0001493152-17-006523.txt : 20170613 0001493152-17-006523.hdr.sgml : 20170613 20170613061200 ACCESSION NUMBER: 0001493152-17-006523 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 64 CONFORMED PERIOD OF REPORT: 20170430 FILED AS OF DATE: 20170613 DATE AS OF CHANGE: 20170613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MamaMancini's Holdings, Inc. CENTRAL INDEX KEY: 0001520358 STANDARD INDUSTRIAL CLASSIFICATION: SAUSAGE, OTHER PREPARED MEAT PRODUCTS [2013] IRS NUMBER: 270607116 STATE OF INCORPORATION: NV FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-54954 FILM NUMBER: 17907908 BUSINESS ADDRESS: STREET 1: 25 BRANCA ROAD CITY: EAST RUTHERFORD STATE: NJ ZIP: 07073 BUSINESS PHONE: 201-531-1212 MAIL ADDRESS: STREET 1: 25 BRANCA ROAD CITY: EAST RUTHERFORD STATE: NJ ZIP: 07073 FORMER COMPANY: FORMER CONFORMED NAME: MASCOT PROPERTIES, INC. DATE OF NAME CHANGE: 20110510 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarter ended: April 30, 2017

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Transition Period from ___________ to ____________

 

Commission File Number: 000-54954

 

MamaMancini’s Holdings, Inc.

(Exact name of Registrant as specified in its charter)

 

Nevada   27-067116
(State or other jurisdiction
of incorporation)
  (IRS Employer
I.D. No.)

 

25 Branca Road

East Rutherford, NJ 07073

(Address of principal executive offices and zip Code)

 

(201) 531-1212

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer [  ] Accelerated filer [  ]
       
Non-accelerated filer [  ] Smaller reporting company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of June 12, 2017, there were 27,947,539 shares outstanding of the registrant’s common stock.

 

 

 

   
  

 

TABLE OF CONTENTS

 

  Page
PART I – FINANCIAL INFORMATION
     
Item 1. Financial Statements. F-1
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 2
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 6
     
Item 4. Controls and Procedures. 6
     
PART II – OTHER INFORMATION
     
Item 1. Legal Proceedings. 6
   
Item 1A. Risk Factors. 7
   
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 7
   
Item 3. Defaults Upon Senior Securities. 7
   
Item 4. Mine Safety Disclosures. 7
   
Item 5. Other Information 7
   
Item 6. Exhibits. 7
   
Signatures   8

 

 1 
 

 

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

MAMAMANCINI’S HOLDINGS, INC.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

APRIL 30, 2017

 

  Page(s)
   
Condensed Consolidated Balance Sheets as of April 30, 2017 (Unaudited) and January 31, 2017 F-2
   
Condensed Consolidated Statements of Operations For the Three Months ended April 30, 2017 and 2016 (Unaudited) F-3
   
Condensed Consolidated Statements of Changes in Stockholders’ Equity For the Period from February 1, 2017 through April 30, 2017 (Unaudited) F-4
   
Condensed Consolidated Statements of Cash Flows For the Three Months Ended April 30, 2017 and 2016 (Unaudited) F-5
   
Notes to Condensed Consolidated Financial Statements F-6

 

 F-1 
  

 

MamaMancini’s Holdings, Inc.

Condensed Consolidated Balance Sheets

 

   April 30, 2017  January 31, 2017
   (Unaudited)   
Assets          
           
Assets:          
Cash  $436,447   $666,580 
Accounts receivable, net   2,301,737    1,817,820 
Inventories   180,929    443,623 
Prepaid expenses   79,686    135,747 
Due from manufacturer - related party   2,016,046    2,079,708 
Total current assets   5,014,845    5,143,478 
           
Property and equipment, net   1,311,777    1,175,508 
           
Deposit on machinery and equipment   423,383    - 
Total Assets  $6,750,005   $6,318,986 
           
Liabilities and Stockholders’ Equity          
           
Liabilities:          
Accounts payable and accrued expenses  $770,071   $484,752 
Line of credit, net   1,608,191    1,363,145 
Term loan   140,004    140,004 
Note payable - net   1,666,950    1,401,906 
Total current liabilities   4,185,216    3,389,807 
           
Term loan - net of current   478,327    513,328 
Note payable - net of current portion   751,055    1,298,819 
Notes payable - related party   117,656    117,656 
Total long-term liabilities   1,347,038    1,929,803 
           
Total Liabilities   5,532,254    5,319,610 
           
Commitments and contingencies          
           
Stockholders’ Equity:          
Series A Preferred stock, $0.00001 par value; 120,000 shares authorized; 23,400 shares issued and outstanding, respectively   —      —   
Preferred stock, $0.00001 par value; 19,880,000 shares authorized; no shares issued and outstanding   —      —   
Common stock, $0.00001 par value; 250,000,000 shares authorized; 27,947,539 and 27,810,717 shares issued and outstanding, respectively   279    278 
Additional paid in capital   15,961,978    15,825,029 
Common stock subscribed, $0.00001 par value; 66,667 shares, respectively   1    1 
Accumulated deficit   (14,595,007)   (14,676,432)
           
Less: Treasury stock, 230,000 shares, respectively   (149,500)   (149,500)
Total Stockholders’ Equity   1,217,751    999,376 
           
Total Liabilities and Stockholders’ Equity  $6,750,005   $6,318,986 

 

See accompanying notes to the condensed consolidated financial statements

 

 F-2 
 

 

MamaMancini’s Holdings, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

   For the Three Months Ended 
   April 30, 2017   April 30, 2016 
         
Sales - net of slotting fees and discounts  $5,357,301   $3,923,977 
           
Cost of sales   3,457,723    2,448,778 
           
Gross profit   1,899,578    1,475,199 
           
Operating expenses          
Research and development   25,588    30,562 
General and administrative expenses   1,557,828    1,499,857 
Total operating expenses   1,583,416    1,530,419 
           
Income (loss) from operations   316,162    (55,220)
           
Other expenses          
Interest expense   (170,657)   (161,762)
Amortization of debt discount   (17,280)   (9,125)
Total other expenses   (187,937)   (170,887)
           
Net income (loss)   128,225    (226,107)
           
Less: preferred dividends   (46,800)   (64,521)
           
Net income (loss) available to common stockholders  $81,425   $(290,628)
           
Net income (loss) per common share - basic  $0.00   $(0.01)
Net income (loss) per common share - diluted  $0.00   $(0.01)
           
Weighted average common shares outstanding          
- basic   27,810,717    26,507,516 
- diluted   

32,532,135

    26,507,516 

 

See accompanying notes to the condensed consolidated financial statements

 

 F-3 
 

 

MamaMancini’s Holdings, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Period from February 1, 2017 through April 30, 2017

(Unaudited)

 

   Series A Preferred Stock   Common Stock   Treasury Stock  

Additional

Paid In

   Common Stock   Accumulated   Stockholders’ 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Subscribed   Deficit   Equity 
                                         
Balance, February 1, 2017   23,400   $-    27,810,717   $278    (230,000)  $(149,500)  $15,825,029   $1   $(14,676,432)  $999,376 
                                                   
Common stock issued for services   -    -    87,554    1    -    -    82,999    -    -    83,000 
                                                   
Stock options issued for services   -    -    -    -    -    -    7,150    -    -    7,150 
                                                   
Series A Preferred dividend issued in common shares   -    -    49,268    -    -    -    46,800    -    -    46,800 
                                                   
Series A Preferred dividend   -    -    -    -    -    -    -    -    (46,800)   (46,800)
                                                   
Net income   -    -    -    -    -    -    -    -    128,225    128,225 
Balance, April 30, 2017   23,400   $-    27,947,539   $279    (230,000)  $(149,500)  $15,961,978   $1   $(14,595,007)  $1,217,751 

 

See accompanying notes to the condensed consolidated financial statements

 

 F-4 
 

 

MamaMancini’s Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   For the Three Months Ended 
   April 30, 2017   April 30, 2016 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net income (loss)  $128,225   $(226,107)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:          
Depreciation   107,081    76,703 
Amortization of debt discount and debt issuance costs   17,280    9,125 
Share-based compensation   90,150    179,208 
Changes in operating assets and liabilities:          
(Increase) Decrease in:          
Accounts receivable   (483,917)   (248,619)
Inventories   262,694    (254,233)
Prepaid expenses   56,061    (15,087)
Due from manufacturer - related party   63,662    51,730 
Increase (Decrease) in:          
Accounts payable and accrued expenses   285,319    (10,582)
Net Cash Provided by (Used In) Operating Activities   

526,555

    (437,862)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Cash paid for fixed assets   (666,733)   (18,650)
Net Cash Used In Investing Activities   (666,733)   (18,650)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Repayment of note payable   (300,000)   - 
Borrowings (repayments) of line of credit, net   245,046    481,039 
Repayment of term loan   (35,001)   (30,000)
Repayment of promissory notes   -    (79,490)
Net Cash (Used In) Provided By Financing Activities   (89,955)   371,549 
           
Net Decrease in Cash   (230,133)   (84,963)
           
Cash - Beginning of Period   666,580    587,422 
           
Cash - End of Period  $436,447   $502,459 
           
SUPPLEMENTARY CASH FLOW INFORMATION:          
Cash Paid During the Period for:          
Income taxes  $-   $- 
Interest  $

66,941

   $72,311 
           
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:          
           
Stock issued for Series A Preferred dividends  $46,800   $131,513 
Accrued dividends  $46,800   $64,521 
Debt extension fee included in principal balance of note  $52,236   $- 

 

See accompanying notes to the condensed consolidated financial statements

 

 F-5 
 

 

MamaMancini’s Holdings, Inc.

Notes to Condensed Consolidated Financial Statements

April 30, 2017

 

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.

 

Basis of Presentation

 

The condensed 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.

 

The unaudited financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. This report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended January 31, 2017 filed on April 23, 2017. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The condensed consolidated balance sheet at January 31, 2017 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the interim periods presented are not necessarily indicative of results for the year ending January 31, 2018.

 

Going Concern Analysis

 

Going Concern Analysis

 

The Company had a net income (loss) of $128,225 and $(226,107) for the three months ended April 30, 2017 and 2016. As a result, these conditions had raised substantial doubt regarding our ability to continue as a going concern. However, as of April 30, 2017, we had cash and working capital of $436,447 and $829,629, respectively. During the three months ended April 30, 2017, the Company generated cash from operations of $526,555. In addition, management was able to negotiate the terms of its note payable with one of the lenders and intends to exercise an option to extend the maturity date of the note payable to May 1, 2018. Also, the continued revenue growth coupled with improved gross margins and control of expenses leads management to conclude that it is probable that the Company’s cash resources will be sufficient to meet our cash requirements through the first quarter of fiscal year ended January 31, 2019. If necessary, management also determined that it is probable that external sources of debt and/or equity financing could be obtained based on management’s history of being able to raise capital coupled with current favorable market conditions. As a result of both management’s plans and current favorable trends in improving cash flow, the Company concluded that the initial conditions which raised substantial doubt regarding the ability to continue as a going concern have been alleviated. Therefore, the accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

 

The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. While we believe in the viability of management’s strategy to generate sufficient revenue, control costs and the ability to raise additional funds if necessary, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon the ability to further implement the business plan, generate sufficient revenues and to control operating expenses.

 

 F-6 
 

 

Note 2 - Summary of Significant Accounting Policies

 

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 condensed 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 April 30, 2017 or January 31, 2017.

 

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded, which is the face amount of the receivable net of the allowance for doubtful accounts. As of April 30, 2017 and January 31, 2017, the Company had reserves of $2,000.

 

Inventories

 

Inventories are stated at average cost using the first-in, first-out (FIFO) valuation method. Inventory was comprised of the following at April 30, 2017 and January 31, 2017:

 

   April 30, 2017   January 31, 2017 
Finished goods  $180,929   $443,623 

 

 F-7 
 

 

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.

 

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.

 

Stock Issuance Costs

 

Stock issuance costs are capitalized as incurred. Upon the completion of the offering, the stock issuance costs are reclassified to equity and netted against proceeds. In the event the costs are in excess of the proceeds, the costs are recorded to expense. In the case of an aborted offering, all costs are expensed.

 

Research and Development

 

Research and development is expensed as incurred. Research and development expenses for the three months ended April 30, 2017 and 2016 were $25,588 and $30,562, respectively.

 

Shipping and Handling Costs

 

The Company classifies freight billed to customers as sales revenue and the related freight costs as general and administrative expenses.

 

Revenue Recognition

 

The Company records revenue for products when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products.

 

The Company meets these criteria upon shipment.

 

Expenses such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows:

 

   Three Months
Ended
April 30, 2017
   Three Months
Ended
April 30, 2016
 
Gross Sales  $5,473,205   $4,040,988 
Less: Slotting, Discounts, Allowances   115,905    117,011 
Net Sales  $5,357,301   $3,923,977 

 

 F-8 
 

 

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 three months ended April 30, 2017 and 2016 were $317,594 and $420,892, respectively.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee compensation. It defines a fair value based method of accounting for an employee stock option or similar equity instrument. The Company accounts for compensation cost for stock option plans in accordance with ASC 718. The Company accounts for share-based payments to non-employees in accordance with ASC 505-50 “Equity Based Payments to Non-Employees”.

 

The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.

 

Share-based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock-based compensation expenses are included in cost of goods sold or selling, general and administrative expenses, depending on the nature of the services provided, in the consolidated statement of operations. Share-based payments issued to placement agents are classified as a direct cost of a stock offering and are recorded as a reduction in additional paid in capital.

 

For the three months ended April 30, 2017 and 2016, share-based compensation amounted to $90,150 and $179,208, respectively.

 

For the three months ended April 30, 2017 and 2016, when computing fair value of share-based payments, the Company has considered the following variables:

 

   April 30, 2017   April 30, 2016 
Risk-free interest rate   1.18%   1.28% to 1.33%
Expected life of grants   4.0 years    2.5 years 
Expected volatility of underlying stock   188%   178% to 179%
Dividends   0%   0%

 

The expected option term is computed using the “simplified” method as permitted under the provisions of ASC 718-10-S99. The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

 

The expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry peers and used an average of those volatilities. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods.

 

 F-9 
 

 

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 Three Months Ended
   April 30, 2017  April 30, 2016
Numerator:          
Net income/(loss) attributable to common stockholders  $81,425   $(290,628)
Effect of dilutive securities:   —      —   
           
Diluted net income (loss)  $81,425   $(290,628)
           
Denominator:          
Weighted average common shares outstanding - basic   27,810,717    26,507,516 
Dilutive securities (a):          
Series A Preferred   3,466,667    —   
Options   198,495    —   
Warrants   1,056,256    —   
           
Weighted average common shares outstanding and assumed conversion - diluted   32,532,135    26,507,516 
           
Basic net income (loss) per common share  $0.00   $(0.01)
           

Diluted net income (loss) per common share

  $0.00   $(0.01)
           
(a) - Anti-dilutive securities excluded:   3,779,884    9,189,805 

 

 F-10 
 

 

Income Taxes

 

Income taxes are provided in accordance with ASC No. 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the period of deferred tax assets and liabilities.

