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 April 23, 2019.
|
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
|
|
Carl
Wolf
|
|
75
|
|
Chief
Executive Officer and Chairman of the Board of Directors
|
|
|
|
|
|
|
|
Matthew
Brown
|
|
50
|
|
President
and Director
|
|
|
|
|
|
|
|
Lawrence
Morgenstein
|
|
68
|
|
Chief
Financial Officer
|
|
|
|
|
|
|
|
Steven
Burns
|
|
58
|
|
Director
|
|
|
|
|
|
|
|
Alfred
D’Agostino
|
|
65
|
|
Director
|
|
|
|
|
|
|
|
Thomas
Toto
|
|
64
|
|
Director
|
|
|
|
|
|
|
|
Dean
Janeway
|
|
75
|
|
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. He was controller of Mama Mia Produce from March 2010 to April 2013. Mr. Morgenstein was Corporate Controller
& VP of Finance. Mr. Morgenstein holds a BS in Economics from Rider University in 1972. He further holds an MBA from Rutgers
University GSB in 1976.
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 Chief Operating Officer, 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. 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, 2019 and January 31, 2018.
Name
and
Principal
Position
|
|
Year(5)
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Stock
Awards ($)
|
|
|
Option
Awards ($)
|
|
|
Non-Equity
Incentive Plan Compensation ($)
|
|
|
Non-Qualified
Deferred Compensation Earnings
($)
|
|
|
All
Other Compensation ($)
|
|
|
Totals
($)
|
|
|
Carl
Wolf
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CEO/Chairman(1)
|
|
|
2019
|
|
|
$
|
180,500
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
180,500
|
|
|
|
|
|
2018
|
|
|
$
|
160,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
160,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matt
Brown
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President(2)
|
|
|
2019
|
|
|
$
|
180,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
180,000
|
|
|
|
|
|
2018
|
|
|
$
|
186,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
186,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence
Morgenstein
CFO(3)
|
|
|
2019
|
|
|
$
|
130,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
28,332
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
158,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lewis
Ochs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Former CFO(4)
|
|
|
2019
|
|
|
$
|
33,700
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
121,200
|
|
|
|
|
|
2018
|
|
|
$
|
121,200
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
121,200
|
|
|
|
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.
Morgenstein was appointed as Chief Financial Officer on April 1, 2018. Upon appointment
to this position, Mr. Morgenstein was granted 30,000 options to purchase common stock.
The options had a grant date fair value of $28,332.
|
|
|
|
|
|
|
4.
|
Mr.
Ochs resigned on April 1, 2018.
|
2019
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
STOCK
AWARDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
Number
of
|
|
|
Number
|
|
|
Payout
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
of
|
|
|
Shares
|
|
|
of
|
|
|
Value
of
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
Shares
|
|
|
or
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
|
|
|
|
|
or
Units
|
|
|
Units
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
|
|
|
|
|
of
Stock
|
|
|
of
|
|
|
Units
or
|
|
|
Units
or
|
|
|
|
|
Number
of
|
|
|
Number
of
|
|
|
Number
of
|
|
|
|
|
|
|
|
That
|
|
|
Stock
|
|
|
Other
|
|
|
Other
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
Have
|
|
|
That
|
|
|
Rights
|
|
|
Rights
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Underlying
|
|
|
Option
|
|
|
|
|
Not
|
|
|
Have
|
|
|
That
|
|
|
That
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Exercise
|
|
|
Option
|
|
Vested
|
|
|
Not
|
|
|
Have
Not
|
|
|
Have
Not
|
|
|
|
|
Options
(#)
|
|
|
Options
(#)
|
|
|
Unearned
|
|
|
Price
|
|
|
Expiration
|
|
(#)
|
|
|
Vested
|
|
|
Vested
|
|
|
Vested
|
|
|
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Options
(#)
|
|
|
($)
|
|
|
Date
|
|
(g)
|
|
|
($)
|
|
|
(#)
|
|
|
(#)
|
|
|
Name
(a)
|
|
(b)
|
|
|
(c)
|
|
|
(d)
|
|
|
(e)
|
|
|
(f)
|
|
(9)
|
|
|
(h)
|
|
|
(i)
|
|
|
(j)
|
|
|
Carl
Wolf
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive Officer(1)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew
Brown
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
President(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven
Burns
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director(3)
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.39
|
|
|
4/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
18,750
|
|
|
|
0
|
|
|
$
|
0.80
|
|
|
9/3/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alfred
D’Agostino
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director(4)
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.39
|
|
|
4/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
18,750
|
|
|
|
0
|
|
|
$
|
0.80
|
|
|
9/3/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
Toto
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director(5)
|
|
|
50,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
0.39
|
|
|
4/13/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
18,750
|
|
|
|
0
|
|
|
$
|
0.80
|
|
|
9/3/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dean
Janeway
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director(6)
|
|
|
25,000
|
|
|
|
0
|
|
|
|
0
|
|
|
$
|
1.05
|
|
|
6/27/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,250
|
|
|
|
18,750
|
|
|
|
0
|
|
|
$
|
0.80
|
|
|
9/3/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence
Morgenstein(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Financial Officer
|
|
|
7,500
|
|
|
|
22,500
|
|
|
|
0
|
|
|
$
|
1.21
|
|
|
9/30/2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brent
Smith(8)
|
|
|
8,000
|
|
|
|
4,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chris
Styler(8)
|
|
|
18,000
|
|
|
|
-
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,666
|
|
|
|
3,334
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dan
Mancini(8)
|
|
|
12,000
|
|
|
|
6,000
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Emma
Rosario(8)
|
|
|
3,000
|
|
|
|
-
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eric
Felice(8)
|
|
|
12,000
|
|
|
|
-
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
8,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joe
Smith(8)
|
|
|
18,000
|
|
|
|
-
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
10,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John
Kaminsky(8)
|
|
|
6,000
|
|
|
|
-
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pete
de Pasquale(8)
|
|
|
6,000
|
|
|
|
-
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Priscilla
Goldman(8)
|
|
|
6,000
|
|
|
|
-
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rich
Franco(8)
|
|
|
6,000
|
|
|
|
-
|
|
|
|
0
|
|
|
$
|
0.60
|
|
|
5/2/2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,000
|
|
|
|
2,000
|
|
|
|
0
|
|
|
$
|
1.38
|
|
|
11/2/2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Scott
Shaffer(8)
|
|
|
18,000
|
|
|
|
-
|
|
|
|
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.
