review
and recommend changes in (i) the structure and operations of Board Committees, and (ii) Committee reporting to the Board.
|
|
|
|
|
●
|
Make
recommendations annually to the Board as to the independence of directors under the Corporate Governance Guidelines.
|
|
●
|
Review
and make recommendations to the Board regarding the position the Company should take with respect to any proposals submitted
by stockholders for approval at any annual or special meeting of stockholders.
|
|
|
|
|
●
|
Regularly
report on Committee activities and recommendations to the Board.
|
|
|
|
|
●
|
Perform
any other activities consistent with this Charter, the Company’s Certificate of Incorporation and Bylaws, as amended
from time to time, the NASDAQ company guide, and any governing law, as the Board considers appropriate and delegates to the
Committee.
|
Our
Nominating/Corporate Governance Committee consists of Mr. Janeway and Mr. D’Agostino, with Mr. Janeway serving as the Chairman.
Code
of Business Conduct and Ethics
Effective
January 21, 2014, the Board of Directors (the “Board”) of MamaMancini’s Holdings, Inc. (the “Company”)
adopted a Code of Ethics (the “Code of Ethics”) applicable to the Company and all subsidiaries and entities controlled
by the Company and the Company’s directors, officers and employees. Compliance with the Code of Ethics is required of all
Company personnel at all times. The Company’s senior management is charged with ensuring that the Code of Ethics and the
Company’s corporate policies will govern, without exception, all business activities of the Company. The Code of Ethics
addresses, among other things, the use and protection of Company assets and information, avoiding conflicts of interest, corporate
opportunities and transactions with business associates and document retention.
Involvement
in Certain Legal Proceedings
During
the past five years no director, person nominated to become a director, executive officer, promoter or control person of the Company
has: (i) had any bankruptcy petition filed by or against any business of which such person was a general partner or executive
officer either at the time of the bankruptcy or within two years prior to that time; (ii) been convicted in a criminal proceeding
or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) been subject to
any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking
activities; or (iv) been found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures
Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed,
suspended, or vacated.
Compliance
with Section 16(A) of the Exchange Act
Section
16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more
of a class of securities registered under Section 12 of the Exchange Act to file reports of beneficial ownership and changes in
beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and
regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).
Based
solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities
Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the
period covered by this Annual Report on Form 10-K, were timely.
Legal
Proceedings
There
are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that
is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries.
No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition
or had a bankruptcy petition filed against it during the past ten years. No director or executive officer has been convicted of
a criminal offense or is the subject of a pending criminal proceeding during the past ten years. No director or executive officer
has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or
otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years. No director
or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.
Item
11. Executive Compensation .
The
following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers
paid by us during the years ended January 31, 2018 and January 31, 2017.
Name and
Principal
Position
|
|
Year(5)
|
|
|
Salary ($)
|
|
|
Bonus ($)
|
|
|
Stock Awards ($)
|
|
|
Option Awards ($)(4)
|
|
|
Non-Equity Incentive Plan Compensation ($)
|
|
|
Non-Qualified Deferred Compensation Earnings
($)
|
|
|
All Other Compensation ($)
|
|
|
Totals ($)
|
|
Carl Wolf
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO/Chairman(1)
|
|
|
2018
|
|
|
$
|
160,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
160,000
|
|
|
|
|
2017
|
|
|
$
|
150,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matt Brown
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President(2)
|
|
|
2018
|
|
|
$
|
186,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
186,000
|
|
|
|
|
2017
|
|
|
$
|
186,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
186,000
|
|
Lewis Ochs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former CFO(3)
|
|
|
2018
|
|
|
$
|
121,200
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
121,200
|
|
|
|
|
2017
|
|
|
$
|
72,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
72,000
|
|
|
1.
|
Mr.
Wolf was appointed as Chief Executive Officer of the Company on January 24, 2013.
|
|
|
|
|
2.
|
Mr.
Brown was appointed as President of the Company on January 24, 2013.
|
|
|
|
|
3.
|
Mr. Ochs resigned on April 1, 2018.
|
2018
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
STOCK
AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Number of
|
|
|
Number
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
of
|
|
|
Shares
|
|
|
of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
Shares
|
|
|
or
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
or Units
|
|
|
Units
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
of Stock
|
|
|
of
|
|
|
Units or
|
|
|
Units or
|
|
|
|
Number of
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
That
|
|
|
Stock
|
|
|
Other
|
|
|
Other
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
Have
|
|
|
That
|
|
|
Rights
|
|
|
Rights
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
Not
|
|
|
Have
|
|
|
That
|
|
|
That
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
Vested
|
|
|
Not
|
|
|
Have Not
|
|
|
Have Not
|
|
|
|
Options (#)
|
|
|
Options (#)
|
|
|
Unearned
|
|
|
Price
|
|
|
Expiration
|
|
(#)
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options (#)
|
|
|
($)
|
|
|
Date
|
|
(g)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
Name (a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
(9)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
Carl Wolf Chief Executive Officer(1)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis Ochs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former CFO
|
|
|
45,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.00
|
|
|
4/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
|
|
|
16,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brown
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Burns
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director(3)
|
|
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.00
|
|
|
4/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.39
|
|
|
4/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alfred
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
D’Agostino
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director(4)
|
|
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.00
|
|
|
4/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.39
|
|
|
4/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toto
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director(5)
|
|
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.00
|
|
|
4/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.39
|
|
|
4/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Altobello
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director(6)
|
|
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.00
|
|
|
4/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.39
|
|
|
4/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Janeway
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director(7)
|
|
|
10,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.00
|
|
|
4/26/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.39
|
|
|
4/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
McGuire
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former Director(__)
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent Smith(8)
|
|
|
6,000
|
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
8,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chris Styler(8)
|
|
|
12,000
|
|
|
|
6,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,334
|
|
|
|
6,666
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dan Mancini(8)
|
|
|
6,000
|
|
|
|
12,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emma Rosario(8)
|
|
|
2,000
|
|
|
|
1,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
4,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric Felice(8)
|
|
|
8,000
|
|
|
|
4,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,000
|
|
|
|
16,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe Smith(8)
|
|
|
12,000
|
|
|
|
6,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
20,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Kaminsky(8)
|
|
|
4,000
|
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
4,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pete de Pasquale(8)
|
|
|
4,000
|
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priscilla Goldman(8)
|
|
|
4,000
|
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rich Franco(8)
|
|
|
4,000
|
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
4,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott Shaffer(8)
|
|
|
12,000
|
|
|
|
6,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125,666
|
|
|
$
|
173,419
|
|
|
|
|
|
|
|
|
|
1.
|
Mr.
Wolf was appointed as Chief Executive Officer of the Company on January 24, 2013
|
|
|
2.
|
Mr.
Brown was appointed as President of the Company on January 24, 2013
|
|
|
3.
|
Mr.
Burns was appointed as a director of the Company on January 24, 2013
|
|
|
4.
|
Mr.
D’Agostino was appointed as a director of the Company on January 24, 2013
|
|
|
5.
|
Mr.
Toto was appointed as a director of the Company on January 24, 2013
|
|
|
6.
|
Mr.
Janeway was appointed as a director of the Company on January 24, 2013
|
|
|
7.
|
Mr.
McGuire was elected as a director of the Company on June 13, 2017 and resigned January 22, 2018. Mr. McGuire’s Options
expired on February 21, 2018.
|
|
|
8.
|
Non-Management
employee.
|
|
|
9.
|
Shares
vest upon a change of control of the Company
|
DIRECTOR
COMPENSATION
Our
executive officers who are members of our board of directors and the directors who are not considered independent under the corporate
governance rules of the New York Stock Exchange do not receive compensation from us for their service on our board of directors.
Accordingly, Mr. Wolf and Mr. Brown do not receive compensation from us for their service on our board of directors. Only those
directors who are considered independent directors under the corporate governance rules of the New York Stock Exchange receive
compensation from us for their service on our board of directors. Mr. Burns, Mr. D’Agostino, Mr. Toto and Mr. Janeway are
to be paid $10,000 per annum for their service as members of the board, payable quarterly in Company common stock.
In
2013 and 2014, our directors were granted stock options to purchase 10,000 shares of the Company’s common stock at an exercise
of $1.00 (“Option Grant 1”) and $2.95 (“Option Grant 2”), respectively. All such options vested immediately
and expire 5 years from the date of grant. Each director that was granted 10,000 options under Option Grant 2 subsequently cancelled
such 10,000 options to purchase common stock on April 23, 2014 in exchange for 8,000 shares of the Company’s common stock.
In 2017, each of our independent directors were granted stock options to purchase 50,000 shares of the Company’s common
stock at an exercise of $0.39 per share. Such options vested immediately and expire 5 years from the date of grant.
In June 2017, each of our directors were granted stock options to purchase 25,000 shares of the Company’s
common stock at an exercise of $1.05. All such options vested quarterly over a one-year period and expire 3 years from the date
of grant.
There
is no formal arrangement with our board of directors for the granting of options. There is no assurance that the Company will
continue to issue options to the board of directors or on what terms such issuance would occur. In addition, our Lead Director,
Steven Burns was paid $42,000 in stock compensation for the year ended January 31, 2017 for his additional services in that capacity.
We
also reimburse all of our directors for reasonable expenses incurred to attend board of director or committee meetings.
The
following Director Compensation Table sets forth the compensation of our directors for the fiscal years ending on January 31,
2018 and January 31, 2017.
