UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): January 24, 2013

 

MASCOT PROPERTIES, INC.

(Exact name of registrant as specified in its charter)

 

Nevada   000-28629   27-067116
(State or other jurisdiction   (Commission File Number)   (IRS Employer
of incorporation)       Identification No.)

 

25 Branca Road
East Rutherford, NJ 07073

(Address of Principal Executive Offices)

 

7985 113th Street, Suite 220

Seminole, Florida 33772

(Former name or former address, if changed
since last report)


(201) 531-1212

Registrant’s telephone number, including area code

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

  

 

 
 

   

Forward Looking Statements

 

This Current Report on Form 8-K and other reports filed by registrant from time to time with the Securities and Exchange Commission (collectively, the “Filings”) contain or may contain forward-looking statements and information that is based upon beliefs of, and information currently available to, registrant’s management, as well as estimates and assumptions made by registrant’s management. When used in the Filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of these terms and similar expressions as they relate to registrant or registrant’s management identify forward-looking statements. Such statements reflect the current view of registrant with respect to future events and are subject to risks, uncertainties, assumptions and other factors (including the risks contained in the section of this Current Report on Form 8-K entitled “Risk Factors”) relating to registrant’s industry and registrant’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

 

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this Current Report on Form 8-K. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this Current Report on Form 8-K to conform our statements to actual results or changed expectations, or the results of any revision to these forward-looking statements.

 

Item 1.01 Entry Into A Material Definitive Agreement

 

On January 24, 2013, Mascot Properties, Inc., a Nevada corporation (“Mascot” or the “Company”), Mascot Properties Acquisition Corp, a Delaware corporation and wholly-owned subsidiary of Mascot (“Merger Sub”), MamaMancini’s, Inc., a privately-held Delaware Corporation headquartered in New Jersey (“MamaMancini’s”) and David Dreslin, an individual (the “Majority Shareholder”), entered into an Acquisition Agreement and Plan of Merger (the “Agreement”) pursuant to which the Merger Sub was merged with and into MamaMancini’s, with MamaMancini’s surviving as a wholly-owned subsidiary of Mascot (the “Merger”). The transaction (the “Closing”) took place on January 24, 2013 (the “Closing Date”). The Company acquired, through a reverse triangular merger, all of the outstanding capital stock of MamaMancini’s in exchange for issuing MamaMancini’s shareholders (the “MamaMancini’s Shareholders”), pro-rata, a total of 20,054,000 shares of the Company’s common stock. Immediately after the Merger was consummated, and further to the Agreement, the majority shareholders and certain affiliates of the Company cancelled a total of 103,408,000 shares of the Company’s common stock held by them (the “Cancellation”). In consideration of the Cancellation of such of common stock, the Company paid the Majority Shareholder in aggregate of $295,000 and released the other affiliates from certain liabilities. In addition, the Company has agreed to spinout to the Majority Shareholder of and all assets related to the Company’s real estate management business within 30 days after the closing. As a result of the Merger and the Cancellation, the MamaMancini’s Shareholders became the majority shareholders of the Company.

 

On December 5, 2012, MamaMancini’s completed a private placement of its common stock (the “Private Placement”) with a group of accredited investors (the “Private Placement Investors”). Pursuant to that certain Subscription Agreement with the Private Placement Investors, MamaMancini’s issued to the Private Placement Investors an aggregate of 5,054,000 shares of its common stock for a purchase price of $5,054,000, or $1.00 per share.  Pursuant to the Agreement, each Private Placement Investor will receive one share of Mascot for each one share purchased under the Private Placement.

 

The directors and majority shareholders of Mascot have approved the Agreement and the transactions contemplated under the Agreement. The directors and shareholders of MamaMancini’s have approved the Agreement and the transactions contemplated thereunder and as of the Closing Date will own approximately 96.2% of the Company’s common stock.

 

A copy of the Agreement is included as Exhibit 2.1 to this Current Report and is hereby incorporated by reference. All references to the Agreement and other exhibits to this Current Report are qualified, in their entirety, by the text of such exhibits.

 

This transaction is discussed more fully in Section 2.01 of this Current Report. The information therein is hereby incorporated in this Section 1.01 by reference.

 

Item 2.01 Completion of Acquisition or Disposition of Assets

 

CLOSING OF THE AGREEMENT

 

As described in Item 1.01 above, on January 24, 2013, the Company effectuated a Merger which resulted in MamaMancini’s, a producer of an upscale line of specialty pre-prepared and frozen and refrigerated foods, becoming our wholly-owned subsidiary. On the Closing Date, pursuant to the terms of the Agreement, we acquired all of the outstanding capital stock of MamaMancini’s. In exchange, we issued to the MamaMancini’s Shareholders, their designees or assigns, 20,054,000 shares of our common stock or 96.2% of the shares of the Company’s common stock issued and outstanding after the Closing.

 

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Pursuant to the terms of the Agreement, certain affiliates of the Company cancelled a total of 103,408,000 shares of the Company’s Common Stock held by them. Following the above transactions, there are 20,854,000 shares of the Company’s common stock issued and outstanding.

 

The directors and majority shareholders of the Company have approved the Agreement and the transactions contemplated under the Agreement. The directors of MamaMancini’s and MamaMancini’s Shareholders have approved the Agreement and the transactions contemplated thereunder. Immediately following the Closing of the Merger the Company changed its business plan to that of MamaMancini’s.

 

References to “we”, “our”, “us”, or “our Company”, from this point forward refer to Mascot Properties, Inc. as currently constituted with MamaMancini’s, Inc. as our operating subsidiary.

 

BUSINESS OF MAMAMANCINI’S

 

Overview

 

Mascot Properties, Inc. was incorporated in the State of Nevada on July 22, 2009. Our activities since inception consisted of trying to locate real estate properties to manage, primarily related to student housing, and services which include general property management, maintenance and activities coordination for residents. We have not had any significant development of our business nor have we received any revenue. Due to the lack of results in our attempt to implement our original business plan, management determined it was in the best interests of the shareholders to look for other potential business opportunities that might be available to the Company. Immediately following the Closing of the Agreement the Company changed its business plan to that of MamaMancini’s.

 

MamaMancini’s roots go back to founder Dan Dougherty, whose grandmother (“Ms. Mancini”), emigrated from Italy. Our business is founded upon her traditional recipes. The recipes have been developed and integrated into packaged foods for sale in retailers around the country. On February 22, 2010, MamaMancini’s was formed as a limited liability company under the laws of the state of New Jersey in order to commercialize our initial products. On March 5, 2012, the members of MamaMancini’s, LLC, holders of 4,700 units (the “Units”) of MamaMancini’s LLC, exchanged the Units for 15,000,000 shares of common stock and those certain options to purchase an additional 223,404 shares of MamaMancini’s (the “Exchange”). Upon consummation of the Exchange, MamaMancini’s LLC ceased to exist and all further business has been and continue to be conducted by MamaMancini’s.

 

We market an upscale line of specialty pre-prepared and frozen and refrigerated foods. Our products are all natural, contain a minimum number of ingredients and are derived from the original recipes of Ms. Mancini from Bay Ridge Brooklyn (originally from Bari, Italy).

 

MamaMancini’s products are principally sold to supermarket and mass market retailers. Our products are sold generally in frozen food sections, meat department sections, prepared foods (meals) sections, sandwich sections, hot bars and cold bars as well as cold deli and foods to go sections (“grab and go”). Some of our main super market customers are Publix, Shop Rite, Price Chopper, Redners, Pathmark, A&P, Waldbaums, Food Emporium, Whole Foods, Shaws Supermarkets, Kings, Key Foods, Giant Eagle, Stop n Shop, Giant Stores, Food Town, Garden of Eden, Harris Teeter and The Fresh Market. As of December 31, 2012, we have over 16,000 placements of products in supermarkets, box stores, and other retail locations.

 

Products

 

The following is a representation of some of the products Mamamancini’s currently offers.

 

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BEEF PRODUCTS

  

   
   
   

 

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TURKEY PRODUCTS

  

   
   
   

  

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SAUSAGE PRODUCTS

 

   
   
   

  

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CHICKEN PRODUCTS

 

   
   
   

 

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SAUCE PRODUCTS

 

   

 

We also sell antibiotic-free beef and turkey meatballs to Whole Foods and special club pack products to Costco and Sam’s Club.

 

Product Development

 

MamaMancini’s maintains a continuing research and development program to improve existing products and to develop new products. We also may contract with third parties in order to develop further products. Currently, we have the following products in development: (i) “Mama’s Mac-n-Cheese” (completed but not being tested yet), (ii) Chicken and Feta and Spinach Meatballs, (iii) Flavored Sausage Meatballs, (iv) Vegetarian Meatballs (in development), (v) Chicken Sausage-n-Sauce and (vi) Spicy Meatballs n’ Sauce.

 

We plan to explore the idea to develop new products, some of which may include: Pasta and Authentic Slow Cooked Italian Sauce n’ Beef Meatballs, Pasta and authentic slow cooked Italian Sauce n’ Turkey Meatballs, Pasta and Authentic Slow Cooked Italian Sauce n’ Sausage, Chicken Marsala, Italian Meatball Soup, Traditional Italian Meatballs (Beef, Pork and Veal) and Authentic Slow Cooked Italian Sauce. We cannot predict if or when any of the foregoing products under development will ever come to fruition.

 

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Key Product Attributes

 

Healthy: Our products are all natural. We use only the highest quality meats, tomatoes, genuine pecorino romano cheese, and other natural ingredients in our products. We believe our customers recognize our products as a healthy alternative to other frozen and refrigerated foods.

 

Authentic Taste and Strong Flavor Profiles: We employ recipes and sauces developed from traditional Italian fare to enhance the authenticity of our products. This allows us to achieve the best aroma, appearance and flavor profile for our customers.

 

Convenience: Ease of use through a microwave oven is a significant factor for consumers and institutional foodservice operators. Our products require simple preparation and heating steps. Virtually every product is ready-to-serve within 12 minutes, providing quick and easy meal solutions for our customers.

 

Pricing

 

Our pricing strategy focuses on being competitively priced with other premium brands. Since our products are positioned in the authentic premium prepared food category, we maintain prices competitive with those of similar products and prices slightly higher than those in the commodity prepared foods section. This pricing strategy also provides greater long term flexibility through the growth curve of our products. As changes occur in customer demand, the market supply pricing policies will require revision.

 

Suppliers/Manufacturers

 

None of our raw materials or ingredients are grown or purchased directly by us. We employ one company, Hors d’oeuvres Unlimited, Inc. (“HDU”) to manufacture and produce all of our current products. We are negotiating with another manufacturer to supplement the services provided by HDU. All of the raw materials and ingredients in our products are readily available and are readily ascertainable by our suppliers. We have not experienced any material shortages of food or other products necessary to our operations and do not anticipate such shortages in the foreseeable future.

 

Dependence on a Few Major Customers

 

Our ten largest customers accounted for approximately 92% of our sales in 2010, approximately 90% in 2011 and approximately 92% for the nine months ended September 30, 2012. For the year ended December 31, 2010, Burris Logistics (The Fresh Market) represented approximately 25% of our sales, C&S Wholesale Grocers represented approximately 17%, Dairyland USA (Whole Foods) represented 16%, and Wakefern Food Corporation (Shoprite) represented 15%. For the year ended December 31, 2011 Publix Supermarkets Inc. represented 26% of our sales, Burris Logistics (The Fresh Market) represented approximately 16%, C&S Wholesale Grocers represented 15% and Wakefern Food Corporation (Shoprite) represented approximately 10%. For the nine months ended September 30, 2012 Publix Supermarkets Inc. represented 39% of our sales, Burris Logistics (The Fresh Market) represented approximately 13%, C&S Wholesale Grocers represented 8%, and Wakefern Food Corporation (Shoprite) represented approximately 15%. We depend heavily on these customers and more information regarding the possible effects of any loss of these customers is discussed in the section entitled “Risk Factors”.

 

Market Size

 

According to Nielsen, IRI, US Dept. of Commerce data (2009) and our best estimates, we will be competing in a total industry of about $1 trillion between grocery stores ($530 billion) and food service ($460 billion). The frozen food grocery business is estimated as a $53 billion retail industry of which prepared foods account for $19 billion at retail and $12 billion at wholesale. The grocery meat business is estimated at $50 billion and we estimate that we will compete in approximately 20% of that business. The dry grocery sauce and gravy business is estimated at 2% of grocery sales or about $6 billion at wholesale. The deli and prepared foods industry is estimated at $22 billion of which we would compete in a $2 billion segment at wholesale. The total market segments in which MamaMancini’s products could eventually compete equate to approximately $33 billion at wholesale and $55 billion at retail.

 

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Sales, Marketing, and Distribution

 

MamaMancini’s products are now sold in over 4,000 retail food stores with an average of four different products per location. We have over 16,000 locations on supermarket or mass retailer shelves throughout the United States. MamaMancini’s products are sold in the frozen meat case, the frozen Italian specialty section, the fresh meat case, the deli (in bulk and grab n go pre-packaged formats) as well as hot bars and sandwich shops in food retailers.

 

Our products are sold primarily through a commission broker network. We sell to large retail chains who direct our products to their own warehouses or to large distributors. Currently, all of our full-time employees sell our products directly to supermarkets and mass retailers.

 

The majority of our marketing activity has been generated through promotional discounts, consumer trial, consumer product tastings and demonstrations, in-store merchandising and signage, couponing, word of mouth, consumer public relations, social media, special merchandising events with retailers and consumer advertising.

 

The retail food trade in the United States has 35,000 large supermarkets and mass market stores and over 200,000 locations including local convenience stores and small retailers. In addition, there are over 200,000 food service locations in the United States. MamaMancini’s sells its products in approximately 11% of the large food retailers in the United States. MamaMancini’s currently has very little distribution in the food service and industrial (custom made) products industries.

 

In March of 2011, we invested in a company called Meatball Obsession. We currently own 28% of Meatball Obsession with one of our executive officers and one of our directors serving on its board of directors. Meatball Obsession plans to open kiosks in malls and other high pedestrian traffic areas around the United States and has signed an exclusive supply agreement with MamaMancini’s whereby Meatball Obsession will sell MamaMancini’s branded products as its primary menu selections. The first Meatball Obsession kiosk opened in March, 2012 in New York City with a second location planned to open in the second quarter of 2013 at the Garden State Plaza Mall in Paramus, New Jersey.

 

Competition

 

The gourmet and specialty pre-packaged and frozen food industry has dozens of large competitors specializing in various types of cuisine from all over the world. Our product lines are currently concentrated on Italian specialty foods. While it is our contention that our competition is much more limited than the entire frozen and pre-packaged food industry based on our products’ niche market, there can be no assurances that we do not compete with the entire frozen and pre-packaged food industry. Some of our competitors include Quaker Maid / Philly-Gourmet Meat Company, Rosina Company, Inc., Casa Di Bertacchi, Inc., Farm Rich, Inc., and Buona Vita, Inc.

 

Intellectual Property

 

Trademarks and Trade Secrets

 

Our current intellectual property consists of trade secret recipes and cooking processes for our products and one trademark, the “MamaMancini’s” mark. The recipes and use of the trademark have been assigned in perpetuity to MamaMancini’s, Inc.

 

We rely on a combination of trademark, copyright and trade secret laws to establish and protect our proprietary rights. We will also use technical measures, confidentiality agreements and non-compete agreements to protect our proprietary rights.

 

Royalty Agreement

 

In accordance with a Development and License Agreement entered into on January 1, 2009 with Dan Dougherty relating to the use of his recipes for the products to be created by MamaMancini’s, Mr. Dougherty granted us a 50 year exclusive license (subject to certain minimum payments being made), with a 25 year extension option, to use and commercialize the licensed items. As part of the Development and License Agreement, we agreed to pay Mr. Dougherty a royalty fee on net sales.

 

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USDA approval / Regulations

 

Our food products which are manufactured in third-party facilities are subject to various federal, state and local regulations and inspection, and to extensive regulations and inspections, regarding sanitation, quality, packaging and labeling. In order to distribute and sell our products outside the State of New Jersey, the third-party food processing facilities must meet the standards promulgated by the U.S. Department of Agriculture. The facilities in which our products are manufactured are inspected regularly by the USDA and we comply with all packaging requirements of the USDA.

 

Employees

 

MamaMancini’s currently has six full-time employees. MamaMancini’s considers its employee relations to be good, and to date has not experienced a work stoppage due to a labor dispute. None of MamaManicni’s employees are represented by a labor union. For further information see Section 5.02 below.