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

The Company is no longer subject to tax examinations by tax authorities for years prior to 2013.

 

Recent Accounting Pronouncements

 

In July 2015, the FASB issued the ASU No. 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. During the three months ended April 30, 2017, the Company adopted the methodologies prescribed by ASU 2015-11 and deemed that the adoption of the ASU did not have a material effect on its financial position or results of operations.

 

In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. During the three months ended April 30, 2017, the Company adopted the methodologies prescribed by ASU 2016-09 and deemed that the adoption of the ASU did not have a material effect on its financial position or results of operations.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will be required to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature of an entity’s leasing activities. This ASU is effective for public reporting companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its consolidated financial statements and disclosures.

 

In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)”. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)”. These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09, which the Company intends to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is in the process of evaluating the standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures.

 

 F-11 
 

 

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.

 

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard.

 

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.

 

Note 3 - Property and Equipment:

 

Property and equipment on April 30, 2017 and January 31, 2017 are as follows:

 

   April 30, 2017   January 31, 2017 
Machinery and Equipment  $1,193,726   $1,193,473 
Furniture and Fixtures   23,067    17,942 
Leasehold Improvements   1,063,170    825,198 
    2,279,963    2,036,613 
Less: Accumulated Depreciation   968,186    861,105 
   $1,311,777   $1,175,508 

 

Depreciation expense charged to income for the three months ended April 30, 2017 and 2016 amounted to $107,081 and $76,703, 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.

 

 F-12 
 

 

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 April 30, 2017 and January 31, 2017, the Company’s ownership interest in MO was 12% and 12%, respectively.

 

Note 5 - Related Party Transactions

 

Joseph Epstein Foods

 

On March 1, 2010, the Company 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 the Company. 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 the Company 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 of the Company is the primary beneficiary of the variable interest entity and bears the risk of loss. Under the terms of the agreement, the Company grants to the Manufacturer a revocable license to use the Company’s recipes, formulas, methods and ingredients for the preparation and production of Company’s products, for manufacturing the Company’s product and all future improvements, modifications, substitutions and replacements developed by the Company. The Manufacturer in turn grants the Company the exclusive right to purchase the product. Under the terms of the agreement the Manufacturer agrees to manufacture, package, and store the Company’s products and the Company 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 the Company.

 

Under the terms of the agreement if the Company 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, the Company 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 the Company requests any repackaging of the product, other than due to defects in the original packaging, the Company will reimburse the Manufacturer for any labor costs incurred in repackaging. Per the agreement, all product delivery shipping costs are the expense of the Company. The Company agreed with the Manufacturer at the end of the last fiscal year 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 the Company competitive prices and would not co-pack for other suppliers and would either maintain or lower its payable to the Company each quarter. In addition, the Manufacturer agreed to rebate the Company any overage of gross margin above 12% each month.

 

From time to time the Company will make investments in equipment located at the Manufacturer’s facility. The equipment is capitalized and depreciated by the Company over the estimated useful life.

 

During the three months ended April 30, 2017 and 2016, the Company purchased inventory of $3,307,107 and $2,843,012, respectively, from the Manufacturer.

 

During the three months ended April 30, 2017 and 2016, the Manufacturer incurred expenses of $15,000 and $6,000, respectively, on behalf of the Company for shared administrative expenses and salary expenses.

 

At April 30, 2017 and January 31, 2017, the amount due from the Manufacturer is $2,016,046 and $2,079,708 respectively.

 

 F-13 
 

 

Meatball Obsession, LLC

 

A current director of the Company is the chairman of the board and shareholder of Meatball Obsession LLC (“MO”).

 

For the three months ended April 30, 2017 and 2016, the Company generated approximately $22,571 and $10,102 in revenues from MO, respectively.

 

As of April 30, 2017 and January 31, 2017, the Company had a receivable of $9,849 and $8,189 due from MO, respectively.

 

WWS, Inc.

 

A current director of the Company is the president of WWS, Inc.

 

For the three months ended April 30, 2017 and 2016, the Company recorded $12,000 and $12,000 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 February 2019. As of April 30, 2017 and January 31, 2017, the outstanding principal balance of the notes was $117,656.

 

Note 6 - Loan and Security Agreement

 

On September 3, 2014, the Company entered into a Loan and Security Agreement (“Loan and Security Agreement”) with Entrepreneur Growth Capital, LLC (“EGC”) which contains a line of credit. As of April 30, 2017 and January 31, 2017, the outstanding balance on the line of credit was $1,608,191 and $1,363,145, respectively. In September 2016, the agreement was amended and the total facility increased to an aggregate principal amount of up to $3,200,000. The facility consists of the following:

 

Accounts Revolving Line of Credit:   $ 2,150,000  
Inventory Revolving Line of Credit:   $ 350,000  
Term Loan:   $ 700,000  

 

EGC may from time to time make loans in an aggregate amount not to exceed the Accounts Revolving Line of Credit up to 85% of the net amount of Eligible Accounts (as defined in the Loan and Security Agreement). EGC may from time to time make loans in an aggregate amount not to exceed the Inventory Revolving Line of Credit against Eligible Inventory (as defined in the Loan and Security Agreement) in an amount up to 50% of finished goods and in an amount up to 20% of raw material.

 

 F-14 
 

 

The revolving interest rates is equal to the highest prime rate in effect during each month as generally reported by Citibank, N.A. plus (a) 2.5% on loans and advances made against eligible accounts and (b) 4.0% on loans made against eligible inventory. The term loan bears interest at a rate of the highest prime rate in effect during each month as generally reported by Citibank, N.A. plus 4.0%. The initial term of the facility is for a period of two years and will automatically renew for an additional one year period. The Company is required to pay an annual facility fee equal to 0.75% of the total $3,200,000 facility and pays an annualized maintenance fee equal to 2.16% of the total facility. In the event of default, the Company shall pay 10% above the stated rates of interest per the Agreement. The drawdowns are secured by all of the assets of the Company. Due to the terms of the agreement regarding a subjective acceleration clause and a lockbox arrangement, the line of credit is shown as a current liability on the condensed consolidated balance sheets.

 

On September 3, 2014, the Company also entered into a 5 year $600,000 Secured Promissory Note (“EGC Note”) with EGC. In September 2016, the ECG Note was increased to $700,000 with an extended maturity date of September 30, 2021. The amended EGC Note is payable in 60 monthly installments of $11,667. The EGC Note bears interest at the prime rate plus 4.0% and is payable monthly, in arrears. In the event of default, the Company shall pay 10% above the stated rates of interest per the Loan and Security Agreement. The EGC Note is secured by all of the assets of the Company. The outstanding balance on the term loan was $618,331 and $653,332 as of April 30, 2017 and January 31, 2017, respectively.

 

Additionally, in connection with the Loan and Security Agreement, Carl Wolf, the Company’s Chief Executive Officer, entered into a Guarantee Agreement with EGC, personally guaranteeing all the amounts borrowed on behalf of the Company under the Loan and Security Agreement.

 

Note 7 –Note Payable

 

On December 19, 2014, the Company entered into a securities purchase agreement (the “Manatuck Purchase Agreement”) with Manatuck Hill Partners, LLC (“Manatuck”) whereby the Company issued a convertible redeemable debenture (the “Manatuck Debenture”) in favor of Manatuck. The Manatuck Debenture is for $2,000,000 bearing interest at a rate of 14% and matures in February 2016. Upon issuance of the Manatuck Debenture, the Company granted Manatuck 200,000 shares of the Company’s restricted common stock. In April 2015, the maturity date was extended to May 2016 and 30,000 shares of restricted common stock were issued to Manatuck. Based on management’s review, the accounting for debt modification applied. The Company valued the 30,000 shares at the grant date share price of $1.32 and recorded $39,600 to debt discount on the consolidated balance sheet.

 

Upon issuance of the debenture and subsequent extension, a debt discount of $498,350 was recorded for the fees incurred by the buyer as well as the value of the common shares granted to Manatuck. The debt discount will be amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt, using the straight-line method which approximates the effective interest method. The amortization of debt discount is included as a component of other expense in the consolidated statements of operations.

 

 F-15 
 

 

On October 29, 2015, the note was further amended to extend the maturity date to December 19, 2016. Per the terms of the execution of the extension, the Company was required to purchase the above 230,000 shares issued to Manatuck for a share price of $0.65, a value of $149,500 and incurred an amendment fee of $170,500, both of which were added to the outstanding principal of the debt. In addition, the extension reduced accrued interest by $220,000 and increased the outstanding principal of the debt by $220,000. Based on management’s review, the accounting for debt extinguishment applied. In accordance with the accounting for debt extinguishment, the Company wrote-off the existing debt of $2,000,000, wrote-off the unamortized debt discount of $190,483 and wrote-off the remaining debt issuance costs relating to this note of $19,106. The loss on debt extinguishment of $380,089 on the statement of operations is comprised of the write-off of the remaining debt discount of $190,483, the write-off of the debt issuance costs of $19,106, and the amendment fee of $170,500.

 

In August 2016, the note was further amended to extend the maturity date to September 30, 2017 and also removed the convertible feature of the note. The principal amount of the note was increased to $2,898,523, which is inclusive of accrued interest payable through October 31, 2016. In addition, the Company paid an origination fee of $50,000 on October 31, 2016 which is recorded as a debt discount and will be amortized over the remaining life of the note using the effective interest method.

 

On March 10, 2017, the Company further extended the maturity date to May 1, 2018. Per the terms of the amended agreement:

 

  1) The Company will pay to Manatuck a cash fee equal to two percent (2%) of the mutually-agreed pro-forma balance payable on account of the note as of March 31, 2017, which shall include all interest which would be accrued on the note through March 31, 2017;
     
  2) The Company shall make monthly principal payments to Manatuck as follows:

 

March 2017-December 2017

  $ 150,000  
January 2018-May 1, 2018   $ 200,000  

 

Based on management’s review of the amended agreement and extension, the accounting for debt modification applied. The Company accrued the 2% fee totaling $52,236 which is recorded as a debt discount and will be amortized over the remaining life of the note using the effective interest method. There was unamortized debt discount of $83,050 and $48,094 as of April 30, 2017 and January 31, 2017, respectively.

 

The outstanding balance including principal and interest and net of debt discount at April 30, 2017 and January 31, 2017 was $2,418,005 and $2,700,725, respectively.

 

Future maturities of all debt (including debt discussed above in Notes 5, 6 and 7) are as follows:

 

For the Twelve-Month Period Ending April 30,   
2018  $3,498,195 
2019   1,008,715 
2020   140,004 
2021   140,004 
2022   58,315 
   $

4,845,233

 

 

 F-16 
 

 

Note 8 - Concentrations

 

Revenues

 

During the three months ended April 30, 2017, the Company earned revenues from two customers representing approximately 35% and 13% of gross sales. During the three months ended April 30, 2016, the Company earned revenues from four customers representing approximately 14%, 13%, 12% and 11% of gross sales.

 

As of April 30, 2017, these two customers represented approximately 41% and 15% of total gross outstanding receivables, respectively. As of April 30, 2016, these four customers represented approximately 16%, 8%, 14% and 25% of total gross outstanding receivables, respectively

 

Cost of Sales

 

For the three months ended April 30, 2017 and 2016, one vendor (a related party) represented approximately 100% and 98% of the Company’s purchases, respectively.

 

Note 9 - Stockholders’ Equity

 

Common Stock

 

During the three months ended April 30, 2017, the Company issued 49,268 shares of its common stock to the holders of the Series A Preferred stockholders for the dividends in arrears totaling $46,800.

 

During the three months ended April 30, 2017, the Company issued 87,554 shares of its common stock to employees and consultants for services rendered of $83,000.

 

Treasury Stock

 

As discussed in Note 7, upon amendment of the Manatuck Debenture on October 29, 2015, the Company repurchased the 230,000 shares for an aggregate purchase price of $149,500 which is presented as Treasury Stock on the condensed consolidated balance sheets.

 

(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   -   $- 
Exercised   -   $- 
Forfeited/Cancelled   (229,404)  $1.00 
Outstanding – April 30, 2017   652,000   $0.71 
Exercisable – April 30, 2017   576,000   $0.80 

 

  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     652,000     2.76 years   $ 0.71       576,000     $ 0.80  

 

 F-17 
 

 

At April 30, 2017 the total intrinsic value of options outstanding and exercisable was $188,570 and $159,870, respectively.

 

For the three months ended April 30, 2017 and 2016, the Company recognized an aggregate of $7,150 and $80,470, respectively. At April 30, 2017, unrecognized stock based compensation was $40,248.

 

(D) Warrants

 

The following is a summary of the Company’s warrant activity:

 

    Warrants     Weighted Average
Exercise Price
 
             
Outstanding – January 31, 2017     7,311,770     $ 1.04  
Exercisable – January 31, 2017     7,311,770     $ 1.04  
Granted     -     $ -  
Exercised     -     $ -  
Forfeited/Cancelled     (150,000   $ 1.00  
Outstanding – April 30, 2017     7,161,770     $ 1.05  
Exercisable – April 30, 2017     7,161,770     $ 1.05  

 

  Warrants Outstanding   Warrants Exercisable
  Range of Exercise Price     Number Outstanding     Weighted Average Remaining Contractual Life (in years)     Weighted Average Exercise Price     Number Exercisable     Weighted Average Exercise Price  
                                   
$ 0.68-$2.50     7,161,770     3.31 years   $ 1.05     7,161,770   $ 1.05  

 

At April 30, 2017, the total intrinsic value of warrants outstanding and exercisable was $1,003,444 and $1,033,444, respectively.

 

Note 10 - Commitments and Contingencies

 

Litigations, Claims and Assessments

 

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.

 

Licensing and Royalty Agreements

 

On March 1, 2010, the Company was assigned a Development and License agreement (the “Agreement”). Under the terms of the Agreement the Licensor shall develop for the Company a line of beef meatballs with sauce, turkey meatballs with sauce and other similar meats and sauces for commercial manufacture, distribution and sale (each a “Licensor Product” and collectively the “Licensor Products”). Licensor shall work with Licensee to develop Licensor Products that are acceptable to Licensee. Upon acceptance of a Licensor Product by Licensee, Licensor’s trade secret recipes, formulas methods and ingredients for the preparation and production of such Licensor Products (the “Recipes”) shall be subject to this Development and License Agreement.

