Good morning and welcome to MamaMancini's Third Quarter 2020 Financial Results Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I now would like to turn the conference over to your host today, Greg Falesnik. Please go ahead, sir.

Thank you, operator. Before we get started, I'll read a disclaimer about forward-looking statements. This conference call may contain, in addition to historical information, forward-looking statements within the meaning of the federal securities laws regarding MamaMancini's. Forward-looking statements include, but are not limited to, statements that express the company's intentions, beliefs, expectations, strategies, predictions or any other statements relating to its future earnings, activities, events or conditions. These statements are based on current expectations, estimates and projections about the company's business based in part on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may vary and are likely to differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors discussed from time to time in this report and in other documents which the company files with the U.S. Securities and Exchange Commission. In addition, such statements could be affected by risks and uncertainties related to factors beyond the company's control. Matters that may cause actual results to differ materially from those in the forward-looking statements include among other factors, the loss of key management personnel, availability of capital and any major litigation regarding the company. In addition, this conference call contains time sensitive information that reflects management's best analysis only as of the date and time of this conference call. The company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arrive after the date of this conference call. Further information concerning issues that could materially affect financial performance related to forward-looking statements contained in this presentation may be found in the company's periodic filings with the SEC. At this time, I'd like to turn the call over to Carl Wolf, the company's Chairman and Chief Executive Officer. Carl, the floor is yours.

Thank you, Greg, and thank you everyone for joining us today. I'd like to welcome you to our third quarter 2020 financial results conference call. The third quarter of fiscal 2020 was a record quarter highlighted by continued revenue growth as we aggressively market our products nationwide, as well as the expansion of our product line to include a plant-based option in partnership with Beyond Meat. To that end, we're very pleased with our progress with sales increasing 12% to a record $9.3 million in the third quarter which drove record net income to $0.4 million. Our revenue growth was driven by new placements, effective merchandising events, and continued success of our multichannel marketing efforts. We have also given guidance that we expect fourth-quarter results to show continued sales growth with revenues of approximately $10 million for the quarter. This is an increase of 45% from the prior year. Our successful multi-brand marketing efforts include radio campaigns, social media efforts, and continued work with QVC. I'd like to touch on a few of these now. We continue to see success in our SiriusXM radio advertising campaign as evidenced by the launch of our fifth campaign this year over the Thanksgiving holiday. The Sirius platform distributes an estimated 1,000 MamaMancini's commercials per day. The commercials provide expedited entry into new market segments for MamaMancini's. We are placing many new products on all major talk and news channels. Let me explain that over again. The SiriusXM platform distributes an estimated 1,000 MamaMancini's commercials on all major talk and news channels reaching over 64 million consumers, an avenue which we have found a cost-effective way to drive sales across various geographic locations with current and new customers of our products. On the social media side of things, we continue to maintain a robust reach engaging new customers and encouraging repeat purchases. Today we have 300,000 likes and continue to target likely consumers who live within five miles of specific retail locations. As an example, we are presently using this medium to introduce our new Pasta Bowls in the Southeast. We believe that our recent accolades of product launches resonate well with consumers. Our QVC efforts have seen notable success as well with Mr. Mancini's live pitches driving impressive sales on their platform. We have recently increased our on-air presence notably and have seen encouraging growth as a result. As many of you are aware, QVC is the world's largest direct-to-consumer marketer and is available in over 100 million homes throughout the United States. Before turning the call over to Larry, I'd like to touch on some of our recent success with respect to existing and new account growth, product placement growth and our recent partnership with Beyond Meat. During the quarter we continued to add new authorizations at over 2,500 Tier-1 grocery retailer locations including Kroger, Albertsons, Sam's Club, Publix and more which we expect to add to quarterly revenue starting in fiscal quarter 4, 2020. In addition, we have the potential of adding an additional 2,700 locations with these retailers in the next several months provided consumer acceptance is positive. We also recently announced new authorizations to both existing and new retailers which started in the fourth quarter of 2019 including Sausage n Peppers, four of our innovative new Pasta Bowl products, lines for supermarkets, Beef Meatballs and Sauce, Beef Meat Loaf and several Pasta and Meatball Entrees. One of the products we are most excited about is our new partnership with Beyond Meat to introduce a new line of fully-cooked authentic Italian foods using Beyond Meat's plant-based protein. Beyond Meat is a clear leader in the rapidly growing plant-based meat market and we believe the partnership provides an expanded entree into an exciting new market segment for MamaMancini's. We expect to be announcing shortly our first placements for this line with shipments beginning this quarter. In addition we expect to receive several additional new placements going forward into fiscal 2021. The strong foundations we have established with the buildout of our manufacturing capabilities of product lines paired with our effective marketing efforts to date have positioned us for a strong Q4 holiday season in fiscal 2020, which we firmly believe will help drive significant shareholder value as we move forward. Now before going forward, I'd like to turn the call over to Larry Morgenstein our Chief Financial Officer to walk through some key financial details from the third quarter of fiscal 2020. Larry?

