Mama's Creations, Inc. (MAMA)

Item 7. 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” AND THOSE INCLUDED ELSEWHERE IN THIS REPORT.

Overview

Mama’s Creations, Inc. (“Mama’s,” “Mama’s Creations” or the “Company”) is a leading marketer and manufacturer of fresh deli prepared foods, found in over 10,000 grocery, mass, club and convenience stores nationally. The Company’s broad product portfolio, born from MamaMancini’s rich history in Italian foods, now consists of a variety of high-quality, fresh, clean and easy to prepare foods to address the needs of both our consumers and retailers. Our vision is to become a one-stop-shop deli solutions platform, leveraging vertical integration and a diverse family of brands to offer a wide array of prepared foods to meet the changing demands of the modern consumer.

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Results of Operations for the Years Ended January 31, 2025 and 2024

The following table sets forth the summary of the consolidated statements of operations for the years ended January 31, 2025 and 2024 (in thousands):

For the years ended January 31, 2025 and 2024, the Company reported net income of approximately $3.7 million and $6.6 million, respectively. The change in net income between the years ended January 31, 2025 and 2024 reflects strong revenue growth offset by manufacturing inefficiencies related to the capital improvement project at the Company's Farmingdale, New York facility and increased costs of commodities, primarily the cost of chicken, and other materials.

Net Sales: Net Sales increased by approximately 19% to $123.3 million for the year ended January 31, 2025, from $103.3 million for the year ended January 31, 2024. The increase is due to higher volume of sales of existing products due to higher production capacity, introductions at new customers, introduction of new products at existing customers and successful pricing actions to recover the increased cost of commodities.

Gross Profit: The gross profit margin was 25% and 29% for the years ended January 31, 2025 and 2024, respectively. The decrease in gross profit margin is due to inefficiencies related to the capital improvement project at the Company's Farmingdale, New York facility and increased costs of commodities, primarily chicken, and other materials.

Operating Expenses: Operating expenses increased by 20% during the year ended January 31, 2025, as compared to the year ended January 31, 2024. Operating expenses as a percentage of sales remained relatively consistent at 21% in both fiscal year 2025 and 2024. The approximate $4.2 million increase in total operating expenses is primarily attributable to the following:

•Advertising expenses increased by approximately $1.1 million due to new digital strategies and an enhanced focus on marketing to help drive increased velocities of our existing products;

•One-time legal settlement expense of approximately $900 thousand, due to the Settlement Agreement with directors;

•Commission and royalty expenses rose by approximately $568 thousand due to increased sales;

•Professional fees increased by approximately $474 thousand due to increased corporate activity due to the growth of the Company and fees associated with Sarbanes-Oxley 404(b) implementation;

•Amortization of intangible assets increased by approximately $463 thousand due to the CIF Acquisition in the prior fiscal year;

•Office and computer-related expenses increased by approximately $300 thousand due to growth of the company, increased office space, and investment in new software to drive efficiencies;

•Travel-related expenses increased by approximately $170 thousand, due to a larger sales team and increased travel to national retailers;

•Freight-related expenses increased by approximately $71 thousand due to increased sales offset by load-sharing between the Company's two manufacturing facilities; and

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•Insurance expenses decreased by approximately $204 thousand due to consolidation of policies.

Other Income (Expenses): Other expenses decreased by approximately $373 thousand to approximately $171 thousand for the year ended January 31, 2025, as compared to approximately $544 thousand for the year ended January 31, 2024. The decrease is mainly due to a decrease in net interest expense of approximately $290 thousand, which was a result of lower debt balances outstanding as well as higher interest earned on Company cash balances.

Liquidity and Capital Resources

We finance our operations with internally generated funds, supplemented by credit arrangements with third parties, and, potentially, capital market financing.

Working Capital:

The following table summarizes total current assets, liabilities and working capital at January 31, 2025 compared to January 31, 2024 (in thousands):

As of January 31, 2025, we had working capital of approximately $4.9 million as compared to working capital of approximately $6.9 million as of January 31, 2024, a decrease of approximately $2.0 million. The decrease in working capital is primarily attributable to a decrease in cash of approximately $3.9 million, which was used to purchase approximately $5.1 million of property plant and equipment, an increase in operating lease liabilities of approximately $414 thousand, and an increase in Promissory notes – related parties of approximately $300 thousand, offset by an increase in inventory of approximately $1.5 million due to increased sales, and a decrease in accounts payable and accrued expenses of approximately $373 thousand due to lower accrued taxes.

Long-term Requirements:

As of January 31, 2025, we have $0 outstanding under our Line of Credit Agreement, with a maximum capacity of $5.5 million, and approximately $2.9 million outstanding under our Term Loan Agreement with M&T Bank (the "Term Loan Agreement"). The Term Loan Agreement has a maturity date of January 17, 2027. In addition, we have payments of $750 thousand (plus accrued interest) due on December 29, 2025 pursuant to promissory notes issued to the sellers of T&L Creative Salads ("T&L") and Olive Branch LLC ("Olive Branch"), as discussed in Item 8, Note 6. In addition, we have a promissory note with a balance of $1.5 million with the sellers of CIF as discussed in Item 8, Note 6. This note is payable in common stock on June 28, 2025. We also have operating leases for offices and other facilities used for our operations, and finance leases comprised primarily of machinery and equipment, as discussed in Item 8, Note 11.

Cash Flows:

The following table summarizes the key components of our cash flows for the years ended January 31, 2025 and January 31, 2024 (in thousands).