 

 F-18 
 

 

The term of the Agreement (the “Term”) shall consist of the Exclusive Term and the Non-Exclusive Term. The 12-month period beginning on each January 1 and ending on each December 31 is referred to herein as an “Agreement Year”.

 

The Exclusive Term began on January 1, 2009 (the “Effective Date”) and ends on the 50th anniversary of the Effective Date, unless terminated or extended as provided herein. Licensor, at its option, may terminate the Exclusive Term by notice in writing to Licensee, delivered between the 60th and the 90th day following the end of any Agreement Year if, on or before the 60th day following the end of such Agreement Year, Licensee has not paid Licensor Royalties with respect to such Agreement Year at least equal to the minimum royalty (the “Minimum Royalty”) for such Agreement Year. Subject to the foregoing sentence, and provided Licensee has not breached this Agreement and failed to cure such breach in accordance herewith, Licensee may extend the Exclusive Term for an additional twenty-five (25) years, by notice in writing to Licensor, delivered on or before the 50th anniversary of the Effective Date.

 

The Non-Exclusive Term begins upon expiration of the Exclusive Term and continues indefinitely thereafter, until terminated by Licensor due to a material breach hereof by Licensee that remains uncured after notice and opportunity to cure in accordance herewith, or until terminated by Licensee.

 

Either party may terminate this Agreement in the event that the other party materially breaches its obligations and fails to cure such material breach within sixty (60) days following written notice from the non-breaching party specifying the nature of the breach. The following termination rights are in addition to the termination rights provided elsewhere in the agreement.

 

  Termination by Licensee - Licensee shall have the right to terminate this Agreement at any time on sixty (60) days written notice to Licensor. In such event, all moneys paid to Licensor shall be deemed non-refundable.

 

Under the terms of the Agreement the Company is required to pay quarterly royalty fees as follows:

 

During the Exclusive Term and the Non-Exclusive Term the Company will pay a royalty equal to the royalty rate (the “Royalty Rate”), multiplied by Company’s “Net Sales”. As used herein, “Net Sales” means gross invoiced sales of Products, directly or indirectly to unrelated third parties, less (a) discounts (including cash discounts), and retroactive price reductions or allowances actually allowed or granted from the billed amount (collectively “Discounts”); (b) credits, rebates, and allowances actually granted upon claims, rejections or returns, including recalls (voluntary or otherwise) (collectively, “Credits”); (c) freight, postage, shipping and insurance charges; (d) taxes, duties or other governmental charges levied on or measured by the billing amount, when included in billing, as adjusted for rebates and refunds; and (e) provisions for uncollectible accounts determined in accordance with reasonable accounting methods, consistently applied.

 

The Royalty Rate shall be: 6% of net sales up to $500,000 of net sales for each Agreement year; 4% of Net Sales from $500,000 up to $2,500,000 of Net Sales for each Agreement year; 2% of Net Sales from $2,500,000 up to $20,000,000 of Net Sales for each Agreement year; and 1% of Net Sales in excess of $20,000,000 of Net Sales for each Agreement year.

 

In order to continue the Exclusive term, the Company shall pay a minimum royalty with respect to the preceding Agreement year as follows:

 

Agreement Year   Minimum
Royalty
to be Paid with
Respect to Such
Agreement Year
 
1st and 2nd   $ -  
3rd and 4th   $ 50,000  
5th, 6th and 7th   $ 75,000  
8th and 9th   $ 100,000  
10th and thereafter   $ 125,000  

 

The Company incurred $116,947 and $85,704 of royalty expenses for the three months ended April 30, 2017 and 2016. Royalty expenses are included in general and administrative expenses on the consolidated statement of operations.

 

 F-19 
 

 

Agreements with Placement Agents and Finders

 

(A) April 1, 2015

 

The Company entered into a fourth Financial Advisory and Investment Banking Agreement with Spartan Capital Securities, LLC (“Spartan”) effective April 1, 2015 (the “Spartan Advisory Agreement”). Pursuant to the Spartan Advisory Agreement, the Company shall pay to Spartan a non-refundable monthly fee of $10,000 through October 1, 2015. The monthly fee shall survive any termination of the Agreement. Additionally, (i) if at least $4,000,000 is raised in the Financing, the Company shall pay to Spartan a non-refundable fee of $5,000 per month from November 1, 2015 through October 2017; and (ii) if at least $5,000,000 is raised in the Financing, the Company shall pay to Spartan a non-refundable fee of $5,000 per month from November 1, 2017 through October 2019. If $10,000,000 or more is raised in the Financing, the Company shall issue to Spartan shares of its common stock having an aggregate value of $5,000 (as determined by reference to the average volume weighted average trading price for the last five trading days of the immediately preceding month) on the first day of each month during the period from November 1, 2015 through October 1, 2019.

 

The Company upon closing of the Financing shall pay consideration to Spartan, in cash, a fee in an amount equal to 10% of the aggregate gross proceeds raised in the Financing and 3% of the aggregate gross proceeds raised in the Financing for expenses incurred by Spartan. The Company shall grant and deliver to Spartan at the closing of the Financing, for nominal consideration, five year warrants to purchase a number of shares of the Company’s common stock equal to 10% of the number of shares of common stock (and/or shares of common stock issuable upon exercise of securities or upon conversion or exchange of convertible or exchangeable securities) sold at such closing. The warrants shall be exercisable at any time during the five-year period commencing on the closing to which they relate at an exercise price equal to the purchase price per share of common stock paid by investors in the Financing or, in the case of exercisable, convertible, or exchangeable securities, the exercise, conversion or exchange price thereof. If the Financing is consummated by means of more than one closing, Spartan shall be entitled to the fees provided herein with respect to each such closing.

 

During the year ended January 31, 2016, the Company paid to Spartan a one-time engagement fee of $10,000. In connection with the Initial Closing, the Company agreed to pay an aggregate cash fee and non-accountable allowance of $157,300. The Company also granted warrants to purchase 179,259 shares of common stock at $0.675 per share. The warrants have a grant date fair value of $84,547 which is treated as a direct cost of the Financing and has been recorded as a reduction in additional paid in capital. During the three months ended April 30, 2017, no payments were made to Spartan.

 

Operating Lease

 

In January 2015, the Company began a lease agreement for office space in East Rutherford, NJ. The lease is for a 51-month term expiring on March 31, 2019 with annual payments of $18,847.

 

Total future minimum payments required under operating lease as of April 30, 2017 are as follows:

 

For the Twelve Months Ending April 30,      
2018   $ 18,847  
2019     17,281  
    $ 36,218  

 

Note 11 – 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 no reportable subsequent events other than those disclosed elsewhere in these financials.

 

 F-20 
 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

THE FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD- LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND “RISK FACTORS” DETAILED IN PRIOR COMPANY FILINGS AND THOSE INCLUDED ELSEWHERE IN THIS REPORT.

 

Results of Operations for the Three Months ended April 30, 2017 and April 30, 2016

 

The following table sets forth the summary statements of operations for the three months ended April 30, 2017 and April 30, 2016:

 

    Three Months Ended  
    April 30, 2017     April 30, 2016  
Sales - Net of Slotting Fees and Discounts   $

5,357,301

    $ 3,923,977  
Gross Profit   $

1,899,578

    $ 1,475,199  
Operating Expenses   $ (1,583,416 )   $ (1,530,419 )
Other Expenses   $ (187,937 )   $ (170,887 )
Net Income (Loss)   $

128,225

  $ (226,107 )

 

For the three months ended April 30, 2017 and April 30, 2016, the Company reported a net income (loss) of $128,225 and $(226,107), respectively. The change in net loss between the three months ended April 30, 2017 and April 30, 2016, which was primarily attributable to an increase in sales of 37%.

 

Sales: Sales, net of slotting fees and discounts increased by approximately 37% to $5,357,301 during the three months ended April 30, 2017, from $3,923,977 during the three months ended April 30, 2016. During the three months ended April 30, 2017, the Company sold into higher volume locations compared to the three months ended April 30, 2016. The Company has sold into approximately 38,600 SKU’s in 11,700 retail and grocery locations at April 30, 2017 as compared to approximately 35,000 SKU’s in 11,400 retail and grocery locations at April 30, 2016. In addition, during the three months ended April 30, 2017, the Company was able to increase its sales through new customers as well as its existing customer base.

 

Gross Profit: The gross profit margin was 35% for the three months ended April 30, 2017 compared to 38% for the three months ended April 30, 2016. The decrease in gross profit margin is attributable to the change in product mix and an increase in commodity costs.

 

Operating Expenses: Operating expenses increased by 3% during the three months ended April 30, 2017, as compared to the three months ended April 30, 2016. The $52,997 increase in operating expenses is primarily attributable to the following approximate increases in operating expenses: 

 

 2 
 

 

Postage and freight of $110,825 due to higher sales offset by better efficiency;
   
Commission expenses of $47,555 related to increased sales;
   
Royalty expense of $31,243 related to increased sales; and
   
Depreciation expense of $30,377 due to new fixed asset purchases during the period.

 

These expense increases were offset by decreases in the following expenses:

 

Advertising, social media and promotional expenses of $99,548 related to a decrease in spending on special promotions;
   
Stock-based compensation for services rendered by employees and consultants decreased by of $80,057 compared to the prior year;
   
Trade show and travel expenses decreased by $27,808 due to better management of this expense.

 

Other Expense: Other expenses increased by $17,050 to $187,937 for the three months ended April 30, 2017 as compared to $170,887 during the three months ended April 30, 2016. For three months ended April 30, 2017, other expenses consisted of $170,657 in interest expense incurred on the Company’s financing arrangements. In addition, the Company recorded $17,280 of amortization expense related to the debt discount. For the three months ended April 30, 2016, other expenses consisted of $161,762 in interest expense incurred on the Company’s finance arrangements. In addition, the Company recorded $9,125 of amortization expense related to the debt discount and finance arrangements.

 

Liquidity and Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at April 30, 2017 compared to January 31, 2017:

 

   April 30, 2017   January 31, 2017   Increase/(Decrease) 
Current Assets  $5,014,845   $5,143,478   $

(128,633

) 
Current Liabilities  $4,185,216   $3,389,807   $795,409 
Working Capital  $

829,629

   $1,753,671   $(924,042)

 

As of April 30, 2017, we had a working capital of $829,629 as compared to a working capital of $1,753,671 as of January 31, 2017, a decrease of $924,042. The decrease in working capital is primarily attributable to decreases in cash, inventories and prepaid expenses which were offset by increases in accounts receivable, due from manufacturer and increases in accounts payable and accrued expenses, line of credit, related party notes and note payable.

 

Net cash provided by (used in) operating activities for the three months ended April 30, 2017 and 2016 was $526,555 and ($437,892), respectively. The net income (loss) for the three months ended April 30, 2017 and 2016 was $128,225 and $(437,862), respectively.

 

Net cash used in all investing activities for the three months ended April 30, 2017 was $666,733 as compared to $18,650 for the three months ended April 30, 2016, respectively, to acquire new machinery and equipment and leasehold improvements. Our capital expenditures primarily relate to continuous improvement to our equipment and facilities in order to increase manufacturing capacity, supporting our growth and continued commercialization of our products.

 

Net cash (used in) provided by all financing activities for the three months ended April 30, 2017 was $(89,955) as compared to cash provided by financing activities of $371,549 for the three months ended April 30, 2016. During the three months ended April 30, 2017, the Company had net borrowings of $245,046 for transactions pursuant to the line of credit. These borrowings were offset by $35,001 and $300,000 paid for repayments on a term loan and net payments of the note payable, respectively. During the year ended January 31, 2016, the Company had net borrowings of $481,039 pursuant to the line of credit. The increase was offset by $30,000 repayments of term loan and $79,490 repayments of promissory notes, respectively.

 

 3 
 

 

As reflected in the accompanying condensed consolidated financial statements, the Company has a net income and net cash provided by operations of $128,225 and $526,555, respectively, for the three months ended April 30, 2017.

 

Although the continued revenue growth coupled with improved gross margins and control of expenses leads management to believe that it is probable that the Company’s cash resources will be sufficient to meet our cash requirements through the first quarter of fiscal year ended January 31, 2019, the Company may require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis, though there is no guarantee it will be able to do so.

 

Going Concern Analysis

 

The Company had a net income (loss) of $128,225 and $(226,107) for the three months ended April 30, 2017 and 2016. As a result, these conditions had raised substantial doubt regarding our ability to continue as a going concern. However, as of April 30, 2017, we had cash and working capital of $436,447 and $829,629, respectively. During the three months ended April 30, 2017, the Company generated cash from operations of $526,555. In addition, management was able to negotiate the terms of its note payable with one of the lenders and intends to exercise an option to extend the maturity date of the note payable to May 1, 2018. Also, the continued revenue growth coupled with improved gross margins and control of expenses leads management to conclude that it is probable that the Company’s cash resources will be sufficient to meet our cash requirements through the first quarter of fiscal year ended January 31, 2019. If necessary, management also determined that it is probable that external sources of debt and/or equity financing could be obtained based on management’s history of being able to raise capital coupled with current favorable market conditions. As a result of both management’s plans and current favorable trends in improving cash flow, the Company concluded that the initial conditions which raised substantial doubt regarding the ability to continue as a going concern have been alleviated. Therefore, the accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

 

The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. While we believe in the viability of management’s strategy to generate sufficient revenue, control costs and the ability to raise additional funds if necessary, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon the ability to further implement the business plan, generate sufficient revenues and to control operating expenses.

 

Recent Accounting Pronouncements

 

Our condensed consolidated financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements. 

 

 4 
 

 

Critical Accounting Policies

 

Our condensed consolidated financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

 

Our significant accounting policies are summarized in Note 2 of our condensed consolidated financial statements. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

 

We believe the following critical accounting policies and procedures, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

 

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 condensed consolidated financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following: allowance for bad debt, inventory obsolescence, 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 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.

 

Stock-Based Compensation - The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Accounting for Stock-Based Compensation” established financial accounting and reporting standards for stock-based employee compensation. It defines a fair value based method of accounting for an employee stock option or similar equity instrument. The Company accounts for compensation cost for stock option plans in accordance with ASC 718. The Company accounts for share based payments to non-employees in accordance with ASC 505-50 “Accounting for Equity Instruments Issued to Non-Employees for Acquiring, or in Conjunction with Selling, Goods or Services”.

 

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. Share-based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. 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 condensed consolidated statement of operations. 

 

When computing fair value of share-based payments, the Company has considered the following variables:

 

The risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant.
   
The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.
   
The expected option term is computed using the “simplified” method as permitted under the provisions of Staff Accounting Bulletin (“SAB”) 110.

 

 5 
 

 

The warrant term is the life of the warrant.
   
The expected volatility was benchmarked against similar companies in a similar industry.
   
The forfeiture rate is based on the historical forfeiture rate for the Company’s unvested stock options, which was 0%.