7.
8.
|
Mr.
Janeway was appointed as a director on January 24, 2013
Mr.
Morgenstein was appointed Chief Financial Officer on April 1, 2018
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
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 5 years from the date of grant.
In
September 2018, each of our directors were granted stock options to purchase 25,000 shares of the Company’s common stock
at an exercise of $0.80. All such options vested quarterly over a one-year period and expire 5 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 $58,000 in cash compensation for the year ended January 31, 2019 for his additional services in that
capacity.
We
also reimburse all of our directors for reasonable expenses incurred to attend board of director or committee meetings.
The
following Director Compensation Table sets forth the compensation of our directors for the fiscal years ending January 31, 2019
and 2018.
Name
and
Principal
Position (a)
|
|
Year
(b)
|
|
Salary
($)
(b)
|
|
|
Bonus
($)
(b)
|
|
|
Stock
Awards ($)
(b)
|
|
|
Option
Awards ($)
(b)
|
|
|
Non-Equity
Incentive Plan Compensation ($)
(b)
|
|
|
All
Other Compensation ($)
(b)
|
|
|
Total
($)
(b)
|
|
|
Director
|
|
2019
|
|
$
|
58,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
17,876
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
75,876
|
|
|
Steven
Burns (1)
|
|
2018
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,000
|
|
|
$
|
8,918
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
2019
|
|
$
|
10,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
17,876
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
27,876
|
|
|
Alfred D’Agostino
(2)
|
|
2018
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,000
|
|
|
$
|
8,918
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
2019
|
|
$
|
10,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
17,876
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
27,876
|
|
|
Thomas Toto
(3)
|
|
2018
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,000
|
|
|
$
|
8,918
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Director
|
|
2019
|
|
$
|
10,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
17,876
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
27,876
|
|
|
Dean Janeway
(4)
|
|
2018
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
25,000
|
|
|
$
|
8,918
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
33,918
|
|
|
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, 2019. As compensation for his services,
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, 2019. 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 half year. 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 April 8, 2019 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)
|
|
|
22.75
|
%
|
|
Matthew
Brown
|
|
|
5,589,181
|
(4)
|
|
|
17.48
|
%
|
|
Lawrence
Morgenstein
|
|
|
7,500
|
(5)
|
|
|
*
|
|
|
Steven
Burns
|
|
|
1,465,893
|
(6)
|
|
|
4.57
|
%
|
|
Alfred
D’Agostino
|
|
|
950,751
|
(7)
|
|
|
2.97
|
%
|
|
Thomas
Toto
|
|
|
860,693
|
(8)
|
|
|
2.65
|
%
|
|
Dean
Janeway
|
|
|
405,586
|
(9)
|
|
|
1.27
|
%
|
|
All
executive officers and directors as a group (7 persons)
|
|
|
16,706,490
|
|
|
|
49.97
|
%(2)
|
|
|
|
|
|
|
|
|
|
|
|
*Less
than 1%
|
|
|
|
|
|
|
|
|
|
|
(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 April 8, 2019, (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 April 23, 2019 (31,866,241 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)
|
5,253,675
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 107,408 shares issuable on the exercise
of Warrants.
|
|
|
|
|
|
|
(5)
|
Includes
portion of 7,500 stock options which are currently exercisable.
|
|
|
|
|
|
|
(6)
|
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 81,250 shares of common stock.
|
|
|
|
|
|
|
(7)
|
This
amount includes 126,938 shares directly held by Alfred D’Agostino, 635,156 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 81,250 shares of common stock.
|
|
|
|
|
|
|
(8)
|
This
amount includes 679,443 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 81,250 shares of
common stock.
|
|
|
|
|
|
|
(9)
|
This
amount includes 201,035 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 81,250 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 April 23, 2019, we have
31,866,241 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 April 8, 2019, no shares of Series A Convertible
Preferred Stock are issued and outstanding. The Series A Convertible Preferred Stock shares 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, 2019, no dividends were paid on the Company’s
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 April 23, 2019, there are outstanding warrants to purchase 6,245,331 of our common shares. All of the warrants
are exercisable for a term of five years with 14,000 having an exercise price of $2.50 per share (which expire on October 15,
2019), 3,466,664 having an exercise price of $0.675 per share (which expire between June 10, 2020 and November 20, 2020)
80,000 having an exercise price of $1.00 per share (which expire on November 20, 2020) and 2,684,667 having an exercise
price of $1.50 per share (which expire on November 20, 2020).
