UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
(Amendment No. 1)
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 1, 2017
MamaMancini’s Holdings, Inc.
(Exact name of registrant as specified in its charter)
Nevada | 000-54954 | 27-067116 | ||
(State or other | (Commission | (I.R.S. Employer | ||
jurisdiction of incorporation) | File Number) | Identification No.) |
25 Branca Road
East Rutherford, NJ 07073
(Address of principal executive offices) (zip code)
(201) 531-1212
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS
Item 9.01 Financial Statements and Exhibits
As reported on our Current Report on Form 8-K filed with the Securities and Exchange Commission on November 2, 2017, on November 1, 2017, MamaMancini’s Holdings, Inc. (the “Company”) closed the merger transaction (the “Merger”) that was the subject of that certain Agreement and Plan of Merger (the “Merger Agreement”) with Joseph Epstein Food Enterprises, Inc., a New Jersey corporation (“JEFE”) dated November 1, 2017. At closing, in accordance with the Merger Agreement, JEFE merged with and into MMMB Acquisition, Inc., a Nevada corporation (“Merger Sub”), a wholly-owned subsidiary of MamaMancini’s Holdings, Inc. (the “Merger”), with JEFE being the surviving corporation. As a result of the Merger, JEFE became a wholly-owned subsidiary of the Company.
The purpose of this amended filing is to enclose the audited financial statements of JEFE for the years ended December 31, 2016 and 2015, the unaudited financial statements for JEFE for the ten months ended October 31, 2017, and pro forma financial statements, as required.
Exhibits
2 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
MamaMancini’s Holdings, Inc. | ||
a Nevada corporation | ||
Date: January 26, 2018 | By: | /s/ Carl Wolf |
Carl Wolf | ||
Chief
Executive Officer (Principal Executive Officer) |
3 |
EXHIBIT 99.1
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors of MamaMancini Holdings, Inc.
We have audited the accompanying balance sheets of Joseph Epstein Food Enterprises, Inc. as of December 31, 2016 and 2015, and the related statements of operations, shareholders’ equity (deficit) and cash flows for each of the years in the two-year period ended December 31, 2016. Joseph Epstein Food Enterprises, Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Joseph Epstein Food Enterprises, Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.
/s/ Rosenberg Rich Baker Berman & Company | |
Somerset, New Jersey | |
January 22, 2018 |
Joseph Epstein Food Enterprises, Inc.
Balance Sheets
At December 31
2016 | 2015 | |||||||
Assets: | ||||||||
Current Assets: | ||||||||
Cash | $ | 15,768 | $ | 14,037 | ||||
Prepaid expenses | 36,699 | 36,128 | ||||||
Inventory | 407,899 | 321,749 | ||||||
Total Current Assets | 460,366 | 371,914 | ||||||
Property, plant, and equipment, net | 395,714 | 401,629 | ||||||
Deposits | 17,036 | 17,036 | ||||||
Total Assets | $ | 873,116 | $ | 790,579 | ||||
Liabilities and Shareholders’ Deficit | ||||||||
Liabilities | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 1,594,418 | $ | 1,595,534 | ||||
Due to related party | 2,178,352 | 2,083,854 | ||||||
Total Current Liabilities | 3,772,770 | 3,679,388 | ||||||
Notes payable - related parties | 532,000 | 532,000 | ||||||
Note payable | 250,000 | 250,000 | ||||||
Total Long-Term Liabilities | 782,000 | 782,000 | ||||||
Total Liabilities | 4,554,770 | 4,461,388 | ||||||
Shareholders’ Deficit | ||||||||
Accumulated Deficit | (3,681,654 | ) | (3,670,809 | ) | ||||
Total Shareholders’ Deficit | (3,681,654 | ) | (3,670,809 | ) | ||||
Total Liabilities and Shareholders’ Deficit | $ | 873,116 | $ | 790,579 |
Joseph Epstein Food Enterprises, Inc.
Statements of Operations
For the Years Ended December 31
2016 | 2015 | |||||||
Revenue | $ | 11,343,047 | $ | 9,019,831 | ||||
Cost of Revenue: | ||||||||
Cost of Goods Sold | 10,711,221 | 8,508,155 | ||||||
Write-off of inventory | - | 437,800 | ||||||
Total Cost of Revenue | 10,711,221 | 8,945,955 | ||||||
Gross Profit | 631,826 | 73,876 | ||||||
General and Administrative Expenses | 581,187 | 610,435 | ||||||
Income (Loss) From Operations | 50,639 | (536,559 | ) | |||||
Other Income (Expense) | ||||||||
Interest Income | - | 762 | ||||||
Interest Expense | (61,484 | ) | (54,175 | ) | ||||
Total Other Income (Expense) | (61,484 | ) | (53,413 | ) | ||||
Net Loss | $ | (10,845 | ) | $ | (589,972 | ) |
Joseph Epstein Food Enterprises, Inc.
Statements of Shareholders' Equity (Deficit)
For the Years Ended December 31, 2015 and 2016
Accumulated Deficit | Total Shareholders' Equity (Deficit) | |||||||
Balance at January 1, 2015 | $ | (3,080,837 | ) | $ | (3,080,837 | ) | ||
Net loss | (589,972 | ) | (589,972 | ) | ||||
Balance at December 31, 2015 | (3,670,809 | ) | (3,670,809 | ) | ||||
Net loss | (10,845 | ) | (10,845 | ) | ||||
Balance at December 31, 2016 | $ | (3,681,654 | ) | $ | (3,681,654 | ) |
Joseph Epstein Food Enterprises, Inc.