 

Growth Plan

 

MamaMancini’s is actively trying to increase sales and improve its brand name over the next two years through the following methods and potential ideas:

 

MamaMancini’s has added to its sales staff and now has three full time regional and national sales persons as well as Dan Dougherty, Carl Wolf and Matt Brown soliciting business with all major supermarket chains and box stores in the U.S.

 

We have undertaken a 19-week national radio advertising program on Sirius/XM Radio which will end at the beginning of May 2013. We currently are running 1,500 commercials per week on those weeks in which we are advertising (13 weeks on, 6 weeks off).
     
We undertook extensive market research and product development for our new 22 oz retail sauce and meatball line last Spring and Summer and that line entered the market in October of 2012. We anticipate further placements this upcoming Spring and Summer.
     
We anticipate development of our brand in food service, industrial and export markets later this year and into 2014.

 

We have begun an intensive special merchandising and social media program for 2013. Events include the MamaMancini’s Meatball Mobile giveaway, find the golden meatball contest, video recipe catalog (20 recipes), a viral video contest with a major university (underway), and active social media updates on youtube, pinterest, facebook, twitter and instagram, as well as periodic mailings to our customer base.
     
We have engaged The Door, a professional public relations firm. The Door has been a valuable resource for MamaMancini’s in the past, with press in the New York Times, Wall Street Journal, Today Show Cooking School, a full segment on the Martha Stewart Show, People Magazine, Rachael Ray, USA Today Magazine, Fox Business News, and many more. It is our goal to continue a relationship with The Door that will further increase our public relations presence.
     
We are gearing up a special line that will be applicable to the Club Store trade for introduction by June of 2013. We have been testing it in Costco and Sam’s Club for the last several months.

 

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RISK FACTORS

 

You should carefully consider the risks described below together with all of the other information included in this report before making an investment decision with regard to our securities. The statements contained in or incorporated into this offering that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

 

RISKS RELATED TO OUR BUSINESS (MAMAMANCINI’S)

 

We are not profitable and may never be profitable.

 

Since inception in February 22, 2010 and through September 30, 2012, MamaMancini’s has raised approximately $4,854,000 in capital. During this same period, we have recorded net accumulated losses totaling $2,672,186. As of September 30, 2012, we had working capital of $1,652,487. MamaMancini’s net losses for the two most recent fiscal years ended December 31, 2010 (beginning on inception on February 22, 2010) and 2011 have been $670,682 and $681,728, respectively. We expect to incur significant increasing operating losses over the next several years. Negative cash flow from operations is expected in the foreseeable future. MamaMancini’s ability to achieve profitability depends upon many factors, including its ability to develop and commercialize products. There can be no assurance that MamaMancini’s will ever achieve any significant revenues or profitable operations.

 

MamaMancini’s has a limited operating history.

 

MamaMancini’s has been in existence for approximately three years. Our limited operating history means that there is a high degree of uncertainty in our ability to: (i) develop and commercialize our products; (ii) achieve market acceptance of our products; (iii) respond to competition; or (iv) operate the business, as management has not previously undertaken such actions as a company. Additionally, even if we do implement our business plan, we may not be successful. No assurances can be given as to exactly when, if at all, we will be able to recognize profits high enough to sustain our business. We face all the risks inherent in a new business, including the expenses, difficulties, complications, and delays frequently encountered in connection with conducting operations, including capital requirements. Given our limited operating history, we may be unable to effectively implement our business plan which would result in a loss of your investment.

 

We will need additional capital.

 

Since inception in 2010 and through September 30, 2012, MamaMancini’s has incurred net accumulated losses of $2,672,186. As of September 30, 2012 we had working capital of $1,652,487 and stockholders’ equity of $1,673,198. We may need additional capital to fund our continuing operations. Currently, we plan to raise additional capital, but we have no committed sources of additional capital and our access to capital funding is always uncertain. There is no assurance that additional equity or debt financing will be available to us when needed, on acceptable terms or even at all. In the event that we are not able to secure financing, we may have to scale back our development plans or cease operations.

 

Raising needed capital in the future may be difficult as a result of our limited operating history.

 

When making investment decisions, investors typically look at a company’s historical performance in evaluating the risks and operations of the business and the business’s future prospects. Our limited operating history makes such evaluation and an estimation of our future performance substantially more difficult. As a result, investors may be unwilling to invest in us or such investment may be on terms or conditions which are not acceptable. If we are unable to secure such additional finance, we may need to cease operations.

 

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There is serious doubt regarding our ability to continue as a going concern.

 

MamaMancini’s has a history of recurring losses from operations and has an accumulated deficit of $2,672,186 as of September 30, 2012. Management is unable to predict if and when we will be to generate positive cash flow. As a result, there is substantial doubt about our ability to continue as a going concern. Our plan regarding these matters is to raise additional debt and/or equity financing to allow us the ability to cover our current cash flow requirements and meet our obligations as they become due. There can be no assurances that financing will be available or if available, that such financing will be available under favorable terms. In the event that we are unable to generate adequate revenues to cover expenses and cannot obtain additional financing in the near future, we may seek protection under bankruptcy laws.

 

The majority of our business depends on a limited number of principal customers.

 

Because we depend on a limited number of principal customers for a majority of our sales, a loss of one principal customer could materially adversely affect our business and financial condition. Our ten largest accounts represented approximately 92% of our sales for the year ended December 31, 2010; approximately 90% of our sales for the year ended December 31, 2011 and approximately 92% of our sales for the nine months ended September 30, 2012. For the year ended December 2010, Burris Logistics (The Fresh Market) represented approximately 25% of our sales, C&S Wholesale Grocers represented approximately 17%, Dairyland USA (Whole Foods) represented approximately 16%, and Wakefern Food Corporation (Shoprite) represented approximately 15%. For the year ended December 31, 2011, Publix Supermarkets, Inc. represented approximately 26% of our sales, Burris Logistics (The Fresh Market) represented approximately 16%, C&S Wholesale Grocers represented approximately 15%, and Wakefern Food Corporation (Shoprite) represented approximately 10%. For the nine months ended September 30, 2012 Publix Supermarkets Inc. represented 39% of our sales, Burris Logistics (The Fresh Market) represented approximately 13%, C&S Wholesale Grocers represented 8%, and Wakefern Food Corporation (Shoprite) represented approximately 15%. Our principal customers only continue to purchase our products if they are able to sell them to end consumers. We have no long term contracts with our principal customers and thus our business would be negatively affected by the failure of our principal customers to purchase our products on a consistent basis. If these principal customers cease ordering products from us, our business could be materially adversely affected.

 

Competitive product and pricing pressures in the food industry and the financial condition of customers and suppliers could adversely affect our ability to gain or maintain market share and/or profitability.

 

We currently operate in the highly competitive food industry, competing with other companies that have varying abilities to withstand changing market conditions. Any significant change in our relationship with a major customer, including changes in product prices, sales volume, or contractual terms may impact financial results. Such changes may result because our competitors may have substantial financial, marketing, and other resources that may change the competitive environment. If we are unable to establish economies of scale, marketing expertise, product innovation, and category leadership positions to respond to changing market trends, or if we are unable to increase its prices while maintaining a customer base, our profitability and volume growth could be impacted in a materially adverse way. The success of our business depends, in part, upon the financial strength and viability of our suppliers and customers. The financial condition of those suppliers and customers is affected in large part by conditions and events that are beyond our control. A significant deterioration of their financial condition would adversely affect our financial results.

 

All of our manufacturing is outsourced.

 

Presently we do not have any manufacturing facilities and all our manufacturing is out-sourced to HDU’s food manufacturing facility in East Rutherford, New Jersey. HDU is a related party entity owned in full by certain officers and directors of MamaMancini’s. We have a five-year contract with HDU that began on March 1, 2010. In the event that HDU ceases operations or stops manufacturing our products, our inability to secure an alternative supplier would adversely affect our business and financial condition. Additionally, should we be forced to manufacture our products, we cannot give you any assurance that we will be able to develop internal manufacturing capabilities or procure third party suppliers. In the event we seek third party suppliers, they may require us to purchase a minimum amount of materials or could require other unfavorable terms. Any such event would materially impact our prospects. Moreover, we cannot give you any assurance that any contract manufacturers or suppliers that we select will be able to supply our products in a timely or cost effective manner or in accordance with applicable regulatory requirements or our specifications.

 

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There is no guarantee that our business goals of expansion into mass market retailers and additional supermarkets will be realized.

 

We are currently selling products in roughly 11% of select high volume supermarkets in the United States. If we are unable to expand into mass market retailers or sell products in a greater number of high volume supermarkets we will fall short of our projections and our business and financial condition would be adversely affected.

 

The shelf and freezer placement of our products in stores may not be optimal for attracting consumer attention.

 

As a smaller supplier, we may not sell in enough bulk in certain stores and as such our products may not be placed in the most ideal locations to catch the attention of end consumers. If we are unable to gain significant sales growth, our products may never be displayed in the most attractive locations in stores and our sales may suffer.

 

Increases in the cost and restrictions on the availability of raw materials could adversely affect our financial results.

 

Our products include agricultural commodities such as tomatoes, onions, and meats and other items such as spices and flour, as well as packaging materials such as plastic, metal, paper, fiberboard, and other materials and inputs such as water, in order to manufacture products. The availability or cost of such commodities may fluctuate widely due to government policy and regulation, crop failures or shortages due to plant disease or insect and other pest infestation, weather conditions, potential impact of climate change, increased demand for biofuels, or other unforeseen circumstances. To the extent that any of the foregoing or other unknown factors increase the prices of such commodities or materials and we are unable to increase our prices or adequately hedge against such changes in a manner that offsets such changes, the results of its operations could be materially and adversely affected. Similarly, if supplier arrangements and relationships result in increased and unforeseen expenses, our financial results could be materially and adversely impacted.

 

Disruption of our supply chain could adversely affect our business.

 

Damage or disruption to our manufacturing or distribution capabilities due to weather, natural disaster, fire, terrorism, pandemic, strikes, the financial and/or operational instability of key suppliers, distributors, warehousing and transportation providers, or brokers, or other reasons could impair our ability to manufacture or sell our products. To the extent that we are unable to, or cannot financially mitigate the likelihood or potential impact of such events, or to effectively manage such events if they occur, particularly when a product is sourced from a single location, there could be a materially adverse effect on our business and results of operations, and additional resources could be required to restore our supply chain.

 

Higher energy costs and other factors affecting the cost of producing, transporting, and distributing our products could adversely affect our financial results.

 

Rising fuel and energy costs may have a significant impact on the cost of operations, including the manufacture, transportation, and distribution of products. Fuel costs may fluctuate due to a number of factors outside of our control, including government policy and regulation and weather conditions. Additionally, we may be unable to maintain favorable arrangements with respect to the manufacturing costs of our products as a result of the rise in costs of procuring raw materials and transportation by our manufacturers. This may result in increased expenses and negatively affect operations.

 

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The impact of various food safety issues, environmental, legal, tax, and other regulations and related developments could adversely affect our sales and profitability.

 

Our products are subject to numerous food safety and other laws and regulations regarding the manufacturing, marketing, and distribution of food products, particularly the USDA, and state and local agencies. These regulations govern matters such as ingredients, advertising, taxation, relations with distributors and retailers, health and safety matters, and environmental concerns. The ineffectiveness of our or our manufacturer’s planning and policies with respect to these matters, and the need to comply with new or revised laws or regulations with regard to licensing requirements, trade and pricing practices, environmental permitting, or other food or safety matters, or new interpretations or enforcement of existing laws and regulations, as well as any related litigation, may have a material adverse effect on our sales and profitability.

 

The need for and effect of product recalls could have an adverse impact on our business.

 

If any of our products become misbranded or adulterated, we may need to conduct a product recall. The scope of such a recall could result in significant costs incurred as a result of the recall, potential destruction of inventory, and lost sales. Should consumption of any product cause injury and/or illness, we may be liable for monetary damages as a result of a judgment against us. A significant product recall or product liability case could cause a loss of consumer confidence in our food products and could have a material adverse effect on the value of its brands and results of operations.

 

The failure of new product or packaging introductions to gain trade and consumer acceptance and changes in consumer preferences could adversely affect our sales.

 

Our success is dependent upon anticipating and reacting to changes in consumer preferences, including health and wellness. There are inherent marketplace risks associated with new product or packaging introductions, including uncertainties about trade and consumer acceptance. Moreover, success is dependent upon our ability to identify and respond to consumer trends through innovation. We may be required to increase expenditures for new product development and there is no guarantee that we will be successful in developing new products or improving upon products already in existence. Additionally, our new products may not achieve consumer acceptance. Each of the foregoing could materially and negatively impact sales.

 

We rely on key personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.

 

Our success depends in large part upon the abilities and continued service of our executive officers and other key employees, particularly Mr. Carl T. Wolf, Chairman, Mr. Matt I. Brown, President, and Mr. Daniel Dougherty. There can be no assurance that we will be able to retain the services of such officers and employees. Our failure to retain the services of our key personnel could have a materially adverse effect on our business. In order to support our projected growth, we will be required to effectively recruit, hire, train and retain additional qualified management personnel. Our inability to attract and retain the necessary personnel could have a materially adverse effect on our business.

 

We may not be able to effectively control and manage our growth, which would negatively impact our operations.

 

If our business and markets grow and develop it will be necessary for us to finance and manage expansion in an orderly fashion. We may face challenges in managing the expansion of our business and in integrating any acquired businesses with our own. Such eventualities will increase demands on our existing management, workforce and facilities. Failure to satisfy increased demands could interrupt or adversely affect our operations and cause administrative inefficiencies.

 

We may be unable to successfully execute our identified business opportunities or other business opportunities that we determine to pursue.

 

We currently have a limited corporate infrastructure. In order to pursue business opportunities, we will need to continue to build our infrastructure and operational capabilities. Our ability to do any of these successfully could be affected by any one or more of the following factors:

 

our ability to raise substantial amounts of additional capital if needed to fund the implementation of our business plan;

 

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our ability to execute our business strategy;
     
the ability of our products to achieve market acceptance;
     
our ability to manage the expansion of our operations and any acquisitions we may make, which could result in increased costs, high employee turnover or damage to customer relationships;
     
our ability to attract and retain qualified personnel;
     
our ability to manage our third party relationships effectively; and
     
our ability to accurately predict and respond to the rapid market changes in our industry and the evolving demands of the markets we serve.

 

Our failure to adequately address any one or more of the above factors could have a significant impact on our ability to implement our business plan and our ability to pursue other opportunities that arise.

 

We face competition from companies who have made similar frozen products and other processed foods for much longer periods of activity.

 

Many of our competitors have been in business for a significantly longer period of time than we have and have learned manufacturing techniques which can aid in efficiently producing their products. Additionally, many of these companies have successfully acquired a loyal customer base that would be difficult for us to compete with. Such customers may be unwilling to purchase our products due to brand loyalty or uncertainty in the highly competitive market in which we compete.

 

There are very few barriers to entry in the gourmet Italian frozen food industry for companies that already manufacture and sell frozen foods.

 

If we gain traction in our particular niche of creating gourmet Italian frozen foods, major food companies with substantial marketing and capital resources may attempt to compete more directly with us. In the event that such large companies do directly compete with us, our business may be adversely affected.

 

We may be unable to maintain quality control.

 

All of our manufacturing is outsourced. Although we have entered into supply agreements specifying certain minimum acceptable quality standards, there is no assurance that our current quality assurance procedures will be able to effective monitor compliance. Additionally, in the event that we expand our operations and increase our output volume, including securing additional manufacturers, there is no assurance that we will be able to adequately maintain quality controls or that our current process is scalable.

 

There may be products liability and other legal claims.

 

We may be exposed to potential product liability claims which could have an adverse impact on our business. While we endeavor to sell safe products, there is a possibility that a vendor could handle our products improperly or that someone could have an adverse reaction to a product. We are currently a named insured through the products liability insurance policy of HDU, our food manufacturer and we also carry our own product liability insurance policy. Although we believe that the amount of insurance coverage is sufficient for our operations, there is no assurance that the coverage will be adequate.

 

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RISKS RELATED TO OUR INTELLECTUAL PROPERTY

 

We may be unable to defend our intellectual property.

 

Our business could be adversely affected if we are unable to adequately protect our intellectual property. Our current intellectual property consists of trade secret recipes and cooking processes for our products and trademarks. We may rely on a combination of patent, trademark, copyright and trade secret laws to establish and protect our proprietary rights. We will also use technical measures, confidentiality agreements and non-compete agreements to protect our proprietary rights. We may however not be able to secure significant protection for service marks or trademarks that we obtain. Our inability to protect our intellectual property from others may impede our brand identity and could lead to consumer confusion.