Name and
Principal
Position (a)
|
|
Year (b)
|
|
Salary ($)
(b)
|
|
|
Bonus ($)
(b)
|
|
|
Stock Awards ($)
(b)
|
|
|
Option Awards ($)
(b)
|
|
|
Non-Equity Incentive Plan Compensation ($)
(b)
|
|
|
All Other Compensation ($)
(b)
|
|
|
Total ($)
(b)
|
|
Director
|
|
2018
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,000
|
|
|
$
|
8,918
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,918
|
|
Steven Burns (1)
|
|
2017
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
58,000
|
|
|
$
|
16,442
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
74,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
2018
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,000
|
|
|
$
|
8,918
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,918
|
|
Alfred D’Agostino(2)
|
|
2017
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
10,000
|
|
|
$
|
16,442
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
26,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
2018
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,000
|
|
|
$
|
8,918
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,918
|
|
Thomas Toto(3)
|
|
2017
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
10,000
|
|
|
$
|
16,442
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
26,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
2018
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,000
|
|
|
$
|
8,918
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,918
|
|
Dean Janeway(4)
|
|
2017
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
10,000
|
|
|
$
|
16,442
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
26,442
|
|
1.
|
Mr.
Burns was appointed as a director of the Company on January 24, 2013.
|
|
|
2.
|
Mr.
D’Agostino was appointed as a director of the Company on January 24, 2013.
|
|
|
3.
|
Mr.
Toto was appointed as a director of the Company on January 24, 2013.
|
|
|
4.
|
Mr.
Janeway was appointed as a director of the Company on January 24, 2013.
|
Employment
Agreements
Carl
Wolf
On March 5, 2012 MamaMancini’s entered into an Employment Agreement with Mr. Carl Wolf as Chief Executive
Officer for a term of 3 years. Mr. Wolf’s employment agreement automatically renews for successive one-year terms, unless
the Company gives written notice of non-renewal not less than six (6) months prior to an anniversary date or until terminated as
set forth herein. Mr. Wolf’s employment agreement was renewed for a period of one year on March 5, 2018. As compensation
for his services, Mr. Wolf receives a base salary of $150,000 per year. Mr. Wolf’s compensation was increased to $190,000
per year effective November 1, 2017. Such base salary is reviewed yearly with regard to possible increase. In addition, Mr. Wolf
is eligible to receive an annual bonus as determined by the Board. As part of the agreement, Mr. Wolf is subject to confidentiality
provisions regarding MamaMancini’s, and certain covenants not to compete. Mr. Wolf is also entitled to receive Termination
Payments (as defined Section 11.1 of Mr. Wolf’s Employment Agreement) in the event his employment is terminated in conjunction
with the following:
Reason
for Termination
|
|
Payment
to be Received
|
Death
|
|
Termination
Payments (1)
|
Disability
|
|
Termination
Payments plus 12 months Base Salary
|
Without
Cause
|
|
Termination
Payments plus lesser of 12 months Base Salary or remaining Initial Term of employment
|
For
Cause
|
|
Termination
Payments minus any yearly bonus
|
(1)
Termination Payment equals: (i) any unpaid Base Salary through the date of termination, (ii) any Bonus for the year in which such
termination occurs prorated as of the date of termination, (iii) accrued and unpaid vacation pay for the year in which such termination
occurs prorated as of the date of termination, (iv) any sums due under any of MamaMancini’s benefit plans, and (v) any unreimbursed
expenses incurred by the Employee on MamaMancini’s behalf.
Matthew
Brown
On March 5, 2012 MamaMancini’s entered into an employment agreement with Mr. Matthew Brown as President
of MamaMancini’s for an initial term of 3 years. Mr. Brown’s employment agreement automatically renews for successive
one-year terms, unless the Company gives written notice of non-renewal not less than six (6) months prior to an anniversary date
or until terminated as set forth herein. Mr. Brown’s employment agreement was renewed for a period of one year on March 5,
2018. As compensation for his services, Mr. Brown receives a base salary of $186,000 per year. Such base salary is reviewed yearly
with regard to possible increase. In addition, Mr. Brown is eligible to receive an annual bonus as determined by the Board. As
part of the agreement, Mr. Brown is subject to confidentiality provisions regarding MamaMancini’s, and certain covenants
not to compete. Mr. Brown is also entitled to receive Termination Payments (as defined in Section 11.1 of Mr. Brown’s Employment
Agreement) in the event his employment is terminated in conjunction with the following:
Reason
for Termination
|
|
Payment
to be Received
|
Death
|
|
Termination
Payments(1)
|
Disability
|
|
Termination
Payments plus 12 months Base Salary
|
Without
Cause
|
|
Termination
Payments plus lesser of 12 months Base Salary or remaining Initial Term of employment
|
For
Cause
|
|
Termination
Payments minus any yearly bonus
|
(1)
Termination Payment equals: (i) any unpaid Base Salary through the date of termination, (ii) any Bonus for the year in which such
termination occurs prorated as of the date of termination, (iii) accrued and unpaid vacation pay for the year in which such termination
occurs prorated as of the date of termination, (iv) any sums due under any of MamaMancini’s benefit plans, and (v) any unreimbursed
expenses incurred by the Employee on the MamaMancini’s behalf.
Lawrence
Morgenstein
On April 1, 2018 MamaMancini’s entered into an employment agreement with Lawrence Morgenstein as Chief
Financial Officer of MamaMancini’s for an initial term of one year. Unless terminated, Mr. Morgenstein’s employment
agreement automatically renews for successive one-year terms. As compensation for his services, Mr. Morgenstein receives a base
salary of $125,000 per year and is eligible for a year-end bonus of up to $25,000. Such base salary is reviewed yearly with regard
to possible increase. In addition, Mr. Morgenstein is eligible to receive an annual bonus as determined by the Board. In addition,
Mr. Morgenstein was initially granted an option to acquire 30,000 shares of Company Common Stock, vesting 7,500 shares per quarter.
As part of the agreement, Mr. Morgenstein is subject to confidentiality provisions regarding MamaMancini’s, and certain covenants
not to compete.
Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table provides the names and addresses of each person known to us to own more than 5% of our
outstanding shares of common stock as of May 15, 2018 31,793,944, and by the officers and directors, individually and as a group.
Except as otherwise indicated, all shares are owned directly and the shareholders listed possess sole voting and investment power
with respect to the shares shown.
Name of Beneficial Owner(1)
|
|
Shares
|
|
|
Percent (2)
|
|
|
|
|
|
|
|
|
5% or Greater Stockholders
|
|
|
|
|
|
|
|
|
N/A
|
|
|
—
|
|
|
|
—
|
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
Carl Wolf
|
|
|
7,426,886
|
(3)
|
|
|
22.80
|
%
|
Matthew Brown
|
|
|
5,663,255
|
(4)
|
|
|
17.75
|
%
|
Lawrence Morgenstein
|
|
|
0
|
|
|
|
0.00
|
%
|
Steven Burns
|
|
|
1,459,643
|
(5)
|
|
|
4.56
|
%
|
Alfred D’Agostino
|
|
|
1,008,575
|
(6)
|
|
|
3.15
|
%
|
Thomas Toto
|
|
|
844,443
|
(7)
|
|
|
2.65
|
%
|
Dean Janeway
|
|
|
389,336
|
(8)
|
|
|
1.22
|
%
|
All executive officers and directors as a group (7 persons)
|
|
|
16,792,138
|
|
|
|
52.13
|
%(2)
|
|
(1)
|
Beneficial
ownership is determined in accordance with Rule 13d-3(a) of the Exchange Act and generally includes voting or investment power
with respect to securities. In determining beneficial ownership of our Common Stock, the number of shares shown includes shares
which the beneficial owner may acquire upon exercise of debentures, warrants and options which may be acquired within 60 days.
In determining the percent of Common Stock owned by a person or entity on May 15, 2018 , (a) the numerator is the number
of shares of the class beneficially owned by such person or entity, including shares which the beneficial ownership may acquire
within 60 days of the conversion of Series A Preferred shares, exercise of debentures, warrants and options; and (b) the denominator
is the sum of (i) the total shares of that class outstanding on May 14, 2018 31,793,944 shares of Common Stock and (ii) the
total number of shares that the beneficial owner may acquire upon exercise of warrants and options. Unless otherwise stated,
each beneficial owner has sole power to vote and dispose of its shares. The address of each of the holders is 25 Branca Road,
East Rutherford, NJ 07073.
|
|
|
|
|
(2)
|
Figures
may not add up due to rounding of percentages.
|
|
|
|
|
(3)
|
The
amount includes 6,170,356 shares held jointly with Ms. Marion F. Wolf and 482,455 shares held directly by Mr. Wolf. Ms. Wolf
is the wife of Mr. Carl Wolf. Mr. Wolf maintains full voting control of such shares. Share total also includes 774,075 shares
issuable on the exercise of Warrants.
|
|
(4)
|
5,327,749 of the shares are held jointly with Ms. Karen Wolf and 228,098 shares are held by Mr. Brown. Ms.
Wolf is the wife of Mr. Matthew Brown. Mr. Brown maintains full voting control of such shares. Share total includes 5,555,847 and
107,408 shares issuable on the exercise of Warrants.
|
|
|
|
|
(5)
|
This
amount includes 130,397 shares held by Steven Burns, 10,000 shares held by Milvia Burns, Mr. Burns’ wife and 1,136,839
shares held by Point Prospect, Inc., a corporation which is wholly-owned by Steven Burns. Share total also includes 107,407
shares issuable on the exercise of Warrants and options to purchase 75,000 shares of common stock.
|
|
|
|
|
(6)
|
This
amount includes 126,938 shares directly held by Alfred D’Agostino, 699,230 shares held by Alfred D’Agostino Revocable
Living Trust 11/6/2009, of which Alfred D’Agostino is the beneficial owner. Share total also includes 107,407 shares
issuable on the exercise of Warrants and an option to purchase 75,000 shares of common stock.
|
|
|
|
|
(7)
|
This
amount includes 669,443 held by Thomas Toto and 66,667 held by Thomas and Andrea Toto, for which Thomas Toto is the beneficial
owner. Share total also includes 33,333 shares issuable on the exercise of Warrants and an option to purchase 75,000 shares
of common stock.
|
|
|
|
|
(8)
|
This
amount includes 191,035 shares held by Dean Janeway and 15,894 owned by Mary Janeway & Dean Janeway Jt Ten. Share total
also includes 107,407 shares issuable on the exercise of Warrants and an option to purchase 75,000 shares of common stock.
|
General
The
Company is authorized to issue an aggregate number of 270,000,000 shares of capital stock, of which 20,000,000 shares are preferred
stock, $0.00001 par value per share and 250,000,000 shares are common stock, $0.00001 par value per share.