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Net cash provided by operating activities for the year ended January 31, 2025 was approximately $5.2 million compared to net cash provided by operating activities for the year ended January 31, 2024 of approximately $11.6 million. Net income for the years ended January 31, 2025 and 2024 was approximately $3.7 million and $6.6 million, respectively. During the year ended January 31, 2025, net income was affected by non-cash adjustments of approximately $2.9 million and by changes in operating activities which used cash of approximately $1.4 million. During the year ended January 31, 2024, net income was affected by non-cash adjustments of approximately $2.8 million and changes in operating activities which provided cash of approximately $2.2 million.

Net cash used in investing activities for the years ended January 31, 2025 was approximately $5.1 million as compared to approximately $1.4 million for the year ended January 31, 2024. For the year ended January 31, 2025, the Company used cash of approximately $5.1 million to purchase new machinery and equipment. For the year ended January 31, 2024, the cash used in investing activities consisted of approximately $786 thousand to purchase new machinery and equipment and $646 thousand for the acquisition of the remaining interest in CIF.

Net cash used in financing activities for the year ended January 31, 2025 was approximately $4.0 million as compared to $3.5 million for the year ended January 31, 2024. During the year ended January 31, 2025, the Company had payments on the term loan, related party loans, and finance lease liabilities of approximately $1.7 million, $2.0 million, and $397 thousand, respectively. During the year ended January 31, 2024, the Company had payments on the term loan, line of credit, related party loans, and finance lease liabilities of approximately $1.7 million, $890 thousand, $750 thousand, and $272 thousand, respectively.

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 at least the next twelve months, based on current and projected levels of operations, 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 on 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.

Recent Accounting Pronouncements

See Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements.

Critical Accounting Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States (“US GAAP”) requires us to make estimates and judgments that affect the amounts reported in the consolidated financial statements and related notes. Critical accounting estimates are those estimates that, in accordance with GAAP, involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our consolidated financial statements. Management has determined that our most critical accounting estimates are those relating to the fair value of stock-based compensation, impairment of goodwill and intangible assets, and estimates for unrealized returns, discounts, and other allowances that are netted against revenue. Although we believe that the estimates we use are reasonable, actual results reported in future periods could differ materially from those estimates. The following is a summary of certain accounting estimates we consider critical. For further discussion about our accounting policies, see Note 2 “Summary of Significant Accounting Policies” to our consolidated financial statements appearing elsewhere in this Annual Report.

Goodwill

Goodwill is the excess of the consideration paid for a business over the fair value of the identifiable net assets acquired. Goodwill and other indefinite lived intangible assets are not amortized. Instead, these assets are reviewed at least annually for impairment. The Company has the option to perform a qualitative assessment to determine whether it is necessary to perform the quantitative goodwill impairment test. However, the Company may elect to perform the quantitative goodwill impairment test even if no indications of a potential impairment exist.

When performing its quantitative annual goodwill impairment test, the Company is comparing the fair value with its carrying amount. The Company would recognize an impairment charge for the amount by which the carrying amount exceeds the fair value; however, the loss recognized would not exceed the total amount of goodwill. Additionally, the Company considers income tax effects from any tax-deductible goodwill on the carrying amount when measuring the

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goodwill impairment loss, if applicable. The fair value is estimated using discounted cash flow methodologies, as well as considering third party market value indicators. The Company’s use of a discounted cash flow methodology includes estimates of future revenue based upon budgets and projections. The Company also develops estimates for future levels of gross and operating profits and projected capital expenditures. The Company’s methodology also includes the use of estimated discount rates based upon industry and competitor analysis as well as other factors. Calculating the fair value requires significant estimates and assumptions by management. Should the estimates and assumptions regarding the fair value of the reporting units prove to be incorrect, the Company may be required to record impairments to its goodwill in future periods and such impairments could be material.

As of January 31, 2025, there were no impairment losses recognized for goodwill.

Other Intangibles

Amortizable intangible assets, including tradenames and trademarks, are amortized on a straight-line basis over 3 years. Customer relationships are amortized on a straight-line basis over 4 to 5 years.

Revenue Recognition

The Company recognizes revenue in accordance with FASB Topic 606, Revenue from Contracts with Customers (Topic 606).

The Company’s sales are primarily generated from the sale of finished products to customers. Revenue is recognized when the performance obligation is satisfied, and the promised goods have been transferred. Control transfers when the product is shipped or delivered based upon applicable shipping terms. For each contract, the Company considers the transfer of product to be the performance obligation. Although some payment terms may be extended, generally the Company’s payment terms are approximately 15- 30 days. Accordingly, there is no significant financing components to consider when determining the transaction price. The Company elected to treat shipping and handling activities as fulfillment activities, and the related costs are recorded as selling expenses in selling, general and administrative expenses on the Consolidated Statements of Operations.

The Company promotes its products with trade incentives and promotions. These programs include discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives. The trade incentives and promotions are recorded as a reduction to the transaction price based on amounts estimated as being due to customers at the end of the period. The Company derives these estimates based on historical experience. The Company does not receive a distinct service in relation to the trade incentives and promotions. The Company’s contracts are all short term in nature; therefore, there are no unsatisfied performance obligations requiring disclosure as of January 31, 2025.