Options
As
of April 23, 2019, there outstanding options to purchase 649,000 shares of Company Common Stock. Of this amount,
30,000 options at $1.21 per share expire on March 31, 2021, 200,000 options at $0.39 per share
expire on April 13, 2021, 12,000 options at $0.49 per share expire on April 13, 2021, 117,000 options at $0.60 per share
expire on May 2, 2021, 100,000 options at $1.05 per share expire on June 27, 2022, 90,000 options at $1.38 per share
expire on November 5, 2022 and 100,000 options at $0.80 expire on September 3, 2023.
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. Subsequent to issuance, the note was amended to extend the maturity date and also removed
the convertible feature of the note. On January 22, 2018, the Company further extended the maturity date to November 1, 2018.
On
July 17, 2018, the Company further extended the maturity date to May 1, 2019. 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 July 17, 2018, which shall include
all interest which would be accrued on the note through July 17, 2018. Total accrued interest of $392,702 was added to the outstanding
principal balance as of the extension date. The 2% fee was expensed in accordance with debt extinguishment accounting.
On
January 4, 2019, the Manatuck Debenture was fully repaid and retired in lieu of a payment in the amount of $1,199,288.
M&T
Bank Facility
Effective,
January 4, 2019, the Company arranged a new $3.5 million working capital line of credit with M&T Bank at LIBOR plus four points
with a two-year expiration. The Company also arranged a $2.5 million five-year note with M&T Bank at LIBOR plus four points
with repayments in equal payments over 60 months. The new financing replaces the Company’s existing Senior Note from Manatuck
Hill Partners (which was due on May 1, 2019) in the amount of approximately $1.2 million; working capital and term loans in the
amount of approximately $2.8 million payable to EGC and a $250,000 term loan payable to Valley National Bank. Advances under the
line of credit are limited to eighty percent (80%) of eligible accounts receivable (which is subject to an agreed limitation and
is further subject to certain asset concentration provisions) and fifty percent (50%) of eligible inventory (which is subject
to an agreed dollar limitation). The new facility is supported by a first priority security interest in all of the Company’s
business assets and is further subject to various affirmative and negative financial covenants and a limited Guaranty by the Company’s
Chief executive Officer, Carl Wolf.
The
effect of the financing as well as an amendment to certain related party financing to notes maturing January 2024 is to
reclassify approximately $3.4 million from short-term liabilities to long-term loans. The Company estimates it initially will
be paying a 6.5% per annum interest rate on the new financing, versus an average of over 12.5% per annum on the prior financing
it replaces. The Company estimates that it will initially reduce its monthly interest and related fees by approximately $33,000,
as well as initially improving its monthly cash flow by $101,000 in interest and related expenses and monthly debt payments.
The
Company recorded a one-time charge of $121,500 for termination of its existing loans in the month of January and will also amortize
origination fees of $89,000 on the new facility over a 24-month period.
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, 2019 and January 31, 2018, were $40,000 and $40,000, 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, 2019 and January 31, 2018 were $43,000 and $30,000, 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, 2019 and January 31, 2018 were $7,500 and $7,500, 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,
2019
|
|
|
January
31,2018
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
550,048
|
|
|
$
|
319,740
|
|
|
Adjustments
to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
679,005
|
|
|
|
538,322
|
|
|
Amortization
of debt discount
|
|
|
133,314
|
|
|
|
63,428
|
|
|
Share-based
compensation
|
|
|
162,494
|
|
|
|
428,240
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
386,153
|
|
|
|
(1,266,895
|
)
|
|
Inventories
|
|
|
(572,124
|
)
|
|
|
(17,653
|
)
|
|
Prepaid
expenses
|
|
|
106,802
|
|
|
|
(81,720
|
)
|
|
Accounts
payable and accrued expenses
|
|
|
(2,284
|
)
|
|
|
1,332,038
|
|
|
Net
Cash Provided by Operating Activities
|
|
|
1,443,408
|
|
|
|
1,315,500
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Cash
paid for fixed assets
|
|
|
(1,033,724
|
)
|
|
|
(1,474,816
|
)
|
|
Net
Cash Used in Investing Activities
|
|
|
(1,033,724
|
)
|
|
|
(1,474,816
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Repayment
of note payable - related party
|
|
|
(7,812
|
)
|
|
|
-
|
|
|
Repayment
of term loan
|
|
|
(1,058,615
|
)
|
|
|
(146,388
|
)
|
|
Borrowings
from term loan
|
|
|
2,800,000
|
|
|
|
251,671
|
|
|
Repayment
of note payable
|
|
|
(2,130625
|
)
|
|
|
(1,350,000
|
)
|
|
Borrowings
(repayments) of line of credit, net
|
|
|
(90,356
|
)
|
|
|
1,339,245
|
|
|
Proceeds
from capital lease
|
|
|
213,250
|
|
|
|
-
|
|
|
Repayment
of capital lease obligations
|
|
|
(26,993
|
)
|
|
|
-
|
|
|
Debt
issuance costs
|
|
|
(120,446
|
)
|
|
|
(24,697
|
)
|
|
Proceeds
from exercise of options
|
|
|
40,000
|
|
|
|
-
|
|
|
Net
Cash Provided by (Used in) Financing Activities
|
|
|
(381,597
|
)
|
|
|
69,831
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Increase (Decrease) in Cash