Thank you, Carl. Revenue for the third quarter of fiscal 2020 increased 12% to $9.3 million as compared to $8.2 million in the same quarter a year ago. The revenue increase was primarily a result of increased sales with current and new customers. Gross profits increased 8% to $2.9 million in the third quarter of fiscal 2020 as compared to $2.7 million in the same year-ago quarter. Gross profits as a percentage of revenue in the third quarter of 2020 totaled 31.3% as compared to 32.6% in the same quarter a year ago, primarily due to higher depreciation expenses and change in product mix in comparison to the prior year comparable period which negatively impacted gross profit by 1% of sales. As we continue to grow our sales, we expect gross profit margins to increase as a result of manufacturing plant efficiencies. Operating expenses totaled $2.4 million in the third quarter of fiscal 2020 compared to $2.2 million in the same year-ago quarter. Operating expenses increased primarily due to increases in advertising and freight. Notably operating expenses decreased as a percentage of sales from 26% to 25% on a year-over-year basis. Net income for the third quarter of fiscal 2020 grew 15% to a record of $409,000 or $0.01 a share as compared to net income of $356,000 or $0.01 per share in the same year-ago quarter. The increase in net income was primarily attributed to increased product volume, lower interest and amortization expenses in 2019. Cash and cash equivalents totaled $600,000 as of October 31, 2019 as compared to $600,000 as of January 31, 2018. Cash flow from operations for the fiscal year of 2020 was $1 million compared to $1.6 million in the same period a year ago. We do not anticipate raising additional capital and are confident that cash on hand is sufficient to sustain operations as we go. Finally, before wrapping up the financial sections, I want to touch base on our payables. We stood at 30 days sales outstanding on a consolidated basis as of October 31, 2019. This is a notable improvement when compared to 33.6 days payable outstanding at January 31, 2019 and 36.8 days payables outstanding at October 31, 2018. We expect the payables outstanding to continue improving through fiscal 2020 as we continue to extract better pricing and terms from vendors. This completes my comments. Let me turn over the call to Matt Brown, our President and Chief Operating Officer. Matt?

Thanks Larry. Increased sales requires increased production at the plant. We planned for this with a year's worth of investments in equipment and plant expansion. While we were successful in hitting record production numbers for the quarter, it was not without the new challenges that come with this significant growth. My management team spent a good portion of the quarter evaluating our larger production runs and began developing new control procedures that we hope will improve our planned margins as we continue this growth into the fourth quarter. Initiating raw material procurement at higher par levels and working out better lead times with our suppliers will enable us to keep to a strict production schedule that is essential moving forward. Increasing capacity will always be a focus of our team as we work within the existing footprint of the plant. We began researching in Q3 the desire for more automation technology to help offset the inevitable rise in labor costs that began in fiscal Q2 and will continue again in fiscal 2021. We believe that these investments over the next few months will better prepare us in the effort to increase production, lower costs and improve our margins. As this growth continues, we cannot neglect our dedication to quality assurance and the need to equally balance our time and investment in this area. We wrapped up our fifth annual Safe Quality Foods, or SQF, audit in Q3 and I'm proud to say yet again that we passed with flying colors. Our in-house laboratory has been paying for itself as we perform all micro testing at a fraction of the cost of outside lab systems in the past. Our R&D Department spearheaded by Executive Chef Chris Styler has been instrumental in our development of the Beyond product that Carl has talked about. We are very excited about this new opportunity for us and it was a team effort to come up with a product that truly meets the desires of the carbon-friendly marketplace, the vegan lifestyle and the continued quest for a great tasting plant-based meatball. In addition to the Beyond meatball, we have been developing a number of new items that we expect to see at several large club stores and national chains this fiscal Q4. Finally, as part of our research and investments in improving controls at the plant, we have signed on with Oracle's NetSuite accounting program ERP and WMS systems and we'll begin the process of transferring existing financials, customer data, product information, and logistics to this new platform. NetSuite has years of experience and a proven track record with food manufacturing operations and we expect this transition will better position us for inventory control, production planning, procurement facilitation and financial reporting. We expect this system to be up and running by the middle of fiscal 2021. At this point I will turn the call back over to Carl for some final notes before wrapping up the call for Q&A.