Stock-Based Compensation

The Company uses the Black-Scholes option-pricing model or Monte Carlo simulation to determine the fair value of equity-based grants, excluding restricted stock. In estimating fair value, management is required to make certain assumptions and estimates such as the expected life of units, volatility of the Company’s future share price, risk-free rates, future dividend yields and estimated forfeitures at the initial grant date. Changes in assumptions used to estimate fair value could result in materially different results.

Item 7. 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” AND THOSE INCLUDED ELSEWHERE IN THIS REPORT.

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Overview

Mama’s Creations, Inc. (“Mama’s,” “Mama’s Creations” or the “Company”) is a leading marketer and manufacturer of fresh deli prepared foods, found in over 8,000 grocery, mass, club and convenience stores nationally. The Company’s broad product portfolio, born from MamaMancini’s rich history in Italian foods, now consists of a variety of high-quality, fresh, clean and easy to prepare foods to address the needs of both our consumers and retailers. Our vision is to become a one-stop-shop deli solutions platform, leveraging vertical integration and a diverse family of brands to offer a wide array of prepared foods to meet the changing demands of the modern consumer.

Recent Developments

On June 28, 2023, the Company completed the acquisition of the remaining 76% of Chef Inspirational Foods, LLC (“CIF”), a leading developer, innovator, marketer and sales company selling prepared foods for approximately $3.7 million, including approximately $1.0 million in cash at closing and $2.7 million in a promissory note (the "CIF Acquisition"). The promissory note requires a principal payment of $1.2 million in cash on the first anniversary of the closing date, and a payment of $1.5 million in common stock of the Company on the second anniversary of the closing date. The CIF Acquisition was accounted for as an asset acquisition as substantially all of the fair value was concentrated in customer relationships. The Company had previously acquired a 24% minority interest in CIF in June 2022.

Results of Operations for the Years Ended January 31, 2024 and 2023

The following table sets forth the summary of the consolidated statements of operations for the years ended January 31, 2024 and 2023 (in thousands):

For the years ended January 31, 2024 and 2023, the Company reported net income of approximately $6.6 million and $2.3 million, respectively. The change in net income between the years ended January 31, 2024 and 2023 reflects strong revenue growth, normalization of costs for commodities and other materials, freight optimization, improvements in manufacturing efficiencies, as well as the CIF Acquisition, which allowed the Company to sell its products to the end retailer, wholesaler, and/or distributor.

Sales - Net of Slotting Fees and Discounts: Sales, net of slotting fees and discounts increased by approximately 11% to $103.3 million for the year ended January 31, 2024, from $93.2 million for the year ended January 31, 2023. The increase is due to higher volume of sales and introduction of new products at existing customers, successful pricing actions, and the acquisition of Chef Inspirational Foods, LLC, which allowed the Company to sell its products to the end retailer, wholesaler, and/or distributor.

Gross Profit: The gross profit margin was 29% and 21% for the years ended January 31, 2024 and 2023, respectively. The increase in gross profit margin is due to normalization of commodity costs, successful pricing actions, higher utilization and investments in the Company's manufacturing facilities, as well as the CIF Acquisition.

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Operating Expenses: Operating expenses increased by 29% during the year ended January 31, 2024, as compared to the year ended January 31, 2023. Operating expenses increased as a percentage of sales to 21% in 2024 compared to 18% in 2023. The approximate $4.8 million increase in total operating expenses is primarily attributable to the following:

•Payroll and Related Expenses inclusive of stock-based compensation rose by approximately $3.3 million related to executive and SG&A hires;

•Amortization of intangible assets increased by approximately $598 thousand due to the CIF Acquisition;

•Insurance expenses rose by approximately $581 thousand due to the growth of the Company and increases in coverage levels;

•Advertising expenses increased by approximately $550 thousand due to new strategies and an enhanced focus on marketing to help drive increased velocities of our existing products

•Commission Expenses rose by approximately $251 thousand due to increased sales;

•Freight-related expenses decreased by approximately $885 thousand due to the addition of dedicated logistics employees and capabilities, increased sales to major retailers, wholesalers and distributors, as well as load-sharing between the Company's two manufacturing facilities;

•Allowance for credit losses decreased by approximately $373 thousand due to our establishment of a reserve in the prior year.

Other Income (Expenses): Other expenses decreased by approximately $109 thousand to approximately $544 thousand for the year ended January 31, 2024, as compared to approximately $653 thousand for the year ended January 31, 2023. The decrease is mainly due to a decrease in interest expense of approximately $85 thousand, which was a result of lower debt balances outstanding as well as higher interest earned on Company cash balances.

Liquidity and Capital Resources

We finance our operations with internally generated funds, supplemented by credit arrangements with third parties and, potentially, capital market financing.

Working Capital:

The following table summarizes total current assets, liabilities and working capital at January 31, 2024 compared to January 31, 2023 (in thousands):

As of January 31, 2024, we had working capital of approximately $6.9 million as compared to working capital of approximately $3.8 million as of January 31, 2023, an increase of approximately $3.1 million. The increase in working capital is primarily attributable to an increase in cash of approximately $6.6 million, an increase in accounts receivable of approximately $1.0 million due to increased sales, and an increase in prepaid expenses and other current assets of approximately $547 thousand, due to deposits placed for machinery and equipment, partially offset by better cash management, which resulted in an increase in accounts payable and accrued expenses of approximately $3.4 million, and an increase in Promissory notes - related parties of $1.2 million due to the CIF Acquisition.