Common
Stock
The Company authorized to issue 250,000,000 shares of common stock, $0.00001 par value per share. At May 15,
2018, we have 31,793,944 shares of common stock issued and outstanding.
Each
share of common stock has one (1) vote per share for all purposes. Our common stock does not provide any preemptive, subscription
or conversion rights and there are no redemption or sinking fund provisions or rights. Our common stock holders are not entitled
to cumulative voting for purposes of electing members to our board of directors.
Preferred
Stock
The Company is authorized to issue 20,000,000 shares of preferred stock, $0.00001 par value per share. The
Company has designated 120,000 shares of preferred stock as Series A Convertible Preferred stock. As of May 15, 2018, no shares
of Series A Convertible Preferred Stock are issued and outstanding. All then-remaining shares of then-outstanding Series A Convertible
Preferred stock were converted into an aggregate of 3,466,667 common shares on July 27, 2017. The holders of the Series A Convertible
Preferred were entitled to receive dividends at a rate of either percent (8%) per annum payable quarterly in cash or Company Common
Stock at the option of the holder and are entitled to a liquidation preference equal to $100 per share plus all accrued and unpaid
dividends. The Series A Convertible Preferred Stock were convertible, at the option of the holder, into shares of Company Common
Stock at a conversion price of $0.675 (subject to adjustment) based upon the stated value of the Series A Convertible Preferred
Stock.
Dividends
Preferred
Stock
. The holders of the Series A Convertible Preferred were entitled to receive dividends at a rate of either percent
(8%) per annum payable quarterly in cash or Company Common Stock at the option of the holder. We have not paid any cash dividends
to the holders of our Common Stock. During the fiscal year ended January 31, 2018, all dividends were paid in Company Common Stock.
During that period, an aggregate of 90,717 Common Shares were issued as Series A Preferred Stock dividends.
Common
Stock.
The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings,
if any, our capital requirements and financial position, general economic conditions, and other pertinent conditions. It is our
present intention not to pay any cash dividends on our Common Stock in the foreseeable future, but rather to reinvest earnings,
if any, in our business operations.
Warrants
As of May 15, 2018, there are outstanding warrants to purchase 7,030,843 of our common shares. All of the
warrants are exercisable for a term of five years with 505,400 having an exercise price of $1.00 per share (which expire between
April 5, 2017 and December 5, 2017), 508,001 having an exercise price of $1.50 per share (which expire between July 12, 2018 and
January 17, 2019), 14,000 having an exercise price of $2.50 per share (which expire on October 15, 2019), 3,959,999 having an exercise
price of $0.675 per share (which expire between June 10, 2020 and November 20, 2020) and 2,510,001 having an exercise price of
$1.50 per share (which expire on November 20, 2020). The aforementioned 2,510,001 Warrants were granted subsequent to January 31,
2016 to investors in a prior offering. 22,666 of the aforementioned Warrants have been either cancelled or exercised.
Options
As
of May 15, 2018, there are currently outstanding options to purchase 846,000 shares of Company Common Stock. Of this amount,
248,000 options at $1.00 per share expire on April 26, 2018, 262,000 options at $0.39 per share expire on April 13, 2021, 123,000
options at $0.60 per share expire on May 2, 2021, 100,000 options at $1.05 per share expire on June 27, 2020 and 114,000 options
at $1.38 per share expire on November 5, 2022.
Manatuck Debenture
On December 19, 2014, the Company entered into a securities purchase agreement (the “Manatuck Purchase
Agreement”) with Manatuck Hill Partners, LLC (“Manatuck”) whereby the Company issued a convertible redeemable
debenture (the “Manatuck Debenture”) in favor of Manatuck. The Manatuck Debenture is for $2,000,000 bearing interest
at a rate of 14% and matures in February 2016. Upon issuance of the Manatuck Debenture, the Company granted Manatuck 200,000 shares
of the Company’s restricted common stock. In April 2015, the maturity date was extended to May 2016 and 30,000 shares of
restricted common stock were issued to Manatuck. Based on management’s review, the accounting for debt modification applied.
The Company valued the 30,000 shares at the grant date share price of $1.32 and recorded $39,600 to debt discount on the consolidated
balance sheet.
Upon issuance of the debenture and subsequent extension, a debt discount of $498,350 was recorded for the
fees incurred by the buyer as well as the value of the common shares granted to Manatuck. The debt discount will be amortized over
the earlier of (i) the term of the debt or (ii) conversion of the debt, using the straight-line method which approximates the effective
interest method. The amortization of debt discount is included as a component of other expense in the consolidated statements of
operations.
On October 29, 2015, the note was further amended to extend the maturity date to December 19, 2016. Per the
terms of the execution of the extension, the Company was required to purchase the above 230,000 shares issued to Manatuck for a
share price of $0.65, a value of $149,500 and incurred an amendment fee of $170,500, both of which were added to the outstanding
principal of the debt. In addition, the extension reduced accrued interest by $220,000 and increased the outstanding principal
of the debt by $220,000. Based on management’s review, the accounting for debt extinguishment applied. In accordance with
the accounting for debt extinguishment, the Company wrote-off the existing debt of $2,000,000, wrote-off the unamortized debt discount
of $190,483 and wrote-off the remaining debt issuance costs relating to this note of $19,106. The loss on debt extinguishment of
$380,089 on the statement of operations is comprised of the write-off of the remaining debt discount of $190,483, the write-off
of the debt issuance costs of $19,106, and the amendment fee of $170,500.
In August 2016, the note was further amended to extend the maturity date to September 30, 2017 and also removed
the convertible feature of the note. The principal amount of the note was increased to $2,898,523, which is inclusive of accrued
interest payable through October 31, 2016. In addition, the Company paid an origination fee of $50,000 on October 31, 2016 which
is recorded as a debt discount and will be amortized over the remaining life of the note using the effective interest method.
On March 10, 2017, the Company further extended the maturity date to May 1, 2018.
The
Company paid to Manatuck a cash fee equal to two percent (2%) of the mutually-agreed pro-forma balance payable on account of the
note as of March 31, 2017.
On January 22, 2018, the Company further extended the maturity date to November 1, 2018. Per the terms of
the amended agreement:
|
1)
|
The
Company will pay to Manatuck a cash fee equal to two percent (2%) of the mutually-agreed pro-forma balance payable on account
of the note as of January 31, 2018, which shall include all interest which would be accrued on the note through January 31,
2018;
|
|
|
|
|
2)
|
The
Company shall make monthly principal payments to Manatuck of $100,000.
|
Based on management’s review of the amended agreement and extension, the accounting for debt modification
applied. The Company accrued the 2% fee totaling $52,236 which is recorded as a debt discount and will be amortized over the remaining
life of the note using the effective interest method. There was unamortized debt discount of $84,841 and $48,094 as of January
31, 2018 and 2017, respectively.
The outstanding balance including principal
and interest and net of debt discount at January 31, 2018 and 2017 was $1,403,082 and $2,700,725, respectively.
Item
13. Certain Relationships and Related Transactions, and Director Independence.
Two
or our directors, Thomas Toto and Alfred D’Agostino work for World Wide Sales, Inc. (“World Wide Sales”), a
perishable food broker that services the New York / New Jersey Metropolitan and Philadelphia marketplace. Mr. D’Agostino
is th
e President of World Wide Sales. Pursuant
to an informal arrangement, the Company has agreed to pay World Wide Sales the greater of $4,000 or 3% sales commission on net
sales (sales less any promotions, credits, allowance, and short pay) to supermarket chains headquartered in the New York Metropolitan
area per month. To date, World Wide Sales has never been paid in excess of $4,000 in any month.
Director
Independence
Our
board of directors has determined that each of Mr. Burns, Mr. D’Agostino, Mr. Toto and Mr. Janeway is an independent director
within the meaning of the applicable rules of the SEC and the New York Stock Exchange, and that each of them is also an independent
director under Rule 10A-3 of the Exchange Act for the purpose of audit committee membership. In addition, our board of directors
has determined that Mr. Burns is an audit committee financial expert within the meaning of the applicable rules of the SEC and
the New York Stock Exchange.
Item
14. Principal Accounting Fees and Services.
Audit
Fees
Audit Fees consist of assurance and related services that are reasonably related to the performance of the
audit or review of our financial statements. This category includes fees related to the performance of audits and attest services
not required by statute or regulations, and accounts consultations regarding the application of GAAP to proposed transactions.
The aggregate Audit Fees billed for the fiscal years ended January 31, 2018 and January 31, 2017, were $40,000 and $30,000, respectively.
Audit
Related Fees
The aggregate fees billed for assurance and related services by our principal accountant that are reasonably
related to the performance of the audit or review of our financial statements, other than those previously reported in this Item
14, for the fiscal year ended January 31, 2018 and January 31, 2017 were $0 and $0, respectively.
Tax
Fees
Tax Fees consist of the aggregate fees billed for professional services rendered by our principal accounts
for tax compliance, tax advice, and tax planning. These services include preparation for federal and state income tax returns.
