MAMA Mamas Creations Inc

Mama’s Creations, Inc. (NASDAQ: MAMA), a leading national marketer and manufacturer of fresh Deli prepared foods, has reported its financial results for the fiscal second quarter ended July 31, 2023.

Financial Summary:

	Three Months Ended July 31,
$ in millions		2023		2022		% Increase
Revenues	$	24.8	$	22.9		8.5	%
Gross Profit	$	7.5	$	2.7		175	%
Operating Expenses	$	5.2	$	3.6		47	%
Net Income (Loss)	$	1.7	$	(0.7	)	335	%
Earnings per Share (Diluted)	$	0.05	$	(0.02	)	-
Adj. EBITDA (non-GAAP)	$	2.9	$	(0.4	)	857	%

Key Second Quarter Fiscal 2024 & Subsequent Operational Highlights:

• Acquired remaining 76% interest in sales agent Chef Inspirational Foods (CIF) for $3.65 Million in a combination of cash and stock, which is expected to immediately enhance gross margins, add sales talent and drive meaningful overhead synergies.
• Announced corporate name change to Mama’s Creations and ticker symbol change to “MAMA”, reflecting the Company’s transition into a national deli prepared foods platform company
• Attended IDDBA 2023, a premier industry tradeshow with over 10,000 attendees hosted by the International Dairy Deli Bakery Association, where the Company:
  • Launched Mama’s Creations, a new international deli foods platform brand offering Asian, Tex-Mex, Indian and other incremental international cuisine opportunities.
  • Introduced an expanded line of highly incremental on-the-go snacking products – building upon the initial success of Meatballs In a Cup tests in convenience stores – with enhanced packaging that expanded shelf life from 5 days to 21 days.
  • Announced the expansion of the Company’s branded sleeve product line, offering a lunch & dinner entrée in convenient grab-and-go packaging easy for retailers to stock, with initial orders already secured from two large national grocery chains.
• Invited to present at leading investor conferences nationally, including the 13th Annual LD Micro Invitational, the Planet MicroCap Showcase, the H.C. Wainwright 25th Annual Global Investment Conference and the Lake Street Capital Markets BIG7 Conference.

Management Commentary

“I am pleased to announce another strong quarter – highlighted by 8.5% revenue growth and the expansion of our gross margin profile into the 30% range – laying the foundation for more robust, profitable growth in the second half,” said Adam L. Michaels, Chairman and CEO of Mama’s Creations. “We continue to fortify our balance sheet to support these near-term growth expectations, growing our cash position to $5.6 million while concurrently paying down $0.6 million in debt and paying the $1 million in cash due at closing as part of the CIF acquisition.

“Our strong gross margin profile was made possible through countless small things done right, further aided by one month of margin synergies from our acquisition of CIF in late June 2023, which we anticipated would enhance corporate-level gross margins by a further 1-2%. Looking ahead to next year, we see further opportunities for improvement via several strategic CapEx projects, which we expect to drive a higher level of automation while concurrently building new in-house capabilities earlier in the value-chain.

“Turning to the 3 C’s, we continue to formalize processes throughout the company with the goal of building a more standardized, resilient organization. These improvements span from the operational basics – such as formalized hiring/HR processes, a consistent company-wide employee handbook, or holding our first-ever town hall meetings – to the more complex, such as a new approach to trade promotion with defined policies and procedures. In addition, by our next earnings call we expect to have our NetSuite ERP software fully implemented across all divisions, providing an incredible level of actionable insight into the details of our operations. Mama’s Creations is committed to a culture of transparency and engagement at all levels of the organization, which will ultimately create long-term value for my fellow shareholders,” concluded Michaels.

Second Quarter Fiscal 2024 Financial Results

Revenue for the second quarter of fiscal 2024 increased 8.5% to $24.8 million, as compared to $22.9 million in the same year-ago quarter. The increase was largely attributable to strong organic growth, driven by successful cross selling efforts, which increased average items carried to over 7 in the second quarter.

Gross profit increased 175% to $7.5 million, or 30.3% of total revenues, in the second quarter of fiscal 2024, as compared to $2.7 million, or 11.9% of total revenues, in the same year-ago quarter. The increase in gross margin was primarily attributable to the normalization of commodity costs, successful pricing actions and improvements in operational efficiencies across the organization. The Company continues to identify procurement and logistics efficiencies and cost savings through stronger buying power created through the acquisitions of T&L Creative Salads, Olive Branch and CIF.