 

Revenue Recognition The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104 for revenue recognition and records revenue 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. Sales are recognized upon shipment of products to customers.

 

Advertising - Costs incurred for producing and communicating advertising for the Company are charged to operations as incurred.

 

Off Balance Sheet Arrangements:

 

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 4. Controls and Procedures

 

(a) Evaluation of Disclosure Controls and Procedures

 

Based on evaluation as of the end of the period covered by this Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(c) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by us in report that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

(b) Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II - OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

 6 
 

 

Item 1A. Risk Factors.

 

Smaller reporting companies are not required to provide the information required by this item. 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

Below is a list of securities issued by us from February 1, 2017 through June 8, 2017 which were not registered under the Securities Act.

 

During the period between February 1, 2017 and June 8, 2017 the Company issued an aggregate of 136,817 shares of its Common stock as follows:

 

Stock in lieu of compensation 87,554 shares
Series A Preferred Stock Dividends 49,263 shares

 

The securities issued in the abovementioned transactions were issued in connection with transactions which were exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to the terms of Section 4(2) of that Act.

 

Item 3. Defaults upon Senior Securities.

 

There has been no default in payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

There is no other information required to be disclosed under this item which was not previously disclosed.

 

Item 6. Exhibits.

 

Exhibit No.   Description
     
31.1   Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*
     
31.2   Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002*
     
32.1   Certification of Principal Executive Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
32.2   Certification of Principal Financial Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
     
101.INS   XBRL Instance Document**
101.SCH   XBRL Taxonomy Extension Schema Document**
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF   XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB   XBRL Taxonomy Extension Label Linkbase Document**
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document**

 

* Filed herewith.

** Furnished herewith.

 

 7 
 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  MAMAMANCINI’S HOLDINGS, INC.
     
Date: June 12, 2017 By: /s/ Carl Wolf
  Name:  Carl Wolf
  Title: Chief Executive Officer
    (Principal Executive Officer)

 

 8 
 

EX-31.1 2 ex31-1.htm

 

EXHIBIT 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Carl Wolf, certify that:

 

1. I have reviewed this Form 10-Q of MamaMancini’s Holdings, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 12, 2017 By: /s/ Carl Wolf
    Carl Wolf
    Principal Executive Officer
    MamaMancini’s Holdings, Inc.

 

   
 

 

EX-31.2 3 ex31-2.htm

 

EXHIBIT 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 302 OF

THE SARBANES-OXLEY ACT OF 2002

 

I, Lewis Ochs, certify that:

 

1. I have reviewed this Form 10-Q of MamaMancini’s Holdings, Inc.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13-a-15(f) and 15d-15(f)) for the registrant and have:

 

  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 12, 2017 By: /s/ Lewis Ochs
    Lewis Ochs
    Principal Financial Officer
    MamaMancini’s Holdings, Inc.

 

   
 

EX-32.1 4 ex32-1.htm

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

In connection with this Quarterly Report of MamaMancini’s Holdings, Inc. (the “Company”), on Form 10-Q for the period ended April 30, 2017, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Carl Wolf, Principal Executive Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) Such Quarterly Report on Form 10-Q for the period ended April 30, 2017, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in such Quarterly Report on Form 10-Q for the period ended April 30, 2017, fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 12, 2017 By: /s/ Carl Wolf
    Carl Wolf
    Principal Executive Officer
    MamaMancini’s Holdings, Inc.

 

   
 
EX-32.2 5 ex32-2.htm

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF

THE SARBANES-OXLEY ACT OF 2002

 

In connection with this Quarterly Report of MamaMancini’s Holdings, Inc. (the “Company”), on Form 10-Q for the period ended April 30, 2017, as filed with the U.S. Securities and Exchange Commission on the date hereof, I, Lewis Ochs, Principal Financial Officer of the Company, certify to the best of my knowledge, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) Such Quarterly Report on Form 10-Q for the period ended April 30, 2017, fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
     
  (2) The information contained in such Quarterly Report on Form 10-Q for the period ended April 30, 2017, fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Date: June 12, 2017 By: /s/ Lewis Ochs
    Lewis Ochs
    Principal Financial Officer
    MamaMancini’s Holdings, Inc.

 

   
 

 

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MeatballObsessionLLCMember Preferred Stock [Member] Assets, Current Assets [Default Label] Liabilities, Current Liabilities, Noncurrent Liabilities Treasury Stock, Value Stockholders' Equity Attributable to Parent Liabilities and Equity Gross Profit Operating Expenses Operating Income (Loss) Interest Expense, Other Other Nonoperating Income (Expense) Preferred Stock Dividends and Other Adjustments Shares, Outstanding Increase (Decrease) in Accounts Receivable Increase (Decrease) in Inventories Increase (Decrease) in Prepaid Expense Increase (Decrease) Due from Other Related Parties Increase (Decrease) in Accounts Payable and Accrued Liabilities Payments to Acquire Property, Plant, and Equipment Net Cash Provided by (Used in) Investing Activities Repayments of Notes Payable Repayments of Debt Repayments of Long-term Debt Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Cash and Cash Equivalents, Policy [Policy Text Block] Inventory, Policy [Policy Text Block] Property, Plant and Equipment, Policy [Policy Text Block] Sales Discounts, Returns and Allowances, Goods Property, Plant and Equipment, Gross Debt Instrument, Unamortized Discount Long-term Debt Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price ShareBasedCompensationArrangementByShareBasedPaymentAwardWarrantsOutstandingWeightedAverageExercisePriceEquityInstrumentsOtherThanOptionsNonvestedNumber ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsGrantsInPeriodWeightedAverageExercisePrice ShareBasedCompensationArrangementsByShareBasedPaymentAwardWarrantsExercisesInPeriodWeightedAverageExercisePrice ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsForfeituresWeightedAverageExercisePrice Operating Leases, Future Minimum Payments Due, Next Twelve Months Operating Leases, Future Minimum Payments, Due in Two Years EX-101.PRE 11 mmmb-20170430_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.7.0.1
Document and Entity Information - shares
3 Months Ended
Apr. 30, 2017
Jun. 12, 2017
Document And Entity Information    
Entity Registrant Name MamaMancini's Holdings, Inc.  
Entity Central Index Key 0001520358  
Document Type 10-Q  
Document Period End Date Apr. 30, 2017  
Amendment Flag false  
Current Fiscal Year End Date --01-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   27,947,539
Trading Symbol MMMB  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2018  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets - USD ($)
Apr. 30, 2017
Jan. 31, 2017
Assets:    
Cash $ 436,447 $ 666,580
Accounts receivable, net 2,301,737 1,817,820
Inventories 180,929 443,623
Prepaid expenses 79,686 135,747
Due from manufacturer - related party 2,016,046 2,079,708
Total current assets 5,014,845 5,143,478
Property and equipment, net 1,311,777 1,175,508
Deposit on machinery and equipment 423,383
Total Assets 6,750,005 6,318,986
Liabilities:    
Accounts payable and accrued expenses 770,071 484,752
Line of credit, net 1,608,191 1,363,145
Term loan 140,004 140,004
Note payable - net 1,666,950 1,401,906
Total current liabilities 4,185,216 3,389,807
Term loan - net of current 478,327 513,328
Note payable - net of current portion 751,055 1,298,819
Notes payable - related party 117,656 117,656
Total long-term liabilities 1,347,038 1,929,803
Total Liabilities 5,532,254 5,319,610
Commitments and contingencies
Stockholders' Equity:    
Preferred stock value
Common stock, $0.00001 par value; 250,000,000 shares authorized; 27,947,539 and 27,810,717 shares issued and outstanding, respectively 279 278
Additional paid in capital 15,961,978 15,825,029
Common stock subscribed, $0.00001 par value; 66,667 shares, respectively 1 1
Accumulated deficit (14,595,007) (14,676,432)
Less: Treasury stock, 230,000 shares, respectively (149,500) (149,500)
Total Stockholders' Equity 1,217,751 999,376
Total Liabilities and Stockholders' Equity 6,750,005 6,318,986
Series A Preferred Stock [Member]    
Stockholders' Equity:    
Preferred stock value
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Apr. 30, 2017
Jan. 31, 2017
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares authorized 19,880,000 19,880,000
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value $ 0.00001 $ 0.00001
Common stock, shares authorized 250,000,000 250,000,000
Common stock, shares issued 27,947,539 27,810,717
Common stock, shares outstanding 27,947,539 27,810,717
Common stock subscribed, par value $ 0.00001 $ 0.00001
Common stock subscribed, shares 66,667 66,667
Treasury stock, shares 230,000 230,000
Series A Preferred Stock [Member]    
Preferred stock, par value $ 0.00001 $ 0.00001
Preferred stock, shares authorized 120,000 120,000
Preferred stock, shares issued 23,400 23,400
Preferred stock, shares outstanding 23,400 23,400
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Income Statement [Abstract]    
Sales - net of slotting fees and discounts $ 5,357,301 $ 3,923,977
Cost of sales 3,457,723 2,448,778
Gross profit 1,899,578 1,475,199
Operating expenses    
Research and development 25,588 30,562
General and administrative expenses 1,557,828 1,499,857
Total operating expenses 1,583,416 1,530,419
Income (loss) from operations 316,162 (55,220)
Other expenses    
Interest expense (170,657) (161,762)
Amortization of debt discount (17,280) (9,125)
Total other expenses (187,937) (170,887)
Net income (loss) 128,225 (226,107)
Less: preferred dividends (46,800) (64,521)
Net income (loss) available to common stockholders $ 81,425 $ (290,628)
Net income (loss) per common share - basic $ 0.00 $ (0.01)
Net income (loss) per common share - diluted $ 0.00 $ (0.01)
Weighted average common shares outstanding - basic 27,810,717 26,507,516
Weighted average common shares outstanding - diluted 32,532,135 26,507,516
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - 3 months ended Apr. 30, 2017 - USD ($)
Series A Preferred Stock [Member]
Common Stock [Member]
Treasury Stock [Member]
Additional Paid In Capital [Member]
Common Stock Subscribed [Member]
Accumulated Deficit [Member]
Total
Balance at Jan. 31, 2017 $ 278 $ (149,500) $ 15,825,029 $ 1 $ (14,676,432) $ 999,376
Balance, shares at Jan. 31, 2017 23,400 27,810,717 (230,000)        
Common stock issued for services $ 1 82,999 83,000
Common stock issued for services, shares 87,554        
Stock options issued for services 7,150 7,150
Series A Preferred dividend issued in common shares 46,800 46,800
Series A Preferred dividend issued in common shares, shares 49,268        
Series A Preferred dividend (46,800) (46,800)
Net loss 128,225 128,225
Balance at Apr. 30, 2017 $ 279 $ (149,500) $ 15,961,978 $ 1 $ (14,595,007) $ 1,217,751
Balance, shares at Apr. 30, 2017 23,400 27,947,539 (230,000)        
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.7.0.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $ 128,225 $ (226,107)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Depreciation 107,081 76,703
Amortization of debt discount and debt issuance costs 17,280 9,125
Share-based compensation 90,150 179,208
(Increase) Decrease in:    
Accounts receivable (483,917) (248,619)
Inventories 262,694 (254,233)
Prepaid expenses 56,061 (15,087)
Due from manufacturer - related party 63,662 51,730
Increase (Decrease) in:    
Accounts payable and accrued expenses 285,319 (10,582)
Net Cash Provided by (Used In) Operating Activities 526,555 (437,862)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Cash paid for fixed assets (666,733) (18,650)
Net Cash Used In Investing Activities (666,733) (18,650)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Repayment of note payable (300,000)
Borrowings (repayments) of line of credit, net 245,046 481,039
Repayment of term loan (35,001) (30,000)
Repayment of promissory notes (79,490)
Net Cash (Used In) Provided By Financing Activities (89,955) 371,549
Net Decrease in Cash (230,133) (84,963)
Cash - Beginning of Period 666,580 587,422
Cash - End of Period 436,447 502,459
SUPPLEMENTARY CASH FLOW INFORMATION:    
Income taxes
Interest 66,941 72,311
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:    
Stock issued for Series A Preferred dividends 46,800 131,513
Accrued dividends 46,800 64,521
Debt extension fee included in principal balance of note $ 52,236
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.7.0.1
Nature of Operations and Basis of Presentation
3 Months Ended
Apr. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Operations and Basis of Presentation

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.

 

Basis of Presentation

 

The condensed 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.

 

The unaudited financial information furnished herein reflects all adjustments, consisting solely of normal recurring items, which in the opinion of management are necessary to fairly state the financial position of the Company and the results of its operations for the periods presented. This report should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended January 31, 2017 filed on April 23, 2017. The Company assumes that the users of the interim financial information herein have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation may be determined in that context. The condensed consolidated balance sheet at January 31, 2017 was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the interim periods presented are not necessarily indicative of results for the year ending January 31, 2018.

 

Going Concern Analysis

 

Going Concern Analysis

 

The Company had a net income (loss) of $128,225 and $(226,107) for the three months ended April 30, 2017 and 2016. As a result, these conditions had raised substantial doubt regarding our ability to continue as a going concern. However, as of April 30, 2017, we had cash and working capital of $436,447 and $829,629, respectively. During the three months ended April 30, 2017, the Company generated cash from operations of $526,555. In addition, management was able to negotiate the terms of its note payable with one of the lenders and intends to exercise an option to extend the maturity date of the note payable to May 1, 2018. Also, the continued revenue growth coupled with improved gross margins and control of expenses leads management to conclude that it is probable that the Company’s cash resources will be sufficient to meet our cash requirements through the first quarter of fiscal year ended January 31, 2019. If necessary, management also determined that it is probable that external sources of debt and/or equity financing could be obtained based on management’s history of being able to raise capital coupled with current favorable market conditions. As a result of both management’s plans and current favorable trends in improving cash flow, the Company concluded that the initial conditions which raised substantial doubt regarding the ability to continue as a going concern have been alleviated. Therefore, the accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

 

The condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the matters discussed herein. While we believe in the viability of management’s strategy to generate sufficient revenue, control costs and the ability to raise additional funds if necessary, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon the ability to further implement the business plan, generate sufficient revenues and to control operating expenses.

XML 19 R8.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies
3 Months Ended
Apr. 30, 2017
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

Note 2 - Summary of Significant Accounting Policies

 

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 condensed 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 April 30, 2017 or January 31, 2017.

 

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded, which is the face amount of the receivable net of the allowance for doubtful accounts. As of April 30, 2017 and January 31, 2017, the Company had reserves of $2,000.

 

Inventories

 

Inventories are stated at average cost using the first-in, first-out (FIFO) valuation method. Inventory was comprised of the following at April 30, 2017 and January 31, 2017:

 

    April 30, 2017     January 31, 2017  
Finished goods   $ 180,929     $ 443,623  
                 

 

Property and Equipment

 

Property and equipment are recorded at cost. Depreciation expense is computed using straight-line methods over the estimated useful lives.