The aggregate Tax Fees billed for the years ended January 31, 2018 and January 31, 2017 were $7,500 and $5,000, respectively.
Audit
Committee Pre-Approval Policies and Procedures
Effective
May 6, 2003, the SEC adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit
related service, the engagement be:
|
●
|
approved
by our audit committee; or
|
|
|
|
|
●
|
entered
into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures
are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures
do not include delegation of the audit committee’s responsibilities to management.
|
Our
Audit Committee pre-approved all services provided by our independent auditors for the period covered by this Annual Report on
Form 10-K.
MamaMancini’s
Holdings, Inc.
Consolidated
Statements of Cash Flows
|
|
For the Years Ended
|
|
|
|
January 31, 2018
|
|
|
January 31, 2017
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
319,740
|
|
|
$
|
(301,080
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
538,322
|
|
|
|
441,585
|
|
Amortization of debt discount
|
|
|
63,428
|
|
|
|
28,526
|
|
Share-based compensation
|
|
|
428,240
|
|
|
|
598,200
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
(Increase) Decrease in:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(1,266,895
|
)
|
|
|
(341,238
|
)
|
Inventories
|
|
|
(17,653
|
)
|
|
|
(248,871
|
)
|
Prepaid expenses
|
|
|
(81,720
|
)
|
|
|
29,093
|
|
Increase (Decrease) in:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
1,332,038
|
|
|
|
151,019
|
|
Net Cash Provided by (Used in) Operating Activities
|
|
|
1,315,500
|
|
|
|
357,234
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash paid for fixed assets
|
|
|
(1,474,816
|
)
|
|
|
(552,869
|
)
|
Net Cash Used in Investing Activities
|
|
|
(1,474,816
|
)
|
|
|
(552,869
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Repayment of note payable – related party
|
|
|
-
|
|
|
|
(7,344
|
)
|
Repayment of note payable
|
|
|
(1,350,000
|
)
|
|
|
(486,279
|
)
|
Debt issuance costs
|
|
|
(24,697
|
)
|
|
|
(50,000
|
)
|
Borrowings (repayments) of line of credit, net
|
|
|
1,339,245
|
|
|
|
403,524
|
|
Borrowings from term loan
|
|
|
251,671
|
|
|
|
340,000
|
|
Repayment of term loan
|
|
|
(146,388
|
)
|
|
|
(126,668
|
)
|
Net Cash Provided by Financing Activities
|
|
|
69,831
|
|
|
|
73,233
|
|
|
|
|
|
|
|
|
|
|
Net Decrease in Cash
|
|
|
(89,485
|
)
|
|
|
(122,402
|
)
|
|
|
|
|
|
|
|
|
|
Cash - Beginning of Period
|
|
|
670,807
|
|
|
|
793,209
|
|
|
|
|
|
|
|
|
|
|
Cash - End of Period
|
|
$
|
581,322
|
|
|
$
|
670,807
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash Paid During the Period for:
|
|
|
|
|
|
|
|
|
Income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Interest
|
|
$
|
464,958
|
|
|
$
|
721,821
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock issued for Series A Preferred dividends
|
|
$
|
91,565
|
|
|
$
|
271,914
|
|
Debt issuance costs included in principal balance of note
|
|
$
|
89,104
|
|
|
$
|
358,523
|
|
See
accompanying notes to the consolidated financial statements
MamaMancini’s
Holdings, Inc.
Notes
to Consolidated Financial Statements
January
31, 2018
Note
1 - Nature of Operations and Basis of Presentation
Nature
of Operations
MamaMancini’s
Holdings, Inc. (the “Company”), (formerly known as Mascot Properties, Inc.) was organized on July 22, 2009 as a Nevada
corporation. The Company has a year-end of January 31.
The
Company is a manufacturer and distributor of beef meatballs with sauce, turkey meatballs with sauce, beef meat loaf and other
similar meats and sauces. The Company’s customers are located throughout the United States, with a large concentration in
the Northeast and Southeast.
Recent
Developments
On
November 1, 2017, the Company, Joseph Epstein Food Enterprises, Inc., a New Jersey corporation (“JEFE”), and MMMB
Acquisition, Inc., a Nevada corporation and wholly owned subsidiary of the Company (“Merger Sub”), completed the merger
contemplated by the Agreement and Plan of Merger (“Merger Agreement”) by and among the Company, JEFE, and Merger Sub,
dated as of November 1, 2017. Pursuant to the terms of the Merger Agreement, JEFE has merged with and into Merger Sub, with Merger
Sub continuing as the surviving entity and a wholly owned subsidiary of the Company.
Under the terms of the Merger Agreement and in connection with the merger, the Company acquired all assets
of JEFE. The consideration for the transaction was (a) the extinguishment of the Inter-Company Loan between the parties, (b) the
assumption by the Company of all JEFE accounts payable and accrued expenses, (c) assumption by the Company of certain third-party
loans to JEFE and (d) indemnification of Carl Wolf with respect to his collateralization of a bank loan to JEFE in the amount of
approximately $250,000. As a result of the transaction, (i) the Company became the sole shareholder of JEFE, which became a wholly-owned
subsidiary of the Company (ii) following the Closing, JEFE’s financial statements as of the Closing are consolidated with
the Consolidated Financial Statements of the Company (collectively, the “Merger Transaction”). No cash or stock was
exchanged in connection with the transaction.
In accordance with the guidance
under Accounting Standards
Codification
Topic 805:
Business
Combinations
,
the Merger transactions
are
accounted for as
a
reorganization
of
entities
under common control. The assets and liabilities of JEFE transferred between entities under common control were recorded by the
Company based on JEFE’s historical cost basis.
The
financial statements of both entities have been combined for all periods presented.
Note
2 - Summary of Significant Accounting Policies
Basis
of Presentation
The
consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries.
All material intercompany balances and transactions have been eliminated in consolidation.
Principles
of Consolidation
The
consolidated financial statements include all accounts of the entities as of the reporting period ending date(s) and for the reporting
period(s). All inter-company balances and transactions have been eliminated.
Use
of Estimates
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Such estimates and assumptions impact, among others, the following: allowance for doubtful accounts,
inventory obsolescence and the fair value of share-based payments.
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 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 change in consumer demand. The Company’s operations
are subject to significant risk and uncertainties including financial and operational risks including 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
The
Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The
Company held no cash equivalents at January 31, 2018 and 2017.
The
Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial
institution. The balance at times may exceed federally insured limits.
Accounts
Receivable and Allowance for Doubtful Accounts
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. The Company provides an allowance for doubtful accounts based upon a review of the
outstanding accounts receivable, historical collection information and existing economic conditions. The Company determines if
receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management.
The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded,
which is the face amount of the receivable net of the allowance for doubtful accounts. As of January 31, 2018 and 2017, the Company
had reserves of $2,000.
Inventories
Inventories are stated at the lower of cost or net realizable value using the first-in, first-out (FIFO) valuation
method. Inventory was comprised of the following at January 31, 2018 and 2017:
|
|
January 31, 2018
|
|
|
January 31, 2017
|
|
Raw Materials
|
|
$
|
486,917
|
|
|
$
|
374,000
|
|
Work in Process
|
|
|
21,387
|
|
|
|
-
|
|
Finished goods
|
|
|
315,972
|
|
|
|
432,623
|
|
|
|
$
|
824,276
|
|
|
$
|
806,623
|
|
Property
and Equipment
Property
and equipment are recorded at cost. Depreciation expense is computed using straight-line methods over the estimated useful lives.
Asset
lives for financial statement reporting of depreciation are:
Machinery and equipment
|
|
|
2-7 years
|
|
Furniture and fixtures
|
|
|
3 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 consolidated statements of operations.
Fair
Value of Financial Instruments
For
purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged
in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s
short-term financial instruments approximates fair value due to the relatively short period to maturity for these instruments.
Research
and Development
Research
and development is expensed as incurred. Research and development expenses for the years ended January 31, 2018 and 2017 were
$138,000 and $153,296, respectively.
Shipping
and Handling Costs
The
Company classifies freight billed to customers as sales revenue and the related freight costs as general and administrative expenses.
Revenue
Recognition
The
Company records revenue for products when all of the following have occurred: (1) persuasive evidence of an arrangement exists,
(2) the product is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related
customer receivable is reasonably assured. There is no stated right of return for products.
The
Company meets these criteria upon shipment.
Expenses
such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows:
|
|
Year Ended
Ended
January 31, 2018
|
|
|
Year Ended
Ended
January 31, 2017
|
|
Gross Sales
|
|
$
|
28,004,078
|
|
|
$
|
18,498,142
|
|
Less: Slotting, Discounts, Allowances
|
|
|
460,743
|
|
|
|
449,350
|
|
Net Sales
|
|
$
|
27,543,335
|
|
|
$
|
18,048,792
|
|
Cost
of Sales
Cost
of sales represents costs directly related to the production and manufacturing of the Company’s products. Costs include
product development, freight, packaging, and print production costs.
Advertising
Costs
incurred for producing and communicating advertising for the Company are charged to operations as incurred. Producing and communicating
advertising expenses for the years January 31, 2018 and 2017 were $1,773,939 and $1,607,581, respectively.
Stock-Based
Compensation
The
Company accounts for stock-based compensation in accordance with ASC Topic 718, “
Compensation – Stock Compensation”
(“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee compensation.
It defines a fair value-based method of accounting for an employee stock option or similar equity instrument. The Company accounts
for compensation cost for stock option plans in accordance with ASC 718. The Company accounts for share-based payments to non-employees
in accordance with ASC 505-50 “
Equity Based Payments to Non-Employees
”.
The
Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at
their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.