Long term Requirements:

As of January 31, 2024, we have $0 outstanding under our Line of Credit Agreement and approximately $4.5 million outstanding under our Term Loan Agreement with M&T Bank (the "Term Loan Agreement"). The Term Loan Agreement

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has a maturity date of January 17, 2027. In addition we have payments of $750 thousand (plus accrued interest) due on December 29, 2024, and December 29, 2025 pursuant to promissory notes issued to the sellers of T&L Creative Salads ("T&L") and Olive Branch LLC ("Olive Branch"), as discussed in Item 8, Note 5. In addition we have a promissory note of $2.7 million with the sellers of CIF as discussed in Item 8, Note 5. Of the $2.7 million, a payment of $1.2 million is due on June 28, 2024, and $1.5 million is payable in common stock on June 28, 2025. We also have operating leases for offices and other facilities used for our operations, and finance leases comprised primarily of machinery and equipment, as discussed in Item 8, Note 10.

Cash Flows:

The following table summarizes the key components of our cash flows for the years ended January 31, 2024 and January 31, 2023 (in thousands).

Net cash provided by operating activities for the year ended January 31, 2024 was approximately $11.6 million compared to net cash provided by operating activities for the year ended January 31, 2023 of approximately $5.5 million. Net income for the years ended January 31, 2024 and 2023 was approximately $6.6 million and $2.3 million, respectively. During the year ended January 31, 2024, net income was affected by non-cash adjustments of approximately $2.8 million and by changes in operating activities which provided cash of approximately $2.2 million. During the year ended January 31, 2023, net income was affected by non-cash adjustments of approximately $1.7 million and changes in operating activities which used cash of approximately $1.5 million.

Net cash used in investing activities for the years ended January 31, 2024 was approximately $1.4 million as compared to approximately $1.1 million for the year ended January 31, 2023, respectively. For the year ended January 31, 2024, the Company used cash of approximately $786 thousand to purchase new machinery and equipment. In addition, the Company paid net cash of approximately $646 thousand for the CIF Acquisition. For the year ended January 31, 2023, the cash used in investing activities of approximately $593 thousand was to purchase new machinery and equipment and $500 thousand for the acquisition of the minority interest in CIF in 2022.

Net cash used in financing activities for the year ended January 31, 2024 was $3.5 million as compared to $0.9 million for the year January 31, 2023. During the year ended January 31, 2024, the Company had payments of the term loan, line of credit, related party loan, and finance lease liabilities of approximately $1.7 million, $890 thousand, $750 thousand, and $272 thousand, respectively. During the year ended January 31, 2023, the Company had net borrowings from the line of credit of approximately $125 thousand and received proceeds of approximately $1.4 million from the sale of Series B Preferred Stock. This was offset by payments of the term loan, related party loan, and finance lease liabilities of approximately $1.3 million, $750 thousand, and $235 thousand, respectively.

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 April 26, 2025, based on current and projected levels of operations, 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.

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Recent Accounting Pronouncements

See Note 2 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for information regarding recently issued accounting pronouncements.

Critical Accounting Policies

Our consolidated financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“US GAAP”). US 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 US GAAP and are consistently 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 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 the Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following: allowance for doubtful accounts, valuation of the CIF Acquisition (which was accounted for as an asset acquisition as substantially all of the fair value is concentrated in customer relationships), the fair value of stock-based compensation, inventory reserves, impairment of goodwill and intangible assets, and estimates for unrealized returns, discounts, and other allowances that are netted against revenue.

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.

Goodwill

Goodwill is the excess of the consideration paid for a business over the fair value of the identifiable net assets acquired. Goodwill and other indefinite lived intangible assets are not amortized. Instead, these assets are reviewed at least annually for impairment. The Company has the option to perform a qualitative assessment to determine whether it is necessary to perform the quantitative goodwill impairment test. However, the Company may elect to perform the quantitative goodwill impairment test even if no indications of a potential impairment exist.

When performing its quantitative annual goodwill impairment test the Company is comparing the fair value with its carrying amounts. The Company would recognize an impairment charge for the amount by which the carrying amount exceeds the fair value; however, the loss recognized would not exceed the total amount of goodwill. Additionally, the Company considers income tax effects from any tax-deductible goodwill on the carrying amount when measuring the goodwill impairment loss, if applicable. The fair value is estimated using discounted cash flow methodologies, as well as considering third party market value indicators. The Company’s use of a discounted cash flow methodology includes estimates of future revenue based upon budgets and projections. The Company also develops estimates for future levels of gross and operating profits and projected capital expenditures. The Company’s methodology also includes the use of

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estimated discount rates based upon industry and competitor analysis as well as other factors. Calculating the fair value requires significant estimates and assumptions by management. Should the estimates and assumptions regarding the fair value of the reporting units prove to be incorrect, the Company may be required to record impairments to its goodwill in future periods and such impairments could be material.

As of January 31, 2024, there were no impairment losses recognized for goodwill.

Other Intangibles

Amortizable intangible assets, including tradenames and trademarks, are amortized on a straight-line basis over 3 years. Customer relationships are amortized on a straight-line basis over 4 to 5 years.

Revenue Recognition

The Company recognizes revenue in accordance with FASB Topic 606, Revenue from Contracts with Customers (Topic 606).