|
|
|
28,087
|
|
|
|
(89,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- Beginning of Period
|
|
|
581,322
|
|
|
|
670,807
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- End of Period
|
|
$
|
609,409
|
|
|
$
|
581,322
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY
CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
Cash
Paid During the Period for:
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Interest
|
|
$
|
638,029
|
|
|
$
|
464,958
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTARY
DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Accrued
interest on note payable reclassified to principal
|
|
$
|
392,702
|
|
|
$
|
-
|
|
|
Capital
lease asset additions
|
|
$
|
30,000
|
|
|
$
|
-
|
|
|
Stock
issued for Series A Preferred dividends
|
|
$
|
-
|
|
|
$
|
91,565
|
|
|
Debt
issuance costs included in principal balance of note
|
|
$
|
-
|
|
|
$
|
52,236
|
|
See
accompanying notes to the consolidated financial statements
MamaMancini’s
Holdings, Inc.
Notes
to Consolidated Financial Statements
January
31, 2019
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.
Following
the closing of the merger with Joseph Epstein Food Enterprises, Inc. (“JEFE”) on November 1, 2017, the financial statements
of JEFE are consolidated with that of the Company. The prior period financial statements included in the condensed consolidated
financial statements have been adjusted to reflect this transaction.
Use
of Estimates
The
preparation of condensed 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, 2019 and 2018.
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, 2019 and 2018, 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, 2019 and 2018:
|
|
|
January
31, 2019
|
|
|
January
31, 2018
|
|
|
Raw
Materials
|
|
$
|
556,703
|
|
|
$
|
486,917
|
|
|
Work
in Process
|
|
|
38,769
|
|
|
|
21,387
|
|
|
Finished
goods
|
|
|
800,928
|
|
|
|
315,972
|
|
|
|
|
$
|
1,396,400
|
|
|
$
|
824,276
|
|
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, 2019 and 2018 were
$130,920 and $138,000, 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
In
May 2014, the FASB issued ASU 2014-09,
Revenue from Contracts with Customers (Topic 606)
. ASU 2014-09 supersedes the revenue
recognition requirements under Topic 605,
Revenue Recognition
, and most industry-specific guidance throughout the Industry
Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange
for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the
contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4)
allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity
satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices
across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to
the nature, amount, timing and uncertainty of revenue that is recognized. In May 2016, the FASB issued ASU No. 2016-12,
Revenue
from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients
. This update clarifies
the objectives of collectability, sales and other taxes, noncash consideration, contract modifications at transition, completed
contracts at transition and technical correction. The amendments in this update affect the guidance in ASU 2014-09. In September
2017, the FASB issued additional amendments providing clarification and implementation guidance.
The
Company adopted this guidance and related amendments as of the first quarter of fiscal 2019, applying the full retrospective transition
method. As the underlying principles of the new standard, relating to the measurement of revenue and the timing of recognition,
are closely aligned with the Company’s current business model and practices, the adoption of ASU 2014-09 did not have a
material impact on the consolidated financial statements. In addition, the adoption of ASC 606 did not impact the previously reported
financial statements in any prior period nor did it result in a cumulative effect adjustment to retained earnings.
The
Company’s sales predominantly are generated from the sale of finished products to customers, contain a single performance
obligation and revenue is recognized at a single point in time when ownership, risks and rewards transfer. Typically, this occurs
when the goods are shipped to the customer. Revenues are recognized in an amount that reflects the net consideration the Company
expects to receive in exchange for the goods. The Company reports all amounts billed to a customer in a sale transaction as revenue.
Under the new revenue guidance, the Company elected to treat shipping and handling activities as fulfillment activities, and the
related costs are recorded as selling expenses in general and administrative expenses on the consolidated statement of operations.
The
Company promotes its products with advertising, consumer incentives and trade promotions. These programs include discounts, slotting
fees, coupons, rebates, in-store display incentives and volume-based incentives. Customer trade promotion and consumer incentive
activities are recorded as a reduction to the transaction price based on amounts estimated as being due to customers and consumers
at the end of a period. The Company derives these estimates principally on historical utilization and redemption rates. The Company
does not receive a distinct service in relation to the advertising, consumer incentives and trade promotions.
Payment
terms in the Company’s invoices are based on the billing schedule established in contracts and purchase orders with customers.