 

Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our services and brand.

 

Our business is largely based upon our recipes which are trade secrets and are not patentable. We may be unable to keep other companies from copying our recipes, or we may be subject to legal actions alleging intellectual property infringement, unfair competition or similar claims against us. Companies may have intellectual property rights covering aspects of our technologies or businesses. Defending ourselves against intellectual property infringement or similar claims would be expensive and would divert management’s attention.

 

RISKS RELATED TO OUR STOCK

 

You will experience dilution of your ownership interest because of the future issuance of additional shares of our common stock and our preferred stock.

 

In the future, we may issue our authorized but previously unissued equity securities, resulting in the dilution of the ownership interests of our present stockholders. We are currently authorized to issue an aggregate of 270,000,000 shares of capital stock consisting of 20,000,000 shares of preferred stock, par value $0.00001 per share and 250,000,000 shares of common stock, par value $0.00001 per share.

 

We may also issue additional shares of our common stock or other securities that are convertible into or exercisable for common stock in connection with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes, or for other business purposes. The future issuance of any such additional shares of our common stock or other securities may create downward pressure on the trading price of our common stock. There can be no assurance that we will not be required to issue additional shares, warrants or other convertible securities in the future in conjunction with hiring or retaining employees or consultants, future acquisitions, future sales of our securities for capital raising purposes or for other business purposes, including at a price (or exercise prices) below the price at which shares of our common stock are trading.

 

Our common stock is considered a penny stock, which may be subject to restrictions on market ability, so you may not be able to sell your shares.

 

If our common stock becomes tradable in the secondary market, we will be subject to the penny stock rules adopted by the SEC that require brokers to provide extensive disclosure to their customers prior to executing trades in penny stocks. These disclosure requirements may cause a reduction in the trading activity of our common stock, which in all likelihood would make it difficult for our shareholders to sell their securities.

 

Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. The broker-dealer must also make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security that becomes subject to the penny stock rules. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our securities, which could severely limit the market price and liquidity of our securities. These requirements may restrict the ability of broker-dealers to sell our common stock and may affect your ability to resell our common stock.

 

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Our executive officers and directors will continue to beneficially own the majority of our outstanding Common Stock.

 

Our executive officers and directors beneficially own approximately 60.6% of our outstanding common stock, including approximately 24.8% of our outstanding shares that are beneficially owned by our Chief Executive Officer, Carl Wolf. As a result, if they act in concert, our executive officers and directors will have the majority vote with respect to all of the issues submitted to a vote of our shareholders.

 

We do not expect to pay dividends.

 

We have never declared or paid any cash dividends or distributions on our capital stock. We currently intend to retain our future earnings, if any, to support operations and to finance expansion and therefore we do not anticipate paying any cash dividends on our common stock in the foreseeable future.

 

The declaration, payment and amount of any future dividends will be made at the discretion of the board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant. There is no assurance that future dividends will be paid, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend. If the Company does not pay dividends, the Company’s common stock may be less valuable because a return on an investor’s investment will only occur if the Company’s stock price appreciates.

 

There has been a limited trading market for our Common Stock which may impair your ability to sell your shares.

 

It is anticipated that there will be a limited trading market for the Common Stock on the Over-the-Counter Bulletin Board or OTC Marketplace. The lack of an active market will impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market will also reduce the fair market value of your shares. An inactive market may also impair our ability to raise capital by selling shares of capital stock and may impair our ability to acquire other companies or assets by using Common Stock as consideration.

  

If we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our Common Stock.

 

Effective internal control is necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. We have not performed an in-depth analysis to determine if historical un-discovered failures of internal controls exist, and may in the future discover areas of our internal control that need improvement.

 

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Management’s Discussion And Analysis Of Financial Condition AND Plan Of Operations

 

This Current Report on Form 8-K contains forward-looking statements within the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,” “plan,” “will,” “we believe,”“management believes” and similar language. Except for the historical information contained herein, the matters discussed in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Current Report are forward-looking statements that involve risks and uncertainties. The factors listed in the section captioned “Risk Factors,” as well as any cautionary language in this Current Report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from those projected. Except as may be required by law, we undertake no obligation to update any forward-looking statement to reflect events after the date of this Current Report on Form 8-K.

 

Results of Operations for the nine months ended September 30, 2012 and 2011

 

The following table sets forth the summary income statement for the nine months ended September 30, 2012 and 2011:

 

    Nine Months Ended  
    September 30, 2012     September 30, 2011  
             
Sales - Net of slotting fees and discounts   $ 3,381,378     $ 2,243,610  
Gross Profit   $ 1,014,524     $ 703,268  
Operating Expenses   $ (2,324,253 )   $ (1,242,448 )
Other Income (Expense)   $ (10,047 )   $ (1,026 )
Net Loss   $ (1,319,776 )   $ (540,206 )

 

For the nine months ended September 30, 2012 and 2011, the Company reported a net loss of $(1,319,776) and $(540,206), respectively. The change in net loss between the nine months ended September 30, 2012 and 2011 was primarily attributable to following significant events:

 

The Company commenced operations during 2010 and has experienced significant growth in sales for the comparable periods. The Company sold into approximately 16,000 retail and grocery locations during 2012 as compared to approximately 12,000 during 2011. The Company has reinvested proceeds to further develop brand awareness.

 

Advertising and promotional expense increased by $503,000.

 

Legal expense increased by $93,000.

 

R&D increased by $65,000.

 

Payroll and related expenses increased by $230,000.

 

Marketing research expenses increased by $72,000.

 

Trade show and Travel expenses increased by $60,000.

 

Royalty expenses increased by $35,000.

 

Sales: Sales, net of slotting fees and discounts increased by approximately 51% to $3,381,378 during the nine months ended September 30, 2012, from $2,243,610 during the corresponding period ended September 30, 2011. The increase in sales is primarily related to the company executing on their expansion strategy. The Company has sold into approximately 16,000 retail locations during 2012 as compared to approximately 12,000 locations in 2011. The Company commenced operations during 2010.

 

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Gross Profit: Gross profit decreased by approximately 1.0% during the nine months ended September 30, 2012 as compared to nine months ended September 30, 2011. This decrease is primarily attributable to higher commodity costs and a change in mix to lower margin products.

 

Operating Expenses: Operating expenses increased by 87% during the nine months ended September 30, 2012, as compared to the nine months ended September 30, 2011. The $1,081,000 increase in operating expenses is primarily attributable the following approximate increases in operating expenses: advertising and promotional expenses of $503,000, legal fees of $93,000, R&D of $65,000, payroll and related expense of $230,000, marketing research of $72,000, trade show and travel expenses of $60,000 and royalty expenses of $35,000.

 

Other Income (Expense): Other expenses increased by approximately $9,000 to $(10,047) for the nine months ended September 30, 2012 as compared to $(1,026) during the nine months ended September 30, 2011. Other expenses consisted of interest expense incurred on the company’s line of credit.

 

Results of Operations for year ended December 31, 2011 and for the Period February 22, 2010 (Inception) to December 31, 2010

 

The following table sets forth the summary income statement for the year ended December 31, 2011 and for the Period February 22, 2010 (Inception) to December 31, 2010:

 

    Year/Period ended  
    December 31, 2011     December 31, 2010  
Sales - Net of slotting fees and discounts   $ 3,734,062     $ 1,512,220  
Gross Profit   $ 1,237,524     $ 464,550  
Operating Expenses   $ (1,885,084 )   $ (1,135,232 )
Other Income (Expense)   $ (34,168 )   $ -  
Net Loss   $ (681,728 )   $ (670,682 )

 

For the year ended December 31, 2011 and for the Period February 22, 2010 (inception) to December 31, 2010, the Company reported a net loss of $(681,728) and $(670,682), respectively. The change in net loss between the year ended December 31, 2011 and the period February 22, 2010 was primarily attributable to following significant events:

 

The Company commenced operations during 2010 and has experienced significant growth in sales for the comparable periods.  The Company sold into approximately 12,000 retail and grocery locations during 2011 as compared to approximately 3,500 during 2010.   The Company has reinvested proceeds to further develop brand awareness.

 

Advertising expense increased by $415,000.

 

Stock based compensation decreased by $70,000.

 

The Company incurred a loss on investment in a start-up company in the amount of $27,032.

 

Sales: Sales, net of slotting fees and discounts increased by approximately 147% to $3,734,062 during the year ended December 31, 2011, from $1,512,220 during the corresponding period ended December 31, 2010. The increase in sales is primarily related to the company executing on their expansion strategy. The Company has sold into approximately 12,000 retail locations during 2011 as compared to approximately 3,500 locations in 2010. The Company commenced operations during 2010.

 

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Gross Profit: Gross profit increased by approximately 2.4% during the year ended December 31, 2011 as compared to the period February 22, 2010 (inception) to December 31, 2010. This increase is primarily attributable to quantity discounts associated with manufacturing and purchasing in greater quantities.

 

Operating Expense: Operating expenses increased by 66% during the year ended December 31, 2011, as compared to the period February 22, 2010 (inception) to December 31, 2010. The $750,000 increase in operating expenses is primarily attributable to an increase in advertising and promotional expenses of approximately $415,000. In addition, the company incurred increased operating expenses due to operating for a full calendar year during 2011 as compared to an abbreviated 10 months in 2010.

 

Other Income (Expense): Other expenses increased by $34,168 to $(34,168) for the year ended December 31, 2011 as compared to $(-) during the period February 22, 2010 (inception) to December 31, 2010. Other expenses consisted of a $27,032 loss on investment in a development stage start-up business and $7,136 in interest expense incurred on the company’s line of credit.

 

Liquidity and Capital Resources

 

The following table summarizes total current assets, liabilities and working capital at September 30, 2012 compared to December 31, 2011:

 

    Year/Period ended        
    September 30, 2012     December 31, 2011     Increase/(Decrease)  
Current Assets   $ 2,072,968     $ 878,476     $ 1,194,492  
Current Liabilities   $ 420,481     $ 849,178     $ (428,697 )
Working Capital   $ 1,652,487     $ 29,298     $ 1,623,189  

 

As of September 30, 2012, we had working capital of $1,652,487 as compared to working capital of $29,298 as of December 31, 2011, an increase of $1,623,189. The increase in working capital is primarily attributable to the sale of 3,454,000 shares of common stock during the nine months ended September 30, 2012 for net proceeds of $2,943,661.

 

Net cash used for operating activities for the nine months ended September 30, 2012 and 2011 was $(1,400,638) and $(689,718), respectively. The Net Loss for the nine months ended September 30, 2012 and 2011 was $(1,319,776) and $(540,206), respectively.

 

Net cash in all investing activities for the nine months ended September 30, 2012 was $(10,000) as compared to $(25,344) for the nine months ended September 30, 2011. The Company paid cash for machinery and equipment during the nine months ended September 30, 2012 in the amount of $10,000. The Company paid cash for machinery and equipment during the nine months ended September 30, 2011 in the amount of $18,402 and invested $6,942 for an equity interest in a development stage company.

 

Net cash obtained through all financing activities for nine months ended September 30, 2012 was $2,643,661 as compared to $465,000 for the nine months ended September 30, 2011. During the nine months ended September 30, 2012 the Company sold 3,454,000 shares of common stock for net proceeds of $2,943,661 and paid down the Company credit line in the amount of $300,000. During the nine months ended September 30, 2010 the Company sold 638,298 shares of common stock for net proceeds of $200,000 and made advances on the Company credit line in the amount of $265,000.

 

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The Company believes that our existing available cash along with the net proceeds from the issuance of securities from the fourth quarter of 2012 will enable the Company to meet the working capital requirements for at least 12 months. The estimated working capital requirement for the next 12 months is $2,200,000 with an estimated burn rate of $183,000 per month. The Company continues to explore potential expansion opportunities in the industry in order to boost sales while leveraging distribution systems to consolidate lower costs.

 

As reflected in the accompanying financial statements, the Company has a net loss and net cash used in operations of $1,319,776 and $1,400,638, respectively, for the nine months ended September 30, 2012.

 

The ability of the Company to continue its operations is dependent on Management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence.

 

The Company may require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis, if at all.

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Recent Accounting Pronouncements

 

There are no recent accounting pronouncements that are expected to have an effect on the Company’s financial statements.

 

Critical Accounting Policies

 

Our 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.

 

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Our significant accounting policies are summarized in Note 2 of our 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 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 financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following: allowance for bad debt, inventory obsolescence, the fair value of share-based payments.

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.

 

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

 

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

 

Share based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Share based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock based compensation expenses are included in cost of goods sold or Selling, general and administrative expenses, depending on the nature of the services provided, in the Statement of Operations.

 

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

 

●     The risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant.

 

●     The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future.

 

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●     The expected warrant term is the life of the warrant.

 

●     Given the Company is privately held, expected volatility was benchmarked against similar companies in a similar industry.

 

●     The forfeiture rate is based on the historical forfeiture rate for the Company’s unvested stock options, which was 0%.

 

Revenue recognition - The Company follows the guidance of the Securities and Exchange Commission’s Staff Accounting Bulletin No. 104 for revenue recognition and records revenue when all of the following have occurred: (1) persuasive evidence of an arrangement exists, (2) the product is delivered, (3) the sales price to the customer is fixed or determinable, and (4) collectability of the related customer receivable is reasonably assured. There is no stated right of return for products. Sales are recognized upon shipment of products to customers.

 

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

 

Off Balance Sheet Arrangements:

 

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

  

MANAGEMENT

 

Directors

 

The following sets forth the current members of our board of directors (“Board”) and information concerning their ages and background. All directors hold office until the next annual meeting of stockholders or until their respective successors are elected, except in the case of death, resignation or removal:

  

Name   Age   Position
         
Carl Wolf   69   Chief Executive Officer and Chairman of  the Board of Directors
         
Matthew Brown   44   President and Director
         
Steven Burns   52   Director
         
Alfred D’Agostino   59   Director
         
Thomas Toto   58   Director
         
Dan Altobello   71   Director
         
Dean Janeway   68   Director

 

A brief biography of each of our directors is more fully set forth in Item 5.02, which is incorporated herein by reference.

 

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Committees

 

We currently do not have any committees in place but anticipate establishing an audit committee, compensation committee, and advertising committee in the near future.

 

Independent Directors

 

For purposes of determining independence, the Company has adopted the definition of independence as contained in NASDAQ Market Place Rules 4200. Pursuant to the definition, the Company has determined that Steven Burns, Alfred D’Agostino, Thomas Toto, Dan Altobello and Dean Janeway qualify as independent.

 

Employment Agreements

 

Section 5.02(e) is hereby incorporated by reference.

 

Family Relationships

 

Mr. Matthew Brown, our President, is the son-in-law of Mr. Carl Wolf, our Chief Executive Officer.

 

Code of Ethics

 

We currently do not have a code of ethics that applies to our officers, employees and directors, including our Chief Executive Officer and senior executives.

 

EXECUTIVE COMPENSATION

 

Mascot Summary Compensation

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by Mascot during the period from inception (July 22, 2009) through December 31, 2012 .

 

Name and
Principal Position
  Year     Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Option
Awards
($)
    Non-Equity
Incentive
Plan
Compensation
($)
    Non-
Qualified
Deferred
Compensation
Earnings
($)
  All Other
Compensation
($)
    Totals
($)
David Dreslin (1)     2010     $ 900       0       0       0       0     0     0     $ 900
      2011     $ 0       0       0       0       0     0     0     $ 0
    2012     $ 0       0       0       0       0     0     0     $ 0

  

(1) Mr. Dreslin is the founder and, until the Merger, was the sole executive officer and director of the Company and has not received any personal compensation for his services as such. Dreslin Financial Services, Inc. is owned by our sole director and officer Mr. David Dreslin. Since the date of inception, July 22, 2009, through the date hereof, Dreslin Financial Services, Inc. has been paid $23,700 in 2009, $900 in 2010 and $300 in 2011 for a total of $24,900 to date for services provided to the Company for consulting, audit preparation and filing review.

 

Option Grants Table

 

There were no individual grants of stock options to purchase our common stock made to the executive officers named in the Summary Compensation Table from inception through December 31, 2012.

 

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MamaMancini’s Summary Compensation

 

The following table sets forth information for MamaMancini’s most recently completed fiscal year concerning the compensation of Carl Wolf, our Chief Executive Officer (“CEO”) and all other executive officers of Company during the most recently completed fiscal years ended December 31, 2012, 2011 and 2010.