Operating expenses totaled $5.2 million in the second quarter of fiscal 2024, as compared to $3.6 million in the same year-ago quarter. As a percentage of sales, operating expenses increased in the second quarter of fiscal 2024 to 21.1% from 15.6%. Operating expenses, as a percentage of sales, increased due to the addition of several new key hires, who brought new and differentiated capabilities to the organization.

Net income for the second quarter of fiscal 2024 increased 335% to $1.7 million, or $0.05 per diluted share, as compared to a net loss of $0.7 million, or $0.02 per diluted share, in the same year-ago quarter. This quarter’s net income totaled 7.0% of revenue, in line with management expectations in the mid-single-digit range.

Adjusted EBITDA, a non-GAAP term, increased 857% to $2.9 million for the second quarter of fiscal 2024, as compared to an adjusted EBITDA loss of $0.4 million in the same year-ago quarter.

Cash and cash equivalents as of July 31, 2023 were $5.6 million, as compared to $4.4 million as of January 31, 2023. The increase in cash and cash equivalents was driven by $1.8 million in cash flow from operations in the second quarter of fiscal 2024, $0.6 million of which was used to pay down the Company’s debt and $1 million of which was used to pay the cash due at closing as part of the CIF acquisition. As of July 31, 2023 total debt stood at $10.8 million.

Conference Call

Management will host an investor conference call at 4:30 p.m. Eastern time today, September 12, 2023 to discuss the Company’s second quarter fiscal 2024 financial results, provide a corporate update, and conclude with Q&A from participants. To participate, please use the following information:

Q2 FY2024 Earnings Conference CallDate: Tuesday, September 12, 2023 Time: 4:30 p.m. Eastern time U.S. Dial-in: 1-877-451-6152International Dial-in: 1-201-389-0879Conference ID: 13740711Webcast: MAMA Q2 FY2024 Earnings Conference Call

Please join at least five minutes before the start of the call to ensure timely participation.

A playback of the call will be available through Thursday, October 12, 2023. To listen, please call 1-844-512-2921 within the United States and Canada or 1-412-317-6671 when calling internationally, using replay pin number 13740711. A webcast replay will also be available using the webcast link above.

About Mama’s Creations, Inc.

Mama’s Creations, Inc. (NASDAQ: MAMA) is a leading marketer and manufacturer of fresh deli prepared foods, found in over 8,400 grocery, mass, club and convenience stores nationally. The Company’s broad product portfolio, born from MamaMancini’s rich history in Italian foods, now consists of a variety of high quality, fresh, clean and easy to prepare foods to address the needs of both our consumers and retailers. Our vision is to become a one-stop-shop deli solutions platform, leveraging vertical integration and a diverse family of brands to offer a wide array of prepared foods to meet the changing demands of the modern consumer. For more information, please visit https://mamascreations.com.

Use of Non-GAAP Financial Measures

This press release includes the following non-GAAP measure – adjusted EBITDA, which is not a measure of financial performance under GAAP and should not be considered as an alternative to net income as a measure of financial performance. The company believes this non-GAAP measure, when considered together with the corresponding GAAP measures, provides useful information to investors and management regarding financial and business trends relating to the company’s results of operations. However, this non-GAAP measure has significant limitations in that it does not reflect all the costs and other items associated with the operation of the company’s business as determined in accordance with GAAP. In addition, the company’s non-GAAP measures may be calculated differently and are therefore not comparable to similar measures by other companies. Therefore, investors should consider non-GAAP measures in addition to, and not as a substitute for, or superior to, measures of financial performance in accordance with GAAP. For a definition and reconciliation of EBITDA to net income, its corresponding GAAP measure, please see the reconciliation table shown in this press release below.