The Company’s sales are primarily generated from the sale of finished products to customers. Revenue is recognized when the performance obligation is satisfied, and the promised goods have been transferred. Control transfers when the product is shipped or delivered based upon applicable shipping terms. For each contract, the Company considers the transfer of product to be the performance obligation. Although some payment terms may be extended, generally the Company’s payment terms are approximately 15- 30 days. Accordingly, there is no significant financing components to consider when determining the transaction price. The Company elected to treat shipping and handling activities as fulfillment activities, and the related costs are recorded as selling expenses in selling, general and administrative expenses on the Consolidated Statements of Operations.

The Company promotes its products with trade incentives and promotions. These programs include discounts, slotting fees, coupons, rebates, in-store display incentives and volume-based incentives. The trade incentives and promotions are recorded as a reduction to the transaction price based on amounts estimated as being due to customers at the end of the period. The Company derives these estimates based on historical experience. The Company does not receive a distinct service in relation to the trade incentives and promotions. The Company’s contracts are all short term in nature, therefore there are no unsatisfied performance obligations requiring disclosure as of January 31, 2024.

Stock-Based Compensation

The Company uses the Black-Scholes option-pricing model or Monte Carlo simulation to determine the fair value of equity-based grants, excluding restricted stock. In estimating fair value, management is required to make certain assumptions and estimates such as the expected life of units, volatility of the Company’s future share price, risk-free rates, future dividend yields and estimated forfeitures at the initial grant date. Changes in assumptions used to estimate fair value could result in materially different results.

Item
7. 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” AND THOSE INCLUDED
ELSEWHERE IN THIS REPORT.

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Results
of Operations for the Years Ended January 31, 2023 and 2022

The
following table sets forth the summary of the consolidated statements of operations for the years ended January 31, 2023 and 2022:

For
the years ended January 31, 2023 and 2022, the Company reported net income (loss) of $2,302,674 and $(251,926), respectively. The change
in net income (loss) between the years ended January 31, 2023 and 2022 reflects strong sales and same-customer product additions, normalization
of costs for commodities, other materials, freight as well as improvements in manufacturing efficiencies.

Sales:
Sales, net of slotting fees and discounts increased by approximately 98% to $93,187,621 during the year ended January 31, 2023, from
$47,083,740 during the year ended January 31, 2022. Sales for the year ended January 31, 2023 include a full year of operations of T&L
Creative Salads and Olive Branch. For the year ended January 31, 2022 T&L Creative Salads and Olive Branch included the period beginning
December 29, 2021 to January 31, 2022.

Gross
Profit: The gross profit margin was 21% and 25% for the years ended January 31, 2023 and 2022, respectively. The Company continues
to identify procurement efficiencies and cost savings through stronger buying power created through the acquisitions of T&L Creative
Salads and Olive Branch.

Operating
Expenses: Operating expenses increased by 41% during the year ended January 31, 2023, as compared to the year ended January 31, 2022.
Operating expenses decreased as a percentage of sales to 18% in 2023 compared to 25% in 2022. The $4,825,502 increase in total operating
expenses is primarily attributable to the following:

Other
Income (Expenses): Other expenses increased by $615,141 to $653,362 for the year ended January 31, 2023 as compared to $38,221 for
the year ended January 31, 2022. For the year ended January 31, 2023, other income (expenses) consisted of $633,889 in interest expense
on the Company’s financing arrangements and $22,121 in amortization of debt discount. For the year ended January 31, 2022, other
expenses consisted of $73,487 in interest expense incurred on the Company’s financing arrangements offset by other income of $37,704.

13

Liquidity
and Capital Resources

The
following table summarizes total current assets, liabilities and working capital at January 31, 2023 compared to January 31, 2022:

As
of January 31, 2023, we had working capital of $3,795,610 as compared to working capital of $2,653,189 as of January 31, 2022, an increase
of $1,142,421. The increase in working capital is primarily attributable to an increase in cash of $3,527,785, an increase of inventories
of $745,088 based on robust sales increases, and an increase in prepaid expenses and other current assets of $174,460 partially offset
by better cash management which resulted in a decrease in accounts receivable of $562,671 and an increase in accounts payable and accrued
liabilities of $2,192,359.

Net
cash provided by operating activities for the year ended January 31, 2023 was $5,509,162 compared to net cash provided by operating activities
for the year ended January 31, 2022 of $909,841. The net income (loss) for the years ended January 31, 2023 and 2022 was $2,302,674 and
$(251,926), respectively. During the year ended January 31, 2023, net income was affected by non-cash adjustments of $1,715,397 and
by changes in operating activities which provided cash of $1,490,965. During the year ended January 31, 2022, net income was affected
by adjustments to net income of $1,345,727 offset by changes in operating activities which used cash of $183,960.

Net
cash used in investing activities for the years ended January 31, 2023 was $1,093,214 as compared to $11,270,957 for the year ended January
31, 2022, respectively. For the year ended January 31, 2023, the Company used cash of $593,214 to purchase new machinery and equipment.
In addition, the Company paid cash of $500,000 for the acquisition of a 24% minority interest in Chef Inspirational Foods, LLC. For the
year ended January 31, 2022, the cash used in investing activities of $862,415 was to purchase new machinery and equipment and $10,408,542
for the acquisition of T&L and Olive Branch.