 

Name and
Principal Position
  Year     Salary
($)
    Bonus
($)
    Stock
Awards
($)
    Option
Awards
($)
    Non-Equity
Incentive
Plan
Compensation
($)
    Non-
Qualified
Deferred
Compensation
Earnings
($)
  All Other
Compensation
($)
    Totals
($)
Carl Wolf CEO/Chairman (1)     2012     $ 125,000       0       0       0       0     0     0     $ 125,000
      2011     $ 60,000       0       0       0       0     0     0     $ 60,000
      2010     $ 35,000       0       0       0       0     0     0     $ 35,000
                                                                 
Lewis Ochs(2)
Executive VP of Finance
    2012     $ 55,000       0       0       0       0     0     0     $ 55,000
      2011     $ 36,000       0       0       0       0     0     0     $ 36,000
      2010     $ 33,000       0       0       0       0     0     0     $ 33,000
                                                                 
Matt Brown
President(3)
    2012     $ 91,667       0       0       0       0     0     0     $ 91,667
      2011     $ 90,000       0       0       0       0     0     0     $ 90,000
      2010     $ 37,500       0       0       0       0     0     0     $ 37,500

 

Aggregated Option Exercises and Fiscal Year-End Option Value Table

 

There were no stock options exercised since the date of inception of the Company, July 22, 2009, through the date of this Current Report on Form 8-K by the executive officers named in the Summary Compensation Tables.

 

Long-Term Incentive Plan (“LTIP”) Awards Table

 

There were no awards made to a named executive officers in the last completed fiscal year under any LTIP.

 

Compensation of Directors

 

Pursuant to the terms of our non-executive director compensation policy, non-employee directors will be entitled to the following compensation for service on our Board:

 

MamaMancini’s is paying its non-executive board members $10,000 per year.

 

Option Plan

 

We currently do not have a Stock Option Plan, however, we may wish to issue stock options pursuant to a Stock Option Plan in the future. Such stock options may be awarded to management, employees, members of the Company’s Board of Directors and consultants of the Company.

 

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

MamaMancini’s is presently under a supply and management agreement with HDU until February 28, 2015. From March 1, 2010 to December 31, 2011, under the terms of such agreement with HDU, we reimbursed HDU for salaries and expenses related to our operations. A total of $193,500 was reimbursed in salaries to HDU since March 1, 2010. HDU is owned by Matthew Brown and Karen Wolf (55%) and by Carl and Marion Wolf (45%), all of whom are shareholders of MamaMancini’s. Matthew Brown and Carl Wolf are also both officers and directors of MamaMancini’s. In addition, a total of $176,228 was incurred as other general and administrative expenses between the company and HDU. These expenses included insurance, freight, travel and other general and overhead expenses.

 

HDU, owned by Matthew Brown and Karen Wolf and by Carl and Marion Wolf, as discussed in the preceding paragraph, is also contracted to produce and manufacture food products for MamaMancini’s. Currently, HDU serves as our principal food manufacturing company. For the fiscal year 2010 and 2011 we paid HDU $2,426,066 and $1,047,670 respectively for the manufacturing of products. At December 31, 2011, MamaMancini’s has a deposit on inventory in the amount of $100,000 to this manufacturer.

 

From the inception of MamaMancini’s, February 22, 2010 through December 31, 2011, MamaMancini’s paid an entity (Lakota Holdings LLC) controlled by Carl Wolf $109,937 for salaries and expense reimbursements for Carl Wolf.

 

PRE-CLOSING PRINCIPAL STOCKHOLDERS

 

The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of December 31, 2012, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly and the shareholders listed possesses sole voting and investment power with respect to the shares shown.

 

Name   Number of
Shares
Beneficially
Owned
    Percent of
Class
 
David Dreslin(1)
Chief Executive Officer
7985 113th Street, Suite 220
Seminole FL, 33772
    80,004,000       76.77 %
Entrust of Tampa Bay FBO Robert C. Rogin #2726
7985 113th Street, Suite 220
Seminole FL, 33772
    12,004,000       11.52 %
Salvatore Kopita
7650 132nd Way North
Seminole FL, 33776
    12,004,000       11.52 %
All Executive Officers and Directors as a group (1)     80,004,000       76.77 %

 

(1) Based on 104,208,000 shares of common stock outstanding as of December 31, 2012. Mr. David Dreslin was the founder and sole officer and director of the Company and prior to the Closing owned 76.77% of the outstanding common stock. As of the Closing, Mr. Dreslin owns 200,000 of the Company’s common stock

 

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POST-CLOSING PRINCIPAL STOCKHOLDERS

 

The following table provides the names and addresses of each person known to us to own more than 5% of our outstanding shares of common stock as of January 24, 2013, and by the officers and directors, individually and as a group. Except as otherwise indicated, all shares are owned directly and the shareholders listed possesses sole voting and investment power with respect to the shares shown.

 

Name and Address of Beneficial Owner(1)   Shares     Total    
               
Directors and named Executive Officers                  
                   
Carl Wolf     5,154,255(3)       24.8 %  
                   
Matthew Brown     5,154,255(4)       24.8 %  
                   
Steven Burns     1,005,319(5)       4.8 %  
                   
Alfred D’Agostino     644,521(6)       3.1 %  
                   
Thomas Toto     644,521(7)       3.1 %  
                   
Lewis Ochs     0       0 %  
                   
Daniel Altobello 0   0 %  
                 
Dean Janeway 0 0 %  
                   
All Directors and executive officers as a group (5 persons)     12,602,871(8)       60.6 % (2)

  

* Less than one percent.

 

(1) Except as otherwise indicated, the persons named in this table have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them, subject to community property laws where applicable and to the information contained in the footnotes to this table. Unless otherwise indicated, the address of the beneficial owner is MamaMancini’s, 25 Branca Road East Rutherford, NJ 07073

 

(2) Pursuant to Rules 13d-3 and 13d-5 of the Exchange Act, beneficial ownership includes any shares as to which a shareholder has sole or shared voting power or investment power, and also any shares which the shareholder has the right to acquire within 60 days, including upon exercise of common shares purchase options or warrants. There are 20,854,000 shares of common stock issued and outstanding as of January 24, 2013.

 

(3) The 5,154,255 shares are held jointly with Ms. Marion F. Wolf. Ms. Wolf is the wife of Mr. Carl Wolf. Mr. Wolf maintains full voting control of such shares.

 

(4) The 5,154,255 shares are held jointly with Ms. Karen Wolf. Ms. Wolf is the wife of Mr. Matthew Brown. Mr. Brown maintains full voting control of such shares.

 

(5) 957,448 common shares are held by Point Prospect, Inc., an S-Corp 100% wholly-owned by Steven Burns. Steven Burns also personally owns 47,871 options to purchase common shares.

 

(6) Includes options to purchase 25,372 common shares.

 

(7) Includes options to purchase 25,372 common shares.

 

(8) Includes options to purchase 223,404 common shares.

 

DESCRIPTION OF SECURITIES

 

General

 

The Company is authorized to issue an aggregate number of 270,000,000 shares of capital stock, of which 20,000,000 shares are preferred stock, $0.00001 par value per share and 250,000,000 shares are common stock, $0.00001 par value per share.

 

Preferred Stock

 

The Company authorized to issue 20,000,000 shares of preferred stock, $0.00001 par value per share. Currently we have no shares of preferred stock issued and outstanding.

 

Common Stock

 

The Company authorized to issue 250,000,000 shares of common stock, $0.00001 par value per share. After the Merger we currently have 20,854,000 shares of common stock issued and outstanding.

 

Each share of common stock shall have one (1) vote per share for all purpose. Our common stock does not provide a preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions or rights. Our common stock holders are not entitled to cumulative voting for purposes of electing members to our board of directors.

 

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Dividends

 

We have not paid any cash dividends to our shareholders. The declaration of any future cash dividends is at the discretion of our board of directors and depends upon our earnings, if any, our capital requirements and financial position, our general economic conditions, and other pertinent conditions. It is our present intention not to pay any cash dividends in the foreseeable future, but rather to reinvest earnings, if any, in our business operations.

 

Warrants

 

As of January 28, 2013, there are 505,400 outstanding warrants to purchase our common shares. The warrants are exercisable for a term of five years with an exercise price of $1.00.

 

Options

 

There are 223,404 outstanding options to purchase our securities.

 

While there is no established public trading market for our Common Stock, our Common Stock is quoted on the OTC Markets OTCQB, under the symbol “MSCT”.

 

The market price of our Common Stock is subject to significant fluctuations in response to variations in our quarterly operating results, general trends in the market and other factors, over many of which we have little or no control. In addition, broad market fluctuations, as well as general economic, business and political conditions, may adversely affect the market for our Common Stock, regardless of our actual or projected performance.

 

Holders

 

As of January 24, 2013, we have 20,854,000 shares of our common stock par value, $0.00001, issued and outstanding. There are approximately 96 holders of our common stock.

 

Transfer Agent and Registrar

 

The Transfer Agent for our capital stock is VStock Transfer, LLC., located at 77 Spruce Street, Suite 201, Cedarhurst, NY 11516.

 

Penny Stock Regulations

 

The Securities and Exchange Commission has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share. Our Common Stock, when and if a trading market develops, may fall within the definition of penny stock and be subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 individually, or $300,000, together with their spouse).

 

For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the “penny stock” rules may restrict the ability of broker-dealers to sell our Common Stock and may affect the ability of investors to sell their Common Stock in the secondary market.

 

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Dividend Policy

 

Any future determination as to the declaration and payment of dividends on shares of our Common Stock will be made at the discretion of our board of directors out of funds legally available for such purpose. We are under no contractual obligations or restrictions to declare or pay dividends on our shares of Common Stock. In addition, we currently have no plans to pay such dividends. Our board of directors currently intends to retain all earnings for use in the business for the foreseeable future. See “Risk Factors.”

 

Equity Compensation Plan Information

 

Currently, there is no equity compensation plan in place.

 

LEGAL PROCEEDINGS

 

There are no material proceedings to which any director or officer, or any associate of any such director or officer, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. No director or executive officer has been a director or executive officer of any business which has filed a bankruptcy petition or had a bankruptcy petition filed against it during the past ten years. No director or executive officer has been convicted of a criminal offense or is the subject of a pending criminal proceeding during the past ten years. No director or executive officer has been the subject of any order, judgment or decree of any court permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities during the past ten years. No director or officer has been found by a court to have violated a federal or state securities or commodities law during the past ten years.

 

In addition, there are no material proceedings to which any affiliate of our Company, or any owner of record or beneficially of more than five percent of any class of voting securities of our Company, is a party that is adverse to our Company or any of our subsidiaries or has a material interest adverse to our Company or any of our subsidiaries. Currently there are no legal proceedings pending or threatened against us. We are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations.

 

There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

RECENT SALES OF UNREGISTERED SECURITIES

 

Reference is made to Item 3.02 of this Current Report on Form 8-K for a description of recent sales of unregistered securities, which is hereby incorporated by reference.

 

INDEMNIFICATION OF OFFICERS AND DIRECTORS

 

The directors and officers of Mascot are indemnified as provided by the Nevada corporate law and our Bylaws. We have agreed to indemnify each of our directors and certain officers against certain liabilities, including liabilities under the Securities Act of 1933. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the provisions described above, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

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We have been advised that in the opinion of the Securities and Exchange Commission indemnification for liabilities arising under the Securities Act is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by one of our directors, officers, or controlling persons in connection with the securities being registered, we will, unless in the opinion of our legal counsel the matter has been settled by controlling precedent, submit the question of whether such indemnification is against public policy to a court of appropriate jurisdiction. We will then be governed by the court’s decision.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

Pursuant to the Agreement, on January 24, 2013, we issued 20,054,000 shares of our Common Stock to the MamaMancini’s Shareholders, their affiliates or assigns, in exchange for 100% of the outstanding shares of MamaMancini’s. Such securities were not registered under the Securities Act of 1933.

 

These securities were not registered under the Securities Act. These securities qualified for exemption under Section 4(2) of the Securities Act since the issuance of securities by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of securities offered. We did not undertake an offering in which we sold a high number of securities to a high number of investors. In addition, these shareholders had the necessary investment intent as required by Section 4(2) of the Securities Act since the Conventions Shareholders agreed to and received share certificates bearing a legend stating that such securities are restricted pursuant to Rule 144 of the Securities Act. This restriction ensures that these securities would not be immediately redistributed into the market and therefore not be part of a “public offering.” Based on an analysis of the above factors, we have met the requirements to qualify for exemption under Section 4(2) of the Securities Act.

 

Item 4.01 Changes in Registrant’s Certifying Accountant.

 

(a) Dismissal of Independent Registered Public Accounting Firm

 

On January 24, 2013, our board of directors dismissed Seale and Beers, CPAs (“Seale and Beers”), as our independent registered public accountant.

 

Seale and Beers’s report on the financial statements for the fiscal years ended June 30, 2012 and 2011 contained no adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principle, other than for a going concern.

 

During the fiscal years ended June 30, 2012 and 2011, and in the subsequent interim period through December 31, 2012, the date of dismissal of Seale and Beers, there were no disagreements with Seale and Beers on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Seale and Beers, would have caused them to make reference to the subject matter of the disagreements in its reports on the financial statements for such year. During the fiscal years ended June 30, 2012 and 2011, and in the subsequent interim period through December 31, 2012, the date of dismissal of Seale and Beers, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

 

We have provided a copy of the above disclosures to Seale and Beers and requested Seale and Beers to provide it with a letter addressed to the U.S. Securities and Exchange Commission stating whether or not Seale and Beers agrees with the above disclosures. A copy of Seale and Beers’s letter, dated January 24, 2012, confirming its agreement with the disclosures in this Item 4.01 is attached as Exhibit 16.1 to this Form 8-K.

 

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(b) New Independent Registered Public Accounting Firm

 

On January 24, 2013, our board of directors approved the engagement of Rosenberg Rich Baker Berman and Company, Certified Public Accountants (“RRBB”), as the Company’s new independent registered public accounting firm.

 

During the fiscal year ended June 30, 2012, and the subsequent interim period prior to the engagement of RRBB, the Company has not consulted RRBB regarding (i) the application of accounting principles to any specified transaction, either completed or proposed; (ii) the type of audit opinion that might be rendered on the Company’s financial statements, and either a written report was provided to the registrant or oral advice was provided that the new accountant concluded was an important factor considered by the registrant in reaching a decision as to the accounting, auditing or financial reporting issue; or (iii) any matter that was either the subject of a disagreement (as defined in Item 304(o)(1)(iv)) or a reportable event (as defined in Item 304(a)(1)(v)).

 

Item 5.01 Changes in Control of Registrant.

 

As explained more fully in Item 2.01, in connection with the Agreement, on January 24, 2013, we issued 20,054,000 shares of our Common Stock to the MamaMancini’s Shareholders, their affiliates or assigns in exchange for the transfer of 100% of the outstanding shares of MamaMancini’s by the MamaMancini’s Shareholders. As such, immediately following the Merger, the MamaMancini’s Shareholders hold approximately 96.2% of the total combined voting power of all classes of our outstanding stock entitled to vote. Reference is made to the disclosures set forth under Item 2.01 of this Current Report on Form 8-K, which disclosure is incorporated herein by reference.

 

In connection with the Closing of the Merger, and as explained more fully in Item 2.01 above under the section titled “Management” and in Item 5.02 of this Current Report dated January 24, 2013, David Dreslin, Mascot’s former President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, and Chairman resigned from these positions.

 

Further, effective January 24, 2013, Mr. Carl Wolf, Mr. Matthew Brown, Mr. Steven Burns, Mr. Alfred D’Agostino and Mr. Thomas Toto, were appointed as members of our board of directors. Finally, effective January 24, 2013, our Directors appointed the following officers:

 

Carl Wolf   Chief Executive Officer
Lewis Ochs   Vice President of Finance
Matthew Brown   President

 

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers.

 

(a) Resignation of Directors

 

Effective January 24, 2013, Mr. David Dreslin resigned as sole member of the board of directors. There were no disagreements between Mr. Dreslin and us or any officer or director of the Company.

 

(b) Resignation of Officers

 

Effective January 24, 2013, Mr. Dreslin resigned as our President, Chief Executive Officer, Chief Financial Officer, and Principal Accounting Officer.

 

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(c) Appointment of Directors

 

Effective January 24, 2013, the following persons were appointed as members of the Board of Directors:

 

Name   Age   Position
         
Carl Wolf   69   Chief Executive Officer and Chairman of  the Board of Directors
         
Matthew Brown   44   President and Director
         
Steven Burns   52   Director
         
Alfred D’Agostino   59   Director
         
Thomas Toto   58   Director
         
Dan Altobello   71   Director
         
Dean Janeway   68   Director

 

Please see also Section 5.02(d) of this current report, whose information is herein incorporated by reference.