Statements of Cash Flows
For the Years Ended December 31
2016 | 2015 | |||||||
Cash Flows From Operating Activities | ||||||||
Net Loss | $ | (10,845 | ) | $ | (589,972 | ) | ||
Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
Depreciation | 93,407 | 116,874 | ||||||
Changes in Operating Assets and Liabilities | ||||||||
Prepaid Expenses | (571 | ) | 9,035 | |||||
Inventory | (86,150 | ) | 216,031 | |||||
Accounts Payable and Accrued Expenses | (1,116 | ) | 4,031 | |||||
Due to related party | 94,498 | (191,265 | ) | |||||
Net Cash (Used In) Provided By Operating Activities | 89,223 | (435,266 | ) | |||||
Cash Flows From Investing Activities | ||||||||
Proceeds from note receivable | - | 33,020 | ||||||
Purchase of property, plant, and equipment | (87,492 | ) | (54,480 | ) | ||||
Net Cash Used In Investing Activities | (87,492 | ) | (21,460 | ) | ||||
Cash Flows From Financing Activities | ||||||||
Proceeds from note payable | - | 250,000 | ||||||
Repayment of note payable | - | (250,000 | ) | |||||
Net proceeds from notes payable - related parties | - | 457,000 | ||||||
Net Cash Provided By Financing Activities | - | 457,000 | ||||||
Net Increase in Cash | 1,731 | 274 | ||||||
Cash - Beginning of Year | 14,037 | 13,763 | ||||||
Cash - End of Year | $ | 15,768 | $ | 14,037 | ||||
Supplementary Cash Flow Information | ||||||||
Cash Paid For Interest | $ | 7,969 | $ | 11,613 | ||||
Cash Paid For Taxes | $ | - | $ | - |
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Note 1 - Nature of Operations and Basis of Presentation
Nature of Operations
Joseph Epstein Food Enterprises, Inc. (the “Company”) is a New Jersey corporation. The Company has a year-end of December 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 sole customer is MamaMancini Holdings, Inc., a related party through common ownership, which is located in New Jersey and has customers throughout the United States, with a large concentration in the Northeast and Southeast.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amount reported in the balance sheets for cash, prepaid expenses and other assets, accounts payable and accrued expenses, due to related party, and notes payable approximate fair value because of the immediate or short-term maturity of these financial instruments.
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 December 31, 2016 or 2015.
Inventories
Inventories are stated at average cost using the first-in, first-out (FIFO) valuation method. Inventory was comprised of the following at December 31, 2016 and 2015:
2016 | 2015 | |||||||
Raw Materials | $ | 385,799 | $ | 249,154 | ||||
Work in Process | 22,100 | 72,595 | ||||||
$ | 407,899 | $ | 321,749 |
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Note 2 - Summary of Significant Accounting Policies (continued)
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 | 5 - 7 years |
Leasehold improvements | Shorter of 10 years or the remaining life of the lease |
Revenue Recognition
The Company records revenue for products when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products.
The Company meets these criteria upon shipment.
Income Taxes
The Company and its stockholders have elected to be taxed under the provision of Subchapter S of the Internal Revenue Code. This election effectively eliminates federal income tax expense at the corporate level as the Company’s stockholders are taxed directly on their respective shares of the Company’s profits. The Company also has elected to be treated as an “S Corporation” for New Jersey tax purposes. The stockholders are subject to state income tax on their respective share of profits of the Company. Accordingly, only the reduced state tax provision has been made in the accompanying financial statements.
Subsequent Events
The Company has evaluated subsequent events through the January 22, 2018, the date the financial statements were available to be issued.
Note 3 – Note Receivable
In 2013, the Company entered into an agreement to sell fixed assets in exchange for a $77,000 note receivable. The agreement calls for monthly payments of $3,378, bears interest of 5%, and matured in July 2015. Interest associated with the note receivable is recorded as interest income. The outstanding balance of the note at December 31, 2016 and 2015 was $0 and $0, respectively.
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Note 4 - Property and Equipment
Property and equipment on December 31, 2016 and 2015 are as follows:
2016 | 2015 | |||||||
Machinery and Equipment | $ | 561,896 | $ | 536,580 | ||||
Leasehold Improvements | 501,662 | 439,486 | ||||||
1,063,558 | 976,066 | |||||||
Accumulated Depreciation | (667,844 | ) | (574,437 | ) | ||||
$ | 395,714 | $ | 401,629 |
Depreciation expense was $93,407 and $116,874, for the years ended December 31, 2016 and 2015, respectively.
Note 5 - Related Party Transactions
Notes Payable – Related Party
The Company receives advances from a principal shareholder which bear interest at 8%. The advances are due on February 1, 2019. At December 31, 2016 and 2015, there was $400,000 of principal outstanding, respectively.
The Company receives advances from an entity 100% owned by the same principal shareholder, which bear interest at 8%. The advances are due on February 1, 2019. At December 31, 2016 and 2015, there was $132,000 of principal outstanding, respectively.