Net
cash used in financing activities for the year ended January 31, 2023 was $888,037 as compared to $8,021,154 provided by financing activities
for the year January 31, 2022. During the year ended January 31, 2023, the Company received net proceeds of $125,000 from borrowings
pursuant to the line of credit which were offset by payments of the term loan, related party loan, and finance lease payments of $1,293,095,
$750,000, and $235,208, respectively. In addition, during the year ended January 31, 2023, the Company received proceeds of $26,250 for
the exercise of options and $1,365,000 from the sale of Series B Convertible Preferred Stock. During the year ended January 31, 2023,
the Company paid offering costs of $64,600 and dividends on the Series B Preferred stock of $34,070. During the year ended January 31,
2022, the Company received proceeds of $19,080 from the exercise of options, $7,500,000 from borrowings from a term loan, and $765,00
from borrowings from a line of credit. These cash in-flows were offset by payments of $199,176 paid for finance lease payments and $63,750
paid in financing fees.

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 April 26, 2024, based on current and projected levels of operations, 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.

Recent
Accounting Pronouncements

In
May 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards update ASU 2021-04, “Earnings
Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic
718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain
Modifications or Exchanges of Freestanding Equity-Classified Written Call Options”, to clarify and reduce diversity in an issuer’s
accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain
equity classified after modification or exchange. The amendments in this ASU are effective for public and nonpublic entities for fiscal
years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2021. Early adoption is permitted,
including adoption in an interim period. The Company adopted the new standard on February 1, 2022 and the adoption of the new standard
did not have a significant impact on the Company’s consolidated financial statements.

14

In
August 2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity
(“ASU 2020-06”), which simplifies an issuer’s accounting for convertible instruments by reducing the number of
accounting models that require separate accounting for embedded conversion features. ASU 2020-06 also simplifies the settlement assessment
that entities are required to perform to determine whether a contract qualifies for equity classification and makes targeted improvements
to the disclosures for convertible instruments and earnings-per-share (EPS) guidance. This update will be effective for the Company’s
fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier
than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Entities can elect to adopt the new
guidance through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently
evaluating the impact of the pending adoption of the new standard on its financial statements and intends to adopt the standard as of
February 1, 2024.

In
January 2017, the FASB issued ASU 2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment
(“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare
the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting
Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”). As a result, an entity should
perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An
impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However,
the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 is effective
for annual reporting periods beginning after December 15, 2022, including any interim impairment tests within those annual periods, with
early application permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. In February
2022, we elected to early adopt ASU 2017-04, and the adoption had no impact on our consolidated financial statements. We will perform
future goodwill impairment tests according to ASU 2017-04.

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
consolidated financial statements and related public financial information are based on the application of accounting principles generally
accepted in the United States (“US GAAP”). US 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 US GAAP and are consistently 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 3 of our 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.

15

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 consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that
affect the amounts reported in the consolidated financial statements and accompanying notes. Such estimates and assumptions impact, among
others, the following: allowance for doubtful accounts, 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.

Goodwill

Goodwill
is not amortized in accordance with US GAAP. Instead, goodwill is reviewed annually for impairment.

Our
annual assessment date is January 31. An interim impairment test would be required whenever events or circumstances make it more likely
than not that an impairment may have occurred. The goodwill impairment test compares the fair value of a reporting unit with its carrying
amount. We would recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value;
however, the loss recognized would not exceed the total amount of goodwill. Additionally, we consider income tax effects from any tax-deductible
goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable.

We
have the option to perform a qualitative assessment to determine whether it is necessary to perform the quantitative goodwill impairment
test. However, we may elect to perform the quantitative goodwill impairment test even if no indications of a potential impairment exist.

Our
goodwill was $8,633,334 at January 31, 2023.

For
our annual goodwill impairment tests as of January 31, 2023, we performed a qualitative assessment which indicated that it was more likely
than not that the fair values of our reporting units exceeded their respective carrying values and, therefore, did not result in an impairment.
In addition, we do not believe we are currently at risk of goodwill impairment. Our qualitative assessments considered several factors
including (i) the business enterprise value and the excess of the fair value over carrying value, (ii) macroeconomic conditions, (iii)
industry and market considerations including industry revenue, EBITDA margins, and multiples based on business enterprise value to revenues
and to EBITDA, and (iv) the recent financial performance and budget, as well as other factors.

Management
evaluates the remaining useful life of an intangible asset that is not being amortized each reporting period to determine whether events
and circumstances continue to support an indefinite useful life. If an intangible asset that is not being amortized is subsequently determined
to have a finite useful life, it is amortized prospectively over its estimated remaining useful life.

Other
Intangibles

Amortizable
intangible assets, including tradenames and trademarks, are amortized on a straight-line basis over 3 years. Customer relationships are
amortized on a straight-line basis over 4 to 5 years.

Revenue
Recognition

The
Company recognizes revenue in accordance with FASB Topic 606, Revenue from Contracts with Customers (Topic 606).

16

The
Company’s sales are generated from the sale of finished products to customers, contain a single performance obligation and revenue
is recognized at a single point in time when ownership, risks and rewards transfer. Typically, this occurs when the goods are received
by the customer. Revenues are recognized in an amount that reflects the net consideration the Company expects to receive in exchange
for the goods. The transaction price is adjusted for estimates of known or expected variable consideration, which includes consumer incentives,
trade promotions, and allowances, such as coupons, discounts, rebates, volume-based incentives, cooperative advertising, and other programs.
The Company reports all amounts billed to a customer in a sale transaction as revenue. Under the revenue guidance, the Company elected
to treat shipping and handling activities as fulfilment activities, and the related costs are recorded as selling expenses in general
and administrative expenses on the consolidated statement of operations.