 

Asset lives for financial statement reporting of depreciation are:

 

  Machinery and equipment 2-7 years
  Furniture and fixtures 3 years
  Leasehold improvements *

 

(*) Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever period is shorter.

 

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.

 

Stock Issuance Costs

 

Stock issuance costs are capitalized as incurred. Upon the completion of the offering, the stock issuance costs are reclassified to equity and netted against proceeds. In the event the costs are in excess of the proceeds, the costs are recorded to expense. In the case of an aborted offering, all costs are expensed.

 

Research and Development

 

Research and development is expensed as incurred. Research and development expenses for the three months ended April 30, 2017 and 2016 were $25,588 and $30,562, respectively.

 

Shipping and Handling Costs

 

The Company classifies freight billed to customers as sales revenue and the related freight costs as general and administrative expenses.

 

Revenue Recognition

 

The Company records revenue for products when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products.

 

The Company meets these criteria upon shipment.

 

Expenses such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows:

 

    Three Months
Ended
April 30, 2017
    Three Months
Ended
April 30, 2016
 
Gross Sales   $ 5,473,205     $ 4,040,988  
Less: Slotting, Discounts, Allowances     115,905       117,011  
Net Sales   $ 5,357,301     $ 3,923,977  

 

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 three months ended April 30, 2017 and 2016 were $317,594 and $420,892, respectively.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee compensation. It defines a fair value based method of accounting for an employee stock option or similar equity instrument. The Company accounts for compensation cost for stock option plans in accordance with ASC 718. The Company accounts for share-based payments to non-employees in accordance with ASC 505-50 “Equity Based Payments to Non-Employees”.

 

The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.

 

Share-based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock-based compensation expenses are included in cost of goods sold or selling, general and administrative expenses, depending on the nature of the services provided, in the consolidated statement of operations. Share-based payments issued to placement agents are classified as a direct cost of a stock offering and are recorded as a reduction in additional paid in capital.

 

For the three months ended April 30, 2017 and 2016, share-based compensation amounted to $90,150 and $179,208, respectively.

 

For the three months ended April 30, 2017 and 2016, when computing fair value of share-based payments, the Company has considered the following variables:

 

    April 30, 2017     April 30, 2016  
Risk-free interest rate     1.18 %     1.28% to 1.33 %
Expected life of grants     4.0 years       2.5 years  
Expected volatility of underlying stock     188 %     178% to 179 %
Dividends     0 %     0 %

 

The expected option term is computed using the “simplified” method as permitted under the provisions of ASC 718-10-S99. The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

 

The expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry peers and used an average of those volatilities. 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 Three Months Ended
    April 30, 2017   April 30, 2016
Numerator:                
Net income/(loss) attributable to common stockholders   $ 81,425     $ (290,628 )
Effect of dilutive securities:     —         —    
                 
Diluted net income (loss)   $ 81,425     $ (290,628 )
                 
Denominator:                
Weighted average common shares outstanding - basic     27,810,717       26,507,516  
Dilutive securities (a):                
Series A Preferred     3,466,667       —    
Options     198,495       —    
Warrants     1,056,256       —    
                 
Weighted average common shares outstanding and assumed conversion - diluted     32,532,135       26,507,516  
                 
Basic net income (loss) per common share   $ 0.00     $ (0.01 )
                 
Diluted net income (loss) per common share   $ 0.00     $ (0.01 )
                 
(a) - Anti-dilutive securities excluded:     3,779,884       9,189,805  

 

Income Taxes

 

Income taxes are provided in accordance with ASC No. 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the period of deferred tax assets and liabilities.

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

The Company is no longer subject to tax examinations by tax authorities for years prior to 2013.

 

Recent Accounting Pronouncements

 

In July 2015, the FASB issued the ASU No. 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. During the three months ended April 30, 2017, the Company adopted the methodologies prescribed by ASU 2015-11 and deemed that the adoption of the ASU did not have a material effect on its financial position or results of operations.

 

In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. During the three months ended April 30, 2017, the Company adopted the methodologies prescribed by ASU 2016-09 and deemed that the adoption of the ASU did not have a material effect on its financial position or results of operations.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will be required to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature of an entity’s leasing activities. This ASU is effective for public reporting companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its consolidated financial statements and disclosures.

 

In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)”. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)”. These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09, which the Company intends to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is in the process of evaluating the standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures.

 

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.

 

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard.

 

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.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.7.0.1
Property and Equipment
3 Months Ended
Apr. 30, 2017
Property, Plant and Equipment [Abstract]  
Property and Equipment

Note 3 - Property and Equipment:

 

Property and equipment on April 30, 2017 and January 31, 2017 are as follows:

 

    April 30, 2017     January 31, 2017  
Machinery and Equipment   $ 1,193,726     $ 1,193,473  
Furniture and Fixtures     23,067       17,942  
Leasehold Improvements     1,063,170       825,198  
      2,279,963       2,036,613  
Less: Accumulated Depreciation     968,186       861,105  
    $ 1,311,777     $ 1,175,508  

 

Depreciation expense charged to income for the three months ended April 30, 2017 and 2016 amounted to $107,081 and $76,703, respectively.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.7.0.1
Investment in Meatball Obsession, LLC
3 Months Ended
Apr. 30, 2017
Investments in and Advances to Affiliates, Schedule of Investments [Abstract]  
Investment in Meatball Obsession, LLC

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 April 30, 2017 and January 31, 2017, the Company’s ownership interest in MO was 12% and 12%, respectively.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Transactions
3 Months Ended
Apr. 30, 2017
Related Party Transactions [Abstract]  
Related Party Transactions

Note 5 - Related Party Transactions

 

Joseph Epstein Foods

 

On March 1, 2010, the Company 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 the Company. 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 the Company 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 of the Company is the primary beneficiary of the variable interest entity and bears the risk of loss. Under the terms of the agreement, the Company grants to the Manufacturer a revocable license to use the Company’s recipes, formulas, methods and ingredients for the preparation and production of Company’s products, for manufacturing the Company’s product and all future improvements, modifications, substitutions and replacements developed by the Company. The Manufacturer in turn grants the Company the exclusive right to purchase the product. Under the terms of the agreement the Manufacturer agrees to manufacture, package, and store the Company’s products and the Company 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 the Company.

 

Under the terms of the agreement if the Company 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, the Company 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 the Company requests any repackaging of the product, other than due to defects in the original packaging, the Company will reimburse the Manufacturer for any labor costs incurred in repackaging. Per the agreement, all product delivery shipping costs are the expense of the Company. The Company agreed with the Manufacturer at the end of the last fiscal year 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 the Company competitive prices and would not co-pack for other suppliers and would either maintain or lower its payable to the Company each quarter. In addition, the Manufacturer agreed to rebate the Company any overage of gross margin above 12% each month.

 

From time to time the Company will make investments in equipment located at the Manufacturer’s facility. The equipment is capitalized and depreciated by the Company over the estimated useful life.

 

During the three months ended April 30, 2017 and 2016, the Company purchased inventory of $3,307,107 and $2,843,012, respectively, from the Manufacturer.

 

During the three months ended April 30, 2017 and 2016, the Manufacturer incurred expenses of $15,000 and $6,000, respectively, on behalf of the Company for shared administrative expenses and salary expenses.

 

At April 30, 2017 and January 31, 2017, the amount due from the Manufacturer is $2,016,046 and $2,079,708 respectively.

 

Meatball Obsession, LLC

 

A current director of the Company is the chairman of the board and shareholder of Meatball Obsession LLC (“MO”).

 

For the three months ended April 30, 2017 and 2016, the Company generated approximately $22,571 and $10,102 in revenues from MO, respectively.

 

As of April 30, 2017 and January 31, 2017, the Company had a receivable of $9,849 and $8,189 due from MO, respectively.

 

WWS, Inc.

 

A current director of the Company is the president of WWS, Inc.

 

For the three months ended April 30, 2017 and 2016, the Company recorded $12,000 and $12,000 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 February 2019. As of April 30, 2017 and January 31, 2017, the outstanding principal balance of the notes was $117,656.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.7.0.1
Loan and Security Agreement
3 Months Ended
Apr. 30, 2017
Debt Disclosure [Abstract]  
Loan and Security Agreement

Note 6 - Loan and Security Agreement

 

On September 3, 2014, the Company entered into a Loan and Security Agreement (“Loan and Security Agreement”) with Entrepreneur Growth Capital, LLC (“EGC”) which contains a line of credit. As of April 30, 2017 and January 31, 2017, the outstanding balance on the line of credit was $1,608,191 and $1,363,145, respectively. In September 2016, the agreement was amended and the total facility increased to an aggregate principal amount of up to $3,200,000. The facility consists of the following:

 

Accounts Revolving Line of Credit:   $ 2,150,000  
Inventory Revolving Line of Credit:   $ 350,000  
Term Loan:   $ 700,000  

 

EGC may from time to time make loans in an aggregate amount not to exceed the Accounts Revolving Line of Credit up to 85% of the net amount of Eligible Accounts (as defined in the Loan and Security Agreement). EGC may from time to time make loans in an aggregate amount not to exceed the Inventory Revolving Line of Credit against Eligible Inventory (as defined in the Loan and Security Agreement) in an amount up to 50% of finished goods and in an amount up to 20% of raw material.

 

The revolving interest rates is equal to the highest prime rate in effect during each month as generally reported by Citibank, N.A. plus (a) 2.5% on loans and advances made against eligible accounts and (b) 4.0% on loans made against eligible inventory. The term loan bears interest at a rate of the highest prime rate in effect during each month as generally reported by Citibank, N.A. plus 4.0%. The initial term of the facility is for a period of two years and will automatically renew for an additional one year period. The Company is required to pay an annual facility fee equal to 0.75% of the total $3,200,000 facility and pays an annualized maintenance fee equal to 2.16% of the total facility. In the event of default, the Company shall pay 10% above the stated rates of interest per the Agreement. The drawdowns are secured by all of the assets of the Company. Due to the terms of the agreement regarding a subjective acceleration clause and a lockbox arrangement, the line of credit is shown as a current liability on the condensed consolidated balance sheets.

 

On September 3, 2014, the Company also entered into a 5 year $600,000 Secured Promissory Note (“EGC Note”) with EGC. In September 2016, the ECG Note was increased to $700,000 with an extended maturity date of September 30, 2021. The amended EGC Note is payable in 60 monthly installments of $11,667. The EGC Note bears interest at the prime rate plus 4.0% and is payable monthly, in arrears. In the event of default, the Company shall pay 10% above the stated rates of interest per the Loan and Security Agreement. The EGC Note is secured by all of the assets of the Company. The outstanding balance on the term loan was $618,331 and $653,332 as of April 30, 2017 and January 31, 2017, respectively.

 

Additionally, in connection with the Loan and Security Agreement, Carl Wolf, the Company’s Chief Executive Officer, entered into a Guarantee Agreement with EGC, personally guaranteeing all the amounts borrowed on behalf of the Company under the Loan and Security Agreement.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.7.0.1
Note Payable
3 Months Ended
Apr. 30, 2017
Debt Disclosure [Abstract]  
Note Payable

Note 7 –Note Payable

 

On December 19, 2014, the Company entered into a securities purchase agreement (the “Manatuck Purchase Agreement”) with Manatuck Hill Partners, LLC (“Manatuck”) whereby the Company issued a convertible redeemable debenture (the “Manatuck Debenture”) in favor of Manatuck. The Manatuck Debenture is for $2,000,000 bearing interest at a rate of 14% and matures in February 2016. Upon issuance of the Manatuck Debenture, the Company granted Manatuck 200,000 shares of the Company’s restricted common stock. In April 2015, the maturity date was extended to May 2016 and 30,000 shares of restricted common stock were issued to Manatuck. Based on management’s review, the accounting for debt modification applied. The Company valued the 30,000 shares at the grant date share price of $1.32 and recorded $39,600 to debt discount on the consolidated balance sheet.

 

Upon issuance of the debenture and subsequent extension, a debt discount of $498,350 was recorded for the fees incurred by the buyer as well as the value of the common shares granted to Manatuck. The debt discount will be amortized over the earlier of (i) the term of the debt or (ii) conversion of the debt, using the straight-line method which approximates the effective interest method. The amortization of debt discount is included as a component of other expense in the consolidated statements of operations.

 

On October 29, 2015, the note was further amended to extend the maturity date to December 19, 2016. Per the terms of the execution of the extension, the Company was required to purchase the above 230,000 shares issued to Manatuck for a share price of $0.65, a value of $149,500 and incurred an amendment fee of $170,500, both of which were added to the outstanding principal of the debt. In addition, the extension reduced accrued interest by $220,000 and increased the outstanding principal of the debt by $220,000. Based on management’s review, the accounting for debt extinguishment applied. In accordance with the accounting for debt extinguishment, the Company wrote-off the existing debt of $2,000,000, wrote-off the unamortized debt discount of $190,483 and wrote-off the remaining debt issuance costs relating to this note of $19,106. The loss on debt extinguishment of $380,089 on the statement of operations is comprised of the write-off of the remaining debt discount of $190,483, the write-off of the debt issuance costs of $19,106, and the amendment fee of $170,500.

 

In August 2016, the note was further amended to extend the maturity date to September 30, 2017 and also removed the convertible feature of the note. The principal amount of the note was increased to $2,898,523, which is inclusive of accrued interest payable through October 31, 2016. In addition, the Company paid an origination fee of $50,000 on October 31, 2016 which is recorded as a debt discount and will be amortized over the remaining life of the note using the effective interest method.

 

On March 10, 2017, the Company further extended the maturity date to May 1, 2018. Per the terms of the amended agreement:

 

  1) The Company will pay to Manatuck a cash fee equal to two percent (2%) of the mutually-agreed pro-forma balance payable on account of the note as of March 31, 2017, which shall include all interest which would be accrued on the note through March 31, 2017;
     
  2) The Company shall make monthly principal payments to Manatuck as follows:

 

March 2017-December 2017   $ 150,000  
January 2018-May 1, 2018   $ 200,000  

 

Based on management’s review of the amended agreement and extension, the accounting for debt modification applied. The Company accrued the 2% fee totaling $52,236 which is recorded as a debt discount and will be amortized over the remaining life of the note using the effective interest method. There was unamortized debt discount of $83,050 and $48,094 as of April 30, 2017 and January 31, 2017, respectively.

 

The outstanding balance including principal and interest and net of debt discount at April 30, 2017 and January 31, 2017 was $2,418,005 and $2,700,725, respectively.

