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 October 31, 2020 and 2019

The following table sets forth the summary statements of operations for the three months ended October 31, 2020 and 2019:





                                                              Three Months Ended
                                                    October 31, 2020       October 31, 2019
Sales - Net of Slotting Fees and Discounts         $        9,898,991     $        9,267,036
Gross Profit                                       $        3,125,329     $        2,900,952
Operating Expenses                                 $       (2,338,201 )   $       (2,397,352 )
Other Expenses                                     $          (52,986 )   $          (94,985 )
Net Income                                         $          734,142     $          408,615



For the three months ended October 31, 2020 and 2019, the Company reported net income of $734,142 and $408,615, respectively. The change in net income between the three months ended October 31, 2020 and 2019 was primarily attributable to an increase in sales of 7% and an increase in gross profit (32% of sales as discussed below) and in addition to a decrease in interest expense and only a modest decrease in operating expenses (24% of sales as discussed below).

Sales: Sales, net of slotting fees and discounts increased by approximately 7% to $9,898,991 during the three months ended October 31, 2020, from $9,267,036 during the three months ended October 31, 2019. During the three months ended October 31, 2020, the Company was able to increase its sales through new customers as well as its existing customer base. The effect of COVID-19 slowed new placements in the third quarter and are expected to resume in the fourth quarter.

Gross Profit: The gross profit margin was 32% for the three months ended October 31, 2020 compared to 31% for the three months ended October 31, 2019. Gross margin increased due to plant operating efficiencies.

Operating Expenses: Operating expenses decreased by 2% during the three months ended October 31, 2020, as compared to the three months ended October 31, 2019. Operating expenses decreased as a percentage of sales from 26% in three months ended October 31, 2019 to 24% in three months ended October 31, 2020. The $59,151 change in total operating expenses is primarily attributable to the following increases in operating expenses:

? Postage and freight of $111,881 due to increased sales and slightly lower

freight costs over the prior year,

? Payroll and related expenses of $64,609 due to the addition of a Senior

Executive in February 2020,

? Commission expense of $55,865 directly related to increased sales, and






2





These expense increases were offset by a decrease in the following as well as minimal decreases in other expense categories:

? Advertising and promotion of $203,847 due to lower promotional expenses for

merchandising, offset by higher spending on a Sirius Radio Campaign, and

? Professional fees of $34,153 due to a decrease in investor relations activities

in comparison to the prior year.

Other Expense: Other expenses decreased by $41,999 to $52,986 for the three months ended October 31, 2020 as compared to $94,985 during the three months ended October 31, 2019. For three months ended October 31, 2020, other expenses consisted of $45,822 in interest expense incurred on the Company's financing arrangements. In addition, the Company recorded $7,164 of amortization expense related to the debt discount. For three months ended October 31, 2019, other expenses consisted of $89,635 in interest expense incurred on the Company's financing arrangements. In addition, the Company recorded $5,350 of amortization expense related to the debt discount.

Results of Operations for the Nine Months ended October 31, 2020 and 2019

The following table sets forth the summary statements of operations for the nine months ended October 31, 2020 and 2019:





                                                               Nine Months Ended
                                                    October 31, 2020       October 31, 2019
Sales - Net of Slotting Fees and Discounts         $       31,384,394     $       24,731,305
Gross Profit                                       $       10,067,010     $        7,963,402
Operating Expenses                                 $       (7,497,163 )   $       (6,529,294 )
Other Expenses                                     $         (189,736 )   $         (311,519 )
Net Income                                         $        2,380,111     $        1,122,589

For the nine months ended October 31, 2020 and 2019, the Company reported net income of $2,380,111 and $1,122,589, respectively. The change in net income between the nine months ended October 31, 2020 and 2019 was primarily attributable to an increase in sales of 27% and stable gross profit (32% of sales as discussed below) in addition to a decrease in interest expense offset by increases in operating expenses (24% of sales, a 2% decrease from the prior year, as discussed below).