Stock-Based
Compensation

The
Company uses the Black-Scholes option-pricing model to determine the fair value of equity-based grants, excluding restricted stock. In
estimating fair value, management is required to make certain assumptions and estimates such as the expected life of units, volatility
of the Company’s future share price, risk-free rates, future dividend yields and estimated forfeitures at the initial grant date.
Changes in assumptions used to estimate fair value could result in materially different results.

Item
7. 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” AND
THOSE INCLUDED ELSEWHERE IN THIS REPORT.

Results
of Operations for the Year ended January 31, 2022 and 2021

The
following table sets forth the summary statements of operations for the year ended January 31, 2022 and 2021:

For
the year ended January 31, 2022 and 2021, the Company reported net (loss) income of $(251,926) and $4,067,206, respectively.
The change in net income between the year ended January 31, 2022 and 2021 was mainly the result of a decrease in gross profit percentage
(as discussed below), one-time expenses equal to $661,293 associated with acquisition closing costs and the income tax provision
of $296,472 recorded during the year ended January 31, 2022 compared to a benefit of $744,973 during the year ended
January 31, 2021.

Sales:
Sales, net of slotting fees and discounts increased by approximately 16% to $47,083,740 during the year ended January 31, 2022, from
$40,758,605 during the year ended January 31, 2021. During the year ended January 31, 2022, the Company established a greater balance
of major customer volumes attributed to growth in sales across a strong portfolio of both national and large regional grocery chains
and club stores. Of this increase, $3,370,825 is attributable to the acquisitions in December 2021.

Gross
Profit: The gross profit margin was 25% for the year ended January 31, 2022 compared to 31% for the year ended January 31,
2021. The change in gross profit margin is due to increases in raw material costs, packaging costs and in-bound freight costs which outpaced
sales price increases during the year ended January 31, 2022. Management believes price increases will catch up to the rise in
materials and services by the end of the second quarter of fiscal year end January 31, 2023.

Operating
Expenses: Operating expenses increased by 27% during the year ended January 31, 2022, as compared to the year ended January
31, 2021. Operating expenses increased as a percentage of sales to 25% in 2022 compared to 22% in 2021. The $2,509,645 increase
in total operating expenses is primarily attributable to the following:

11

Other
Income (Expenses): Other income (expenses) decreased by $117,394 to $38,221 for the year ended January 31, 2022 as compared to expenses
of $155,615 during the year ended January 31, 2021. For the year ended January 31, 2022, other income (expenses) consisted of $73,487
in interest expense incurred on the Company’s financing arrangements and amortization of debt discount of $2,438 which was offset
by the net insurance proceeds relating to the property damage claim of $37,704. For year ended January 31, 2021, other expenses consisted
of $137,751 in interest expense incurred on the Company’s financing arrangements and the Company recorded $17,864 of amortization
expense related to the debt discount.

Liquidity
and Capital Resources

The
following table summarizes total current assets, liabilities and working capital at January 31, 2022 compared to January 31, 2021:

As
of January 31, 2022, we had working capital of $2,653,189 as compared to a working capital of $4,834,102 as of January 31, 2021,
a decrease of $2,180,913. The decrease in working capital is primarily attributable to a decrease in cash of $2,339,962 used for
acquisitions, an increase in accounts payable and accrued expenses of $2,772,029, increase in current portion of lease obligations
of $172,500, an increase in the related party promissory note of $759,917 and an increase in the term loan of $1,253,333. These
amounts were offset by an increase in inventory of $1,695,582 and an increase in accounts receivable of $3,653,924.

Net
cash provided by operating activities for the year ended January 31, 2022 was $909,841 compared to net cash provided
by operating activities for the year ended January 31, 2021 of $3,698,540. The net income (loss) for the year ended January
31, 2022 and 2021 was ($251,926) and $4,067,206, respectively.

Net
cash used in investing activities for the year ended January 31, 2022 was $11,270,957 as compared
to $(451,940) for the year ended January 31, 2021, respectively. For the year ended January 31,
2022, the cash used in investing activities was to acquire two new companies and purchase of additional fixed assets. For the year ended
January 31, 2021, the cash used in investing activities was to purchase additional fixed assets and intangible assets.

12

Net
cash used in all financing activities for the year ended January 31, 2022 was $8,021,154 as compared to $449,723 used by
financing activities for the year ended January 31, 2021. During the year ended January 31, 2022, the Company received proceeds of new
loan borrowings of $7,500,000 from a term loan and $765,000 from the Company’s line of credit. These cash in-flows
(among others of a lesser amount) were offset by payments of $199,176 paid for finance lease payments. During the year
ended January 31, 2021, the Company received proceeds of $330,505 from the Paycheck Protection Program promissory note and proceeds of
$3,787,582 from the exercise of options and warrants. These cash in-flows were offset by payments on its line of credit of $2,997,348,
payments on its term loan of $441,663, payments of $641,844 on the related party loans and $156,450 paid for capital lease payments.
The Company returned the $330,505 received from the Paycheck Protection Program in May 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 May 27, 2023 based on current and projected levels of operations,
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.

Recent
Accounting Pronouncements

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

In May 2021,
the FASB issued accounting standards update ASU 2021-04, “Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments
(Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own
Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written
Call Options”, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding
equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments
in this ASU are effective for public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods with
fiscal years beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period. The Company is
currently evaluating the effects of the adoption of ASU No. 2021-04 on its consolidated financial statements.