Interest expense associated with these notes was $42,560 and $21,812 for the years ended December 31, 2016 and 2015, respectively. Accrued interest associated with these notes was $21,281 and $17,412 at December 31, 2016 and 2015, respectively.
MamaMancini Holdings, Inc.
On March 1, 2010, the MamaMancini Holdings, Inc., (“MamaMancini”) entered into a five-year agreement with Joseph Epstein Foods (the “Manufacturer”) who is a related party. The Manufacturer is co-owned by the CEO and President of MamaMancini. The Company analyzed the relationship with the Manufacturer to determine if the Manufacturer is a variable interest entity as defined by FASB ASC 810 “Consolidation”. Based on this analysis, the Company has determined that the Manufacturer is a variable interest entity but that MamaMancini is not the primary beneficiary of the variable interest entity and therefore consolidation is not required. In addition, based on the analysis the Company determined that the CEO and President is the primary beneficiary of the variable interest entity and bears the risk of loss. Under the terms of the agreement, the MamaMancini grants to the Manufacturer a revocable license to use the Company’s recipes, formulas, methods and ingredients for the preparation and production of MamaMancini’s products, for manufacturing the MamaMancini’s product and all future improvements, modifications, substitutions and replacements developed by the MamaMancini. The Manufacturer in turn grants MamaMancini the exclusive right to purchase the product. Under the terms of the agreement the Manufacturer agrees to manufacture, package, and store MamaMancini’s products and MamaMancini has the right to purchase products from one or more other manufacturers, distributors or suppliers. In September 2016, the agreement was amended and restated to extend the agreement until August 2, 2021. The amended agreement contains a perpetual automatic renewal clause for a period of one year after the expiration of the initial term. During the renewal period either party may cancel the contract with written notice nine months prior to the termination date. The term of this Agreement shall expire on the later of the expiration date or a date which is three (3) years following a Change of Control. For purposes of the agreement, a Change of Control shall occur when a third party who is not currently a shareholder of the Company acquires control of at least fifty-one percent (51%) of the voting shares of MamaMancini.
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Under the terms of the agreement if MamaMancini specifies any change in packaging or shipping materials which results in the manufacturer incurring increased expense for packaging and shipping materials or in the Manufacturer being unable to utilize obsolete packaging or shipping materials in ordinary packaging or shipping, MamaMancini agrees to pay as additional product cost the additional cost for packaging and shipping materials and to purchase at cost such obsolete packaging and shipping materials. If MamaMancini requests any repackaging of the product, other than due to defects in the original packaging, MamaMancini will reimburse the Manufacturer for any labor costs incurred in repackaging. Per the agreement, all product delivery shipping costs are the expense of the MamaMancini. MamaMancini agreed with the Manufacturer at the end of 2015 that Company would purchase a minimum of $963,000 of product each month and that any amount below that sum would be a charge of 12% of that shortfall each month. In return, the Manufacturer obligated itself to offer MamaMancini competitive prices and would not co-pack for other suppliers and would either maintain or lower its payable to MamaMancini each quarter. In addition, the Manufacturer agreed to rebate MamaMancini any overage of gross margin above 12% each month.
MamaMancini Holdings, Inc. accounted for 100% of the Company’s sales for the years ended December 31, 2016 and 2015, respectively.
At December 31, 2016 and 2015, the amount due to MamaMancini is $2,178,352 and $2,083,854 respectively.
Note 6 – Notes Payable
On August 2, 2010, the Company entered into a note payable with a bank for $250,000. The note was payable on demand and bore interest at 3.75%, with interest being due monthly. The note was fully guaranteed by a principal shareholder. The outstanding balance of $250,000 was fully repaid on April 29, 2015 with the proceeds from a new note with another bank.
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 the note mentioned above. The note bears interest at 3.75%, with interest being due monthly. The note is due in full on the maturity date of April 1, 2018. The note is fully guaranteed by a principal shareholder.
Note 7 - 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.
Operating Lease
The Company has a lease for office, manufacturing, and warehouse space in East Rutherford, NJ. The lease expires on March 31, 2024, with a 5-year renewal option. Rent expense for the years ended December 31, 2016 and 2015 was $164,775 and $103,596, respectively.
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Total future minimum payments required under the lease as of December 31, 2016 are as follows:
Years Ending December 31, | ||||
2017 | $ | 189,790 | ||
2018 | 191,957 | |||
2019 | 197,807 | |||
2020 | 199,757 | |||
2021 | 208,837 | |||
Thereafter | 476,693 | |||
Total | $ | 1,464,841 |
Note 8 – Subsequent Events
On November 1, 2017, MamaMancini’s Holdings, Inc., a Nevada corporation (“MamaMancini’s”), Joseph Epstein Food Enterprises, Inc., a New Jersey corporation(“JEFE”), and MMMB Acquisition, Inc., a Nevada corporation and wholly owned subsidiary of MamaMancini’s (“Merger Sub”), completed the merger contemplated by the Agreement and Plan of Merger by and among MamaMancini’s, JEFE, and Merger Sub, dated as of November 1, 2017 (the “Merger Agreement”). 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 MamaMancini’s. It is anticipated that Merger Sub will be renamed “Joseph Epstein Food Enterprises, Inc.”