Sales: Sales, net of slotting fees and discounts increased by approximately 27% to $31,384,394 during the nine months ended October 31, 2020, from $24,731,305 during the nine months ended October 31, 2019. During the nine months ended October 31, 2020, the Company was able to increase its sales through new customers as well as its existing customer base. COVID-19 had the effect of, consumer hoarding of food and increasing inventory build at retailers in the first quarter of the year but slowed new placements in the third quarter. The Company expects new placements to revert back to normal levels in the fourth quarter of this fiscal year.

Gross Profit: The gross profit margin was 32% for the nine months ended October 31, 2020 compared to 32% for the nine months ended October 31, 2019. Gross margins remained the same as a percentage of sales, due to short term higher beef raw material prices, offset by higher plant operations efficiency.

Operating Expenses: Operating expenses increased by 15% during the nine months ended October 31, 2020, as compared to the nine months ended October 31, 2019. Operating expenses decreased as a percentage of sales from 26% in 2019 to 24% in 2020. The $967,869 increase in total operating expenses is primarily attributable to the following increases in operating expenses:

? Postage and freight of $503,432 due to increased sales and change of customer

mix;

? Commission expense of $263,760 directly related to increased sales;

? Payroll and related expenses of $221,653 due to the addition of a Senior

Executive in February 2020;

? Professional fees of $107,453 due to an increase in investor relations and

investment banking activities; and

? Royalty expenses of $79,511 due to the increase in sales.






3





These expense increases were offset by decrease in the following as well as minimal decreases in other expense categories:

? Advertising and promotion of $289,041 due to lower promotional expenses for

merchandising activity related to higher sales, and increased spending on a

Sirius Radio advertising campaign; and

? Trade show and travel expenses of $65,609 due to reduced need for travel and

the elimination of in person trade shows due to COVID-19.

Other Expense: Other expenses decreased by $121,783 to $189,736 for the nine months ended October 31, 2020 as compared to $311,519 during the nine months ended October 31, 2019. For nine months ended October 31, 2020, other expenses consisted of $171,872 in interest expense incurred on the Company's financing arrangements. In addition, the Company recorded $17,864 of amortization expense related to the debt discount. For nine months ended October 31, 2019, other expenses consisted of $293,531 in interest expense incurred on the Company's financing arrangements. In addition, the Company recorded $17,988 of amortization expense related to the debt discount.

Liquidity and Capital Resources

The following table summarizes total current assets, liabilities and working capital at October 31, 2020 compared to January 31, 2020:





                       October 31, 2020       January 31, 2020       Increase
Current Assets        $        7,332,094     $        5,620,255     $ 1,711,839
Current Liabilities   $        3,837,835     $        4,208,231     $   370,396
Working Capital       $        3,494,259     $        1,412,024     $ 2,082,235

As of October 31, 2020, we had working capital of $3,494,259 as compared to a working capital of $1,412,024 as of January 31, 2020, an increase of $2,082,235. In addition to the increase in sales and net income, the increase in working capital is primarily attributable to an increase in cash of $1,399,160, an increase in inventories of $313,870, an increase in prepaid expenses of $38,784, a decrease in accounts payable and accrued expenses $39,669 and a net decrease of $330,727 in the current portion of lease and debt obligations. These amounts were offset by a decrease in accounts receivable of $39,975.

Net cash provided by operating activities for the nine months ended October 31, 2020 and 2019 was $2,518,012 and $975,848, respectively. Cash provided by operations is primarily attributable to the net income for the nine months ended October 31, 2020 and 2019 of $2,380,111 and $1,122,589, respectively.

Net cash used in all investing activities for the nine months ended October 31, 2020 was $320,332 as compared to $163,186 for the nine months ended October 31, 2019, respectively, to acquire new machinery and equipment and leasehold improvements. Our capital expenditures are attributed to a Plant Expansion Project in progress since mid-2017 to expand plant capacity and efficiency to meet growing demand.