In August
2020, the FASB issued ASU No. 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU
2020-06”), which simplifies an issuer’s accounting for convertible instruments by reducing the number of accounting models
that require separate accounting for embedded conversion features. ASU 2020-06 also simplifies the settlement assessment that entities
are required to perform to determine whether a contract qualifies for equity classification and makes targeted improvements to the disclosures
for convertible instruments and earnings-per-share (EPS) guidance. This update will be effective for the Company’s fiscal years
beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal
years beginning after December 15, 2020, and interim periods within those fiscal years. Entities can elect to adopt the new guidance
through either a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently
evaluating the impact of the pending adoption of the new standard on its financial statements and intends to adopt the standard as of
January 1, 2024.

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 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 3 of our 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 consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management
to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Such
estimates and assumptions impact, among others, the following: allowance for doubtful accounts, inventory obsolescence and the fair value
of share-based payments.

13

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.

Intangible Assets

Software

The Company accounts for acquired internal-use
software licenses and certain costs within the scope of ASC 350-40, Intangibles - Goodwill and Other - Internal-Use Software as
intangible assets. The Company capitalized $87,639 of costs incurred in the year ended January 31, 2022 to implement cloud computing
arrangements. Acquired internal-use software licenses are amortized over the term of the arrangement on a straight-line basis to the
line item within the consolidated statements of operations that reflects the nature of the license.

Additionally, the Company evaluates its accounting
for fees paid in an agreement to determine whether it includes a license to internal-use software. If the agreement includes a software
license, the Company accounts for the software license as an intangible asset. Acquired software licenses are recognized and measured
at cost, which includes the present value of the license obligation if the license is to be paid for over time. If the agreement does
not include a software license, the Company accounts for the arrangement as a service contract (hosting arrangement) and hosting costs
are generally expensed as incurred.

Goodwill

The Company does not amortize goodwill or indefinite-lived
intangible assets. The Company tests goodwill for impairment annually as of January 31 or if an event occurs or circumstances change
that indicate that the fair value of the entity, or the reporting unit, may be below its carrying amount (a “triggering event”).
Whenever events or circumstances change, entities have the option to first make a qualitative evaluation about the likelihood of goodwill
impairment. If impairment is deemed more likely than not, management would perform the two-step goodwill impairment test. Otherwise,
the two-step impairment test is not required. In assessing the qualitative factors, the Company assessed relevant events and circumstances
that may impact the fair value and the carrying amount of the reporting unit. The identification of the relevant events and circumstances
and how these may impact a reporting unit’s fair value or carrying amount involve significant judgements and assumptions. The judgement
and assumptions include the identification of macroeconomic conditions, industry and market considerations, overall financial performance,
Company specific events and share price trends, an assessment of whether each relevant factor will impact the impairment test positively
or negatively, and the magnitude of an such impact.

If a quantitative assessment is performed, a reporting
unit’s fair value is compared to its carrying value. A reporting unit’s fair value is determined based upon consideration
of various valuation methodologies, including the income approach, which utilizes projected future cash flows discounted at rates commensurate
with the risks involved and multiples of current and future earnings. If the fair value of a reporting unit is less than its carrying
amount, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value;
however, the loss recognized cannot exceed the total amount of goodwill allocated to that reporting unit.

Management evaluates the remaining useful life
of an intangible asset that is not being amortized each reporting period to determine whether events and circumstances continue to support
an indefinite useful life. If an intangible asset that is not being amortized is subsequently determined to have a finite useful life,
it is amortized prospectively over its estimated remaining useful life.

Other Intangibles

Amortizable intangible assets, including tradenames
and trademarks, are amortized on a straight-line basis over 3 years. Customer relationships are amortized on a straight-line basis over
4 to 5 years.

Leases

In
February 2016, the FASB issued ASU 2016-02 “Leases” (Topic 842) which amended guidance for lease arrangements to increase
transparency and comparability by providing additional information to users of financial statements regarding an entity’s leasing
activities. Subsequent to the issuance of Topic 842, the FASB clarified the guidance through several ASUs; hereinafter the collection
of lease guidance is referred to as ASC 842. The revised guidance seeks to achieve this objective by requiring reporting entities to
recognize lease assets and lease liabilities on the balance sheet for substantially all lease arrangements.

As
part of the adoption the Company elected the practical expedients permitted under the transition guidance within the new standard, which
among other things, allowed the Company to:

Revenue
Recognition

The Company recognizes revenue in accordance with
ASU 2014-09, Revenue from Contracts with Customers (Topic 606).

14

The
Company’s sales predominantly are generated from the sale of finished products to customers, contain a single performance obligation
and revenue is recognized at a single point in time when ownership, risks and rewards transfer. Typically, this occurs when the goods
are shipped to the customer. Revenues are recognized in an amount that reflects the net consideration the Company expects to receive
in exchange for the goods. The Company reports all amounts billed to a customer in a sale transaction as revenue. Under the new revenue
guidance, the Company elected to treat shipping and handling activities as fulfillment activities, and the related costs are recorded
as selling expenses in general and administrative expenses on the consolidated statement of operations.

Stock-Based
Compensation

The
Company accounts for stock-based compensation in accordance with ASC Topic 718, “Compensation – Stock Compensation”
(“ASC 718”) which establishes financial accounting and reporting standards for stock-based employee compensation. It
defines a fair value-based method of accounting for an employee stock option or similar equity instrument. The Company accounts for compensation
cost for stock option plans in accordance with ASC 718.

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

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

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

Advertising

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