 

(d) Appointment of Officers

 

Effective January 24, 2013, the directors appointed the following persons as our executive officers, with the respective titles as set forth opposite his or her name below:

 

Carl Wolf   Chief Executive Officer
Lewis Ochs   Vice President of Finance
Matthew Brown   President

 

The business background descriptions of the newly appointed officers and directors are as follows:

 

Carl Wolf, age 69, has over 35 years of experience in the management and operations of companies in the food industry. Mr. Wolf has served as Chief Executive Officer and Chairman of the Board of MamaMancini’s from February 2010 through the Present. Mr. Wolf was the founder, majority shareholder, Chairman of the Board, and CEO of Alpine Lace Brands, Inc. (formerly NASDAQ: LACE) with over $125 million in wholesale sales. He also founded, managed, and sold MCT Dairies, Inc., a $60 million international dairy component resource company. Other experience in the food industry includes his role as Co-chairman of Saratoga Beverage Company, a publicly traded (formerly NASDAQ: TOGA) bottled water and fresh juice company prior to its successful sale to a private equity firm. Mr. Wolf served an advisor to Mamma Sez Biscotti, a snack and bakery product company (which was sold in a later period to Nonnis, the largest biscotti company in the United States) from 2002 to 2004. Previously he served as Director and on the Audit and Development committees of American Home Food Products, Inc. (OTC PK AHFP), a marketer of Artisanal Brand Cheeses, from 2007 to 2009. Mr. Wolf also served as Chairman of the Board of Media Bay (NASDAQ: MBAY), a direct seller of spoken word through its audio book club and old time radio classic activities and download spoken content, from 2002 to 2004.

 

Mr. Wolf received his B.A. in 1965 from Rutgers University and his M.B.A. in 1966 from the University of Pittsburgh.

 

In evaluating Mr. Wolf’s specific experience, qualifications, attributes and skills in connection with his appointment to our board, we took into account his numerous years of experience in the food industry, as a serial entrepreneur in growing business, his knowledge of publicly traded companies, and his proven track record of success in such endeavors.

 

Matthew Brown, age 44, has over 19 years of experience in the sales and marketing of products in the food industry. Beginning in February 2010 through the present, he has served as President of MamaMancini’s. From April 2001 until January of 2012, he served as the President of Hors D’oeuvres Unlimited, overseeing the day to day operations of their food manufacturing business. He previously worked as a marketing associate from September 1993 to December 1998 at Kraft Foods, Inc., where he dealt with numerous aspects of the company’s marketing of their food products.

 

Mr. Brown received his B.A. from the University of Michigan in 1991 and his M.B.A. from the University of Illinois in 1993.

 

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In evaluating Mr. Brown’s specific experience, qualifications, attributes and skills in connection with his appointment to our board, we took into account his numerous years of experience in sales and marketing, and his proven track record of success in such endeavors.

 

Steven Burns, age 52, has over 20 years of experience in the management and operations of various companies. Mr. Burns has served as a director of MamaMancini’s from February 2010 through the present. Beginning in June 2011 and still presently, he serves as the Chairman of the Board of Directors of Meatball Obsession, LLC. Additionally, beginning in 2006 and still Presently he works as the President and CEO of Point Prospect, Inc., where he oversees the day to day operations of the company, which primarily deal with investments and services in real estate, clean and efficient energy sources, high-quality and healthy food services, and healthcare technology. Prior to that, for a period of 24 years he worked at and was senior executive at Accenture where he led the U.S. Health Insurance Industry Program comprised of approximately 600 professionals. He also has sat on various financial committees and boards of directors throughout his career.

 

Mr. Burns received his B.S. in Business Management from Boston College in 1982.

 

In evaluating Mr. Burns’ specific experience, qualifications, attributes and skills in connection with his appointment to our board, we took into account his numerous years of experience in serving on board of directors, his knowledge of running and managing companies, and his proven track record of success in such endeavors.

 

Alfred D’Agostino, age 59, has over 34 years of experience in the management and ownership of food brokerage and food distribution companies. Mr. D’Agostino has served as a director of MamaMancini’s from February 2010 through the Present. Beginning in March 2001 and still presently, he serves as the President for World Wide Sales Inc., a perishable food broker that services the New York / New Jersey Metropolitan and Philadelphia marketplace. Prior to this he worked from September 1995 until February 2001 as Vice-President of the perishable business unit at Marketing Specialists, a nationwide food brokerage. Previously, from February 1987 until August 1995 he worked as a Partner for the perishable division of Food Associates until its merger with Merket Enterprises.

 

In evaluating Mr. D’agostino’s specific experience, qualifications, attributes and skills in connection with his appointment to our board, we took into account his numerous years of experience in the food brokerage and other food related industries, his knowledge of running and managing companies, and his proven track record of success in such endeavors.

 

Mr. D’Agostino received his B.S. in Business Management from the City College of New York in 1974.

 

Thomas Toto, age 58, has over 32 years of experience in the management and ownership of food brokerage and food distribution companies. Mr. Toto has served as a director of MamaMancini’s from February 2010 through the Present. Beginning in June 2009 and still presently, he serves as the Senior Business manager for World Wide Sales Inc., a perishable food broker that services the New York / New Jersey Metropolitan and Philadelphia marketplace. Prior to this he worked from September 2007 until May 2009 as a Division President for DCI Cheese Co., a company that imported and distributed various kinds of cheeses. Previously from March 1993 until September 2007 he was the President and owner of Advantage International Foods Corporation, where he ran the day to day operations of importing and distributing cheeses around the world.

 

Mr. Toto received his B.A. from Seton Hall University in 1976 and his M.B.A. from Seton Hall University in 1979.

 

In evaluating Mr. Toto’s specific experience, qualifications, attributes and skills in connection with his appointment to our board, we took into account his numerous years of experience in the food brokerage and other food related industries, his knowledge of running and managing companies, and his proven track record of success in such endeavors.

 

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Dan Altobello, age 71, has served as a director of MamaMancini’s since 2012. Since October 2000, Mr. Altobello, Chairman of Altobello Family LP, has been a private investor and active board member of several companies. From September 1995 until October 2000, Mr. Altobello was the Chairman of Onex Food Services, Inc., the parent of Caterair International, Inc. and LSG/SKY Chefs. He is a current member of the boards of directors of DiamondRock Hospitality Company, a publicly-traded hotel REIT, Northstar Senior Care Trust, Inc., a private company that intends to qualify as a REIT, Mesa Air Group, Inc. and Arlington Asset Investment, Corp , a principal investment firm that acquires and holds mortgage-related and other assets. From 2004 to December 2010, he served as a member of the board of JER Investors Trust, Inc., a specialty finance company. Mr. Altobello serves on the advisory board of Thayer | Hidden Creek, a private equity firm. Mr. Altobello is also a trustee of Loyola Foundation, Inc.

 

The Board of Directors determined that Mr. Altobello’s qualifications to serve as a director include his notable business and leadership experience in the areas of specialty finance. He also has experience in the area of of food service distribution, due to his past position as Chairman of Onex Food Services, Inc. His past and present service on multiple public and private company boards, including his service on the audit committee of DiamondRock Hospitality Company and Northstar Senior Care Trust, Inc., provides him with comprehensive experience in the area of corporate governance that can be extremely valuable to Board and Company operations.

 

Mr. Altobello, received his B.A. from Georgetown University in June 1963 and his M.B.A. from Loyola University Maryland in June 1978.

 

Dean Janeway, age 68, has served as a director of MamaMancini’s since 2012. Mr. Janeway is an executive with more than 40 years of broad leadership skills and extensive experience in the areas of corporate strategy, business development, operational oversight and financial management. From 1966 through 2011, Mr. Janeway served in various positions at Wakefern Food Corp., the largest retailer-owned cooperative in the United States. From 1966 through 1990. Mr. Janeway advanced through various positions of increasing responsibility including positions in Wakefern’s accounting, merchandising, dairy-deli, and frozen foods divisions. From 1990 through 1995 Mr. Janeway provided oversight for all of Wakefern’s procurement, marketing, merchandising, advertising and logistics divisions. From 1995 until his retirement in 2011, Mr. Janeway served as President and Chief Operating Officer of “Wakefern” providing primary oversight for the company’s financial and treasury functions, human resources, labor relations, new business development, strategic acquisitions, government relations, corporate social responsibility, sustainability initiatives and member relations. Mr. Janeway previously served as the chairman for the National Grocers Association from 1993 through 2001. From 2009 through the present, Mr. Janeway has served as the Chairman of the Foundation for the University of Medicine and Dentistry of New Jersey.

 

The Board of Directors determined that Mr. Janeway’s qualifications to serve as a director include his notable business and leadership experience in the all areas of management, particularly in the food industry. He also has experience in the area of whole sale wholesale distribution, due to his past position at Wakefern and his knowledge of running and managing companies and his proven track record of success in such endeavors will be invaluable to the Company going forward.

 

Mr. Janeway received his B.A. in Marketing from Rutgers University, and his M.B.A from Wharton School of Business, University of Pennsylvania.

 

Lewis Ochs, age 66, has over 40 years of experience in the financial and accounting industry. From February 2010 through the present he has served as the Executive Vice President of Finance for MamaMancini’s. Additionally, beginning in January 2003 and still presently, he serves as the CFO of Hors D’oeuvres Unlimited, overseeing all of the financial aspects of the company. From 1979 through 1991, he also was an owner of Captive Plastics, Inc., a large molding manufacturer, directly contributing to the overseeing of over 500 union and non-union employees. At various times in his career he also acted as an independent consultant utilizing his financial skills including forensic accounting, restructuring of businesses, and as a field examiner for lending institutions.

 

Mr. Ochs received his B.S. in Accounting from the University of Akron in 1970.

 

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In evaluating Mr. Ochs’ specific experience, qualifications, attributes and skills in connection with his appointment to our board, we took into account his numerous years of experience in finance and accounting, and his proven track record of success in such endeavors.

 

Family Relationships

 

Mr. Matthew Brown, our President, is the son-in-law of Mr. Carl Wolf, our Chief Executive Officer.

 

EMPLOYMENT AGREEMENTS OF THE EXECUTIVE OFFICERS

 

Effective April 1, 2011, the Company and Mr. Dreslin, our Chief Executive Officer, entered into a two (2) year employment agreement (the “Employment Agreement”). As of the Closing Date, Mr. Dreslin’s employment agreement was terminated and he is owed no further compensation. While the Company does not have any employment agreements with its executives, on March 5, 2012, MamaMancini’s entered into written employment agreements with Mr. Wolf, Mr. Ochs, and Mr. Brown. The Company intends to enter similar agreements with these executives in the immediate future. Both Mr. Brown and Mr. Wolf will devote their efforts to the Company on a full-time basis. Mr. Ochs will devote 50-60% of his efforts in a full working day to the Company.

 

MamaMancini’s Employment Agreements

 

Carl Wolf

 

On March 5, 2012 MamaMancini’s entered into an Employment Agreement with Mr. Carl Wolf as Chief Executive Officer for a term of 3 years, terminating on March 5, 2015, unless otherwise renewed by MamaMancini’s. As compensation for his services, Mr. Wolf receives a base salary of $150,000 per year. Such base salary is reviewed yearly with regard to possible increase. In addition, Mr. Wolf is eligible to receive an annual bonus as determined by the Board. As part of the agreement, Mr. Wolf is subject to confidentiality provisions regarding MamaMancini’s, and certain covenants not to compete. Mr. Wolf is also entitled to receive Termination Payments (as defined Section 11.1 of Mr. Wolf’s Employment Agreement) in the event his employment is terminated in conjunction with the following:

 

Reason for Termination   Payment to be Received
Death   Termination Payments(1)
Disability   Termination Payments plus 12 months Base Salary
Without Cause   Termination Payments plus lesser of 12 months Base Salary or remaining Initial Term of employment
For Cause   Termination Payments minus any yearly bonus

 

(1) Termination Payment equals: (i) any unpaid Base Salary through the date of termination, (ii) any Bonus for the year in which such termination occurs prorated as of the date of termination, (iii) accrued and unpaid vacation pay for the year in which such termination occurs prorated as of the date of termination, (iv) any sums due under any of MamaMancini’s’s benefit plans, and (v) any unreimbursed expenses incurred by the Employee on MamaMancini’s’s behalf.

 

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Matthew Brown

 

On March 5, 2012 MamaMancini’s entered into an Employment Agreement with Mr. Matthew Brown as President of MamaMancini’s for a term of 3 years, terminating on unless otherwise renewed by MamaMancini’s. As compensation for his services, Mr. Brown receives a base salary of $110,000 per year. Such base salary is reviewed yearly with regard to possible increase. In addition, Mr. Brown is eligible to receive an annual bonus as determined by the Board. As part of the agreement, Mr. Brown is subject to confidentiality provisions regarding MamaMancini’s, and certain covenants not to compete. Mr. Brown is also entitled to receive Termination Payments (as defined in Section 11.1 of Mr. Brown’s Employment Agreement) in the event his employment is terminated in conjunction with the following:

  

Reason for Termination   Payment to be Received
Death   Termination Payments(1)
Disability   Termination Payments plus 12 months Base Salary
Without Cause   Termination Payments plus lesser of 12 months Base Salary or remaining Initial Term of employment
For Cause   Termination Payments minus any yearly bonus

 

(1) Termination Payment equals: (i) any unpaid Base Salary through the date of termination, (ii) any Bonus for the year in which such termination occurs prorated as of the date of termination, (iii) accrued and unpaid vacation pay for the year in which such termination occurs prorated as of the date of termination, (iv) any sums due under any of MamaMancini’s benefit plans, and (v) any unreimbursed expenses incurred by the Employee on the MamaMancini’s’s behalf.

 

Lewis Ochs

 

On March 5, 2012 MamaMancini’s entered into an Employment Agreement with Mr. Lewis Ochs as our Executive Vice President of Finance for a term of 1 year, terminating on March 5, 2013, unless otherwise renewed by MamaMancini’s. As compensation for his services, Mr. Ochs receives a base salary of $60,000 per year. Such base salary is reviewed yearly with regard to possible increase. In addition, Mr. Ochs is eligible to receive an annual bonus as determined by the Board. As part of the agreement, Mr. Ochs is subject to confidentiality provisions regarding MamaMancini’s, and certain covenants not to compete. Mr. Ochs is also entitled to receive Termination Payments (as defined in Section 11.1 of Mr. Ochs’ Employment Agreement) in the event his employment is terminated in conjunction with the following:

 

Reason for Termination   Payment to be Received
Death   Termination Payments(1)
Disability   Termination Payments plus 12 months Base Salary
Without Cause   Termination Payments plus lesser of 12 months Base Salary or remaining Initial Term of employment
For Cause   Termination Payments minus any yearly bonus

 

(1) Termination Payment equals: (i) any unpaid Base Salary through the date of termination, (ii) any Bonus for the year in which such termination occurs prorated as of the date of termination, (iii) accrued and unpaid vacation pay for the year in which such termination occurs prorated as of the date of termination, (iv) any sums due under any of MamaMancini’s’s benefit plans, and (v) any unreimbursed expenses incurred by the Employee on the MamaMancini’s’s behalf.

 

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Item 9.01 Financial Statement and Exhibits.

 

(a) Financial Statements of Business Acquired. The Audited Financial Statements of MamaMancini’s, are filed as Exhibit 99.2 to this Current Report on Form 8-K and are incorporated herein by reference.

 

(d) Exhibits. Exhibit No. Description

 

Exhibit
No.
  Description
2.1   Acquisition and Plan of Merger Agreement dated January 24, 2013 by and among Mascot Properties, Inc., Mascot Properties Acquisition Corp., and MamaMancini’s Inc.
     
3.1   Certificate of Incorporation (incorporated herein by reference to exhibit 3.1 of the Form S-1 filed on May 24, 2011).
     
3.2   By-Laws (incorporated herein by reference to exhibit 3.2 of the Form S-1 filed on May 24, 2011).
     
3.3  

Certificate of Incorporation of MamaMancini’s, Inc.

     
3.4  

By-Laws of MamaMancini’s 

     
10.1  

Supply Agreement between MamaMancini’s Inc. and Hors d’oeuvres Unlimited, Inc. 

     
10.2  

Development and License Agreement 

     
16.1   Letter by Seale and Beers dated January 24, 2013.
     
99.1   Letter of Resignation from David Dreslin, dated January 23, 2013.
     
99.2   MamaMancini’s financial statements for the three months ended September 30, 2012 and Audited financial statements for the fiscal years ended December 31, 2011 and December 31, 2010.
     