Under the terms of the Merger Agreement and in connection with the merger, the Company acquired all assets of JEFE. 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 will be consolidated with the Consolidated Financial Statements of the Company (collectively, the “Merger Transaction”). No cash or stock was exchanged in connection with the transaction.
EXHIBIT 99.2
Joseph Epstein Food Enterprises, Inc.
Balance Sheet
At October 31, 2017
Assets: | ||||
Current Assets: | ||||
Cash | $ | 17,627 | ||
Prepaid expenses | 25,497 | |||
Inventory | 733,687 | |||
Total Current Assets | 776,811 | |||
Property, plant, and equipment, net | 404,591 | |||
Deposits | 17,036 | |||
Total Assets | $ | 1,198,438 | ||
Liabilities and Shareholders’ Deficit | ||||
Liabilities | ||||
Current Liabilities: | ||||
Accounts payable and accrued expenses | $ | 2,723,226 | ||
Note payable | 250,000 | |||
Due to related party | 1,537,724 | |||
Total Current Liabilities | 4,510,950 | |||
Notes payable - related parties | 532,000 | |||
Total Long-Term Liabilities | 532,000 | |||
Total Liabilities | 5,042,950 | |||
Shareholders’ Deficit | ||||
Accumulated Deficit | (3,844,512 | ) | ||
Total Shareholders’ Deficit | (3,844,512 | ) | ||
Total Liabilities and Shareholders’ Deficit | $ | 1,198,438 |
Joseph Epstein Food Enterprises, Inc.
Statement of Operations
For the Ten Months Ended October 31, 2017
Revenue | $ | 14,609,007 | ||
Cost of Sales | 14,177,683 | |||
431,324 | ||||
General and Administrative Expenses | 547,861 | |||
Loss From Operations | (116,537 | ) | ||
Other Expense | ||||
Interest Expense | 46,321 | |||
Total Other Expense | 46,321 | |||
Net Loss | $ | (162,858 | ) |
Joseph Epstein Food Enterprises, Inc.
Statement of Cash Flows
For the Ten Months Ended October 31, 2017
Cash Flows From Operating Activities | ||||
Net Loss | $ | (162,858 | ) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||
Depreciation | 70,424 | |||
Changes in Operating Assets and Liabilities | ||||
Prepaid Expenses | 11,202 | |||
Inventory | (325,788 | ) | ||
Accounts Payable and Accrued Expenses | 1,128,808 | |||
Due to related party | (640,628 | ) | ||
Net Cash Provided By Operating Activities | 81,160 | |||
Cash Flows From Investing Activities | ||||
Purchase of property, plant, and equipment | (79,301 | ) | ||
Net Cash Used In Investing Activities | (79,301 | ) | ||
Net Increase in Cash | 1,859 | |||
Cash - Beginning of Year | 15,768 | |||
Cash - End of Year | $ | 17,627 | ||
Supplementary Cash Flow Information | ||||
Cash Paid For Interest | $ | 52,602 | ||
Cash Paid For Taxes | $ | - |
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Note 1 - Nature of Operations and Basis of Presentation
Nature of Operations
Joseph Epstein Food Enterprises, Inc. (the “Company”) is a New Jersey corporation. The Company has a year-end of December 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 sole customer is MamaMancini Holdings, Inc., a related party through common ownership, which is located in New Jersey and has customers throughout the United States, with a large concentration in the Northeast and Southeast.
Note 2 - Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates.
Fair Value of Financial Instruments
The carrying amount reported in the balance sheets for cash, prepaid expenses and other assets, accounts payable and accrued expenses, due to related party, and notes payable approximate fair value because of the immediate or short-term maturity of these financial instruments.
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 October 31, 2017.
Inventories
Inventories are stated at average cost using the first-in, first-out (FIFO) valuation method. Inventory was comprised of the following at October 31, 2017:
Raw Materials | $ | 721,187 | ||
Work in Process | 12,500 | |||
$ | 733,687 |
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Note 2 - Summary of Significant Accounting Policies (continued)
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 | 5 - 7 years | ||
Leasehold improvements | Shorter of 10 years or the remaining life of the lease |
Revenue Recognition
The Company records revenue for products when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products.
The Company meets these criteria upon shipment.
Income Taxes
The Company and its stockholders have elected to be taxed under the provision of Subchapter S of the Internal Revenue Code. This election effectively eliminates federal income tax expense at the corporate level as the Company’s stockholders are taxed directly on their respective shares of the Company’s profits. The Company also has elected to be treated as an “S Corporation” for New Jersey tax purposes. The stockholders are subject to state income tax on their respective share of profits of the Company. Accordingly, only the reduced state tax provision has been made in the accompanying financial statements.
Subsequent Events
The Company has evaluated subsequent events through the January 22, 2018, the date the financial statements were available to be issued.
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Note 3 - Property and Equipment
Property and equipment on October 31, 2017 are as follows:
Machinery and Equipment | $ | 581,187 | ||
Leasehold Improvements | 561,672 | |||
1,142,859 | ||||
Accumulated Depreciation | (738,268 | ) | ||
$ | 404,591 |
Depreciation expense was $70,424 for the ten months ended October 31, 2017.
Note 4 - Related Party Transactions
Notes Payable – Related Party
The Company receives advances from a principal shareholder which bear interest at 8%. The advances are due on February 1, 2019. At October 31, 2017, there was $400,000 of principal outstanding.