Thank you, Larry and Matt. As I noted in my opening remarks, we've really laid the groundwork for a strong closing of fiscal 2020 and incredible fiscal 2021. I look forward to continued operational execution and shareholder value creation as we continue our growth. With that, I'll turn it over to the operator.

Thank you, yes. We will now begin the question-and-answer session. And the first question comes from Howard Halpern with Taglich Brothers.

Congratulations, great quarter Carl.

Thank you, Howard.

With the forecast for at least $10 million in revenue for Q4, will gross margin sequentially improve or is there going to be a product mix that might restrain the gross margin excluding the depreciation and amortization that you take?

We think there will be an improvement in gross margin for a whole variety of factors in this quarter and more so in the first quarter of 2021 as we do additional volume and there's relatively stable plant overheads, so that additional volume should result in higher margins.

Okay, and you talked about the authorizations to the, I guess 2,500-plus locations. Is that going to increase your overall? Because I think in the past we've talked about like 45,000 locations, is that going to incrementally increase it to some degree?

Yes, but we are not reporting that because the location, there are different types of locations. And you get a new location with a club store, you're going to do substantially more volume per location than a group of associated grocers. So we have stopped reporting because in a way it's misleading. The new locations that we have are going after much higher volume per location. Yes it would increase it but we are not really reporting that anymore. To give you a better idea we are in approximately 15,000 supermarkets versus 12,000.

Okay, okay, that helps. And then, I mean in terms of the sales and marketing and establishing yourself with these new locations, what do you think you'll be able to achieve and how quickly will the results of getting into these new locations help or determine the expansion into the potential of what was an additional 2,700 locations? What is your plan to be successful and drive those new authorizations?

We believe that basically what we're saying is some of it was a test and we believe that we will know the full answer on that by the end of December and right now it looks very promising, but until we get the final answer I can't really comment on that, but anyway it looks good.

Okay, and if you have it what was existing customer growth year-over-year?

Our largest customers are growing somewhere between 10% and 30%. So we are at very, very high volume growth in our existing customers, our largest existing customers.

Okay, and now touching on the food service initiatives, where does that stand in terms of the cycle of potential authorizations and does your move into the plant-based help that effort going forward?

We believe plant-based helps the efforts substantially. We as of now have not had a substantial first order in food service. We expect modest growth shipping to Canada first orders and the other areas it will be after the first year before we see activity. There is a lot of activity going on, but we don't have orders yet.

Okay and lastly, you talked about moving to a new software infrastructure system. Is there going to be any one-time bump or a couple of quarters bump in SG&A to make that transition work effectively?

I don't see a material bump. Most of the investments are amortized over a reasonable period. So we are aware that it will modestly increase some SG&A expenses on the one hand; however, I think on the other hand we think we have certain control procedures that are done manually or in Excel where we have manpower and we think that manpower will decrease. As long as you're talking about operations, which made a question you brought up in the last quarter conference call, we've made a lot of progress on freight. A little bit showed up in the third quarter by changing consolidators. But this quarter, part of this quarter really starting in December we've seen some very, very nice improved efficiencies and logistics, so that will be reflected. Also on marketing expenses and developing new customers there is some marketing expenses in the first two months as we tried to get product out into heavier distribution. So we'll have a little bit of that, but not above what we see right now on four new customers coming in, but the older customers who came in and now in the third quarter those major expenses for the most part are over.

Well thanks, and keep up the great work. Things are moving in the right direction.

Thank you.

And the next question comes from Herve Fleming, a private investor.

Hey, good morning gentlemen and congratulations on your report today. A couple of questions if I may. What percent of your plant-based product do you expect next year and is this going to be a margin enhancer or the same? That's the first question I have.

Okay, well frankly right now plant-based in our official projections are really not shown as major volume as it's such a new area. It could be a game changer. We have shown it to a limited number of customers. So we want to refine the recipe, procure, make sure source supply was good, make sure production runs were right. We're now past that phase. We'll be announcing progress in the very near future as to where we stand on that. So as we roll out we will be very conservative in our projections, but it could be a game changer for the company. Tremendous game, but the product is being very well received in general. In terms of margins, the margin may be a drop lower as a percent of sales, but the selling price is substantially higher per pound. So the margin actually per pound will be as good or better than what we sell now.

Next question is, what is the percentage of your current volume in food service and what do you expect food service to be next year?