Share-based
payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards
issued to non-employees for services rendered have been recorded at the fair value of the share-based payment, which is the more
readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, 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. Stock-based compensation expenses are included in cost of goods sold or selling,
general and administrative expenses, depending on the nature of the services provided, in the consolidated statement of operations.
Share-based payments issued to placement agents are classified as a direct cost of a stock offering and are recorded as a reduction
in additional paid in capital.
For the years ended January 31, 2018 and 2017, share-based compensation amounted to $428,240 and $598,200,
respectively.
For
the years ended January 31, 2018 and 2017, when computing fair value of share-based payments, the Company has considered the following
variables:
|
|
January 31, 2018
|
|
|
January 31, 2017
|
|
Risk-free interest rate
|
|
|
1.60% to 1.99
|
%
|
|
|
1.25% to 1.90
|
%
|
Expected life of grants
|
|
|
2.0 – 4.0 years
|
|
|
|
2.5 years
|
|
Expected volatility of underlying stock
|
|
|
139% to 177
|
%
|
|
|
139% to 179
|
%
|
Dividends
|
|
|
0
|
%
|
|
|
0
|
%
|
The
expected option term is computed using the “simplified” method as permitted under the provisions of ASC 718-10-S99.
The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does
not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
The expected stock price volatility for the Company’s stock options was
estimated
using the historical volatilities of the Company’s common stock. Risk free interest rates were obtained from U.S. Treasury
rates for the applicable periods.
Earnings
(Loss) Per Share
Earnings
per share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term
is used to refer to either earnings or loss per share. EPS is computed pursuant to Section 260-10-45 of the FASB Accounting Standards
Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16, basic EPS shall be computed by dividing income available
to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the
period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred
stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned)
from income from continuing operations (if that amount appears in the income statement) and also from net income. The computation
of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional
common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect
the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options
or warrants.
The
following table provides a reconciliation of the numerator and denominator used in computing basic and diluted net income (loss)
attributable to common stockholders per common share.
|
|
For the Years Ended
|
|
|
|
January 31, 2018
|
|
|
January 31, 2017
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders
|
|
$
|
228,175
|
|
|
$
|
(506,001
|
)
|
Effect of dilutive securities:
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
|
|
$
|
228,175
|
|
|
$
|
(506,001
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic
|
|
|
29,811,521
|
|
|
|
27,100,316
|
|
Dilutive securities (a):
|
|
|
|
|
|
|
|
|
Series A Preferred
|
|
|
-
|
|
|
|
-
|
|
Options
|
|
|
350,694
|
|
|
|
-
|
|
Warrants
|
|
|
1,974,648
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding and assumed conversion – diluted
|
|
|
32,205,577
|
|
|
|
27,100,316
|
|
|
|
|
|
|
|
|
|
|
Basic net income (loss) per common share
|
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per common share
|
|
$
|
0.01
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
(a) - Anti-dilutive securities excluded:
|
|
|
3,041,001
|
|
|
|
11,659,841
|
|
Income
Taxes
The
Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, “
Income Taxes
.”
Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax
assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized.
FASB
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement
of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more
likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of January
31, 2018. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. No
amounts were accrued for the payment of interest and penalties at January 31, 2018. The Company is currently not aware of any
issues under review that could result in significant payments, accruals or material deviation from its position. The Company is
subject to income tax examinations by major taxing authorities since inception.
The
Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes. These
potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions,
and compliance with federal, state, and city tax laws. The Company’s management does not expect that the total amount of
unrecognized tax benefits will materially change over the next twelve months.
The
Company is no longer subject to tax examinations by tax authorities for years prior to 2015.
Related
Parties
The
Company follows subtopic ASC 850-10 for the identification of related parties and disclosure of related party transactions.
Pursuant
to Section 850-10-20, the related parties include: (a) affiliates of the Company (“Affiliate” means, with respect
to any specified person, any other person that, directly or indirectly through one or more intermediaries, controls, is controlled
by or is under common control with such person, as such terms are used in and construed under Rule 405 under the Securities Act);
(b) entities for which investments in their equity securities would be required, absent the election of the fair value option
under the Fair Value Option Subsection of Section 825-10-15, to be accounted for by the equity method by the investing entity;
(c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship
of management; (d) principal owners of the Company; (e) management of the Company; (f) other parties with which the Company may
deal if one party controls or can significantly influence the management or operating policies of the other to an extent that
one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g) other parties that can
significantly influence the management or operating policies of the transacting parties or that have an ownership interest in
one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties
might be prevented from fully pursuing its own separate interests.
Recent
Accounting Pronouncements
In
July 2015, the FASB issued the ASU No. 2015-11 “
Inventory (Topic 330)
:
Simplifying the Measurement of Inventory”
(“ASU 2015-11”)
.
The amendments in this ASU do not apply to inventory that is measured using last-in, first-out
(LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured
using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this ASU at the lower
of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less
reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured
using LIFO or the retail inventory method. For public business entities, the amendments in this ASU are effective for fiscal years
beginning after December 15, 2016, including interim periods within those fiscal years. During the years ended January 31, 2017,
the Company adopted the methodologies prescribed by ASU 2015-11 and deemed that the adoption of the ASU did not have a material
effect on its financial position or results of operations.
In
February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842).”
Under ASU 2016-02, lessees will be required
to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the
right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of
financial statements better understand the nature of an entity’s leasing activities. This ASU is effective for public reporting
companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted
using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its consolidated
financial statements and disclosures.
In
April 2016, the FASB issued ASU No. 2016-09, “
Compensation – Stock Compensation (Topic 718)
”. The FASB
issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based
payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified,
including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on
the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including
interim periods within those fiscal years. During the year ended January 31, 2018, the Company adopted the methodologies prescribed
by ASU 2016-09 and deemed that the adoption of the ASU did not have a material effect on its financial position or results of
operations.
In
April 2016, the FASB issued ASU No. 2016-10, “
Revenue from Contracts with Customers: Identifying Performance Obligations
and Licensing (Topic 606)
”. In March 2016, the FASB issued ASU No. 2016-08, “
Revenue from Contracts with Customers:
Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)
”. These amendments provide additional
clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”.
The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance
obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides
a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual
property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal
versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10
and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09, which the Company intends to adopt for interim
and annual reporting periods beginning after December 15, 2017. The Company does not expect the adoption will have a material
effect on its financial statements and disclosures.
In
May 2016, the FASB issued ASU No. 2016-12, “
Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements
and Practical Expedients”
, which narrowly amended the revenue recognition guidance regarding collectability, noncash
consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is
currently evaluating the standard and does not expect the adoption will have a material effect on its consolidated financial statements
and disclosures. The Company is in the process of performing an initial review of custom contracts to determine the impact that
ASU 2014-09 and its subsequent updates will have on the Company’s condensed consolidated financial statements or financial
statement disclosures upon adoption. Based on this preliminary review, the Company believes that the timing and measurement of
revenue for these customers will be similar to the current revenue recognition. However, this view is preliminary and could change
based on the detailed analysis associated with the conversion and implementation phases of ASU 2014-09. The Company intends to
utilize the transition method, retrospectively adopting with the cumulative effect of initially applying the standard at the date
of initial application.
In
August 2016, the FASB issued ASU 2016-15,
“Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts
and Cash Payments”
(“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and
cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning
after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply,
in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company does
not expect the adoption will have a material effect on its financial statements and disclosures.
In
October 2016, the FASB issued ASU 2016-16,
“Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”,
which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity
transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective
for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the
update is permitted. The Company is currently evaluating the impact of the new standard.
In
November 2016, the FASB issued ASU 2016-18,
“Statement of Cash Flows (Topic 230)”
, requiring that the statement
of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted
cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December
15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which
requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard.
In
May 2017, the FASB issued ASU 2017-09, “
Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,”
which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to
apply modification accounting in Topic 718. This standard is required to be adopted in the first quarter of 2018. The Company
is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures.
In
July 2017, the FASB issued ASU 2017-11, “
Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic
480) and Derivatives and Hedging (Topic 815): I. Accounting for Certain Financial Instruments with Down Round Features; II. Replacement
of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily
Redeemable Noncontrolling Interests with a Scope Exception”
. Part I of this update addresses the complexity of accounting
for certain financial instruments with down round features. Down round features are features of certain equity-linked instruments
(or embedded features) that result in the strike price being reduced on the basis of the pricing of future equity offerings. Current
accounting guidance creates cost and complexity for entities that issue financial instruments (such as warrants and convertible
instruments) with down round features that require fair value measurement of the entire instrument or conversion option. Part
II of this update addresses the difficulty of navigating Topic 480,
Distinguishing Liabilities from Equity
, because of
the existence of extensive pending content in the FASB Accounting Standards Codification. This pending content is the result of
the indefinite deferral of accounting requirements about mandatorily redeemable financial instruments of certain nonpublic entities
and certain mandatorily redeemable noncontrolling interests. The amendments in Part II of this update do not have an accounting
effect. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.
In
September 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-13,
Revenue
Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842).
The
new standard, among other things, provides additional implementation guidance with respect to Accounting Standards Codification
(ASC) Topic 606 and ASC Topic 842. ASU 2017-03 is effective for annual and interim fiscal reporting periods beginning after December
15, 2017. The Company does not expect the adoption will have a material effect on its financial statements and disclosures.
Management
does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material
effect on the accompanying consolidated financial statements.
Subsequent
Events
The
Company evaluates subsequent events and transactions that occur after the balance sheet date for potential recognition or disclosure.
Any material events that occur between the balance sheet date and the date that the financial statements were issued are disclosed
as subsequent events, while the financial statements are adjusted to reflect any conditions that existed at the balance sheet
date.