The Company receives advances from an entity 100% owned by the same principal shareholder, which bear interest at 8%. The advances are due on February 1, 2019. At October 31, 2017 there was $132,000 of principal outstanding.
The Company incurred interest expense on these loans of $35,467 during the ten months ended October 31, 2017 and has approximately $15,000 of accrued interest from these loans at October 31, 2017.
MamaMancini’s Holdings, Inc.
On March 1, 2010, the MamaMancini’s Holdings, Inc., (“MamaMancini”) entered into a five-year agreement with Joseph Epstein Foods (the “Manufacturer”) who is a related party. The Manufacturer is co-owned by the CEO and President of MamaMancini. The Company analyzed the relationship with the Manufacturer to determine if the Manufacturer is a variable interest entity as defined by FASB ASC 810 “Consolidation”. Based on this analysis, the Company has determined that the Manufacturer is a variable interest entity but that MamaMancini is not the primary beneficiary of the variable interest entity and therefore consolidation is not required. In addition, based on the analysis the Company determined that the CEO and President is the primary beneficiary of the variable interest entity and bears the risk of loss. Under the terms of the agreement, the MamaMancini grants to the Manufacturer a revocable license to use the Company’s recipes, formulas, methods and ingredients for the preparation and production of MamaMancini’s products, for manufacturing the MamaMancini’s product and all future improvements, modifications, substitutions and replacements developed by the MamaMancini. The Manufacturer in turn grants MamaMancini the exclusive right to purchase the product. Under the terms of the agreement the Manufacturer agrees to manufacture, package, and store MamaMancini’s products and MamaMancini has the right to purchase products from one or more other manufacturers, distributors or suppliers. In September 2016, the agreement was amended and restated to extend the agreement until August 2, 2021. The amended agreement contains a perpetual automatic renewal clause for a period of one year after the expiration of the initial term. During the renewal period either party may cancel the contract with written notice nine months prior to the termination date. The term of this Agreement shall expire on the later of the expiration date or a date which is three (3) years following a Change of Control. For purposes of the agreement, a Change of Control shall occur when a third party who is not currently a shareholder of the Company acquires control of at least fifty-one percent (51%) of the voting shares of MamaMancini.
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Note 4 - Related Party Transactions (continued)
MamaMancini’s Holdings, Inc. (continued)
Under the terms of the agreement if MamaMancini specifies any change in packaging or shipping materials which results in the manufacturer incurring increased expense for packaging and shipping materials or in the Manufacturer being unable to utilize obsolete packaging or shipping materials in ordinary packaging or shipping, MamaMancini agrees to pay as additional product cost the additional cost for packaging and shipping materials and to purchase at cost such obsolete packaging and shipping materials. If MamaMancini requests any repackaging of the product, other than due to defects in the original packaging, MamaMancini will reimburse the Manufacturer for any labor costs incurred in repackaging. Per the agreement, all product delivery shipping costs are the expense of the MamaMancini. MamaMancini agreed with the Manufacturer at the end of 2015 that Company would purchase a minimum of $963,000 of product each month and that any amount below that sum would be a charge of 12% of that shortfall each month. In return, the Manufacturer obligated itself to offer MamaMancini competitive prices and would not co-pack for other suppliers and would either maintain or lower its payable to MamaMancini each quarter. In addition, the Manufacturer agreed to rebate MamaMancini any overage of gross margin above 12% each month.
MamaMancini’s Holdings, Inc. accounted for 100% of the Company’s sales for the ten months ended October 31, 2017.
At October 31, 2017 the amount due to MamaMancini is $1,537,724.
Note 5 – Notes Payable
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 the note mentioned above. The note bears interest at 3.75%, with interest being due monthly. The note is due in full on the maturity date of April 1, 2018. The note is fully guaranteed by a principal shareholder.
Note 6 - 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.
Operating Lease
The Company has a lease for office, manufacturing, and warehouse space in East Rutherford, NJ. The lease expires on March 31, 2024, with a 5 year renewal option. Rent expense for the ten months ended October 31, 2017 was $157,798.
Total future minimum payments required under the lease as of October 31, 2017 are as follows:
Years Ending December 31, | ||||
2017 (remainder) | $ | 31,993 | ||
2018 | 191,957 | |||
2019 | 197,807 | |||
2020 | 199,757 | |||
2021 | 208,837 | |||
Thereafter | 476,693 | |||
Total | $ | 1,307,044 |
Joseph Epstein Food Enterprises, Inc.
Notes to Financial Statements
Note 7 – Subsequent Events
On November 1, 2017, MamaMancini’s Holdings, Inc., a Nevada corporation (“MamaMancini’s”), Joseph Epstein Food Enterprises, Inc., a New Jersey corporation(“JEFE”), and MMMB Acquisition, Inc., a Nevada corporation and wholly owned subsidiary of MamaMancini’s (“Merger Sub”), completed the merger contemplated by the Agreement and Plan of Merger by and among MamaMancini’s, JEFE, and Merger Sub, dated as of November 1, 2017 (the “Merger Agreement”). 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 MamaMancini’s. It is anticipated that Merger Sub will be renamed “Joseph Epstein Food Enterprises, Inc.”