The Company generally recognizes the related trade receivable when the goods are shipped.
Expenses
such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows:
|
|
|
Year
Ended
January
31, 2019
|
|
|
Year
Ended
January
31, 2018
|
|
|
Gross
Sales
|
|
$
|
28,952,187
|
|
|
$
|
28,004,078
|
|
|
Less:
Slotting, Discounts, Allowances
|
|
|
430,075
|
|
|
|
460,743
|
|
|
Net
Sales
|
|
$
|
28,522,112
|
|
|
$
|
27,543,335
|
|
Disaggregation
of Revenue from Contracts with Customers.
The following table disaggregates gross revenue by significant geographic area for
the years ended January 31, 2019 and 2018:
|
|
|
For the Year Ended
|
|
|
|
|
January 31, 2019
|
|
|
January 31, 2018
|
|
|
Northeast
|
|
$
|
8,339,738
|
|
|
$
|
8,719,757
|
|
|
Southeast
|
|
|
8,134,168
|
|
|
|
7,334,575
|
|
|
Midwest
|
|
|
6,013,536
|
|
|
|
6,555,607
|
|
|
West
|
|
|
4,135,590
|
|
|
|
3,669,491
|
|
|
Southwest
|
|
|
2,329,155
|
|
|
|
1,724,648
|
|
|
Total revenue
|
|
$
|
28,952,187
|
|
|
$
|
28,004,078
|
|
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, 2019 and 2018 were $1,729,448 and $1,773,939, 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 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, 2019 and 2018, share-based compensation amounted to $162,494 and $428,240, respectively.
For
the years ended January 31, 2019 and 2018, when computing fair value of share-based payments, the Company has considered the following
variables:
|
|
|
January
31, 2019
|
|
|
January
31, 2018
|
|
|
Risk-free
interest rate
|
|
|
1.99%
to 2.78
|
%
|
|
|
1.60%
to 1.99
|
%
|
|
Expected
life of grants
|
|
|
2.0
to
3.0 years
|
|
|
|
2.0
– 4.0 years
|
|
|
Expected
volatility of underlying stock
|
|
|
154
%
to 172
|
%
|
|
|
139%
to 177
|
%
|
|
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, 2019
|
|
|
January
31, 2018
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net
income attributable to common stockholders
|
|
$
|
550,048
|
|
|
$
|
228,175
|
|
|
Effect
of dilutive securities:
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income
|
|
$
|
550,048
|
|
|
$
|
228,175
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding - basic
|
|
|
31,843,755
|
|
|
|
29,811,521
|
|
|
Dilutive
securities (a):
|
|
|
|
|
|
|
|
|
|
Series
A Preferred
|
|
|
-
|
|
|
|
-
|
|
|
Options
|
|
|
136,400
|
|
|
|
350,694
|
|
|
Warrants
|
|
|
541,666
|
|
|
|
1,974,648
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding and assumed conversion – diluted
|
|
|
32,521,821
|
|
|
|
32,205,577
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income per common share
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
net income per common share
|
|
$
|
0.02
|
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
- Anti-dilutive securities excluded:
|
|
|
3,098,667
|
|
|
|
3,041,001
|
|
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, 2019. 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, 2019. 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 2016.
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
February 2016, the FASB issued ASU 2016-02,
“Leases (Topic 842),”
which will require recognition on the balance
sheet for the rights and obligations created by leases with terms greater than twelve months. The new standard is effective for
fiscal years and interim periods within those years beginning after December 15, 2018, with early adoption permitted. The Company
plans to adopt this guidance at the beginning of its first quarter of fiscal 2020 and plans to utilize the transition option which
does not require application of the guidance to comparative periods in the year of adoption. While the Company continues to evaluate
this standard and the effect on related disclosures, the primary effect of adoption will be recording right-of-use assets and
corresponding lease obligations for current operating leases. The adoption is expected to have a material impact on the Company’s
consolidated balance sheets, but not on the consolidated statements of income or cash flows. However, the ultimate impact of adopting
ASU 2016-02 will depend on the Company’s lease portfolio as of the adoption date. Additionally, the Company is in the process
of reviewing current accounting policies, changes to business processes, systems and controls to support adoption of the new standard.
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
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
June 2018, the FASB issued Accounting Standards Update (ASU) No. 2018-07,
Compensation – Stock Compensation (Topic718):
Improvements to Nonemployee Share-Based Payment Accounting
. Under the new standard, companies will no longer be required to
value non-employee awards differently from employee awards. Companies will value all equity classified awards at their grant-date
under ASC 718 and forgo revaluing the award after the grant date. ASU 2018-07 is effective for annual reporting periods beginning
after December 15, 2018, including interim reporting periods within that reporting period. Early adoption is permitted, but no
earlier than the Company’s adoption date of Topic 606,
Revenue from Contracts with Customers
(as described above
under “Revenue Recognition”). The Company does not believe the new standard will have a significant impact on its
consolidated financial statements.
In
August 2018, the FASB issued ASU 2018-13,
“Fair Value Measurement (Topic 820): Disclosure Framework—Changes to
the Disclosure Requirements for Fair Value Measurement”.