99.3   MamaMancini’s Pro Forma Balance Sheet as of September 30, 2012.

 

101.INS*   XBRL Instance Document
101.SCH*   XBRL Taxonomy Extension Schema Document
101.CAL*   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*   XBRL Taxonomy Extension Label Linkbase Document
101.PRE*   XBRL Taxonomy Extension Presentation Linkbase Document

 

 * Filed Herewith.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  Mascot Properties, Inc.
     
Date: January 30, 2013 By: /s/ Carl Wolf
  Name: Carl Wolf
  Title: Chief Executive Officer

  

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Exhibit 2.1

  

ACQUISITION AGREEMENT AND PLAN OF MERGER

 

This ACQUISITION AGREEMENT AND PLAN OF MERGER (this “Agreement”) is made and entered into on this 24th day of January, 2013, by and among Mascot Properties, Inc., a corporation incorporated under the laws of the State of Nevada (the “Parent”), Mascot Properties Acquisition Corp., a corporation incorporated under the laws of the State of Delaware and a wholly-owned subsidiary of the Parent (the “Merger Sub”), David Dreslin, an individual residing at 7985 113th Street, Suite 220 Seminole, Florida 33772 (the “Majority Shareholder”), and MamaMancini’s, Inc., a corporation incorporated under the laws of the State of Delaware (“MamaMancini’s”).

 

W I T N E S S E T H:

 

WHEREAS, Parent is a corporation incorporated under the laws of the State of Nevada pursuant to Articles of Incorporation filed with the Nevada Secretary of State on July 22, 2009 (the “Articles of Incorporation”).

 

WHEREAS, the Merger Sub is a corporation incorporated under the laws of the State of Delaware pursuant to Articles of Incorporation filed with the Delaware Secretary of State on January 17, 2013 and is a wholly-owned subsidiary of Parent.

 

WHEREAS, MamaMancini’s was incorporated under the laws of the State of Delaware pursuant to Articles of Incorporation filed with the Delaware Secretary of State on February 21, 2012;

 

WHEREAS, the Majority Shareholder currently resides at 7985 113th Street, Suite 220 Seminole, Florida 33772 and is the owner of the majority of the shares of Common Stock of the Parent;

 

WHEREAS, the board of directors of the Parent and the Merger Sub as well as the Majority Shareholder have each determined that a merger of Merger Sub with and into MamaMancini’s (the “Merger”), upon the terms and subject to the conditions set forth in this Agreement, is in the best interests of the Parent, the Merger Sub and the shareholders thereof, and as such, the respective boards of directors of each have approved the Merger;

 

WHEREAS, the board of directors of MamaMancini’s as well as the majority of its shareholders have determined that the Merger, upon the terms and subject to the conditions set forth in this Agreement, is in the best interests of the shareholders of MamaMancini’s and its board of directors has approved the Merger;

 

WHEREAS, the Parent, Merger Sub, Majority Shareholder and MamaMancini’s desire to make certain representations, warranties, covenants and agreements in connection with the Merger, as well as prescribe various conditions precedent to the effectiveness of the Merger;

 

WHEREAS, for federal income tax purposes, the parties intend that the Merger shall qualify as a reorganization under the provisions of Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended (the “Code”) and shall be a tax free exchange;

 

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NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements contained herein, the parties agree as follows:

 

ARTICLE I.

DEFINITIONS

 

When used in this Agreement (and any Exhibits and Schedules in which terms are not otherwise defined), the following terms shall have the following meanings:

 

1.01 Common Stock. “Common Stock” shall mean the outstanding shares of common stock, $0.00001 par value, of Parent or Merger Sub.

 

1.02 Certificate of Merger. “Certificate of Merger” shall mean a Certificate of Merger in substantially the form attached to this Agreement as Exhibit A and to be filed with the Secretary of State of the State of Delaware.

 

1.03 Closing. “Closing” and “Closing Date” shall mean the closing of the transactions contemplated by this Agreement.

 

1.04 Effective Time. “Effective Time” shall mean the date of which the Certificate of Merger is properly filed with the Secretary of State of the State of Delaware, as required under the applicable provisions of the law of such jurisdictions, or at such other time as is permissible in accordance with the DGCL.

 

1.05 Liens. “Lien” shall mean any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by statute or other law.

 

1.06 MamaMancini’s Shares. “MamaMancini’s Share(s)” shall mean the shares of common stock, par value $0.001 per share, of MamaMancini’s, Inc.

 

1.07 Material Adverse Change; Material Adverse Effect. “Material Adverse Change” or “Material Adverse Effect” means, when used in connection with MamaMancini’s, Parent or Merger Sub, any change or effect that either individually or in the aggregate with all other such changes or effects is materially adverse to the business, assets, properties, condition (financial or otherwise) or results of operations of such party taken as a whole.

 

1.08 Person. “Person” means an individual, corporation, partnership, joint venture, association, trust, unincorporated organization or other entity.

 

1.09 Subsidiary. A “Subsidiary” of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, fifty percent (50%) or more of the equity interests) is owned directly or indirectly by such first person.

 

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1.10 Surviving Corporation. “Surviving Corporation” shall have the meaning set forth in Section 2.01.

 

1.11 Tax Return. “Tax Return” shall include all returns and reports (including elections, declarations, disclosures, schedules, estimates and information returns (including Form 1099 and partnership returns filed on Form 1065, as applicable) required to be supplied to a Tax authority relating to Taxes.

 

ARTICLE II.

THE MERGER

 

2.01 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, the Certificate of Merger and in accordance with the Delaware General Corporation Law (the “DGCL”), MamaMancini’s shall be merged with and into Merger Sub at the Effective Time of the Merger. At the Effective Time of the Merger, the Merger Sub shall merge with MamaMancini’s, and MamaMancini’s shall continue as a subsidiary of the Parent and shall continue its corporate existence under the laws of the State of Delaware (the “Surviving Corporation”).

 

2.02 Effective Time. The Merger shall become effective on the date and at the time the Certificate of Merger is filed with the Secretary of State of Delaware in accordance with provisions of the DGCL, or at such other time as is permissible in accordance with the DGCL. The time at which the Merger shall become effective as aforesaid is referred to hereinafter as the “Effective Time.”

 

2.03 Closing. The closing of the Merger (the “Closing”) shall occur concurrently with the Effective Time (the “Closing Date”). The Closing shall occur at the offices of Lucosky Brookman LLP, 33 Wood Avenue South, 6th Floor, Iselin, NJ, 08830, unless another place is agreed to in writing by the parties hereto.

 

2.04 Manner and Basis of Converting Shares.

 

(a) Each MamaMancini’s Share that shall be outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into the right to receive one share of Common Stock of the Merger Sub, which will immediately thereafter be exchanged for one share of Common Stock of the Parent, so that at the Effective Time, Parent shall be the holder of all of the issued and outstanding shares of MamaMancini’s and the MamaMancini’s Shareholders shall have received one share of the Common Stock of Parent for every one share of MamaMancini’s owned immediately prior to the Effective Time.

 

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(b)  Prior to the Effective Time, the shareholders of the Merger Sub shall surrender certificates, if applicable, evidencing one hundred percent (100%) of the Merger Sub’s Common Stock.  As of the Effective Time, all Common Stock of the Merger Sub issued and outstanding immediately prior to the Effective Time shall no longer be outstanding and shall automatically be cancelled and retired and exchanged for shares of Common Stock of the Parent and simultaneously therewith the Parent will issue and deliver twenty million fifty four thousand (20,054,000) shares of its Common Stock to the Merger Sub representing the shares to be issued in exchange for one hundred percent (100%) of MamaMancini’s Shares. 

 

(c) The MamaMancini’s Shares, which immediately prior to the Effective Time constitutes all of the issued and outstanding shares of common stock of MamaMancini’s beneficially owned by the stockholders listed on its books and records, shall, by virtue of the Merger and without any action on the part of the holders thereof, be converted into the right to receive one share of Common Stock of the Parent for each one MamaMancini’s Share.  The Merger Sub will issue to the MamaMancini’s Shareholders, as of the Effective Time, the twenty million fifty four thousand (20,054,000) shares of the Parent’s Common Stock, in exchange for the MamaMancini’s Shares.

 

(d) Parent shall issue to each MamaMancini’s Shareholder the number of shares of Common Stock of the Parent that such stockholder shall be entitled to receive as set forth in Section 2.04 (b) hereof.  To the extent that any certificates evidencing shares of MamaMancini’s common stock were issued prior to the Effective Time, each such certificate or an affidavit and indemnification in form reasonably acceptable to counsel for the Parent stating that such stockholder has lost such certificate(s) must be surrendered or delivered to Parent, as the case may be, and all such shares shall be deemed at and after the Effective Time to have no value.

 

2.05 Effective Date of Merger. As soon as practicable following the satisfaction or waiver of the conditions set forth in Article IV, the parties shall file the Certificate of Merger with the Secretary of State of the State of Delaware executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required thereunder. The Merger shall become effective at such date as the Certificate of Merger is duly filed with the Secretary of State of Delaware, or at such other time as is permissible in accordance with the DGCL and MamaMancini’s shall agree (the time the Merger becomes effective being the “Effective Time of the Merger”). Parent shall use reasonable efforts to have the Closing Date and the Effective Time of the Merger to be the same day.

 

2.06 Effects of the Merger. The Merger shall have the effects set forth in the applicable provisions of the DGCL.

 

2.07 Articles of Incorporation; Bylaws; Purposes.

 

(a) The Articles of Incorporation of the Parent in effect immediately prior to the Effective Time of the Merger shall be the Articles of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.

 

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(b) The Bylaws of the Parent in effect at the Effective Time of the Merger shall be the Bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law.

 

(c) The purposes of the Surviving Corporation and the total number of its authorized common stock shall be as set forth in the Certificate of Incorporation of the Parent in effect immediately prior to the Effective Time of the Merger until such time as such purposes and such number may be amended as provided in the Certificate of Incorporation of the Surviving Corporation and by applicable law.

 

ARTICLE III.

EFFECT OF THE MERGER ON THE COMMON STOCK

AND THE GOVERNANCE OF THE CONSTITUENT CORPORATIONS

 

3.01 Effect on Common Stock. As of the Effective Time of the Merger, by virtue of the Merger and without any action on the part of the holders of the MamaMancini’s Shares:

 

(a) Cancellation of Certain shares of the Majority Shareholder. On the Closing Date MamaMancini’s shall pay $295,000 to the Majority Shareholder for the cancellation of his 80,000,000 shares of the Parent. In addition, in further consideration for the cancellation of these shares, the Majority Shareholder will be entitled to retain and continue to operate that certain business which the Parent is operating prior to the Effective Time, including, but not limited to, that certain real estate management business in operation prior to the Effective Time (the “Existing Business”). The Majority Shareholder shall assume any and all assets and liabilities related to the Existing Business and the Existing Business shall operate, following the Effective Time, separately and independently of the Parent and the Merger Sub and utilizing a different name than that of the name of the Parent or the Merger Sub.

 

(b) Exchange. Each MamaMacini’s Share issued and outstanding immediately prior to the Effective Time of the Merger shall be converted so that approximately one (1) share of Merger Sub’s Common Stock is issued for each one MamaMancini’s Share held (the “Merger Consideration”) and shall subsequently be exchanged for Parent’s Common Stock at a ratio of one-to-one (1:1) (the “Exchange Ratio”). For purposes of illustration, MamaMancini’s shareholders currently own 20,054,000 of MamaMancini’s Shares which will be converted on a pro-rata basis in exchange for 20,054,000 of the Merger Sub’s Common Stock and subsequently 20,054,000 of the Parent’s Common Stock.

 

(c) Assumption. All options to purchase MamaMancini’s Shares then outstanding, and all outstanding warrants to purchase MamaMancini’s Shares then outstanding in each case whether vested or unvested, shall be assumed by Parent in accordance with Section 3.01(d) hereof.

 

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(d) Stock Options and Warrants. Each outstanding option to purchase MamaMancini’s Shares (each a “Stock Option”), and all outstanding warrants to purchase MamaMancini’s Shares then outstanding, whether or not vested (each a “Warrant”), shall by virtue of the Merger be assumed by Parent. Each Stock Option and Warrant so assumed by Parent under this Agreement will continue to have, and be subject to, the same terms and conditions of such options immediately prior to the Effective Time of the Merger (including, without limitation, any repurchase rights or vesting provisions and provisions regarding the acceleration of vesting on certain transactions), except that (i) each Stock Option and Warrant will be exercisable (or will become exercisable in accordance with its terms) for that number of whole shares of Parent’s Common Stock equal to the product of the number of MamaMancini’s Shares that were issuable upon exercise of such Stock Option or Warrant immediately prior to the Effective Time of the Merger multiplied by the Exchange Ratio, rounded down to the nearest whole number of shares of Parent’s Common Stock if the said product is equal to or less than the fraction of one-half (.5) of one share of Parent’s Common Stock or rounded up to the nearest whole number of shares of Parent’s Common Stock if the said product is greater than the fraction of one-half (.5) of one share of Parent’s Common Stock, and (ii) the per share exercise price for the shares of Parent’s Common Stock issuable upon exercise of such assumed Stock Option and Warrant will be equal to the quotient determined by dividing the exercise price per each MamaMancini’s Share at which such Option and Warrant were exercisable immediately prior to the Effective Time of the Merger by the Exchange Ratio, rounded up to the nearest whole cent. Parent shall comply with the terms of all such Stock Options and Warrants and use its best efforts to ensure, to the extent required by, and permitted under the Code or other relevant laws and regulations that any Stock Option that qualified for tax treatment under Section 424(b) of the Code prior to the Effective Time of the Merger continue to so qualify after the Effective Time of the Merger. Parent shall take all corporate actions necessary to reserve for issuance a sufficient number of shares of Parent’s Common Stock for delivery upon exercise of all Stock Options and Warrants.

 

(e) Fractional Stock. No fractional shares of Common Stock shall be issued in the Merger. If the product of the number of shares a MamaMancini’s shareholder holds immediately prior to the Closing would result in the issuance of a fractional share of Merger Sub’s Common Stock, that product will be rounded down to the nearest whole number of shares of Merger Sub’s Common Stock if it is equal to or less than the fraction of one-half (.5) of one share or round up to the nearest whole number of shares of Merger Sub’s Common Stock if it is greater than the fraction of one-half (.5) of one share of Merger Sub’s Common Stock.

 

(f) Transaction Disclosure. The officers and directors of Parent existing prior to the Effective Time shall cooperate and sign an undertaking to assist the Surviving Corporation in all respects disclosing the transactions set forth herein and other information required by the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

(g) No Further Certificates. There shall be no further transfer on the records of MamaMancini’s of certificates representing MamaMancini’s Shares and there shall be no further transfer on the records of the Merger Sub of certificates representing securities of the Merger Sub following the Effective Time of the Merger. If any certificate for shares of Common Stock is to be issued in a name other than that in which the certificate for Merger Sub’s or MamaMancini’s securities surrendered for exchange is registered, it shall be a condition of such exchange that the certificate so surrendered shall be properly endorsed, with signature guaranteed, or otherwise in proper form for transfer and that the person requesting such exchange shall pay to Parent or its transfer agent any transfer or other taxes or other costs required by reason of the issuance of certificates for such shares of Common Stock in a name other than that of the registered holder of the certificate surrendered, or establish to the satisfaction of Parent or its transfer agent that all taxes have been paid.

 

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(h) No Further Ownership Rights in MamaMancini’s Shares. All shares of Common Stock of the Parent issued upon the surrender of MamaMancini’s Shares in accordance with the terms of this Article III shall be deemed to have been issued (and paid) in full satisfaction of all rights pertaining to MamaMancini’s Shares.

 

(j) Governance. The Board of Directors of the Parent and MamaMancini’s will have an identical composition with the same members sitting on each Board of Directors. Subject to annual shareholder votes, the composition of the Board of Directors of the Parent and MamaMancini’s will remain identical thereafter.

 

ARTICLE IV.

CONDITIONS PRECEDENT TO THE OBLIGATION

OF MamaMancini’s TO EFFECT THE MERGER

 

The obligation of MamaMancini’s to effect the Merger is subject, at the option of MamaMancini’s, to the fulfillment on or prior to the Closing Date of the following conditions, any one or more of which may be waived by MamaMancini’s and its shareholders in writing:

 

4.01 Representations and Covenants. The representations and warranties of the Parent, Merger Sub and Majority Shareholder contained in this Agreement shall be true in all respects on and as of the Closing Date with the same force and effect as though made on and as of the Closing Date. The Parent, Merger Sub and Majority Shareholder shall each have performed and complied with all covenants and agreements required by this Agreement to be performed or complied with by the Parent, Merger Sub and/or Majority Shareholder on or prior to the Closing Date.