Under the terms of the Merger Agreement and in connection with the merger, the Company acquired all assets of JEFE. 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 will be consolidated with the Consolidated Financial Statements of the Company (collectively, the “Merger Transaction”). No cash or stock was exchanged in connection with the transaction.
EXHIBIT 99.3
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF MAMAMANCINI’S HOLDINGS, INC.
References to “MamaMancini”, the “Company”, “we”, “us” and “our” mean MamaMancini’s Holdings, Inc. and its consolidated subsidiaries, unless the context otherwise requires.
Pro Forma Financial Statements
On November 1, 2017, MamaMancini’s Holdings, Inc., a Nevada corporation (“MamaMancini’s”), Joseph Epstein Food Enterprises, Inc., a New Jersey corporation(“JEFE”), and MMMB Acquisition, Inc., a Nevada corporation and wholly owned subsidiary of MamaMancini’s (“Merger Sub”), completed the merger contemplated by the Agreement and Plan of Merger (“Merger Agreement”) by and among MamaMancini’s, 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 MamaMancini’s.
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 will be consolidated with the Consolidated Financial Statements of the Company (collectively, the “Merger Transaction”). No cash or stock was exchanged in connection with the transaction.
The following unaudited pro forma condensed combined financial statements, which are referred to as the unaudited pro forma financial statements, have been prepared to assist in the analysis of financial effects of the Merger Transaction. The unaudited pro forma combined condensed statements of operations, which are referred to as the unaudited pro forma statements of operations, for the year ended January 31, 2017 and the nine months ended October 31, 2017, combine the historical consolidated statements of operations of MamaMancini’s and JEFE, giving effect to the Merger Transaction, as if they had been completed on February 1, 2016, the beginning of the earliest period presented. The unaudited pro forma condensed combined statements of operations for the nine months ended October 31, 2017 were derived from the unaudited condensed consolidated financial statements of MamaMancini’s for the nine months ended October 31, 2017, and the unaudited condensed financial statements of JEFE for the period from February 1, 2017 through October 31, 2017. The unaudited pro forma condensed combined balance sheet, which is known as the unaudited pro forma balance sheet, combines the historical balance sheets of MamaMancini’s and JEFE as of October 31, 2017, giving effect to the Merger Transaction, as if they had been completed on October 31, 2017. The historical financial statements of JEFE have been adjusted to reflect certain reclassification and other conforming adjustments in order to align to MamaMancini’s condensed financial statement presentation.
Effective November 1, 2017, MamaMancini’s and JEFE completed the Merger Transaction whereby JEFE became a wholly-owned subsidiary of MamaMancini’s. 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 MamaMancini’s based on JEFE’s historical cost basis.
Assumptions and estimates underlying the adjustments to the unaudited pro forma financial statements, which are referred to as the pro forma adjustments, are described in the accompanying notes. The historical consolidated financial statements have been adjusted in the unaudited pro forma financial statements to give effect to pro forma events that are (1) directly attributable to the Merger Transaction; (2) factually supportable; and (3) with respect to the unaudited pro forma statements of operations, expected to have a continuing impact on the combined results of MamaMancini’s and JEFE following the Merger Transaction. The unaudited pro forma financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Merger Transaction occurred on the dates indicated. Further, the unaudited pro forma financial statements do not purport to project the future operating results or financial position of the combined company following the Merger Transaction. The unaudited pro forma financial statements include assets and liabilities of JEFE adjusted for MamaMancini’s historical cost basis. The final purchase price allocation may be materially different than that reflected in the pro forma purchase price allocation presented herein.
The unaudited pro forma financial statements, although helpful in illustrating the financial characteristics of the combined company under one set of assumptions, do not reflect the benefits of expected cost savings (or associated costs to achieve such savings), opportunities to earn additional revenue, or other factors that may result as a consequence of the Merger Transaction and, accordingly, do not attempt to predict or suggest future results. Further, the unaudited pro forma financial statements do not reflect (i) any other acquisition subsequent to the balance sheet date presented or (ii) the effect of any regulatory actions that may impact the results of the combined partnership following the Merger Transaction.
The unaudited pro forma financial statements have been developed from and should be read in conjunction with:
● | the accompanying notes to the unaudited pro forma financial statements; | |
● | the historical audited consolidated financial statements of MamaMancini’s for the year ended January 31, 2017 in MamaMancini’s Annual Report on Form 10-K, filed with the SEC on March 23, 2017, and incorporated by reference into this document; | |
● | the historical unaudited condensed consolidated financial statements of MamaMancini’s as of and for the nine months ended October 31, 2017, included in MamaMancini’s Quarterly Report on Form 10-Q and incorporated by reference into this document; | |
● | the historical audited financial statements of JEFE for the year ended December 31, 2016; and | |
● | the historical unaudited condensed financial statements of JEFE as of and for the ten months ended October 31, 2017, incorporated by reference into this document. | |
● | The pro forma financial statements include the impact of the merger of Joseph Epstein Food Enterprises, Inc. (“JEFE”) as if they occurred at the inception of each relevant period reported. JEFE has a calendar year-end, however JEFE’s historical information presented herein has been modified to conform to the same periods as the historical financial statements filed by the Company in Forms 10-K and 10-Q. |
MamaMancini’s Holdings, Inc.