Net cash used in all financing activities for the nine months ended October 31, 2020 was $798,520 as compared to $811,497 for the nine months ended October 31, 2019. During the nine months ended October 31, 2020, the Company received proceeds of $330,505 from the Paycheck Protection Program promissory note and proceeds of $2,742,897 from the exercise of options and warrants. The Company returned the $330,505 received from the Paycheck Protection Program in May 2020. These cash in-flows were offset by payments on its line of credit of $2,347,348, payments on its term loan of $441,663, payments of $641,844 on the related party loans and $110,562 paid for capital lease payments. During the nine months ended October 31, 2019, the Company made net borrowings on the line of credit of $285,314. These cash in-flows were offset by net payments of term loan of $1,033,336 and $63,475 paid for capital lease payments.

As reflected in the accompanying consolidated financial statements, the Company has net income and net cash provided by operations of $2,380,111 and $2,518,012, respectively, for the nine months ended October 31, 2020.

Although the expected revenue growth and control of expenses lead management to believe that it is probable that the Company's cash resources will be sufficient to meet its cash requirements through the fiscal year ending January 31, 2021 based on current and projected levels of operation, the Company may require additional funding to finance growth and achieve its strategic objectives. If such financing is required, there can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In the event funding is not available on reasonable terms, the Company might be required to change its growth strategy and/or seek funding on an alternative basis, but there is no guarantee it will be able to do so. Because of the rapidly changing environment in response to COVID-19, the current expectations of the Company may be altered as conditions change.





4





Recent Accounting Pronouncements

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 adoption of the new standard did not have a significant impact on the Company's condensed consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, "Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement". This update is to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by U.S. GAAP that is most important to users of each entity's financial statements. The amendments in this update apply to all entities that are required, under existing U.S. GAAP, to make disclosures about recurring or nonrecurring fair value measurements. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The adoption of the new standard did not have a significant impact on the Company's condensed consolidated financial statements.

In August 2019, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ASU 2018-15, "Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract". The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The Company adopted this guidance on February 1, 2020 on a prospective basis.

In December 2019, the FASB issued authoritative guidance intended to simplify the accounting for income taxes (ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes"). This guidance eliminates certain exceptions to the general approach to the income tax accounting model and adds new guidance to reduce the complexity in accounting for income taxes. This guidance is effective for annual periods after December 15, 2020, including interim periods within those annual periods. The Company is currently evaluating the potential impact of this guidance on its consolidated financial statements.

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements.





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.





5






COVID-19 Pandemic


In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to a number of other countries, including the United States. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of the time of the filing of this Annual Report on Form 10-K, several states in the United States, including New Jersey, where the Company is headquartered, have declared states of emergency, and several countries around the world, including the United States, have taken steps to restrict travel. While all of the Company's operations are located in the United States, it participates in a global supply chain, and the existence of a worldwide pandemic, the fear associated with COVID-19, or any pandemic, and the reactions of governments around the world in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact its ability to conduct normal business operations, which could adversely affect the Company's results of operations and liquidity. Disruptions to the Company's supply chain and business operations, or to its suppliers' or customers' supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of its suppliers' or customers' products, any of which could have adverse ripple effects on the Company's manufacturing output and delivery schedule. If the Company needs to close any of its facilities or a critical number of our employees become too ill to work, the production ability could be materially adversely affected in a rapid manner. Similarly, if the Company's customers experience adverse business consequences due to COVID-19, or any other pandemic, demand for its products could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which the Company or its suppliers and customers operate. Any of these uncertainties could have a material adverse effect on the business, financial condition or results of operations. In addition, a catastrophic event that results in the destruction or disruption of the Company's data centers or its critical business or information technology systems would severely affect the ability to conduct normal business operations and, as a result, the operating results would be adversely affected.

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).

© Edgar Online, source Glimpses