 

4.02 Governmental Permits and Approvals in Corporate Resolutions. Any and all permits and approvals from any governmental or regulatory body required for the lawful consummation of the Closing shall have been obtained. The Boards of Directors and shareholders of Parent and Merger Sub shall have each approved the transactions contemplated by this Agreement, and Parent and Merger Sub shall have delivered to MamaMancini’s resolutions by their respective Boards of Directors and shareholders each certified by an officer of Parent and Merger Sub, as applicable, authorizing the transactions contemplated by this Agreement.

 

4.03 Satisfactory Business Review. MamaMancini’s and their representatives shall have completed the review of the business of Parent and Merger Sub and none of the information revealed thereby or in the financial statements included in the Parent SEC Documents (as defined herein) and/or delivered to MamaMancini’s prior to the Closing Date has resulted in, or in the opinion of them may result in, an adverse change in the assets, properties, business, operations or condition (financial or otherwise) of Parent or Merger Sub.

 

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4.04 No Material Adverse Change. Between the date of this Agreement and the Closing Date: (a) there shall have been no Material Adverse Change to Parent or Merger Sub or their respective business, financial position, or results of operation excluding events which affect companies businesses generally; (b) there shall have been no adverse federal, state, or local legislative or regulatory change affecting in any material respect the services, products or business of Parent or Merger Sub; and (c) none of the properties or assets of Parent or Merger Sub or its subsidiaries shall be damaged by fire, flood, casualty, act of God or the public enemy or other cause (regardless of insurance coverage for such damage) which damage may, in the opinion of MamaMancini’s have a Material Adverse Effect on Parent or Merger Sub.

 

4.05 Litigation. No action, suit, or proceeding shall have been instituted before any court or governmental or regulatory body or instituted or threatened by any governmental or regulatory body, to restrain, modify or prevent the carrying out of the transactions contemplated hereby, or to seek damages or a discovery order in connection with such transactions, or which has or may have, in the opinion of the MamaMancini’s, a Material Adverse Effect on the assets, properties, business, operations, or condition (financial or otherwise) of Parent or Merger Sub.

 

4.06 Review of Financial Statements. MamaMancini’s designated representatives shall complete a satisfactory review of financial statements of Parent and Merger Sub immediately prior to Closing in accordance with the provisions herein.

 

4.07 Financial Condition. Merger Sub shall have no assets and no liabilities at the time of Closing.

 

4.08 Merger Sub Operations. Merger Sub shall have conducted no operations, had no activity and have not issued or undertaken any obligation to issue any securities of any nature other than in connection with the Merger as set forth herein.

 

4.09 Other Documents. Parent and Merger Sub shall have delivered such other documents, instruments, and certificates, if any, as are required to be delivered pursuant to the provisions of this Agreement or which may reasonably be requested by MamaMancini’s in furtherance of the provisions of this Agreement, including, but not limited to, the documents, instruments and certificates contained in Article V hereof.

 

4.10 Agreement. The officers of Parent and Merger Sub shall have delivered to MamaMancini’s duly executed copies of this Agreement and the Certificate of Merger as required by applicable law.

 

4.11 Shareholder Approval. This Agreement and the transactions contemplated by this Agreement shall have been approved by the majority of the shareholders of MamaMancini’s, the majority of the shareholders of Parent and one hundred percent (100%) of the shareholders of the Merger Sub.

 

4.12 Other Legal Requirements. All statutory and other legal requirements for the valid consummation of the Merger shall have been fulfilled. No law or regulation shall have passed or been enacted that would prevent the consummation of the transactions contemplated by this Agreement.

 

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ARTICLE V.

DOCUMENTS TO BE DELIVERED TO MAMAMANCINI’S

BY PARENT AND MERGER SUB

 

5.01 Documents. The following documents shall be delivered to MamaMancini’s by Parent and the Merger Sub prior to closing:

 

(a) Certified copies of resolutions of the Board of Directors and shareholders of the Parent and Merger Sub approving and authorizing the execution, delivery and performance of this Agreement and authorizing all of the necessary and proper action to enable Parent and Merger Sub to comply with the terms of this Agreement.

 

(b) The corporate book of Parent and Merger Sub.

 

(c) A list of the authorized and outstanding securities of Parent and Merger Sub certified by their transfer agents.

 

(d) A list of the officers and directors of Parent and Merger Sub.

 

(e) Certified copies of the Articles of Incorporation and bylaws currently in effect of Parent and Merger Sub.

 

(f) Copies of all contracts, agreements or commitments in which Parent or Merger Sub is a party.

 

(g) A list of all fringe benefit plans and programs applying to employees of Parent and Merger Sub including but not limited to, pension, profit sharing, life insurance, medical, bonus, incentive and similar plans and the approximate annual cost of each.

 

(h) A list of all employees of Parent and Merger Sub.

 

(i) A list of all letters, patents, patent applications, inventions upon which patent application have not yet been filed, trade names, trademarks, trademark registrations and applications, copyrights, copyright registrations, both domestic and foreign presently owned by Parent and Merger Sub together with the corporate owner.

 

(j) Copies of all financing or loan agreements, mortgages or similar agreements to which Parent and Merger Sub are a party.

 

(k) Copies of all powers of attorney granted by Parent or Merger Sub.

 

(l) A list of any insurance policy owned by Parent or Merger Sub, with the name of the insurance carrier, the policy number, a brief description of the coverage, the annual premium, the corporate owner and any claims pending.

 

(m) Such other instruments and documents as are required to be delivered pursuant to the provisions of this Agreement or which may be requested by MamaMancini’s prior to the Closing Date.

 

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ARTICLE VI.

REPRESENTATIONS AND WARRANTIES

 

6.01 Representations and Warranties of MamaMancini’s. Except as otherwise disclosed by MamaMancini’s prior to the Closing Date, MamaMancini’s represents and warrants to Parent as follows:

 

(a) Organization, Standing and Corporate Power. MamaMancini’s is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has the requisite organizational power and authority to carry on its business as now being conducted. MamaMancini’s is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed (individually or in the aggregate) would not have a Material Adverse Effect.

 

(b) Subsidiaries. MamaMancini’s does not have any subsidiaries.

 

(c) Capital Structure. The issued and outstanding shares of MamaMancini’s consists of 20,054,000 shares that are held by approximately 96shareholders as listed on the Company’s books and records and set forth on Schedule I hereto. MamaMancini’s has no other securities of any nature issued, reserved for issuance or outstanding. All outstanding MamaMancini’s Shares are duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights.

 

(d) Authority; Non-contravention. MamaMancini’s has the requisite power and authority to enter into this Agreement and to consummate the Merger. The execution and delivery of this Agreement by MamaMancini’s and the consummation by MamaMancini’s of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of MamaMancini’s. This Agreement has been duly executed and delivered by MamaMancini’s and constitutes a valid and binding obligation of MamaMancini’s, enforceable against MamaMancini’s in accordance with its terms. The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of or “put” right with respect to any obligation or to loss of a material benefit under, or result in the creation of any material lien upon any of the properties or assets of MamaMancini’s, except, with respect to this Agreement, for the filing of the Certificate of Merger with the Secretary of State of Delaware.

 

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(f) Litigation; Labor Matters; Compliance with Laws.

 

(i) To the knowledge of MamaMancini’s officers or directors, there is no suit, action or proceeding or investigation pending or threatened against or affecting MamaMancini’s or any basis for any such suit, action, proceeding or investigation that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or prevent, hinder or materially delay the ability of MamaMancini’s to consummate the transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule or order of any governmental entity or arbitrator outstanding against MamaMancini’s having, or which, insofar as reasonably could be foreseen by MamaMancini’s, in the future could have, a Material Adverse Effect.

 

(ii) To the knowledge of MamaMancini’s officers or directors, the conduct of the business of MamaMancini’s complies with all statutes, laws, regulations, ordinances, rules, judgments, orders, decrees or arbitration awards applicable thereto except for such violation thereof would not have a Material Adverse Effect

 

6.02 Representations and Warranties of Parent, Merger Sub and Majority Shareholder. Except as set forth in the disclosure schedule delivered by Parent to MamaMancini’s at the time of execution of this Agreement, Parent, Merger Sub and Majority Shareholder each represent and warrant to MamaMancini’s as follows:

 

(a) Organization, Standing and Corporate Power. Parent and Merger Sub are (or at Closing will be) duly incorporated, validly existing and in good standing under the laws of the State of Nevada and Delaware, respectively, and each has the requisite corporate power and authority to carry on its business as now being conducted. Parent and Merger Sub are duly qualified or licensed to do business and is in good standing in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed (individually or in the aggregate) would not have a Material Adverse Effect with respect to Parent.

 

(b) Subsidiaries.

 

(i) The Parent has no Subsidiaries other than the Merger Sub. Merger Sub is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. The Merger Sub was formed solely to effectuate the Merger and has not conducted any business operations since its organization. The Parent has delivered or made available to MamaMancini’s complete and accurate copies of the charter, bylaws or other organizational documents of the Merger Sub. The Merger Sub has no assets, it has no liabilities or other obligations, and it is not in default under or in violation of any provision of its charter, bylaws or other organizational documents. All shares of the Merger Sub are owned by the Parent free and clear of any restrictions on transfer (other than restrictions under the Securities Act and state securities laws), claims, security interests, options, warrants, rights, contracts, calls, commitments, equities and demands. There are no outstanding or authorized options, warrants, rights, agreements or commitments to which the Parent or the Merger Sub is a party or which are binding on any of them providing for the issuance, disposition or acquisition of any capital stock of the Merger Sub (except as contemplated by this Agreement). There are no outstanding stock appreciation, phantom stock or similar rights with respect to the Merger Sub. There are no voting trusts, proxies or other agreements or understandings with respect to the voting of any capital stock of the Merger Sub.

 

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(ii) At all times from July 22, 2009 through the date of this Agreement, the business and operations of the Parent have been conducted exclusively through the Parent.

 

(iii) The Parent does not control directly or indirectly or have any direct or indirect participation or similar interest in any corporation, partnership, limited liability company, joint venture, trust or other business association which is not a Subsidiary.

 

(c) Capital Structure. The authorized capital stock of Parent consists of (i) 250,000,000 shares of common stock, $0.00001 par value, of which 104,208,000 shares are issued and outstanding as of the date hereof, (ii) 20,000,000 shares of preferred stock, $0.00001 par value, of which no shares are issued and outstanding as of the date hereof. There are no outstanding bonds, debentures, notes or other indebtedness or other securities of Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of Parent may vote. There are no outstanding securities, options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any kind to which Parent is a party or by which it is bound obligating Parent to issue, deliver or sell, or cause to be issued, delivered or sold, additional Common Stock of Parent or other equity or voting securities of Parent or obligating Parent to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, arrangement or undertaking.  There are no outstanding contractual obligations, commitments, understandings or arrangements of Parent to repurchase, redeem or otherwise acquire or make any payment in respect of any Common Stock of the Parent or any other securities of Parent. There are no agreements or arrangements pursuant to which Parent is or could be required to register Parent’s Common Stock or other securities under the Securities Act or other agreements or arrangements with or among any holders of Parent or with respect to any securities of Parent. The official shareholders report delivered to MamaMancini’s from Parent’s transfer agent is complete and accurate in all respects.

 

(d) Authority; Non-contravention. Parent, the Merger Sub and the Majority Shareholder have all requisite authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated by this Agreement have been (or at Closing will have been) duly authorized by all necessary corporate action on the part of Parent and Merger Sub. This Agreement has been duly executed and delivered by and constitutes a valid and binding obligation of Parent, Merger Sub and the Majority Shareholder, enforceable in accordance with its terms. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any breach or violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of or “put” right with respect to any obligation or to loss of a material benefit under, or result in the creation of any lien upon any of the properties or assets of Parent or Merger Sub under, (i) the Articles of Incorporation or bylaws of Parent or Merger Sub or the comparable charter or organizational documents of any other Subsidiary of Parent or Merger Sub, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession,

 

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franchise or license applicable to Parent, Merger Sub or their respective properties or assets, or (iii) subject to the governmental filings and other matters referred to in the following sentence, any judgment, order, decree, statute, law, ordinance, rule, regulation or arbitration award applicable to Parent, Merger Sub or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, breaches, violations, defaults, rights, losses or liens that individually or in the aggregate could not have a Material Adverse Effect with respect to Parent or Merger Sub or could not prevent, hinder or materially delay the ability of Parent or Merger Sub to consummate the transactions contemplated by this Agreement. No consent, approval, order or authorization of, or registration, declaration or filing with, or notice to, any governmental entity is required by or with respect to Parent or Merger Sub in connection with the execution and delivery of this Agreement by Parent or Merger Sub or the consummation by Parent or Merger Sub, as the case may be, of any of the transactions contemplated by this Agreement, except for the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, as required, and such other consents, approvals, orders, authorizations, registrations, declarations, filings or notices as may be required under the “blue sky” laws of various states.

 

(f) SEC Documents; Undisclosed Liabilities. Parent has filed all reports, schedules, forms, statements and other documents as required by the U.S. Securities and Exchange Commission (the “SEC”) and Parent has delivered or made available to MamaMancini’s all reports, schedules, forms, statements and other documents filed with the SEC (collectively, and in each case including all exhibits and schedules thereto and documents incorporated by reference therein, the “Parent SEC Documents”). The Parent SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Parent SEC documents, and none of the Parent SEC Documents (including any and all consolidated financial statements included therein) as of such date contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent revised or superseded by a subsequent filing with the SEC (a copy of which has been provided to MamaMancini’s prior to the date of this Agreement), none of the Parent SEC Documents contains any untrue statement of a material fact or omits to state any material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The consolidated financial statements of Parent included in such Parent SEC Documents comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles (except, in the case of unaudited consolidated quarterly statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Parent and its consolidated subsidiaries as of the dates thereof and the consolidated results of operations and changes in cash flows for the periods then ended (subject, in the case of unaudited quarterly statements, to normal year-end audit adjustments as determined by Parent’s independent accountants). Except as set forth in the Parent SEC Documents, at the date of the most recent audited financial statements of Parent included in the Parent SEC Documents, neither Parent nor any of its subsidiaries had, and since such date neither Parent nor any of such subsidiaries has incurred, any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect with respect to Parent.

 

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(g) Absence of Certain Changes or Events. Except as disclosed in the Parent SEC Documents, since the date of the most recent financial statements included in the Parent SEC Documents, Parent and Merger Sub have conducted their business only in the ordinary course consistent with past practice in light of its current business circumstances, and there is not and has not been: (i) any Material Adverse Change with respect to Parent or Merger Sub; (ii) any condition, event or occurrence which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect or give rise to a Material Adverse Change with respect to Parent or Merger Sub; (iii) any event which, if it had taken place following the execution of this Agreement, would not have been permitted by Section 7.01 without the prior consent of MamaMancini’s; or (iv) any condition, event or occurrence which could reasonably be expected to prevent, hinder or materially delay the ability of Parent and Merger Sub to consummate the transactions contemplated by this Agreement.

 

(g) Litigation; Labor Matters; Compliance with Laws.

 

(i) There is no suit, action or proceeding or investigation pending or threatened against or affecting Parent, Merger Sub or the Majority Shareholder or any basis for any such suit, action, proceeding or investigation that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect with respect to Parent or Merger Sub or prevent, hinder or materially delay the ability of Parent, Merger Sub or the Majority Shareholder to consummate the transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule or order of any governmental entity or arbitrator outstanding against Parent or Merger Sub having, or which, insofar as reasonably could be foreseen by Parent or Merger Sub, in the future could have, any such effect.

 

(ii) Parent and Merger Sub are not a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is it the subject of any proceeding asserting that it has committed an unfair labor practice or seeking to compel it to bargain with any labor organization as to wages or conditions of employment nor is there any strike, work stoppage or other labor dispute involving it pending or, to its knowledge, threatened, any of which could have a Material Adverse Effect with respect to Parent.

 

(iii) The conduct of the business of Parent and Merger Sub complies with all statutes, laws, regulations, ordinances, rules, judgments, orders, decrees or arbitration awards applicable thereto.

 

(h) Tax Returns and Tax Payments. Parent and Merger Sub have timely filed all tax returns required to be filed by them, have paid all taxes shown thereon to be due and have provided adequate reserves in their financial statements for any taxes that have not been paid, whether or not shown as being due on any returns. No material claim for unpaid taxes have been made or become a lien against the property of Parent or Merger Sub or is being asserted against Parent or Merger Sub, no audit of any tax return of Parent or Merger Sub is being conducted by a tax authority, and no extension of the statute of limitations on the assessment of any taxes has been granted by Parent or Merger Sub and is currently in effect.