Pro Forma Combined Balance Sheets
October 31, 2017
(Unaudited)
MamaMancini | Joseph Epstein Foods | Eliminations | Combined Balance | |||||||||||||
Current Assets | ||||||||||||||||
Cash | 558,633 | 17,627 | 576,260 | |||||||||||||
Accounts receivable | 2,859,190 | - | 2,859,190 | |||||||||||||
Inventories | 361,111 | 733,687 | 1,094,798 | |||||||||||||
Prepaid expenses | 97,957 | 25,497 | 123,454 | |||||||||||||
Due from manufacturer - related party | 1,537,724 | - | (1,537,724 | ) | - | |||||||||||
5,414,615 | 776,811 | (1,537,724 | ) | 4,653,702 | ||||||||||||
Property , plant, and equipment | 2,111,053 | 404,591 | 2,515,644 | |||||||||||||
Deposits | 94,060 | 17,036 | 111,096 | |||||||||||||
Total Assets | 7,619,728 | 1,198,438 | (1,537,724 | ) | 7,280,442 | |||||||||||
Current Liabilities | ||||||||||||||||
Accounts payable and accrued expenses | 1,006,216 | 2,723,226 | 3,729,442 | |||||||||||||
Due to related party | - | 1,537,724 | (1,537,724 | ) | - | |||||||||||
Line of credit, net | 2,303,920 | - | 2,303,920 | |||||||||||||
Term loan | 165,540 | - | 165,540 | |||||||||||||
Note payable, net | 1,807,182 | - | 1,807,182 | |||||||||||||
5,282,858 | 4,260,950 | (1,537,724 | ) | 8,006,084 | ||||||||||||
Term loan, net of current | 634,460 | - | 634,460 | |||||||||||||
Note payable | - | 250,000 | 250,000 | |||||||||||||
Notes payable - related party | 117,656 | 532,000 | 649,656 | |||||||||||||
752,116 | 782,000 | 1,534,116 | ||||||||||||||
Total Liabilities | 6,034,974 | 5,042,950 | (1,537,724 | ) | 9,540,200 | |||||||||||
Shareholders’ Equity | ||||||||||||||||
Common stock | 318 | - | 318 | |||||||||||||
Additional paid in capital | 16,145,954 | - | 16,145,954 | |||||||||||||
Common stock subscribed | 1 | - | 1 | |||||||||||||
Accumulated deficit | (14,412,019 | ) | (3,844,512 | ) | (18,256,531 | ) | ||||||||||
Treasury stock | (149,500 | ) | - | (149,500 | ) | |||||||||||
Total shareholders’ equity | 1,584,754 | (3,844,512 | ) | (2,259,758 | ) | |||||||||||
Total liabilities and shareholders’ equity | 7,619,728 | 1,198,438 | (1,537,724 | ) | 7,280,442 |
MamaMancini’s Holdings, Inc.
Pro Forma Combined Statement of Operations
For the Nine Months Ended October 31, 2017
(Unaudited)
MamaMancini | Joseph Epstein Foods | Eliminations | Combined Balance | |||||||||||||
Sales, net | 19,714,090 | 13,443,949 | (13,443,949 | ) | 19,714,090 | |||||||||||
Cost of sales | 13,443,949 | 13,047,131 | (13,443,949 | ) | 13,047,131 | |||||||||||
6,270,141 | 396,818 | - | 6,666,959 | |||||||||||||
- | ||||||||||||||||
Operating Expenses | ||||||||||||||||
Research and development | 77,647 | - | 77,647 | |||||||||||||
General and administrative | 5,251,090 | 504,032 | 5,755,122 | |||||||||||||
5,328,737 | 504,032 | 5,832,769 | ||||||||||||||
Income from operations | 941,404 | (107,214 | ) | - | 834,190 | |||||||||||
Other Expense | ||||||||||||||||
Interest expense | 528,969 | 42,615 | 571,584 | |||||||||||||
Amortization of debt discount | 56,457 | - | 56,457 | |||||||||||||
585,426 | 42,615 | 628,041 | ||||||||||||||
Net income (loss) | 355,978 | (149,829 | ) | - | 206,149 | |||||||||||
Less preferred dividends | (91,565 | ) | - | (91,565 | ) | |||||||||||
Net income (loss) available to common shareholders | 264,413 | (149,829 | ) | - | 114,584 | |||||||||||
Net income (loss) per common share - basic | 0.00 | |||||||||||||||
Net income (loss) per common share - diluted | 0.00 | |||||||||||||||
Weighted average common shares outstanding - basic | 29,152,736 | |||||||||||||||
Weighted average common shares outstanding - diluted | 30,932,182 |
MamaMancini’s Holdings, Inc.