Note
3 - Property and Equipment:
Property
and equipment on January 31, 2018 and January 31, 2017 are as follows:
|
|
January 31, 2018
|
|
|
January 31, 2017
|
|
Machinery and Equipment
|
|
$
|
2,431,589
|
|
|
$
|
1,707,004
|
|
Furniture and Fixtures
|
|
|
71,969
|
|
|
|
66,306
|
|
Leasehold Improvements
|
|
|
2,071,169
|
|
|
|
1,326,861
|
|
|
|
|
4,574,727
|
|
|
|
3,100,171
|
|
Less: Accumulated Depreciation
|
|
|
2,074,852
|
|
|
|
1,536,790
|
|
|
|
$
|
2,499,875
|
|
|
$
|
1,563,381
|
|
Depreciation expense charged to income for the years ended January 31, 2018 and 2017 amounted to $538,322
and $441,585, respectively.
Note
4 - Investment in Meatball Obsession, LLC
During
2011, the Company acquired a 34.62% interest in Meatball Obsession, LLC (“MO”) for a total investment of $27,032.
This investment is accounted for using the equity method of accounting. Accordingly, investments are recorded at acquisition cost
plus the Company’s equity in the undistributed earnings or losses of the entity.
At
December 31, 2011, the investment was written down to $0 due to losses incurred by MO.
The
Company’s ownership interest in MO has decreased due to dilution. At January 31, 2018 and 2017, the Company’s ownership
interest in MO was 12% and 12%, respectively.
Note
5 - Related Party Transactions
Meatball
Obsession, LLC
A
current director of the Company is the chairman of the board and shareholder of Meatball Obsession LLC (“MO”).
For
the years ended January 31, 2018 and 2017, the Company generated approximately $104,081 and $76,342 in revenues from MO, respectively.
As
of January 31, 2018 and 2017, the Company had a receivable of $32,869 and $8,189 due from MO, respectively.
WWS,
Inc.
A
current director of the Company is the president of WWS, Inc.
For
the years ended January 31, 2018 and 2017, the Company recorded $24,000 in commission expense from WWS, Inc. generated sales.
Notes
Payable – Related Party
During
the year ended January 31, 2016, the Company received aggregate proceeds of $125,000 from notes payable with the CEO of the Company.
The notes bear interest at a rate of 4% per annum and matured on December 31, 2016. The notes were subsequently extended until
February 2019. As of January 31, 2018 and 2017, the outstanding principal balance of the notes was $117,656.
The Company received advances from the
CEO
of the Company which bear interest at 8%. The advances are due on February 1, 2020. At January 31, 2018 and 2017, there was $400,000
of principal outstanding, respectively.
The Company received advances from an entity 100% owned by the
CEO
of the Company, which bear interest at 8%. The advances are due on February 1, 2020. At January 31, 2018 and 2017, there was $132,000
of principal outstanding, respectively.
For the years ended January 31, 2018 and
2017, the Company recorded interest expense of $47,266 and $47,266, respectively, related to the above related party notes payable.
Note
6 - Loan and Security Agreement
On September 3, 2014, the Company entered into a Loan and Security Agreement (“Loan and Security Agreement”)
with Entrepreneur Growth Capital, LLC (“EGC”) which contains a line of credit. As of January 31, 2018 and 2017, the
outstanding balance on the line of credit was $2,702,390 and $1,363,145, respectively. In September 2016, the agreement was amended
and the total facility increased to an aggregate principal amount of up to $3,200,000. The facility consists of the following:
●
|
Accounts Revolving Line of Credit:
|
|
$
|
2,150,000
|
|
●
|
Inventory Revolving Line of Credit:
|
|
$
|
350,000
|
|
●
|
Term Loan:
|
|
$
|
800,000
|
|
EGC may from time to time make loans in an aggregate amount not to exceed the Accounts Revolving Line of Credit
up to 85% of the net amount of Eligible Accounts (as defined in the Loan and Security Agreement). In July 2017, EGC made an accommodation
whereby the Accounts Receivable Line of Credit could be increased to $2,500,000, provided that the aggregate principal amount of
the facility did not exceed $3,200,000. Also, in July 2017, EGC advanced an additional loan to the Company in the principal amount
of $300,000, subject to $50,000 monthly repayments commencing October 31, 2017. In relation to the over advance, the Company paid
a fee totaling $24,697 which is recorded as a debt discount and will be amortized over the remaining life of the note. EGC may
from time to time make loans in an aggregate amount not to exceed the Inventory Revolving Line of Credit against Eligible Inventory
(as defined in the Loan and Security Agreement) in an amount up to 50% of finished goods and in an amount up to 20% of raw material,
which is capped at $30,000.
The revolving interest rates is equal to the highest prime rate in effect during each month as generally reported
by Citibank, N.A. plus (a) 2.5% on loans and advances made against eligible accounts and (b) 4.0% on loans made against eligible
inventory. The term loan bears interest at a rate of the highest prime rate in effect during each month as generally reported by
Citibank, N.A. plus 4.0%. The initial term of the facility is for a period of two years and will automatically renew for an additional
one-year period. The Company is required to pay an annual facility fee equal to 0.75% of the total $3,200,000 facility and pays
an annualized maintenance fee equal to 2.16% of the total facility. In the event of default, the Company shall pay 10% above the
stated rates of interest per the Agreement. The drawdowns are secured by all of the assets of the Company. Due to the terms of
the agreement regarding a subjective acceleration clause and a lockbox arrangement, the line of credit is shown as a current liability
on the consolidated balance sheets.
On September 3, 2014, the Company also entered into a 5-year $600,000 Secured Promissory Note (“EGC
Note”) with EGC. In September 2016, the ECG Note was increased to $700,000 with an extended maturity date of September 30,
2021. The amended EGC Note is payable in 60 monthly installments of $11,667. The EGC Note was further amended in October 2017 to
increase the note to $800,000 with principal payments of $13,795. The EGC Note bears interest at the prime rate plus 4.0% and is
payable monthly, in arrears. In the event of default, the Company shall pay 10% above the stated rates of interest per the Loan
and Security Agreement. The EGC Note is secured by all of the assets of the Company. The outstanding balance on the term loan was
$758,615 and $653,332 as of January 31, 2018 and 2017, respectively.
Additionally,
in connection with the Loan and Security Agreement, Carl Wolf, the Company’s Chief Executive Officer, entered into a Guarantee
Agreement with EGC, personally guaranteeing all the amounts borrowed on behalf of the Company under the Loan and Security Agreement.
Note 7 – Notes Payable
On
December 19, 2014, the Company entered into a securities purchase agreement (the “Manatuck Purchase Agreement”) with
Manatuck Hill Partners, LLC (“Manatuck”) whereby the Company issued a convertible redeemable debenture (the “Manatuck
Debenture”) in favor of Manatuck. The Manatuck Debenture is for $2,000,000 bearing interest at a rate of 14% and matures
in February 2016. Upon issuance of the Manatuck Debenture, the Company granted Manatuck 200,000 shares of the Company’s
restricted common stock. In April 2015, the maturity date was extended to May 2016 and 30,000 shares of restricted common stock
were issued to Manatuck. Based on management’s review, the accounting for debt modification applied. The Company valued
the 30,000 shares at the grant date share price of $1.32 and recorded $39,600 to debt discount on the consolidated balance sheet.
Upon
issuance of the debenture and subsequent extension, a debt discount of $498,350 was recorded for the fees incurred by the buyer
as well as the value of the common shares granted to Manatuck. The debt discount will be amortized over the earlier of (i) the
term of the debt or (ii) conversion of the debt, using the straight-line method which approximates the effective interest method.
The amortization of debt discount is included as a component of other expense in the consolidated statements of operations.
On
October 29, 2015, the note was further amended to extend the maturity date to December 19, 2016. Per the terms of the execution
of the extension, the Company was required to purchase the above 230,000 shares issued to Manatuck for a share price of $0.65,
a value of $149,500 and incurred an amendment fee of $170,500, both of which were added to the outstanding principal of the debt.
In addition, the extension reduced accrued interest by $220,000 and increased the outstanding principal of the debt by $220,000.
Based on management’s review, the accounting for debt extinguishment applied. In accordance with the accounting for debt
extinguishment, the Company wrote-off the existing debt of $2,000,000, wrote-off the unamortized debt discount of $190,483 and
wrote-off the remaining debt issuance costs relating to this note of $19,106. The loss on debt extinguishment of $380,089 on the
statement of operations is comprised of the write-off of the remaining debt discount of $190,483, the write-off of the debt issuance
costs of $19,106, and the amendment fee of $170,500.
In
August 2016, the note was further amended to extend the maturity date to September 30, 2017 and also removed the convertible feature
of the note. The principal amount of the note was increased to $2,898,523, which is inclusive of accrued interest payable through
October 31, 2016. In addition, the Company paid an origination fee of $50,000 on October 31, 2016 which is recorded as a debt
discount and will be amortized over the remaining life of the note using the effective interest method.
On
March 10, 2017, the Company further extended the maturity date to May 1, 2018. The Company paid to Manatuck a cash fee equal to
two percent (2%) of the mutually-agreed pro-forma balance payable on account of the note as of March 31, 2017.
On
January 22, 2018, the Company further extended the maturity date to November 1, 2018. Per the terms of the amended agreement:
|
1)
|
The
Company will pay to Manatuck a cash fee equal to two percent (2%) of the mutually-agreed pro-forma balance payable on account
of the note as of January 31, 2018, which shall include all interest which would be accrued on the note through January 31,
2018;
|
|
|
|
|
2)
|
The
Company shall make monthly principal payments to Manatuck of $100,000.
|
Based
on management’s review of the amended agreement and extension, the accounting for debt modification applied. The Company
accrued the 2% fee totaling $52,236 which is recorded as a debt discount and will be amortized over the remaining life of the
note using the effective interest method. There was unamortized debt discount of $84,841 and $48,094 as of January 31, 2018 and
2017, respectively.