This update is to improve the effectiveness of disclosures
in the notes to the financial statements by facilitating clear communication of the information required by U.S. GAAP that is
most important to users of each entity’s financial statements. The amendments in this update apply to all entities that
are required, under existing U.S. GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments
in this update are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those
fiscal years. The Company is currently evaluating this guidance and the impact of this update on its consolidated financial statements.
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.
Reclassification
Certain
prior period amounts have been reclassified to conform to current period presentation.
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, 2019 and 2018 are as follows:
|
|
|
January
31, 2019
|
|
|
January
31, 2018
|
|
|
Machinery
and Equipment
|
|
$
|
2,662,403
|
|
|
$
|
2,431,589
|
|
|
Furniture
and Fixtures
|
|
|
81,099
|
|
|
|
71,969
|
|
|
Leasehold
Improvements
|
|
|
2,894,949
|
|
|
|
2,071,169
|
|
|
|
|
|
5,638,451
|
|
|
|
4,574,727
|
|
|
Less:
Accumulated Depreciation
|
|
|
2,753,857
|
|
|
|
2,074,852
|
|
|
|
|
$
|
2,884,594
|
|
|
$
|
2,499,875
|
|
During
the year ended January 31, 2019, leasehold improvements increased by $823,780 in relation to the continued plant expansion in
progress since 2017.
Depreciation
expense charged to income for the years ended January 31, 2019 and 2018 amounted to $679,005 and $538,322, 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, 2019 and 2018, 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, 2019 and 2018, the Company generated approximately $106,596 and $104,081 in revenues from MO, respectively.
As
of January 31, 2019 and 2018, the Company had a receivable of $57,374 and $32,869 due from MO, respectively.
WWS,
Inc.
A
current director of the Company is the president of WWS, Inc.
For
the years ended January 31, 2019 and 2018, the Company recorded $59,000 and $24,000 in commission expense from WWS, Inc. generated
sales, respectively.
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
January 2024. As of January 31, 2019 and 2018, the outstanding principal balance of the notes was $109,844 and $117,656, respectively.
The
Company received advances from the CEO of the Company which bear interest at 8%. The advances are due on January 2024. At January
31, 2019 and 2018, 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 January 2024. At January 31, 2019 and 2018, there was $132,000 of principal outstanding, respectively.
For
the years ended January 31, 2019 and 2018, the Company recorded interest expense of $45,150 and $47,266, respectively,
related to the above related party notes payable. As of January 31, 2019 and 2018, the Company accrued interest on the related
party notes totaling $48,141 and $11,422, respectively.
Note
6 - Loan and Security Agreement
Entrepreneur
Growth Capital, LLC
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. In September 2016, the agreement was amended and the
total facility increased to an aggregate principal amount of up to $3,200,000. In May 2018, the agreement was amended to extend
the termination date to October 1, 2020. In June 2018, the line was increased by $300,000. The increase was personally guaranteed
by the CEO of the Company. As of January 31, 2019 and 2018, the outstanding balance on the line of credit was $0 and $2,702,390,
respectively. As noted below, the loan was paid off upon execution of the M&T Bank agreement.
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 was 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 bore interest at the prime rate plus 4.0% and was
payable monthly, in arrears. In the event of default, the Company would pay 10% above the stated rates of interest
per the Loan and Security Agreement. The EGC Note was secured by all of the assets of the Company. As of January 31,
2019 and 2018, the outstanding balance on the note was $0 and $758,615, respectively. As noted below, the loan was paid off upon
execution of the M&T Bank agreement.
Effective
June 6, 2018, the Company executed a Secured Promissory Note with EGC which provided for $300,000 in financing with a maturity
date of June 1, 2020. The Note required 24 monthly payments of $12,500 together with interest on the outstanding balance
at four percent (4%) over the applicable prime rate. As noted below, the loan was paid off upon execution of the M&T
Bank agreement.
The
Company recorded a one-time charge of $121,500 for termination of its existing loans in the month of January 2019.
M&T
Bank
Effective,
January 4, 2019, the Company also entered into a $2.5 million five-year note with M&T Bank at LIBOR plus four points
with repayments in equal payments over 60 months. The new facility is supported by a first priority security interest in all of
the Company’s business assets and is further subject to various affirmative and negative financial covenants and a limited
Guaranty by the Company’s Chief Executive Officer, Carl Wolf. The Company recorded $89,321 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 $85,599 as of January 31, 2019. The outstanding balance on the term loan was $2,500,000 as of January 31, 2019.
Effective,
January 4, 2019, the Company has arranged a new $3.5 million working capital line of credit with M&T Bank at LIBOR plus four
points with a two-year expiration. The new facility is supported by a first priority security interest in all of the Company’s
business assets and is further subject to various affirmative and negative financial covenants and a limited Guaranty by the Company’s
Chief Executive Officer, Carl Wolf. Advances under the line of credit are limited to eighty percent (80%) of eligible accounts
receivable (which is subject to an agreed limitation and is further subject to certain asset concentration provisions) and fifty
percent (50%) of eligible inventory (which is subject to an agreed dollar limitation). All advances under the line of credit are
due upon maturity. The outstanding balance on the line of credit was $2,612,034 as of January 31, 2019.