Pro Forma Combined Statement of Operations
For the Year Ended January 31, 2017
MamaMancini | Joseph Epstein Foods | Eliminations | Combined Balance | |||||||||||||
Sales, net | 18,048,792 | 11,555,976 | (11,555,976 | ) | 18,048,792 | |||||||||||
Cost of sales | 11,555,976 | 10,924,150 | (11,555,976 | ) | 10,924,150 | |||||||||||
6,492,816 | 631,826 | - | 7,124,642 | |||||||||||||
Operating Expenses | ||||||||||||||||
Research and development | 144,013 | - | 144,013 | |||||||||||||
General and administrative | 5,941,794 | 581,187 | 6,522,981 | |||||||||||||
6,085,807 | 581,187 | 6,666,994 | ||||||||||||||
Income from operations | 407,009 | 50,639 | - | 457,648 | ||||||||||||
Other Expense | ||||||||||||||||
Interest expense | 667,623 | 61,484 | 729,107 | |||||||||||||
Amortization of debt discount | 28,526 | - | 28,526 | |||||||||||||
696,149 | 61,484 | 757,633 | ||||||||||||||
Net income (loss) | (289,140 | ) | (10,845 | ) | - | (299,985 | ) | |||||||||
Less preferred dividends | (204,921 | ) | - | (204,921 | ) | |||||||||||
Net income (loss) available to common shareholders | (494,061 | ) | (10,845 | ) | - | (504,906 | ) | |||||||||
Net income (loss) per common share - basic | (0.02 | ) | ||||||||||||||
Net income (loss) per common share - diluted | (0.02 | ) | ||||||||||||||
Weighted average common shares outstanding - basic | 27,100,316 | |||||||||||||||
Weighted average common shares outstanding - diluted | 27,100,316 |
MamaMancini’s Holdings, Inc.
Pro Forma Combined Statement of Operations
For the Year Ended January 31, 2016
MamaMancini | Joseph Epstein Foods | Eliminations | Combined Balance | |||||||||||||
Sales, net | $ | 12,603,447 | $ | 9,006,220 | $ | (9,006,220 | ) | $ | 12,603,447 | |||||||
Cost of sales: | ||||||||||||||||
Cost of goods sold | 9,006,220 | 8,494,544 | (9,006,220 | ) | 8,494,544 | |||||||||||
Write-off of inventory | - | 437,800 | - | 437,800 | ||||||||||||
Total cost of sales | 9,006,220 | 8,932,344 | (9,006,220 | ) | 8,932,344 | |||||||||||
Gross Profit (Loss) | 3,597,227 | 73,876 | - | 3,671,103 | ||||||||||||
Operating Expenses: | ||||||||||||||||
Research and development | 107,632 | - | - | 107,632 | ||||||||||||
General and Administrative Expenses | 5,748,912 | 610,434 | - | 6,359,346 | ||||||||||||
Total operating expenses | 5,856,544 | 610,434 | - | 6,466,978 | ||||||||||||
Income (Loss) From Operations | (2,259,317 | ) | (536,558 | ) | - | (2,795,875 | ) | |||||||||
Other Income (Expense) | ||||||||||||||||
Interest expense | 555,071 | 53,414 | - | 608,485 | ||||||||||||
Amortization of debt discount | 261,670 | 261,670 | ||||||||||||||
Amortization of debt closing costs | 55,471 | 55,471 | ||||||||||||||
Loss on debt extinguishment | 380,089 | - | - | 380,089 | ||||||||||||
Total Other Income (Expense) | 1,252,301 | 53,414 | - | 1,305,715 | ||||||||||||
Net income (loss) | $ | (3,511,618 | ) | $ | (589,972 | ) | $ | - | $ | (4,101,590 | ) | |||||
Less: preferred dividends | (66,992 | ) | (66,992 | ) | ||||||||||||
Net income (loss) available to common shareholders | $ | (3,578,610 | ) | $ | (589,972 | ) | $ | - | $ | (4,168,582 | ) | |||||
Net income (loss) per common share - basic | (0.16 | ) | ||||||||||||||
Net income (loss) per common share - diluted | (0.16 | ) | ||||||||||||||
Weighted average common shares outstanding - basic | 26,147,913 | |||||||||||||||
Weighted average common shares outstanding - diluted | 26,147,913 |
MAMAMANCINI’S HOLDINGS, INC.
NOTES TO PROFORMA FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma balance sheet has been derived from the historical financial statements of MamaMancini’s Holdings, Inc. after giving effect to the acquisition of Joseph Epstein Food Enterprises, Inc. which closed on November 1, 2017.
Historical financial information has been adjusted in the pro forma balance sheet and statements of operations to give effect to pro forma events that are: (1) directly attributable to the Acquisition; (2) factually supportable; and (3) expected to have a continuing impact on the Company’s balance sheet and results of operations.
The accompanying unaudited pro forma combined balance sheet has been presented as of October 31, 2017. The unaudited pro forma combined statements of operations for the periods ended October 31, 2017, January 31, 2017 and January 31, 2016 have been presented as if the acquisition had occurred as if the Merger Transaction took place at the beginning of the periods presented, or February 1, 2016.
Under the terms of the Merger Agreement and in connection with the merger, the Company acquired all assets of JEFE. 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 will be consolidated with the Consolidated Financial Statements of the Company (collectively, the “Merger Transaction”). No cash or stock was exchanged in connection with the transaction.
The unaudited pro forma consolidated statements do not necessarily represent the actual results that would have been achieved had the companies been combined at the beginning of the year, nor may they be indicative of future operations. These unaudited pro forma financial statements should be read in conjunction with the companies’ respective historical financial statements and notes included thereto.
3. PRO FORMA ADJUSTMENTS
The adjustments included in the pro forma balance sheet are as follows:
(A) The elimination of inter-company balances.
The adjustments included in the pro forma statement of operations for the years ended January 2016 and 2017 and for the nine months ended October 31, 2017 are as follows:
(B) The elimination of intercompany sales and purchases for each relevant period.