US-GAAP NET INCOME (LOSS) TO ADJUSTED EBITDA RECONCILIATION(Unaudited)

	THREE MONTHS ENDED
	July 31,
		2023	2022
Net Income (Loss)	$	1,743,911		$	(743,246	)
Depreciation	$	263,176		$	192,297
Amortization of Debt Discount	$	5,530		$	2,596
Amortization of Right of Use Assets	$	106,447		$	113,518
Amortization of Intangibles	$	202,947		$	116,986
Taxes	$	429,764		$	(208,992	)
Interest	$	181,658			139,064
Adjusted EBITDA (Non-GAAP)	$	2,933,433		$	(387,777	)

Forward-Looking Statements

This press release may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934. "Forward-looking statements" describe future expectations, plans, results, or strategies and are generally preceded by words such as "may," "future," "plan" or "planned," "will" or "should," "expected," "anticipates," "draft," "eventually" or "projected." You are cautioned that such statements are subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially from those projected in the forward-looking statements, including the risks that actual results may differ materially from those projected in the forward-looking statements as a result of various factors, and other risks identified in the Company's 10-K for the fiscal year ended January 31, 2023 and other filings made by the Company with the Securities and Exchange Commission.

Investor Relations Contact:Lucas A. ZimmermanDirectorMZ Group - MZ North America(949) 259-4987MAMA@mzgroup.us www.mzgroup.us

Mama’s Creations, Inc. Condensed Consolidated Balance Sheets

		July 31, 2023				January 31, 2023
		(Unaudited)
Assets:
Current Assets:
Cash		$	5,560,176			$	4,378,383
Accounts receivable, net			8,843,756				6,832,046
Inventories, net			3,308,513				3,635,881
Prepaid expenses and other current assets			474,301				828,391
Total current assets			18,186,746				15,674,701
Property, plant, and equipment, net			4,067,648				3,423,096
Intangible assets, net			5,754,182				1,502,510
Goodwill			8,633,334				8,633,334
Operating lease right of use assets, net			3,124,449				3,236,690
Deferred tax asset			67,908				717,559
Equity method investment			-				1,343,486
Deposits			65,410				53,819
Total Assets		$	39,899,677			$	34,585,195
Liabilities and Stockholders’ Equity:
Liabilities:
Current Liabilities:
Accounts payable and accrued expenses		$	8,872,582			$	9,063,256
Term loan, net of debt discount of $49,022 and $60,082, respectively			1,502,702				1,491,642
Operating lease liabilities			414,937				391,802
Finance leases payable			335,119				182,391
Promissory notes – related parties			1,950,000				750,000
Total current liabilities			13,075,340				11,879,091
Line of credit			500,000				890,000
Operating lease liabilities – net of current			2,739,208				2,897,205
Finance leases payable – net of current			906,476				248,640
Promissory notes – related parties, net of current			3,000,000				1,500,000
Term loan – net of current			3,879,318				4,655,181
Total long-term liabilities			11,025,002				10,191,026
Total Liabilities			24,100,342				22,070,117
Commitments and contingencies (Notes 10 and 11)
Stockholders’ Equity:
Series A Preferred stock, $0.00001 par value; 120,000 shares authorized; 23,400 issued as of July 31, 2023 and January 31, 2023, respectively, 0 shares outstanding as of July 31, 2023 and January 31, 2023, respectively			-				-
Series B Preferred stock, $0.00001 par value; 200,000 shares authorized; 0 and 54,600 issued and outstanding as of July 31, 2023 and January 31, 2023 respectively			-				-
Preferred stock, $0.00001 par value; 19,680,000 shares authorized; no shares issued and outstanding			-				-
Common stock, $0.00001 par value; 250,000,000 shares authorized; 37,343,387 and 36,317,857 shares issued and outstanding as of July 31, 2023 and January 31, 2023			374				364
Additional paid in capital			22,912,383				22,724,440
Accumulated deficit			(6,963,922	)			(10,060,226	)
Less: Treasury stock, 230,000 shares at cost			(149,500	)			(149,500	)
Total Stockholders’ Equity			15,799,335				12,515,078
Total Liabilities and Stockholders’ Equity		$	39,899,677			$	34,585,195

Mama’s Creations, Inc.Condensed Consolidated Statements of Operations(Unaudited)