Food service is very modest volume right now and we are projecting a modest increase. Anywhere where we don't have what I would call official authorizations or indication of authorizations it is very hard to put into projection. So right now our projections for next year are mainly based on where we know we have interest or significant interest or verbal authorizations. We do expect very substantial increase next year. There is something I do want to mention, that our incremental contribution toward operating profit, our goal is between 20% and 25%, and thus far we are pricing our new products and our new authorizations in that range. So if we do get the increased sales and we run our business as we hope, we should have a very incremental substantial increase in operating profits.

Okay, the last question I have is, I noticed from a CapEx point of view you have significant numbers in the capital leases this past year. What do your capex expenses look for the coming year including additional or incremental capitalized leases?

The leases were just a change in accounting form, but it wasn't any real major substantial difference than leases. There is a new accounting procedure that makes us take all the value of our lease and show it as a liability and also as an asset. So that's misleading. Our CapEx for next year is still being put together. We do not think in terms of depreciation rather than talk about CapEx because our cash flow should be very strong and also we have substantial financial commitments from M&T Bank. My opinion is the CapEx will be not more than $10,000 to $15,000 a month, if that much additional amortization is required.

Very good, thank you. My last question is, your relationship with M&T as a percentage of your availability—will you be bumping up against your upper limit this time or do you see some decrease in your usage and your revolving credit?

Our M&T Bank loan is down to under $1 million right now. Our long-term loan was $2.5 million at the beginning of the year. We have substantial availability on our line and we will increase the line just as a safety valve for next year. We expect also to rollover what is a two-year commitment in our working capital will become one in the New Year on January 31 and we've asked for another one-year extension. So our relations are very good and we feel we have ample credit availability.

Your performance has certainly been very reasonable against those numbers and I'm sure you'll get what you need. Thank you very much for your responses.

Thank you, Herve.

Thank you. And the next question comes from Steven McGregor of SJ Capital.

Carl I wondered if you are ready to characterize what we're thinking about QVC at this point?

Well, we like QVC a lot. If you overexpose yourself on QVC you start cannibalizing your own business. So we are on QVC live anywhere from two to eight times a month. We are on their order ship programs and also we do a very nice business direct ship to consumers who just go online and order. QVC is a great marketing tool for us and we're very, very happy. Often we are one of the number one or number two products on their show and often sell out. So it's a great relationship, but we see QVC as an important channel. We would like to see substantial additional growth for us and we have no problem with that, but there are limits to how big you can get on QVC and that's fine with us.

And the other question I wanted to ask is, at what point will we be in the ability to make some projections about what kind of revenues and profits we're going to see next year?

We are only taking it quarter-by-quarter as we've done in the past. Right now we feel very confident next year will be very strong over this year.

Thank you very much, very well done.

Thank you.

Thank you. And the next question comes from George Melas with MKH Management.

Good morning, gentlemen. I came in a little bit late, but I just want to ask about gross margin. Maybe you discussed that already, but just to understand how product mix impacts gross margin and if there are some other factors that could drive growth in gross margin in the fourth quarter and in 2021?

Well, we think gross margin will increase in the fourth quarter as I mentioned before because as our plant follows up on more capacity, we have relatively fixed overhead. So that comes down to higher gross margin. As Matt mentioned in his discussions, we have implemented some control procedures which we think will be effective in controlling costs. As far as what happens with some very major large customers, we may negotiate lower gross margin but have no promotional expenses, no merchandising expenses, lower sales agency fees and lower freight. So the bottom line, the key number to us is what is the contribution toward our overhead. So if your mix moves to some higher volume customers, it may lower your gross margin percentage, but at the same time help you or keep your operating profit stable. We do see gross margin increasing in the fourth quarter. There also was higher depreciation this year, part of it was new equipment, part of it was accounting procedures. So that should even out and gross margin compared to last year should be better.

Okay, so just to understand how it flows through the P&L, when you say product mix you don't necessarily mean the actual product, but you mean the customer mix?

They should be customer mix rather than product mix.

Got you, okay. And then promotional expense and the marketing expenses that you can save on, that would be in G&A, is that right?

Yes, that is in G&A.

Okay, very good. Thank you very much.

Thank you. And at this time, I would like to return the call over to Carl Wolf for any closing comments.

Okay, great. Thank you, operator. As a final note, I wanted to mention that we are continuing to be active in attending top investor conferences and investor marketing on both coasts of the United States including the upcoming LD Micro Main Event Conference which we will attend and present at tomorrow on December 10. We also will be part of the lunch as I mentioned before with our plant-based meatballs. If interested in scheduling a meeting with management, please reach out to our IR firm MZ Group to arrange. Thank you again for joining us today. We look forward to continuing to update you on our progress.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.