 

Future maturities of all debt (including debt discussed above in Notes 5, 6 and 7) are as follows:

 

For the Twelve-Month Period Ending April 30,    
2018   $ 3,498,195  
2019     1,008,715  
2020     140,004  
2021     140,004  
2022     58,315  
    $ 4,845,233

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.7.0.1
Concentrations
3 Months Ended
Apr. 30, 2017
Risks and Uncertainties [Abstract]  
Concentrations

Note 8 - Concentrations

 

Revenues

 

During the three months ended April 30, 2017, the Company earned revenues from two customers representing approximately 35% and 13% of gross sales. During the three months ended April 30, 2016, the Company earned revenues from four customers representing approximately 14%, 13%, 12% and 11% of gross sales.

 

As of April 30, 2017, these two customers represented approximately 41% and 15% of total gross outstanding receivables, respectively. As of April 30, 2016, these four customers represented approximately 16%, 8%, 14% and 25% of total gross outstanding receivables, respectively

 

Cost of Sales

 

For the three months ended April 30, 2017 and 2016, one vendor (a related party) represented approximately 100% and 98% of the Company’s purchases, respectively.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity
3 Months Ended
Apr. 30, 2017
Equity [Abstract]  
Stockholders' Equity

Note 9 - Stockholders’ Equity

 

Common Stock

 

During the three months ended April 30, 2017, the Company issued 49,268 shares of its common stock to the holders of the Series A Preferred stockholders for the dividends in arrears totaling $46,800.

 

During the three months ended April 30, 2017, the Company issued 87,554 shares of its common stock to employees and consultants for services rendered of $83,000.

 

Treasury Stock

 

As discussed in Note 7, upon amendment of the Manatuck Debenture on October 29, 2015, the Company repurchased the 230,000 shares for an aggregate purchase price of $149,500 which is presented as Treasury Stock on the condensed consolidated balance sheets.

 

(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     -     $ -  
Exercised     -     $ -  
Forfeited/Cancelled     (229,404 )   $ 1.00  
Outstanding – April 30, 2017     652,000     $ 0.71  
Exercisable – April 30, 2017     576,000     $ 0.80  

 

  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     652,000     2.76 years   $ 0.71       576,000     $ 0.80  

 

At April 30, 2017 the total intrinsic value of options outstanding and exercisable was $188,570 and $159,870, respectively.

 

For the three months ended April 30, 2017 and 2016, the Company recognized an aggregate of $7,150 and $80,470, respectively. At April 30, 2017, unrecognized stock based compensation was $40,248.

 

(D) Warrants

 

The following is a summary of the Company’s warrant activity:

 

    Warrants     Weighted Average
Exercise Price
 
             
Outstanding – January 31, 2017     7,311,770     $ 1.04  
Exercisable – January 31, 2017     7,311,770     $ 1.04  
Granted     -     $ -  
Exercised     -     $ -  
Forfeited/Cancelled     (150,000   $ 1.00  
Outstanding – April 30, 2017     7,161,770     $ 1.05  
Exercisable – April 30, 2017     7,161,770     $ 1.05  

 

  Warrants Outstanding   Warrants Exercisable
  Range of Exercise Price     Number Outstanding     Weighted Average Remaining Contractual Life (in years)     Weighted Average Exercise Price     Number Exercisable     Weighted Average Exercise Price  
                                   
$ 0.68-$2.50     7,161,770     3.31 years   $ 1.05     7,161,770   $ 1.05  

 

At April 30, 2017, the total intrinsic value of warrants outstanding and exercisable was $1,003,444 and $1,033,444, respectively.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments and Contingencies
3 Months Ended
Apr. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies

Note 10 - Commitments and Contingencies

 

Litigations, Claims and Assessments

 

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm its business. The Company is currently not aware of any such legal proceedings or claims that they believe will have, individually or in the aggregate, a material adverse effect on its business, financial condition or operating results.

 

Licensing and Royalty Agreements

 

On March 1, 2010, the Company was assigned a Development and License agreement (the “Agreement”). Under the terms of the Agreement the Licensor shall develop for the Company a line of beef meatballs with sauce, turkey meatballs with sauce and other similar meats and sauces for commercial manufacture, distribution and sale (each a “Licensor Product” and collectively the “Licensor Products”). Licensor shall work with Licensee to develop Licensor Products that are acceptable to Licensee. Upon acceptance of a Licensor Product by Licensee, Licensor’s trade secret recipes, formulas methods and ingredients for the preparation and production of such Licensor Products (the “Recipes”) shall be subject to this Development and License Agreement.

 

The term of the Agreement (the “Term”) shall consist of the Exclusive Term and the Non-Exclusive Term. The 12-month period beginning on each January 1 and ending on each December 31 is referred to herein as an “Agreement Year”.

 

The Exclusive Term began on January 1, 2009 (the “Effective Date”) and ends on the 50th anniversary of the Effective Date, unless terminated or extended as provided herein. Licensor, at its option, may terminate the Exclusive Term by notice in writing to Licensee, delivered between the 60th and the 90th day following the end of any Agreement Year if, on or before the 60th day following the end of such Agreement Year, Licensee has not paid Licensor Royalties with respect to such Agreement Year at least equal to the minimum royalty (the “Minimum Royalty”) for such Agreement Year. Subject to the foregoing sentence, and provided Licensee has not breached this Agreement and failed to cure such breach in accordance herewith, Licensee may extend the Exclusive Term for an additional twenty-five (25) years, by notice in writing to Licensor, delivered on or before the 50th anniversary of the Effective Date.

 

The Non-Exclusive Term begins upon expiration of the Exclusive Term and continues indefinitely thereafter, until terminated by Licensor due to a material breach hereof by Licensee that remains uncured after notice and opportunity to cure in accordance herewith, or until terminated by Licensee.

 

Either party may terminate this Agreement in the event that the other party materially breaches its obligations and fails to cure such material breach within sixty (60) days following written notice from the non-breaching party specifying the nature of the breach. The following termination rights are in addition to the termination rights provided elsewhere in the agreement.

 

  Termination by Licensee - Licensee shall have the right to terminate this Agreement at any time on sixty (60) days written notice to Licensor. In such event, all moneys paid to Licensor shall be deemed non-refundable.

 

Under the terms of the Agreement the Company is required to pay quarterly royalty fees as follows:

 

During the Exclusive Term and the Non-Exclusive Term the Company will pay a royalty equal to the royalty rate (the “Royalty Rate”), multiplied by Company’s “Net Sales”. As used herein, “Net Sales” means gross invoiced sales of Products, directly or indirectly to unrelated third parties, less (a) discounts (including cash discounts), and retroactive price reductions or allowances actually allowed or granted from the billed amount (collectively “Discounts”); (b) credits, rebates, and allowances actually granted upon claims, rejections or returns, including recalls (voluntary or otherwise) (collectively, “Credits”); (c) freight, postage, shipping and insurance charges; (d) taxes, duties or other governmental charges levied on or measured by the billing amount, when included in billing, as adjusted for rebates and refunds; and (e) provisions for uncollectible accounts determined in accordance with reasonable accounting methods, consistently applied.

 

The Royalty Rate shall be: 6% of net sales up to $500,000 of net sales for each Agreement year; 4% of Net Sales from $500,000 up to $2,500,000 of Net Sales for each Agreement year; 2% of Net Sales from $2,500,000 up to $20,000,000 of Net Sales for each Agreement year; and 1% of Net Sales in excess of $20,000,000 of Net Sales for each Agreement year.

 

In order to continue the Exclusive term, the Company shall pay a minimum royalty with respect to the preceding Agreement year as follows:

 

Agreement Year   Minimum
Royalty
to be Paid with
Respect to Such
Agreement Year
 
1st and 2nd   $ -  
3rd and 4th   $ 50,000  
5th, 6th and 7th   $ 75,000  
8th and 9th   $ 100,000  
10th and thereafter   $ 125,000  

 

The Company incurred $116,947 and $85,704 of royalty expenses for the three months ended April 30, 2017 and 2016. Royalty expenses are included in general and administrative expenses on the consolidated statement of operations.

 

Agreements with Placement Agents and Finders

 

(A) April 1, 2015

 

The Company entered into a fourth Financial Advisory and Investment Banking Agreement with Spartan Capital Securities, LLC (“Spartan”) effective April 1, 2015 (the “Spartan Advisory Agreement”). Pursuant to the Spartan Advisory Agreement, the Company shall pay to Spartan a non-refundable monthly fee of $10,000 through October 1, 2015. The monthly fee shall survive any termination of the Agreement. Additionally, (i) if at least $4,000,000 is raised in the Financing, the Company shall pay to Spartan a non-refundable fee of $5,000 per month from November 1, 2015 through October 2017; and (ii) if at least $5,000,000 is raised in the Financing, the Company shall pay to Spartan a non-refundable fee of $5,000 per month from November 1, 2017 through October 2019. If $10,000,000 or more is raised in the Financing, the Company shall issue to Spartan shares of its common stock having an aggregate value of $5,000 (as determined by reference to the average volume weighted average trading price for the last five trading days of the immediately preceding month) on the first day of each month during the period from November 1, 2015 through October 1, 2019.

 

The Company upon closing of the Financing shall pay consideration to Spartan, in cash, a fee in an amount equal to 10% of the aggregate gross proceeds raised in the Financing and 3% of the aggregate gross proceeds raised in the Financing for expenses incurred by Spartan. The Company shall grant and deliver to Spartan at the closing of the Financing, for nominal consideration, five year warrants to purchase a number of shares of the Company’s common stock equal to 10% of the number of shares of common stock (and/or shares of common stock issuable upon exercise of securities or upon conversion or exchange of convertible or exchangeable securities) sold at such closing. The warrants shall be exercisable at any time during the five-year period commencing on the closing to which they relate at an exercise price equal to the purchase price per share of common stock paid by investors in the Financing or, in the case of exercisable, convertible, or exchangeable securities, the exercise, conversion or exchange price thereof. If the Financing is consummated by means of more than one closing, Spartan shall be entitled to the fees provided herein with respect to each such closing.

 

During the year ended January 31, 2016, the Company paid to Spartan a one-time engagement fee of $10,000. In connection with the Initial Closing, the Company agreed to pay an aggregate cash fee and non-accountable allowance of $157,300. The Company also granted warrants to purchase 179,259 shares of common stock at $0.675 per share. The warrants have a grant date fair value of $84,547 which is treated as a direct cost of the Financing and has been recorded as a reduction in additional paid in capital. During the three months ended April 30, 2017, no payments were made to Spartan.

 

Operating Lease

 

In January 2015, the Company began a lease agreement for office space in East Rutherford, NJ. The lease is for a 51-month term expiring on March 31, 2019 with annual payments of $18,847.

 

Total future minimum payments required under operating lease as of April 30, 2017 are as follows:

 

For the Twelve Months Ending April 30,      
2018   $ 18,847  
2019     17,281  
    $ 36,218

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.7.0.1
Subsequent Events
3 Months Ended
Apr. 30, 2017
Subsequent Events [Abstract]  
Subsequent Events

Note 11 – 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 no reportable subsequent events other than those disclosed elsewhere in these financials.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Policies)
3 Months Ended
Apr. 30, 2017
Accounting Policies [Abstract]  
Use of Estimates

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 condensed 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

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

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 April 30, 2017 or January 31, 2017.

 

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts Receivable 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 April 30, 2017 and January 31, 2017, the Company had reserves of $2,000.

Inventories

Inventories

 

Inventories are stated at average cost using the first-in, first-out (FIFO) valuation method. Inventory was comprised of the following at April 30, 2017 and January 31, 2017:

 

    April 30, 2017     January 31, 2017  
Finished goods   $ 180,929     $ 443,623

Property and Equipment

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.

Fair Value of Financial Instruments

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.

Stock Issuance Costs

Stock Issuance Costs

 

Stock issuance costs are capitalized as incurred. Upon the completion of the offering, the stock issuance costs are reclassified to equity and netted against proceeds. In the event the costs are in excess of the proceeds, the costs are recorded to expense. In the case of an aborted offering, all costs are expensed.

Research and Development

Research and Development

 

Research and development is expensed as incurred. Research and development expenses for the three months ended April 30, 2017 and 2016 were $25,588 and $30,562, respectively.

Shipping and Handling Costs

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

Revenue Recognition

 

The Company records revenue for products when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products.

 

The Company meets these criteria upon shipment.

 

Expenses such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows:

 

    Three Months
Ended
April 30, 2017
    Three Months
Ended
April 30, 2016
 
Gross Sales   $ 5,473,205     $ 4,040,988  
Less: Slotting, Discounts, Allowances     115,905       117,011  
Net Sales   $ 5,357,301     $ 3,923,977

Cost of Sales

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

Advertising

 

Costs incurred for producing and communicating advertising for the Company are charged to operations as incurred. Producing and communicating advertising expenses for the three months ended April 30, 2017 and 2016 were $317,594 and $420,892, respectively.

Stock-Based Compensation

Stock-Based Compensation

 

The Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation” (“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee compensation. It defines a fair value based method of accounting for an employee stock option or similar equity instrument. The Company accounts for compensation cost for stock option plans in accordance with ASC 718. The Company accounts for share-based payments to non-employees in accordance with ASC 505-50 “Equity Based Payments to Non-Employees”.

 

The Company recognizes all forms of share-based payments, including stock option grants, warrants and restricted stock grants, at their fair value on the grant date, which are based on the estimated number of awards that are ultimately expected to vest.

 

Share-based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Grants of share-based payment awards issued to non-employees for services rendered have been recorded at the fair value of the share-based payment, which is the more readily determinable value. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock-based compensation expenses are included in cost of goods sold or selling, general and administrative expenses, depending on the nature of the services provided, in the consolidated statement of operations. Share-based payments issued to placement agents are classified as a direct cost of a stock offering and are recorded as a reduction in additional paid in capital.

 

For the three months ended April 30, 2017 and 2016, share-based compensation amounted to $90,150 and $179,208, respectively.

 

For the three months ended April 30, 2017 and 2016, when computing fair value of share-based payments, the Company has considered the following variables:

 

    April 30, 2017     April 30, 2016  
Risk-free interest rate     1.18 %     1.28% to 1.33 %
Expected life of grants     4.0 years       2.5 years  
Expected volatility of underlying stock     188 %     178% to 179 %
Dividends     0 %     0 %

 

The expected option term is computed using the “simplified” method as permitted under the provisions of ASC 718-10-S99. The Company uses the simplified method to calculate expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

 

The expected stock price volatility for the Company’s stock options was determined by the historical volatilities for industry peers and used an average of those volatilities. Risk free interest rates were obtained from U.S. Treasury rates for the applicable periods.