The outstanding principal net of debt discount at January 31, 2018 and 2017 was $1,403,082 and $2,700,725,
respectively.
On April 29, 2015, the Company entered into a note payable with a bank for $250,000, which was used to pay
down and replace a prior note payable. The note bears interest at 3.75%, with interest being due monthly. The note is due in full
on the maturity date of April 1, 2019. The note is fully guaranteed by the Company’s
Chief
Executive Officer.
Future
maturities of all debt (including debt discussed above in Notes 5, 6 and 7) are as follows:
For the Years Ending January 31,
|
|
|
|
2019
|
|
$
|
4,198,784
|
|
2020
|
|
|
483,758
|
|
2021
|
|
|
658,051
|
|
2022
|
|
|
136,852
|
|
2023
|
|
|
148,579
|
|
Thereafter
|
|
|
124,093
|
|
|
|
$
|
5,750,117
|
|
Note
8 - Concentrations
Revenues
During
the year ended January 31, 2018, the Company earned revenues from two customers representing approximately 40% and 10% of gross
sales. During the year ended January 31, 2017, the Company earned revenues from two customers representing approximately 28% and
13% of gross sales.
As
of January 31, 2018, these two customers represented approximately 43% and 15% of total gross outstanding receivables, respectively.
As of January 31, 2017, these two customers represented approximately 44% and 12% of total gross outstanding receivables, respectively.
Note 9 - Stockholders’ Deficit
Common
Stock
On
July 27, 2017, (the effective date), 23,400 shares of the Company’s Series A Preferred Stock were automatically converted
into approximately 3,466,667 shares of the Company’s Common Stock. Pursuant to the terms of the Certificate of Designation,
the automatic conversion occurred on June 27, 2017 following the volume weighted average price of the Common Stock during any
ten consecutive trading days remaining at least $1.0125. The conversion became effective on July 27, 2017.
During
the years ended January 31, 2018, the Company issued 90,717 shares of its common stock to the holders of the Series A Preferred
stockholders for the dividends in arrears totaling $91,565.
During
the years ended January 31, 2017, the Company issued 509,894 shares of its common stock to the holders of the Series A Preferred
stockholders for the dividends in arrears totaling $271,914.
During the year ended January 31, 2018, the Company issued 225,882 shares of its common stock to employees
and consultants for services rendered of $255,500.
During
the year ended January 31, 2017, the Company issued 793,307 shares of its common stock to employees and consultants for services
rendered of $470,500.
Treasury
Stock
As discussed in Note 7, upon amendment of the Manatuck Debenture on October 29, 2015, the Company repurchased
the 230,000 shares for an aggregate purchase price of $149,500 which is presented as Treasury Stock on the consolidated balance
sheets.
(C)
Options
The
following is a summary of the Company’s option activity:
|
|
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding – January 31, 2016
|
|
|
496,404
|
|
|
$
|
1.04
|
|
Exercisable – January 31, 2016
|
|
|
496,404
|
|
|
$
|
1.04
|
|
Granted
|
|
|
385,000
|
|
|
$
|
0.46
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding – January 31, 2017
|
|
|
881,404
|
|
|
$
|
0.78
|
|
Exercisable – January 31, 2017
|
|
|
799,404
|
|
|
$
|
0.78
|
|
Granted
|
|
|
239,000
|
|
|
$
|
1.21
|
|
Exercised
|
|
|
-
|
|
|
$
|
-
|
|
Forfeited/Cancelled
|
|
|
(254,404
|
)
|
|
$
|
1.05
|
|
Outstanding – January 31, 2018
|
|
|
866,000
|
|
|
$
|
0.87
|
|
Exercisable – January 31, 2018
|
|
|
699,000
|
|
|
$
|
0.78
|
|
|
|
|
Options Outstanding
|
|
|
|
|
Options Exercisable
|
|
Exercise
Price
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
|
Weighted
Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.39 – 2.97
|
|
|
|
866,000
|
|
|
2.42 years
|
|
$
|
0.87
|
|
|
|
699,000
|
|
|
$
|
0.78
|
|
At January 31, 2018 the total intrinsic value of options outstanding and exercisable was $562,290 and $498,827,
respectively.
For the years ended January 31, 2018 and 2017, the Company recognized share-based compensation related to
options of an aggregate of $172,740 and $127,700, respectively. At January 31, 2018, unrecognized share-based compensation was
$135,614.
(D)
Warrants
The
following is a summary of the Company’s warrant activity:
|
|
Warrants
|
|
|
Weighted Average
Exercise Price
|
|
|
|
|
|
|
|
|
Outstanding – January 31, 2016
|
|
|
4,915,865
|
|
|
$
|
1.05
|
|
Exercisable – January 31, 2017
|
|
|
2,510,000
|
|
|
$
|
1.50
|
|
Granted
|
|
|
2,510,000
|
|
|
|
1.50
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
|
-
|
|
Outstanding – January 31, 2017
|
|
|
7,425,865
|
|
|
$
|
1.06
|
|
Exercisable – January 31, 2017
|
|
|
7,425,865
|
|
|
$
|
1.06
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
Exercised
|
|
|
(364,466
|
)
|
|
$
|
-
|
|
Forfeited/Cancelled
|
|
|
-
|
|
|
$
|
-
|
|
Outstanding – January 31, 2018
|
|
|
7,061,399
|
|
|
$
|
1.06
|
|
Exercisable – January 31, 2018
|
|
|
7,061,399
|
|
|
$
|
1.06
|
|
Warrants Outstanding
|
|
|
Warrants Exercisable
|
|
Exercise
Price
|
|
|
Number
Outstanding
|
|
|
Weighted
Average
Remaining
Contractual
Life
(in years)
|
|
|
Weighted
Average
Exercise Price
|
|
|
Number
Exercisable
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.68 – 2.50
|
|
|
|
7,061,399
|
|
|
|
2.54 years
|
|
|
$
|
1.06
|
|
|
|
7,061,399
|
|
|
$
|
1.06
|
|
At
January 31, 2018, the total intrinsic value of warrants outstanding and exercisable was $3,020,483 and $3,020,483, respectively.
During the year ended January 31, 2018, 364,466 warrants were exercised by the warrant holders on a cashless
basis. The Company issued 159,454 shares of common stock as a result of this exercise.
Note
10 - Commitments and Contingencies
Litigations,
Claims and Assessments
From
time to time, the Company may become involved in various lawsuits and legal proceedings, which 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. The Company is currently not aware of any such legal proceedings or claims that they believe
will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.
Licensing
and Royalty Agreements
On
March 1, 2010, the Company was assigned a Development and License agreement (the “Agreement”). Under the terms of
the Agreement the Licensor shall develop for the Company a line of beef meatballs with sauce, turkey meatballs with sauce and
other similar meats and sauces for commercial manufacture, distribution and sale (each a “Licensor Product” and collectively
the “Licensor Products”). Licensor shall work with Licensee to develop Licensor Products that are acceptable to Licensee.
Upon acceptance of a Licensor Product by Licensee, Licensor’s trade secret recipes, formulas methods and ingredients for
the preparation and production of such Licensor Products (the “Recipes”) shall be subject to this Development and
License Agreement.
The
term of the Agreement (the “Term”) shall consist of the Exclusive Term and the Non-Exclusive Term. The 12-month period
beginning on each January 1 and ending on each December 31 is referred to herein as an “Agreement Year”.
The
Exclusive Term began on January 1, 2009 (the “Effective Date”) and ends on the 50th anniversary of the Effective Date,
unless terminated or extended as provided herein. Licensor, at its option, may terminate the Exclusive Term by notice in writing
to Licensee, delivered between the 60th and the 90th day following the end of any Agreement Year if, on or before the 60th day
following the end of such Agreement Year, Licensee has not paid Licensor Royalties with respect to such Agreement Year at least
equal to the minimum royalty (the “Minimum Royalty”) for such Agreement Year. Subject to the foregoing sentence, and
provided Licensee has not breached this Agreement and failed to cure such breach in accordance herewith, Licensee may extend the
Exclusive Term for an additional twenty-five (25) years, by notice in writing to Licensor, delivered on or before the 50th anniversary
of the Effective Date.
The
Non-Exclusive Term begins upon expiration of the Exclusive Term and continues indefinitely thereafter, until terminated by Licensor
due to a material breach hereof by Licensee that remains uncured after notice and opportunity to cure in accordance herewith,
or until terminated by Licensee.
Either
party may terminate this Agreement in the event that the other party materially breaches its obligations and fails to cure such
material breach within ninety (60) days following written notice from the non-breaching party specifying the nature of the breach.
The following termination rights are in addition to the termination rights provided elsewhere in the agreement.
|
●
|
Termination
by Licensee - Licensee shall have the right to terminate this Agreement at any time on ninety (60) days written notice to
Licensor. In such event, all moneys paid to Licensor shall be deemed non-refundable.
|
Under
the terms of the Agreement the Company is required to pay quarterly royalty fees as follows:
During
the Exclusive Term and the Non-Exclusive Term the Company will pay a royalty equal to the royalty rate (the “Royalty Rate”),
multiplied by Company’s “Net Sales”. As used herein, “Net Sales” means gross invoiced sales of Products,
directly or indirectly to unrelated third parties, less (a) discounts (including cash discounts), and retroactive price reductions
or allowances actually allowed or granted from the billed amount (collectively “Discounts”); (b) credits, rebates,
and allowances actually granted upon claims, rejections or returns, including recalls (voluntary or otherwise) (collectively,
“Credits”); (c) freight, postage, shipping and insurance charges; (d) taxes, duties or other governmental charges
levied on or measured by the billing amount, when included in billing, as adjusted for rebates and refunds; and (e) provisions
for uncollectible accounts determined in accordance with reasonable accounting methods, consistently applied.