		For the Three Months EndedJuly 31,								For the Six Months EndedJuly 31,
		2023				2022				2023				2022
Net sales		$	24,790,085			$	22,846,474			$	47,910,901			$	44,677,054
Costs of sales			17,283,847				20,119,862				34,033,663				38,090,179
Gross profit			7,506,238				2,726,612				13,877,238				6,586,875
Operating expenses:
Research and development			94,871				41,792				166,056				68,327
Selling, general and administrative			5,135,537				3,516,115				9,492,568				7,088,870
Total operating expenses			5,230,408				3,557,907				9,658,624				7,157,197
Income (loss) from operations			2,275,830				(831,295	)			4,218,614				(570,322	)
Other income (expenses)
Interest, net			(181,658	)			(139,064	)			(359,052	)			(263,315	)
Amortization of debt discount			(5,530	)			(3,015	)			(11,060	)			(6,655	)
Other income			7,449				2,596				27,449				2,596
Total other expenses			(179,739	)			(139,483	)			(342,663	)			(267,374	)
Net income (loss) before income tax provision and income from equity method investment			2,096,091				(970,778	)			3,875,951				(837,696	)
Income from equity method investment			77,584				18,540				223,342				18,540
Income tax (provision) benefit			(429,764	)			208,992				(954,456	)			179,607
Net income (loss)			1,743,911				(743,246	)			3,144,837				(639,549	)
Less: series B preferred dividends			(21,233	)			-				(48,533	)			-
Net Income available to common stockholders			1,722,678				(743,246	)			3,096,304				(639,549	)
Net income (loss) per common share
– basic		$	0.05			$	(0.02	)		$	0.09			$	(0.02	)
– diluted		$	0.05			$	(0.02	)		$	0.08			$	(0.02	)
Weighted average common shares outstanding
– basic			36,855,181				35,811,087				36,628,429				35,785,719
– diluted			37,490,567				35,811,087				37,195,314				35,785,719

Mama’s Creations, Inc. Condensed Consolidated Statements of Cash Flows(Unaudited)

		For the Six Months Ended July 31,
		2023				2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)		$	3,144,837			$	(639,549	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			511,589				401,126
Amortization of debt discount			11,060				6,655
Amortization of right of use assets			112,241				182,862
Amortization of intangibles			303,949				230,156
Stock-based compensation			110,173				12,333
Allowance for obsolete inventory			93,238				-
Change in deferred tax asset			649,651				(188,080	)
Income from equity method investment			(223,342	)			(18,540	)
Paid in kind interest			-				53,356
Changes in operating assets and liabilities:
Allowance for doubtful accounts			140,442				-
Accounts receivable			1,126,867				749,959
Inventories			234,130				(1,302,933	)
Prepaid expenses and other current assets			346,709				(248,113	)
Security deposits			(17,941	)			-
Accounts payable and accrued expenses			(3,049,114	)			1,170,280
Operating lease liability			(134,862	)			(176,534	)
Net Cash Provided by Operating Activities			3,359,627				232,978
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for fixed assets			(252,853	)			(305,547	)
Cash paid for investment in Chef Inspirational Foods, LLC, net			(645,641	)			(500,000	)
Net Cash (Used in) Investing Activities			(898,494	)			(805,547	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds in advance of preferred stock offering			-				515,000
Repayment of term loan			(775,863	)			(517,241	)
(Repayment) borrowings of line of credit, net			(390,000	)			1,725,000
Repayment of finance lease obligations			(92,724	)			(130,626	)
Payment of Series B Preferred dividends			(48,533	)			-
Proceeds from exercise of options			27,780				26,250
Net Cash (Used in) Provided by Financing Activities			(1,279,340	)			1,618,383
Net Increase in Cash			1,181,793				1,045,814
Cash - Beginning of Period			4,378,383				850,598
Cash - End of Period		$	5,560,176			$	1,896,412
SUPPLEMENTARY CASH FLOW INFORMATION:
Cash Paid During the Period for:
Income taxes		$	112,500			$	-
Interest		$	313,488			$	182,873
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Conversion of series b preferred stock to common stock		$	8			$	-
Finance lease asset additions		$	903,288			$	34,268
Related party debt incurred for purchase of Chef Inspirational Foods, LLC		$	2,700,000				-
Non-cash consideration paid in common stock for equity investment in Chef Inspirational		$	-			$	700,000
Settlement of liability in common stock		$	50,000			$	-

See accompanying notes to the condensed consolidated financial statements.