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. Subsequent to issuance, the note was amended to extend the maturity date and also remove
the convertible feature of the note. On January 22, 2018, the Company further extended the maturity date to November 1, 2018.
On
July 17, 2018, the Company further extended the maturity date to May 1, 2019. 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 July 17, 2018, which shall include
all interest which would be accrued on the note through July 17, 2018. Total accrued interest of $392,702 was added to the outstanding
principal balance as of the extension date. The 2% fee was expensed in accordance with debt extinguishment accounting.
There
was unamortized debt discount of $0 and $84,841 as of January 31, 2019 and 2018, respectively.
The
outstanding principal at January 31, 2019 and 2018 was $0 and $1,487,923, 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 bore interest at 3.75%, with interest being due monthly. The note was due in full on the
maturity date of April 1, 2019. The note was fully guaranteed by the Company’s Chief Executive Officer. As noted
above, the Company completed a financing on January 4, 2019 upon which time this note was fully satisfied. The outstanding balance
on the note was $0 and $250,000 as of January 31, 2019 and 2018, respectively.
Note
8 – Capital Leases Payable
Capital
lease obligations consisted of the following at January 31, 2019:
|
|
|
January
31, 2019
|
|
|
|
|
|
|
|
Capital
lease obligation to a financing company for a term of four (4) years, collateralized by equipment, with interest at 7.5% per
annum, with principal and interest due and payable in monthly installments of $5,152 and buyout purchase option of $31,988
at end of lease
(i)
|
|
$
|
189,264
|
|
|
|
|
|
|
|
|
Capital
lease obligation to a financing company for a term of five (5) years, collateralized by kitchen equipment, with interest at
5.9% per annum, with principal and interest due and payable in monthly installments of $610 and buyout purchase option of
$1 at end of lease
|
|
|
26,993
|
|
|
|
|
|
|
|
|
|
|
|
216,257
|
|
|
|
|
|
|
|
|
Less
current maturities
|
|
|
53,730
|
|
|
|
|
|
|
|
|
Capital
lease obligations, net of current maturities
|
|
$
|
162,527
|
|
|
|
(i)
|
In
May 2018, the Company executed a sale-leaseback arrangement with an unrelated third party
whereby the Company sold its equipment and leased it back for a period of 4 years. Pursuant
to the agreement, the Company received gross proceeds of $213,250. This transaction is
recorded as a financing transaction with the assets and related financing obligation
on the consolidated balance sheet. The lease expires in April 2022 and includes purchase,
renewal and return options and certain default provisions requiring the Company to perform
repairs and maintenance, make timely rent payments and insure the equipment.
|
Future
maturities of all debt and capital leases (excluding debt discount discussed above in Notes 5, 6, 7 and 8) are as
follows:
|
For
the Years Ending January 31,
|
|
|
|
|
2020
|
|
$
|
553,730
|
|
|
2021
|
|
|
3,171,983
|
|
|
2022
|
|
|
564,489
|
|
|
2023
|
|
|
521,833
|
|
|
2024
|
|
|
1,158,099
|
|
|
Thereafter
|
|
|
-
|
|
|
|
|
$
|
5,970,134
|
|
The
cost basis and accumulated depreciation of the capitalized equipment at January 31, 2019 was $273,844 and $45,296, respectively.
Depreciation associated with these capital lease arrangements is included in cost of sales on the consolidated statement of operations.
Note
9 - Concentrations
Revenues
During
the year ended January 31, 2019, the Company earned revenues from two customers representing approximately 50% and 10% of gross
sales. During the year ended January 31, 2018, the Company earned revenues from two customers representing approximately 40% and
10% of gross sales. As of January 31, 2019, three customers represented approximately 44%, 19% and 13% of total gross outstanding
receivables, respectively. As of January 31, 2018, two customers represented approximately 43% and 15% of total gross outstanding
receivables, respectively.
Note
10 - 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 year 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 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.
(C)
Options
The
following is a summary of the Company’s option activity:
|
|
|
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
Granted
|
|
|
130,000
|
|
|
$
|
0.89
|
|
|
Exercised
|
|
|
(40,000
|
)
|
|
$
|
1.00
|
|
|
Forfeited/Cancelled
|
|
|
(307,000
|
)
|
|
$
|
0.98
|
|
|
Outstanding
– January 31, 2019
|
|
|
649,000
|
|
|
$
|
0.77
|
|
|
Exercisable
– January 31, 2019
|
|
|
521,500
|
|
|
$
|
0.71
|
|
|
|
|
|
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
|
|
|
|
649,000
|
|
|
2.84
years
|
|
$
|
0.77
|
|
|
521,500
|
|
$
|
0.71
|
|
At
January 31, 2019 the total intrinsic value of options outstanding and exercisable was $109,120 and $109,120, respectively.
During
the year ended January 31, 2019, 40,000 options were exercised by the option holders. The Company issued 40,000 shares of common
stock as a result of this exercise and received proceeds of $40,000.