The
Royalty Rate shall be: 6% of net sales up to $500,000 of net sales for each Agreement year; 4% of Net Sales from $500,000 up to
$2,500,000 of Net Sales for each Agreement year; 2% of Net Sales from $2,500,000 up to $20,000,000 of Net Sales for each Agreement
year; and 1% of Net Sales in excess of $20,000,000 of Net Sales for each Agreement year.
In
order to continue the Exclusive term, the Company shall pay a minimum royalty with respect to the preceding Agreement year as
follows:
Agreement Year
|
|
Minimum
Royalty
to be Paid with
Respect to Such
Agreement Year
|
|
1
st
and 2
nd
|
|
$
|
-
|
|
3
rd
and 4
th
|
|
$
|
50,000
|
|
5
th
, 6th and 7
th
|
|
$
|
75,000
|
|
8
th
and 9
th
|
|
$
|
100,000
|
|
10
th
and thereafter
|
|
$
|
125,000
|
|
The
Company incurred $429,934 and $304,157 of royalty expenses for the years ended January 31, 2018 and 2017. Royalty expenses are
included in general and administrative expenses on the consolidated statement of operations.
Agreements
with Placement Agents and Finders
(A)
April 1, 2015
The
Company entered into a fourth Financial Advisory and Investment Banking Agreement with Spartan Capital Securities, LLC (“Spartan”)
effective April 1, 2015 (the “Spartan Advisory Agreement”). Pursuant to the Spartan Advisory Agreement, the Company
shall pay to Spartan a non-refundable monthly fee of $10,000 through October 1, 2015. The monthly fee shall survive any termination
of the Agreement. Additionally, (i) if at least $4,000,000 is raised in the Financing, the Company shall pay to Spartan a non-refundable
fee of $5,000 per month from November 1, 2015 through October 2017; and (ii) if at least $5,000,000 is raised in the Financing,
the Company shall pay to Spartan a non-refundable fee of $5,000 per month from November 1, 2017 through October 2019. If $10,000,000
or more is raised in the Financing, the Company shall issue to Spartan shares of its common stock having an aggregate value of
$5,000 (as determined by reference to the average volume weighted average trading price for the last five trading days of the
immediately preceding month) on the first day of each month during the period from November 1, 2015 through October 1, 2019.
The
Company upon closing of the Financing shall pay consideration to Spartan, in cash, a fee in an amount equal to 10% of the aggregate
gross proceeds raised in the Financing and 3% of the aggregate gross proceeds raised in the Financing for expenses incurred by
Spartan. The Company shall grant and deliver to Spartan at the closing of the Financing, for nominal consideration, five-year
warrants to purchase a number of shares of the Company’s common stock equal to 10% of the number of shares of common stock
(and/or shares of common stock issuable upon exercise of securities or upon conversion or exchange of convertible or exchangeable
securities) sold at such closing. The warrants shall be exercisable at any time during the five-year period commencing on the
closing to which they relate at an exercise price equal to the purchase price per share of common stock paid by investors in the
Financing or, in the case of exercisable, convertible, or exchangeable securities, the exercise, conversion or exchange price
thereof. If the Financing is consummated by means of more than one closing, Spartan shall be entitled to the fees provided herein
with respect to each such closing.
During
the year ended January 31, 2017, the Company paid to Spartan a one-time engagement fee of $10,000. In connection with the Initial
Closing, the Company agreed to pay an aggregate cash fee and non-accountable allowance of $157,300. The Company also granted warrants
to purchase 364,466 shares of common stock at $0.675 per share. The warrants have a grant date fair value of $241,769 which is
treated as a direct cost of the Financing and has been recorded as a reduction in additional paid in capital. In connection with
the Initial Closing, the Company granted warrants to purchase 80,000 shares of common stock at $1.00 per share. Spartan exercised
364,466 warrants during the year ended January 31, 2018.
During
the years ended January 31, 2018 and 2017, no payments were made to Spartan.
Operating
Lease
The Company has a lease
for office, manufacturing, and warehouse space in East Rutherford, NJ. The lease expires on March 31, 2024, with a 5-year renewa
l
option. The Company leases additional office space in East Rutherford, NJ. This lease is for a 51-month term expiring on March
31, 2019 with annual payments of $18,847.
Rent
expense for the years ended January 31, 2018 and 2017 was $297,339 and $256,681, respectively.
Total
future minimum payments required under the lease as of January 31, 2018 are as follows:
Years
Ending January 31,
|
|
|
|
2019
|
|
$
|
210,809
|
|
2020
|
|
|
201,599
|
|
2021
|
|
|
199,757
|
|
2022
|
|
|
209,846
|
|
2023
|
|
|
211,864
|
|
Thereafter
|
|
|
247,174
|
|
Total
|
|
$
|
1,281,049
|
|
Note
11 - Income Tax Provision (Benefit)
The
income tax provision (benefit) consists of the following:
|
|
January 31, 2018
|
|
|
January 31, 2017
|
|
Federal
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
Deferred
|
|
|
(2,188,418
|
)
|
|
|
(105,137
|
)
|
State and Local
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
-
|
|
|
|
(106,002
|
)
|
Change in valuation allowance
|
|
|
2,188,418
|
|
|
|
211,139
|
|
Income tax provision (benefit)
|
|
$
|
-
|
|
|
$
|
-
|
|
On
December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Reform Bill”) was signed into law. Prior to the enactment of
the Tax Reform Bill, the Company measured its deferred tax assets at the federal rate of 34%. The Tax Reform Bill reduced the
federal tax rate to 21% resulting in the re-measurement of the deferred tax asset as of January 31, 2018. Beginning January 1,
2018, the lower tax rate of 21% will be used to calculate the amount of any federal income tax due on taxable income earned during
2019.
The Company has U.S. federal net operating
loss carryovers (NOLs) of approximately $11.1 million and $11.1 million at January 31, 2018 and 2017, respectively,
available to offset taxable income through 2034. If not used, these NOLs may be subject to limitation under Internal Revenue Code
Section 382 should there be a greater than 50% ownership change as determined under the regulations. The Company plans on undertaking
a detailed analysis of any historical and/or current Section 382 ownership changes that may limit the utilization of the net operating
loss carryovers. The Company also has New Jersey State Net Operating Loss carry overs of $10.9 million and $10.9
million at January 31, 2018 and 2017, respectively, available to offset future taxable income through 2035.
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 for 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. After
consideration of all the information available, Management believes that significant uncertainty exists with respect to future
realization of the deferred tax assets and has therefore established a full valuation allowance. For the years ended January 31,
2018 and 2017, the change in the valuation allowance was $2,188,418 and $211,139, respectively.
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 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 carry forward 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.
If
applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as “Other
expenses – Interest” in the statement of operations. Penalties would be recognized as a component of “General
and administrative.”
No
interest or penalties on unpaid tax were recorded during the years ended January 31, 2018 and 2017, respectively. As of January
31, 2018 and 2017, no liability for unrecognized tax benefits was required to be reported. The Company does not expect any significant
changes in its unrecognized tax benefits in the next year.
The
Company’s deferred tax assets (liabilities) consisted of the effects of temporary differences attributable to the following:
Deferred Tax Assets
|
|
Year Ended
January 31, 2018
|
|
|
Year Ended
January 31, 2017
|
|
|
|
|
|
|
|
|
Net operating loss carryovers
|
|
$
|
3,252,384
|
|
|
$
|
5,456,947
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
3,252,384
|
|
|
|
5,456,947
|
|
Valuation allowance
|
|
|
(3,183,275
|
)
|
|
|
(5,371,693
|
)
|
Deferred tax asset, net of valuation allowance
|
|
|
69,109
|
|
|
|
85,254
|
|
|
|
|
|
|
|
|
|
|
Deferred Tax Liabilities
|
|
|
|
|
|
|
|
|
Other deferred tax liabilities
|
|
|
(69,109
|
)
|
|
|
(85,254
|
)
|
Total deferred tax liabilities
|
|
$
|
(69,109
|
)
|
|
$
|
(85,254
|
)
|
Net deferred tax asset (liability)
|
|
$
|
-
|
|
|
$
|
-
|
|
The
expected tax expense (benefit) based on the statutory rate is reconciled with actual tax expense benefit as follows:
|
|
Year
Ended
January 31, 2018
|
|
|
Year
Ended
January 31, 2017
|
|
|
|
|
|
|
|
|
US
Federal statutory rate
|
|
|
(21.00
|
)%
|
|
|
(34.00
|
)%
|
State
income tax, net of federal benefit
|
|
|
(5.94
|
)
|
|
|
(5.94
|
)
|
Deferred
tax true-up
|
|
|
|
|
|
|
|
|
Change
in valuation allowance
|
|
|
27.03
|
|
|
|
40.03
|
|
Other
permanent differences
|
|
|
(0.09
|
)
|
|
|
(0.09
|
)
|
Income
tax provision (benefit)
|
|
|
-
|
%
|
|
|
-
|
%
|
Note
12
– Subsequent Events
The
Company has evaluated subsequent events through the date the financial statements were available to be issued. Based on this evaluation,
the Company has identified the following reportable subsequent events other than those disclosed elsewhere in these financials.
In
May 2018, the Company entered into a sales leaseback agreement for equipment with a third-party lender. The agreement has a 4-year
lease period and a 15% residual buy back option at the end of the term. The total equipment cost under the agreement was $213,250.