Earnings (Loss) Per Share

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 Three Months Ended
    April 30, 2017   April 30, 2016
Numerator:                
Net income/(loss) attributable to common stockholders   $ 81,425     $ (290,628 )
Effect of dilutive securities:     —         —    
                 
Diluted net income (loss)   $ 81,425     $ (290,628 )
                 
Denominator:                
Weighted average common shares outstanding - basic     27,810,717       26,507,516  
Dilutive securities (a):                
Series A Preferred     3,466,667       —    
Options     198,495       —    
Warrants     1,056,256       —    
                 
Weighted average common shares outstanding and assumed conversion - diluted     32,532,135       26,507,516  
                 
Basic net income (loss) per common share   $ 0.00     $ (0.01 )
                 
Diluted net income (loss) per common share   $ 0.00     $ (0.01 )
                 
(a) - Anti-dilutive securities excluded:     3,779,884       9,189,805

Income Taxes

Income Taxes

 

Income taxes are provided in accordance with ASC No. 740, “Accounting for Income Taxes”. A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss carryforwards. Deferred tax expense (benefit) results from the net change during the period of deferred tax assets and liabilities.

 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

The Company is no longer subject to tax examinations by tax authorities for years prior to 2013.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

 

In July 2015, the FASB issued the ASU No. 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”). The amendments in this ASU do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of this ASU at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. During the three months ended April 30, 2017, the Company adopted the methodologies prescribed by ASU 2015-11 and deemed that the adoption of the ASU did not have a material effect on its financial position or results of operations.

 

In April 2016, the FASB issued ASU No. 2016-09, “Compensation – Stock Compensation (Topic 718)”. The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. During the three months ended April 30, 2017, the Company adopted the methodologies prescribed by ASU 2016-09 and deemed that the adoption of the ASU did not have a material effect on its financial position or results of operations.

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” Under ASU 2016-02, lessees will be required to recognize, for all leases of 12 months or more, a liability to make lease payments and a right-of-use asset representing the right to use the underlying asset for the lease term. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature of an entity’s leasing activities. This ASU is effective for public reporting companies for interim and annual periods beginning after December 15, 2018, with early adoption permitted, and must be adopted using a modified retrospective approach. The Company is in the process of evaluating the effect of the new guidance on its consolidated financial statements and disclosures.

 

In April 2016, the FASB issued ASU No. 2016-10, “Revenue from Contracts with Customers: Identifying Performance Obligations and Licensing (Topic 606)”. In March 2016, the FASB issued ASU No. 2016-08, “Revenue from Contracts with Customers: Principal versus Agent Considerations (Reporting Revenue Gross verses Net) (Topic 606)”. These amendments provide additional clarification and implementation guidance on the previously issued ASU 2014-09, “Revenue from Contracts with Customers”. The amendments in ASU 2016-10 provide clarifying guidance on materiality of performance obligations; evaluating distinct performance obligations; treatment of shipping and handling costs; and determining whether an entity’s promise to grant a license provides a customer with either a right to use an entity’s intellectual property or a right to access an entity’s intellectual property. The amendments in ASU 2016-08 clarify how an entity should identify the specified good or service for the principal versus agent evaluation and how it should apply the control principle to certain types of arrangements. The adoption of ASU 2016-10 and ASU 2016-08 is to coincide with an entity’s adoption of ASU 2014-09, which the Company intends to adopt for interim and annual reporting periods beginning after December 15, 2017. The Company is in the process of evaluating the standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures.

 

In May 2016, the FASB issued ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients”, which narrowly amended the revenue recognition guidance regarding collectability, noncash consideration, presentation of sales tax and transition and is effective during the same period as ASU 2014-09. The Company is currently evaluating the standard and does not expect the adoption will have a material effect on its consolidated financial statements and disclosures.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017. The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of ASU 2016-15 on its consolidated financial statements.

 

In October 2016, the FASB issued ASU 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other than Inventory”, which eliminates the exception that prohibits the recognition of current and deferred income tax effects for intra-entity transfers of assets other than inventory until the asset has been sold to an outside party. The updated guidance is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.

 

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230)”, requiring that the statement of cash flows explain the change in the total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. This guidance is effective for fiscal years, and interim reporting periods therein, beginning after December 15, 2017 with early adoption permitted. The provisions of this guidance are to be applied using a retrospective approach which requires application of the guidance for all periods presented. The Company is currently evaluating the impact of the new standard.

 

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.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Apr. 30, 2017
Accounting Policies [Abstract]  
Schedule of Inventories

Inventory was comprised of the following at April 30, 2017 and January 31, 2017:

 

    April 30, 2017     January 31, 2017  
Finished goods   $ 180,929     $ 443,623

Schedule of Property and Equipment 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.

Schedule of Expenses of Slotting Fees, Sales Discounts and Allowances are Accounted as Direct Reduction of Revenues

Expenses such as slotting fees, sales discounts, and allowances are accounted for as a direct reduction of revenues as follows:

 

    Three Months
Ended
April 30, 2017
    Three Months
Ended
April 30, 2016
 
Gross Sales   $ 5,473,205     $ 4,040,988  
Less: Slotting, Discounts, Allowances     115,905       117,011  
Net Sales   $ 5,357,301     $ 3,923,977

Schedule of Fair Value of Share-Based Payments

For the three months ended April 30, 2017 and 2016, when computing fair value of share-based payments, the Company has considered the following variables:

 

    April 30, 2017     April 30, 2016  
Risk-free interest rate     1.18 %     1.28% to 1.33 %
Expected life of grants     4.0 years       2.5 years  
Expected volatility of underlying stock     188 %     178% to 179 %
Dividends     0 %     0 %

Schedule of Earnings Per Share, Basic and Diluted

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 Three Months Ended
    April 30, 2017   April 30, 2016
Numerator:                
Net income/(loss) attributable to common stockholders   $ 81,425     $ (290,628 )
Effect of dilutive securities:     —         —    
                 
Diluted net income (loss)   $ 81,425     $ (290,628 )
                 
Denominator:                
Weighted average common shares outstanding - basic     27,810,717       26,507,516  
Dilutive securities (a):                
Series A Preferred     3,466,667       —    
Options     198,495       —    
Warrants     1,056,256       —    
                 
Weighted average common shares outstanding and assumed conversion - diluted     32,532,135       26,507,516  
                 
Basic net income (loss) per common share   $ 0.00     $ (0.01 )
                 
Diluted net income (loss) per common share   $ 0.00     $ (0.01 )
                 
(a) - Anti-dilutive securities excluded:     3,779,884       9,189,805

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.7.0.1
Property and Equipment (Tables)
3 Months Ended
Apr. 30, 2017
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment

Property and equipment on April 30, 2017 and January 31, 2017 are as follows:

 

    April 30, 2017     January 31, 2017  
Machinery and Equipment   $ 1,193,726     $ 1,193,473  
Furniture and Fixtures     23,067       17,942  
Leasehold Improvements     1,063,170       825,198  
      2,279,963       2,036,613  
Less: Accumulated Depreciation     968,186       861,105  
    $ 1,311,777     $ 1,175,508

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.7.0.1
Loan and Security Agreement (Tables)
3 Months Ended
Apr. 30, 2017
Debt Disclosure [Abstract]  
Schedule of Line of Credit

The facility consists of the following:

 

Accounts Revolving Line of Credit:   $ 2,150,000  
Inventory Revolving Line of Credit:   $ 350,000  
Term Loan:   $ 700,000

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.7.0.1
Note Payable (Tables)
3 Months Ended
Apr. 30, 2017
Debt Disclosure [Abstract]  
Schedule of Future Maturities of Long Term Debt

Future maturities of all debt (including debt discussed above in Notes 5, 6 and 7) are as follows:

 

For the Twelve-Month Period Ending April 30,    
2018   $ 3,498,195  
2019     1,008,715  
2020     140,004  
2021     140,004  
2022     58,315  
    $ 4,845,233

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity (Tables)
3 Months Ended
Apr. 30, 2017
Equity [Abstract]  
Summary of Option Activity

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     -     $ -  
Exercised     -     $ -  
Forfeited/Cancelled     (229,404 )   $ 1.00  
Outstanding – April 30, 2017     652,000     $ 0.71  
Exercisable – April 30, 2017     576,000     $ 0.80

Summary of Option Outstanding and Exercisable

  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     652,000     2.76 years   $ 0.71       576,000     $ 0.80

Schedule of Warrants Activity

The following is a summary of the Company’s warrant activity:

 

    Warrants     Weighted Average
Exercise Price
 
             
Outstanding – January 31, 2017     7,311,770     $ 1.04  
Exercisable – January 31, 2017     7,311,770     $ 1.04  
Granted     -     $ -  
Exercised     -     $ -  
Forfeited/Cancelled     (150,000   $ 1.00  
Outstanding – April 30, 2017     7,161,770     $ 1.05  
Exercisable – April 30, 2017     7,161,770     $ 1.05

Schedule of Warrants Outstanding and Exercisable

  Warrants Outstanding   Warrants Exercisable
  Range of Exercise Price     Number Outstanding     Weighted Average Remaining Contractual Life (in years)     Weighted Average Exercise Price     Number Exercisable     Weighted Average Exercise Price  
                                   
$ 0.68-$2.50     7,161,770     3.31 years   $ 1.05     7,161,770   $ 1.05

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments and Contingencies (Tables)
3 Months Ended
Apr. 30, 2017
Commitments and Contingencies Disclosure [Abstract]  
Schedule of Royalty Minimum Payment by Preceding 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
 
1st and 2nd   $ -  
3rd and 4th   $ 50,000  
5th, 6th and 7th   $ 75,000  
8th and 9th   $ 100,000  
10th and thereafter   $ 125,000

Schedule of Future Minimum Payments Under Operating Leases

Total future minimum payments required under operating lease as of April 30, 2017 are as follows:

 

For the Twelve Months Ending April 30,      
2018   $ 18,847  
2019     17,281  
    $ 36,218