For
the years ended January 31, 2019 and 2018, the Company recognized share-based compensation related to options of an aggregate
of $162,494 and $172,740, respectively. At January 31, 2019, unrecognized share-based compensation was $40,778.
(D)
Warrants
The
following is a summary of the Company’s warrant activity:
|
|
|
Warrants
|
|
|
Weighted
Average
Exercise Price
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
Granted
|
|
|
-
|
|
|
$
|
-
|
|
|
Exercised
|
|
|
(482,734
|
)
|
|
$
|
1.00
|
|
|
Forfeited/Cancelled
|
|
|
(333,334
|
)
|
|
$
|
1.50
|
|
|
Outstanding
– January 31, 2019
|
|
|
6,245,331
|
|
|
$
|
1.04
|
|
|
Exercisable
– January 31, 2019
|
|
|
6,245,331
|
|
|
$
|
1.04
|
|
|
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
|
|
|
|
6,245,331
|
|
|
|
1.83
years
|
|
|
$
|
1.04
|
|
|
|
6,245,331
|
|
|
$
|
1.04
|
|
At
January 31, 2019, the total intrinsic value of warrants outstanding and exercisable was $433,333 and $433,333, respectively.
During
the year ended January 31, 2019, 482,734 warrants were exercised by the warrant holders on a cashless basis. The Company issued
72,804 shares of common stock as a result of this exercise.
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
11 - 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
Exclusive Term began on January 1, 2009 (the “Effective Date”) and ends on the 50th anniversary of the Effective Date.
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 $413,497 and $429,934 of royalty expenses for the years ended January 31, 2019 and 2018. Royalty expenses are
included in general and administrative expenses on the consolidated statement of operations.
Agreements
with Placement Agents and Finders
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.
If
the Company enters into a change of control transaction during the term of the agreement through October 1, 2022, the Company
shall pay to Spartan a fee equal to 3% of the consideration paid or received by the Company and/or its stockholders in such transaction.
During
the years ended January 31, 2019 and 2018, 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 renewal options through March 2029. The Company leases additional office space in East Rutherford, NJ. This lease
is for a 51-month term expiring on March 31, 2019 which was extended through March 2022.
Rent
expense for the years ended January 31, 2019 and 2018 was $279,799 and $297,339, respectively.
Total
future minimum payments required under the lease as of January 31, 2019 are as follows:
|
Years
Ending January 31,
|
|
|
|
|
2020
|
|
$
|
218,203
|
|
|
2021
|
|
|
219,682
|
|
|
2022
|
|
|
229,771
|
|
|
2023
|
|
|
215,184
|
|
|
2024
|
|
|
211,864
|
|
|
Thereafter
|
|
|
35,311
|
|
|
Total
|
|
$
|
1,130,015
|
|
Note
12
- Income
Tax Provision (Benefit)
The
income tax provision (benefit) consists of the following:
|
|
|
January
31, 2019
|
|
|
January
31, 2018
|
|
|
Federal
|
|
|
|
|
|
|
|
|
|
Current
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Deferred
|
|
|
(383,948
|
)
|
|
|
(2,188,418
|
)
|
|
State
and Local
|
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
|
Change
in valuation allowance
|
|
|
383,948
|
|
|
|
2,188,418
|
|
|
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 $10.8 million and $11.1 million at January
31, 2019 and 2018, 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
$10.0 million and $10.9 million at January 31, 2019 and 2018, 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, 2019 and 2018, the change in the valuation allowance was $383,948 and $2,188,418,
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, 2019 and 2018, respectively. As of January
31, 2019 and 2018, 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, 2019
|
|
|
Year
Ended
January 31, 2018
|
|
|
|
|
|
|
|
|
|
|
Net
operating loss carryovers
|
|
$
|
2,780,110
|
|
|
$
|
3,252,384
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
deferred tax assets
|
|
|
2,780,110
|
|
|
|
3,252,384
|
|
|
Valuation
allowance
|
|
|
(2,813,148
|
)
|
|
|
(3,183,275
|
)
|
|
Deferred
tax asset, net of valuation allowance
|
|
|
(33,038
|
)
|
|
|
69,109
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
Tax Liabilities
|
|
|
|
|
|
|
|
|
|
Other
deferred tax liabilities
|
|
|
33,038
|
|
|
|
(69,109
|
)
|
|
Total
deferred tax liabilities
|
|
$
|
33,038
|
|
|
$
|
(69,109
|
)
|
|
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, 2019
|
|
|
Year
Ended
January 31, 2018
|
|
|
|
|
|
|
|
|
|
|
US
Federal statutory rate
|
|
|
(21.00
|
)%
|
|
|
(21.00
|
)%
|
|
State
income tax, net of federal benefit
|
|
|
(8.98
|
)
|
|
|
(5.94
|
)
|
|
Deferred
tax adjustment
|
|
|
(4.26
|
)
|
|
|
-
|
|
|
Change
in valuation allowance
|
|
|
30.52
|
|
|
|
27.03
|
|
|
Other
permanent differences
|
|
|
(3.72
|
)
|
|
|
(0.09
|
)
|
|
Income
tax provision (benefit)
|
|
|
-
|
%
|
|
|
-
|
%
|
Note
13
– 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.