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.7.0.1
Nature of Operations and Basis of Presentation (Details Narrative) - USD ($)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Jan. 31, 2017
Jan. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]        
Net loss $ 128,225 $ (226,107)    
Cash 436,447 502,459 $ 666,580 $ 587,422
Working capital deficit 829,629      
Net cash generated from operating activities $ 526,555 $ (437,862)    
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies (Details Narrative) - USD ($)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Jan. 31, 2017
Accounting Policies [Abstract]      
Cash equivalents  
Accounts receivable reserves 2,000   $ 2,000
Research and development expense 25,588 $ 30,562  
Advertising expenses 317,594 420,892  
Share-based compensation $ 90,150 $ 179,208  
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Inventories (Details) - USD ($)
Apr. 30, 2017
Jan. 31, 2017
Accounting Policies [Abstract]    
Finished goods $ 180,929 $ 443,623
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Property and Equipment Estimated Useful Lives (Details)
3 Months Ended
Apr. 30, 2017
Furniture and Fixtures [Member]  
Property and equipment estimated useful lives 3 years
Leasehold Improvements [Member]  
Property and equipment estimated useful lives 0 years [1]
Minimum [Member] | Machinery and Equipment [Member]  
Property and equipment estimated useful lives 2 years
Maximum [Member] | Machinery and Equipment [Member]  
Property and equipment estimated useful lives 7 years
[1] Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever period is shorter.
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Expenses of Slotting Fees, Sales Discounts and Allowances are Accounted as Direct Reduction of Revenues (Details) - USD ($)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Accounting Policies [Abstract]    
Gross Sales $ 5,473,205 $ 4,040,988
Less: Slotting, Discounts, Allowances 115,905 117,011
Net Sales $ 5,357,301 $ 3,923,977
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Fair Value of Share-Based Payments (Details)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Accounting Policies [Abstract]    
Risk-free interest rate 1.18%  
Risk-free interest rate, minimum   1.28%
Risk-free interest rate, maximum   1.33%
Expected life of grants 4 years 2 years 6 months
Expected volatility of underlying stock 188.00%  
Expected volatility of underlying stock, minimum   178.00%
Expected volatility of underlying stock, maximum   179.00%
Dividends 0.00% 0.00%
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.7.0.1
Summary of Significant Accounting Policies - Schedule of Earnings Per Share, Basic and Diluted (Details) - USD ($)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Accounting Policies [Abstract]    
Net income/(loss) attributable to common stockholders $ 81,425 $ (290,628)
Effect of dilutive securities
Diluted net income (loss) $ 81,425 $ (290,628)
Weighted average common shares outstanding - basic 27,810,717 26,507,516
Series A Preferred 3,466,667
Options 198,495
Warrants 1,056,256
Weighted average common shares outstanding and assumed conversion - diluted 32,532,135 26,507,516
Basic net income (loss) per common share $ 0.00 $ (0.01)
Diluted net income (loss) per common share $ 0.00 $ (0.01)
(a) - Anti-dilutive securities excluded 3,779,884 9,189,805
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.7.0.1
Property and Equipment (Details Narrative) - USD ($)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Property, Plant and Equipment [Abstract]    
Depreciation expense $ 107,081 $ 76,703
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.7.0.1
Property and Equipment - Schedule of Property and Equipment (Details) - USD ($)
Apr. 30, 2017
Jan. 31, 2017
Property, Plant and Equipment [Abstract]    
Machinery and Equipment $ 1,193,726 $ 1,193,473
Furniture and Fixtures 23,067 17,942
Leasehold Improvements 1,063,170 825,198
Property plant and equipment, gross 2,279,963 2,036,613
Less: Accumulated Depreciation 968,186 861,105
Property, plant and equipment, net $ 1,311,777 $ 1,175,508
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.7.0.1
Investment in Meatball Obsession, LLC (Details Narrative) - Meatball Obsession, LLC [Member] - USD ($)
Dec. 31, 2011
Apr. 30, 2017
Jan. 31, 2017
Percentage of equity interest acquired in business combination 34.62%    
Investment in business combination $ 27,032    
Reduction in investment due to losses in affiliates $ 0    
Ownership interest percentage   12.00% 12.00%
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.7.0.1
Related Party Transactions (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Oct. 29, 2015
Mar. 01, 2010
Aug. 31, 2016
Apr. 30, 2017
Apr. 30, 2016
Jan. 31, 2016
Jan. 31, 2017
Voting rights description   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 the Company.          
Purchased inventory from manufacturer       $ 3,307,107 $ 2,843,012    
Administrative expenses and salary expenses       15,000 6,000    
Due from manufacturer - related party       2,016,046     $ 2,079,708
Proceeds from notes payable with related party       650,000    
Debt maturity date Dec. 19, 2016   Sep. 30, 2017        
Note principal balance amount       117,656     117,656
Meatball Obsession, LLC [Member]              
Revenue from related parties       22,571 10,102    
Due from related party       9,849     $ 8,189
WWS, Inc [Member]              
Commission expense       12,000 $ 12,000    
CEO [Member]              
Proceeds from notes payable with related party           $ 125,000  
Note bears interest rate per annum           4.00%  
Debt maturity date           Dec. 31, 2016  
CEO [Member] | Extended Maturity [Member]              
Debt maturity date           Feb. 28, 2019  
Joseph Epstein Foods [Member]              
Minimum purchase of product each month amount       $ 963,000      
Percentage of shortfall each month       12.00%      
Percentage of overage of gross margin each month       12.00%      
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.7.0.1
Loan and Security Agreement (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Oct. 29, 2015
Sep. 03, 2014
Sep. 30, 2016
Aug. 31, 2016
Apr. 30, 2017
Jan. 31, 2017
Line of credit         $ 1,608,191 $ 1,363,145
Debt instrument, increase $ 220,000          
Extended maturity date Dec. 19, 2016     Sep. 30, 2017    
Repayment of secured debt, monthly installment basis         2,418,005 2,700,725
Loan and Security Agreement [Member] | Entrepreneur Growth Capital LLC [Member]            
Line of credit aggregate value     $ 3,200,000      
Percentage of accounts revolving line of credit maximum     85.00%      
Percentage of finished goods amount     50.00%      
Percentage of raw material amount     20.00%      
Line of credit interest rate description     The revolving interest rates is equal to the highest prime rate in effect during each month as generally reported by Citibank, N.A. plus (a) 2.5% on loans and advances made against eligible accounts and (b) 4.0% on loans made against eligible inventory. The term loan bears interest at a rate of the highest prime rate in effect during each month as generally reported by Citibank, N.A. plus 4.0%. The initial term of the facility is for a period of two years and will automatically renew for an additional one year period. The Company is required to pay an annual facility fee equal to 0.75% of the total $3,200,000 facility and pays an annualized maintenance fee equal to 2.16% of the total facility. In the event of default, the Company shall pay 10% above the stated rates of interest per the Agreement. The drawdowns are secured by all of the assets of the Company.      
Line of credit annual facility percentage     0.75%      
Line of credit facility annualized maintenance fee     $ 3,200,000      
Line of credit fee percentage     2.16%      
Line of credit default stated rates of interest     10.00%      
Secured Promissory Note [Member] | Entrepreneur Growth Capital LLC [Member]            
Debt instrument, increase     $ 700,000      
Extended maturity date     Sep. 30, 2021      
Term loan outstanding         $ 618,331 $ 653,332
Secured Promissory Note [Member] | Entrepreneur Growth Capital LLC [Member]            
Line of credit aggregate value   $ 600,000        
Line of credit interest rate description   The EGC Note bears interest at the prime rate plus 4.0% and is payable monthly, in arrears. In the event of default, the Company shall pay 10% above the stated rates of interest per the Loan and Security Agreement.        
Line of credit default stated rates of interest   10.00%        
Term of loan   5 years        
Repayment of secured debt, monthly installment basis   $ 11,667        
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.7.0.1
Loan and Security Agreement - Schedule of Line of Credit (Details)
Sep. 03, 2014
USD ($)
Accounts Revolving Line of Credit [Member]  
Line of credit facility $ 2,150,000
Inventory Revolving Line of Credit [Member]  
Line of credit facility 350,000
Term Loan [Member]  
Line of credit facility $ 700,000
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.7.0.1
Note Payable (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Mar. 31, 2017
Oct. 31, 2016
Oct. 29, 2015
Dec. 19, 2014
Aug. 31, 2016
Apr. 30, 2015
Apr. 30, 2017
Apr. 30, 2016
Jan. 31, 2017
Common stock price per shares             $ 0.675    
Debt discount             $ 17,280 $ 9,125  
Unamortized debt discount             83,050   $ 48,094
Debt maturity date     Dec. 19, 2016   Sep. 30, 2017        
Sale of stock during period     230,000            
Sale of stock price per share     $ 0.65            
Sale of stock during period, value     $ 149,500            
Amendment fee     170,500       170,500    
Accrued interest     220,000            
Increased in outstanding principal of debt     220,000            
Debt extinguishment     2,000,000            
Unamortized debt discount     190,483           190,483
Debt issuance cost     19,106           19,106
Loss on debt extinguishment     380,089            
Remaining debt discount     $ 190,483            
Outstanding principal debt         $ 2,898,523        
Origination fees   $ 50,000         50,000    
Accrued fee percentage 2.00%                
Debt fee $ 52,236                
Debt instrument, periodic payment             $ 2,418,005   $ 2,700,725
Manatuck Purchase Agreement [Member] | March 1, 2017 [Member]                  
Debt maturity month year                 May 1, 2018
Debt instrument, description                 Upon exercise of the Option, the Company will pay to Manatuck a cash fee equal to two percent (2%) of the mutually-agreed pro-forma balance payable on account of the note as of March 31, 2017, which shall include all interest which would be accrued on the note through March 31, 2017 which can be included in the outstanding principal balance of the note
Manatuck Purchase Agreement [Member] | March 2017-December 2017 [Member]                  
Outstanding principal debt                 $ 150,000
Manatuck Purchase Agreement [Member] | January 2018-May 1, 2018 [Member]                  
Outstanding principal debt                 $ 200,000
Manatuck Purchase Agreement [Member] | Manatuck Hill Partners, LLC [Member]                  
Convertible debenture       $ 2,000,000          
Convertible debt, interest rate percentage       14.00%          
Debt maturity month year       February 2016          
Number of restricted common stock granted, shares       200,000   30,000      
Debt maturity extended month year           May 2016      
Common stock price per shares           $ 1.32      
Debt discount       $ 498,350   $ 39,600      
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.7.0.1
Note Payable - Schedule of Future Maturities of Long Term Debt (Details)
Apr. 30, 2017
USD ($)
Debt Disclosure [Abstract]  
2018 $ 3,498,195
2019 1,008,715
2020 140,004
2021 140,004
2022 58,315
Future maturities of long term debt total $ 4,845,233
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.7.0.1
Concentrations (Details Narrative)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Sales Revenue [Member] | Customer A [Member]    
Concentrations of risk percentage 35.00% 14.00%
Sales Revenue [Member] | Customer B [Member]    
Concentrations of risk percentage 13.00% 13.00%
Sales Revenue [Member] | Customer C [Member]    
Concentrations of risk percentage   12.00%
Sales Revenue [Member] | Customer D [Member]    
Concentrations of risk percentage   11.00%
Accounts Receivable [Member] | Customer A [Member]    
Concentrations of risk percentage 41.00% 16.00%
Accounts Receivable [Member] | Customer B [Member]    
Concentrations of risk percentage 15.00% 8.00%
Accounts Receivable [Member] | Customer C [Member]    
Concentrations of risk percentage   14.00%
Accounts Receivable [Member] | Customer D [Member]    
Concentrations of risk percentage   25.00%
Cost Of Sales [Member] | Vendor One [Member]    
Concentrations of risk percentage 100.00% 98.00%
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity (Details Narrative) - USD ($)
3 Months Ended
Oct. 29, 2015
Apr. 30, 2017
Apr. 30, 2016
Number of stock issued for employees services   $ 83,000  
Repurchase of treasury stock, shares 230,000    
Repurchase of treasury stock $ 149,500   $ (149,500)
Total intrinsic value of options outstanding   188,570  
Total intrinsic value of options exercisable   159,870  
Recognized stock options   7,150 $ 80,470
Unrecognized stock based compensation   40,248  
Warrant [Member]      
Total intrinsic value of options exercisable   1,033,444  
Total intrinsic value of warrants outstanding   $ 1,003,444  
Employees [Member]      
Number of stock issued for employees services , shares   87,554  
Number of stock issued for employees services   $ 83,000  
Series A Preferred Stockholders [Member]      
Number common stock shares issued for dividends in arrears   49,268  
Number common stock issued for dividends in arrears   $ 46,800  
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity - Summary of Option Activity (Details)
3 Months Ended
Apr. 30, 2017
$ / shares
shares
Equity [Abstract]  
Options Outstanding, Beginning balance | shares 881,404
Options Exercisable, Beginning balance | shares 799,404
Options, Granted | shares
Options, Exercised | shares
Options, Forfeited/Cancelled | shares (229,404)
Options Outstanding, Ending balance | shares 652,000
Options Exercisable, Ending balance | shares 576,000
Options Outstanding, Weighted Average Exercise Price, Beginning balance | $ / shares $ 0.78
Options Exercisable, Weighted Average Exercise Price, Beginning balance | $ / shares 0.78
Weighted Average Exercise Price, Granted | $ / shares
Weighted Average Exercise Price, Exercised | $ / shares
Weighted Average Exercise Price, Forfeited/Cancelled | $ / shares 1.00
Options Outstanding, Weighted Average Exercise Price, Ending balance | $ / shares 0.71
Options Exercisable, Weighted Average Exercise Price, Ending balance | $ / shares $ 0.80
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity - Summary of Option Outstanding and Exercisable (Details) - Range Of Exercise Price One [Member]
3 Months Ended
Apr. 30, 2017
$ / shares
shares
Range of exercise price lower range limit $ 0.39
Range of exercise price upper range limit $ 2.97
Number of Options Outstanding | shares 652,000
Weighted Average Remaining Contractual Life (in years), Options Outstanding 2 years 9 months 3 days
Weighted Average Exercise Price, Options Outstanding $ 0.71
Number of Options Exercisable | shares 576,000
Weighted Average Exercise Price, Options Exercisable $ 0.80
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity - Schedule of Warrants Activity (Details) - Warrant [Member]
3 Months Ended
Apr. 30, 2017
$ / shares
shares
Warrants Outstanding, Beginning balance | shares 7,311,770
Warrants Exercisable, Beginning balance | shares 7,311,770
Warrants, Granted | shares
Warrants, Exercised | shares
Warrants, Forfeited/Cancelled | shares (150,000)
Warrants Outstanding, Ending balance | shares 7,161,770
Warrants Exercisable, Ending balance | shares 7,161,770
Warrants Outstanding, Weighted Average Exercise Price, Beginning balance | $ / shares $ 1.04
Warrants Exercisable, Weighted Average Exercise Price, Beginning balance | $ / shares 1.04
Weighted Average Exercise Price, Granted | $ / shares
Weighted Average Exercise Price, Exercised | $ / shares
Weighted Average Exercise Price, Forfeited/Cancelled | $ / shares 1.00
Warrants Outstanding, Weighted Average Exercise Price, Ending balance | $ / shares 1.05
Warrants Exercisable, Weighted Average Exercise Price, Ending balance | $ / shares $ 1.05
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.7.0.1
Stockholders' Equity - Schedule of Warrants Outstanding and Exercisable (Details) - Warrant [Member] - $ / shares
3 Months Ended
Apr. 30, 2017
Jan. 31, 2017
Range of Exercise Price, lower limit $ 0.68  
Range of Exercise Price, upper limit $ 2.50  
Number of Warrants Outstanding 7,161,770 7,311,770
Weighted Average Remaining Contractual Life (in Years) 3 years 3 months 22 days  
Weighted Average Exercise Price, Warrants Outstanding $ 1.05  
Number of Warrants Exercisable 7,161,770 7,311,770
Weighted Average Exercise Price, Warrants Exercisable $ 1.05 $ 1.04
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments and Contingencies (Details Narrative) - USD ($)
1 Months Ended 3 Months Ended 12 Months Ended
Jan. 31, 2015
Apr. 30, 2017
Apr. 30, 2016
Jan. 31, 2016
Royalty expenses   $ 116,947 $ 85,704  
Warrants issued to investors   179,259    
Shares issued exercise price per share   $ 0.675    
Warrants grant date fair value   $ 84,547    
Operating lease annual payments   $ 36,218    
Spartan Capital Securities, LLC [Member]        
Percentage of fee equal to aggregate gross proceeds   10.00%    
Percentage of fees equal to aggregate gross proceeds for expenses   3.00%    
Percentage of common stock issuable   10.00%    
One-time engagement fee       $ 10,000
Cash fee and non-accountable allowance       $ 157,300
Spartan Capital Securities, LLC [Member] | Advisory Agreement [Member]        
Nonrefundable monthly fee amount   $ 10,000    
Operating lease expiration term 51 months      
Lease agreement expire date Mar. 31, 2019      
Operating lease annual payments $ 18,847      
Minimum [Member] | Spartan Capital Securities, LLC [Member] | Advisory Agreement [Member]        
Nonrefundable monthly fee amount   $ 5,000    
Nonrefundable monthly fee term   November 1, 2015 through October 2017    
Aggregate gross proceeds fee   $ 4,000,000    
Maximum [Member] | Spartan Capital Securities, LLC [Member] | Advisory Agreement [Member]        
Nonrefundable monthly fee amount   $ 5,000    
Nonrefundable monthly fee term   November 1, 2017 through October 2019    
Aggregate gross proceeds fee   $ 5,000,000    
Year 1 [Member]        
Percentage of royalty on net sales   6.00%    
Royalty revenue   $ 500,000    
Year 2 [Member]        
Percentage of royalty on net sales   4.00%    
Year 2 [Member] | Minimum [Member]        
Royalty revenue   $ 500,000    
Year 2 [Member] | Maximum [Member]        
Royalty revenue   $ 2,500,000    
Year 3 [Member]        
Percentage of royalty on net sales   2.00%    
Year 3 [Member] | Minimum [Member]        
Royalty revenue   $ 2,500,000    
Year 3 [Member] | Maximum [Member]        
Royalty revenue   $ 20,000,000    
Year 4 [Member]        
Percentage of royalty on net sales   1.00%    
Royalty revenue   $ 20,000,000    
$10,000,000 or More Raised Financing [Member] | Spartan Capital Securities, LLC [Member] | Advisory Agreement [Member]        
Nonrefundable monthly fee amount   $ 5,000    
Nonrefundable monthly fee term   November 1, 2015 through October 1, 2019    
Aggregate gross proceeds fee   $ 10,000,000    
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments and Contingencies - Schedule of Royalty Minimum Payment by Preceding Agreement Year (Details) - USD ($)
3 Months Ended
Apr. 30, 2017
Apr. 30, 2016
Minimum Royalty to be Paid $ 116,947 $ 85,704
Agreement Year 1st and 2nd [Member]    
Minimum Royalty to be Paid  
Agreement Year 3rd and 4th [Member]    
Minimum Royalty to be Paid 50,000  
Agreement Year 5th, 6th and 7th [Member]    
Minimum Royalty to be Paid 75,000  
Agreement Year 8th and 9th [Member]    
Minimum Royalty to be Paid 100,000  
Agreement Year 10th and thereafter [Member]    
Minimum Royalty to be Paid $ 125,000  
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.7.0.1
Commitments and Contingencies - Schedule of Future Minimum Payments Under Operating Leases (Details)
Apr. 30, 2017
USD ($)
Commitments and Contingencies Disclosure [Abstract]  
2018 $ 18,847
2019 17,281
Total $ 36,218
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