 

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(i) Environmental Matters. Parent and Merger Sub are in compliance with all applicable Environmental Laws except for such violation thereof would not have a Material Adverse Effect. “Environmental Laws” means all applicable federal, state and local statutes, rules, regulations, ordinances, orders, decrees and common law relating in any manner to contamination, pollution or protection of human health or the environment, and similar state laws.

 

(j) Material Contract Defaults. Parent, Merger Sub and Majority Shareholder are not, or have not, received any notice or have any knowledge that any other party is, in default in any respect under any Material Contract; and there has not occurred any event that with the lapse of time or the giving of notice or both would constitute such a material default.  For purposes of this Agreement, a “Material Contract” means any contract, agreement or commitment that is effective as of the Closing Date to which Parent or Merger Sub is a party (i) with expected receipts or expenditures in excess of $100,000, (ii) requiring Parent or Merger Sub to indemnify any person, (iii) granting exclusive rights to any party, (iv) evidencing indebtedness for borrowed or loaned money in excess of $100,000 or more, including guarantees of such indebtedness, or (v) which, if breached by Parent or Merger Sub in such a manner would (A) permit any other party to cancel or terminate the same (with or without notice of passage of time) or (B) provide a basis for any other party to claim money damages (either individually or in the aggregate with all other such claims under that contract) from Parent or Merger Sub or (C) give rise to a right of acceleration of any material obligation or loss of any material benefit under any such contract, agreement or commitment.

 

(k) Properties. Parent and Merger Sub have good, clear and marketable titles to all the tangible properties and tangible assets reflected in the latest balance sheet as being owned by Parent or Merger Sub or acquired after the date thereof which are, individually or in the aggregate, material to Parent’s or Merger Sub’s business (except properties sold or otherwise disposed of since the date thereof in the ordinary course of business), free and clear of all material liens.

 

(l) Trademarks and Related Contracts.

 

(i) Except as disclosed in this Agreement, Parent or Merger Sub (i) owns or has the right to use, free and clear of all Liens, claims and restrictions, all patents, trademarks, service marks, trade names, copyrights, licenses and rights with respect to the foregoing used in or necessary for the conduct of its business as now conducted or proposed to be conducted without infringing upon or otherwise acting adversely to the right or claimed right of any Person under or with respect to any of the foregoing and (ii) is not obligated or under any liability to make any payments by way of royalties, fees or otherwise to any owner or licensor of, or other claimant to, any patent, trademark, service mark, trade name, copyright or other intangible asset, with respect to the use thereof or in connection with the conduct of its business or otherwise.

 

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(ii) Parent or Merger Sub owns and has the unrestricted right to use all trade secrets, if any, including know-how, negative know-how, formulas, patterns, programs, devices, methods, techniques, inventions, designs, processes, computer programs and technical data and all information that derives independent economic value, actual or potential, from not being generally known or known by competitors (collectively, “intellectual property”) required for or incident to the development, operation and sale of all products and services sold by Parent, free and clear of any right, Lien or claim of others; provided, however, the possibility exists that other Persons, completely independent of Parent, Merger Sub or its employees or agents, could have developed intellectual property similar or identical to that of Parent or Merger Sub. Except as disclosed in the Agreement, the officers and directors of Parent and Merger Sub are not aware of any such development of substantially identical trade secrets or technical information by others.

 

(m) Certain Employee Payments. Parent and Merger Sub are not parties to any employment agreement which could result in the payment to any current, former or future director or employee of Parent or Merger Sub of any money or other property or rights or accelerate or provide any other rights or benefits to any such employee or director as a result of the transactions contemplated by this Agreement, whether or not (i) such payment, acceleration or provision would constitute a “parachute payment” (within the meaning of Section 280G of the Code), or (ii) some other subsequent action or event would be required to cause such payment, acceleration or provision to be triggered.

 

(n) Financial Statements. The audited financial statements and unaudited interim financial statements of the Parent included in the SEC Documents (i) complied as to form in all material respects with applicable accounting requirements and, as appropriate, the published rules and regulations of the SEC with respect thereto when filed, (ii) were prepared in accordance with GAAP applied on a consistent basis throughout the periods covered thereby (except as may be indicated therein or in the notes thereto, and in the case of quarterly financial statements, as permitted by Form 10-Q under the Exchange Act), (iii) fairly present the consolidated financial condition, results of operations and cash flows of the Parent as of the respective dates thereof and for the periods referred to therein, and (iv) are consistent with the books and records of the Parent.

 

(o) Undisclosed Liabilities. Neither of the Parent nor the Merger Sub has any liability (whether known or unknown, whether absolute or contingent, whether liquidated or unliquidated and whether due or to become due), except for (a) liabilities shown on the balance sheet contained in the most recent Form 10-Q filed with the SEC, (b) liabilities which have arisen since the date of the balance sheet contained in the most recent Form 10-Q filed with the SEC in the ordinary course of business which do not exceed $1,000.00 in the aggregate and (c) contractual and other liabilities incurred in the ordinary course of business which are not required by GAAP to be reflected on a balance sheet.

 

(p) Powers of Attorney. There are no outstanding powers of attorney executed on behalf of the Parent or the Merger Sub.

 

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(q) Certain Business Relationships with Affiliates. No Affiliate of the Parent or of the Merger Sub (a) owns any property or right, tangible or intangible, which is used in the business of the Parent or Merger Sub, (b) has any claim or cause of action against the Parent or Merger Sub, or (c) owes any money to, or is owed any money by, the Parent or Merger Sub.

 

ARTICLE VII.

COVENANTS RELATING TO CONDUCT OF BUSINESS PRIOR TO MERGER

 

7.01 Conduct of Parent and Merger Sub. From the date of this Agreement and until the Effective Time, or until the prior termination of this Agreement, the Parent and Merger Sub shall not, unless mutually agreed to in writing:

 

(a) engage in any transaction, except in the normal and ordinary course of business, or create or suffer to exist any lien or other encumbrance upon any of their respective assets or which will not be discharged in full prior to the Effective Time;

 

(b) sell, assign or otherwise transfer any of their assets, or cancel or compromise any debts or claims relating to their assets, other than for fair value, in the ordinary course of business, and consistent with past practice;

 

(c) (i) directly or indirectly redeem, purchase or otherwise acquire to redeem, purchase or otherwise acquire any shares of Parent or Merger Sub Common Stock; (ii) issue or agree to issue any additional shares of, or options, warrants rights of any kind to acquire any shares of Parent or Merger Sub Common Stock; or (iii) amend its certificate of incorporation or bylaws, or split, combine or reclassify the outstanding Common Stock of Parent or Merger Sub or declare, set aside or pay any dividend payable in cash, stock or property or make any distribution with respect to any such stock.

 

(d) fail to use reasonable efforts to preserve intact their present business organizations, keep available the services of their employees and preserve its material relationships with customers, suppliers, licensors, licensees, distributors and others, to the end that its good will and on-going business not be impaired prior to the Effective Time;

 

(e) except for matters related to complaints by former employees related to wages, suffer or permit any Material Adverse Change to occur with respect to Parent and Merger Sub or their respective business or assets; or

 

(f) make any material change with respect to their business in accounting or bookkeeping methods, principles or practices, except as required by GAAP.

 

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ARTICLE VIII.

ADDITIONAL AGREEMENTS

 

8.01 Access to Information; Confidentiality.

 

(a) Each party hereto shall, and shall cause its officers, employees, counsel, financial advisors and other representatives to, afford to any other party and its representatives reasonable access during normal business hours during the period prior to the Effective Time of the Merger to its properties, books, contracts, commitments, personnel and records and, during such period, the parties shall, and shall cause each of its officers, employees and representatives to, furnish promptly to any other party all information concerning its business, properties, financial condition, operations and personnel as such other party may from time to time reasonably request. For the purposes of determining the accuracy of the representations and warranties of each party set forth herein and compliance by each party of its obligations hereunder, during the period prior to the Effective Time of the Merger, each party shall provide each other party and its representatives with reasonable access during normal business hours to its properties, books, contracts, commitments, personnel and records as may be necessary to enable each party to confirm the accuracy of the representations and warranties of each other party set forth herein and compliance by each party of their obligations hereunder, and, during such period, cause its, officers, employees and representatives to, furnish promptly to each party upon its request (i) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state securities laws and (ii) all other information concerning its business, properties, financial condition, operations and personnel as such other party may from time to time reasonably request. Except as required by law, each party will hold, and will cause its respective directors, officers, employees, accountants, counsel, financial advisors and other representatives and affiliates to hold, any nonpublic information concerning another party in strict confidence.

 

(b) No investigation pursuant to this Section 8.01 shall affect any representations or warranties of the parties herein or the conditions to the obligations of the parties hereto.

 

8.02 Best Efforts. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties agrees to use its best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by this Agreement. The parties hereto will use their best efforts and cooperate with one another (i) in promptly determining whether any filings are required to be made or consents, approvals, waivers, permits or authorizations are required to be obtained (or, which if not obtained, would result in an event of default, termination or acceleration of any agreement or any put right under any agreement) under any applicable law or regulation or from any governmental authorities or third parties, including parties to loan agreements or other debt instruments and including such consents, approvals, waivers, permits or authorizations as may be required to transfer the assets and related liabilities of MamaMancini’s to the Surviving Corporation in the Merger, in connection with the transactions contemplated by this Agreement, and (ii) in promptly making any such filings, in furnishing information required in connection therewith and in timely seeking to obtain any such consents, approvals, permits or authorizations. The parties hereto shall mutually cooperate in order to facilitate the achievement of the benefits reasonably anticipated from the Merger.

 

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8.03 Public Announcements. The parties hereto will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law or court process. The parties have to agree that the initial press release or releases to be issued with respect to the transactions contemplated by this Agreement shall be mutually agreed upon prior to the issuance thereof except as may be required by applicable law or court process.

 

8.04 Expenses. All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses.

 

8.05 Payment of Liabilities. Recognizing the need to extinguish all existing liabilities of Parent and Merger Sub prior to the Merger, MamaMancini’s has indicated it will not enter into this Agreement unless Parent and Merger Sub have arranged for the payment and discharge of all of Parent’s and Merger Sub’s liabilities, contingent or otherwise, including all of Parent’s and Merger Sub’s accounts payable totaling approximately $19,010.83, including any outstanding legal fees incurred prior to the Closing Date. Accordingly, Parent and Merger Sub shall arrange for the payment and discharge of all such liabilities.

 

8.06 No Solicitation. No party shall authorize or permit any of its officers, directors, agents, representatives, or advisors to (a) solicit, initiate or encourage or take any action to facilitate the submission of inquiries, proposals or offers from any person relating to any matter concerning any merger, consolidation, business combination, recapitalization or similar transaction involving MamaManinci’s, Parent or Merger Sub, other than the transaction contemplated by this Agreement or any other transaction the consummation of which would or could reasonably be expected to impede, interfere with, prevent or delay the Merger or which would or could be expected to dilute the benefits to MamaMancini’s of the transactions contemplated hereby. The parties hereto will immediately cease and cause to be terminated any existing activities, discussions and negotiations with any parties conducted heretofore with respect to any of the foregoing.

 

ARTICLE IX.

TERMINATION, AMENDMENT AND WAIVER

 

9.01 Termination. This Agreement may be terminated and abandoned at any time prior to the Effective Time of the Merger in the event of any of the following:

 

(a) by mutual written consent of Parent, Merger Sub, Majority Shareholder and MamaMancini’s;

 

(b) by any party hereto, if any governmental entity shall have issued an order, decree or ruling or taken any other action permanently enjoining, restraining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and non-appealable;

 

(c) by any party hereto, if the Merger shall not have been consummated on or before January 31, 2013 (other than as a result of the failure of the party seeking to terminate this Agreement to perform its obligations under this Agreement required to be performed at or prior to the Effective Time of the Merger);

 

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(d) by MamaMancini’s, if a Material Adverse Change shall have occurred, in the sole discretion of MamaMancini’s, since the time in which the due diligence and other financial documentation was originally delivered to MamaMancini’s by the Majority Shareholder and the Closing Date;

 

(e) by Parent, Merger Sub or the Majority Shareholder, if MamaMancini’s willfully fails to perform in any material respect any of its material obligations under this Agreement;

 

(f) by MamaMancini’s, if Parent, Merger Sub or Majority Shareholder willfully fails to perform in any material respect any of their respective obligations under this Agreement; and

 

(g) by MamaMancini’s if the due diligence investigation by MamaMancini’s of the Parent and Merger Sub is not satisfactory to MamaMancini’s in its sole discretion.

 

9.02 Effect of Termination. In the event of termination of this Agreement by any party as provided in Section 9.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of any party, other than the provisions of Section 8.01 and Section 10.02. Nothing contained in this Section shall relieve any party for any breach of the representations, warranties, covenants or agreements set forth in this Agreement.

 

9.03 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.

 

9.04 Extension; Waiver. Subject to Section 8.02 at any time prior to the Effective Time of the Merger, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement, or (c) waive compliance with any of the agreements or conditions contained in this Agreement.  Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.

 

9.05 Procedure for Termination, Amendment, Extension or Waiver. A termination of this Agreement pursuant to Section 9.01, an amendment of this Agreement pursuant to Section 9.03 or an extension or waiver of this Agreement pursuant to Section 9.04 shall, in order to be effective, require in the case of Parent, Merger Sub or MamaMancini’s, action by the corporation’s Board of Directors and in the case of the Majority Shareholder, written authorization.

 

9.06 Return of Documents. In the event of termination of this Agreement for any reason, the parties will return to the other applicable party all of the other party’s documents, work papers, and other materials (including copies) relating to the transactions contemplated in this Agreement, whether obtained before or after execution of this Agreement. The parties will not use any information so obtained from the other party for any purpose and will take all reasonable steps to have such other party’s information kept confidential.

 

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ARTICLE X.

INDEMNIFICATION AND RELATED MATTERS

 

10.01 Survival of Representations and Warranties. The representations and warranties of the parties made in Article VI of this Agreement shall not survive beyond the two-year anniversary of the Effective Time.

 

10.02 Indemnification by the Majority Stockholder. The Majority Shareholder shall indemnify the Parent, Merger Sub, MamaMancini’s and the Surviving Corporation in respect of, and hold it harmless against, loss, liability, deficiency, damages, expense or cost (including without limitation amounts paid in settlement, interest, court costs, costs of investigators, fees and expenses of attorneys, accountants, financial advisors and other experts, and other expenses of litigation, arbitration or otherwise) (“Damages”) incurred or suffered by Parent, Merger Sub, MamaMancini’s and/or the Surviving Corporation resulting from:

 

(a) any misrepresentation, breach of warranty or failure to perform any covenant or agreement of Parent, Merger Sub and/or the Majority Shareholder contained in this Agreement;

 

(b) any claim by a stockholder or former stockholder of the Parent, Merger Sub, or any other person or entity, seeking to assert, or based upon: (i) ownership or rights to ownership of any shares of Common Stock of the Parent or the Merger Sub; (ii) any rights under the certificate of incorporation or bylaws of the Parent or Merger Sub; or (iii) any claim that his, her or its shares of Common Stock were wrongfully repurchased cancelled or reissued by the Parent or Merger Sub.

 

The Majority Shareholder expressly acknowledges and agrees that its indemnification pursuant to this Section is wholly independent of any other indemnity owed by any other party or any other remedy available to MamaMancini’s, Parent, Merger Sub and/or the Surviving Corporation (as applicable, the “Indemnitee”). The Indemnitee may enforce the indemnity provided herein independently of any other remedy the Indemnitee may have against any other party at any time, and it shall not be necessary for the Indemnitee to proceed upon or against and/or exhaust any other remedy before proceeding to enforce the indemnity provided herein. The Majority Shareholder expressly waives any right to require the Indemnitee to proceed against any other party and agrees that Indemnitee may proceed against the Majority Shareholder or any other party in such order as Indemnitee shall determine in its sole and absolute discretion. Indemnitee may file a separate action or actions against the Majority Shareholder, whether action is brought or prosecuted with respect to or against any other Person, or whether any other Person is joined in any such action or actions.

 

10.03 Notice of Indemnification. In the event that the Indemnitees hall threaten, assert or institute against the Majority Shareholder any claim or demand in respect of which payment may be sought, including, without limitation, pursuant to Section 10.02 hereof, the Indemnitee shall promptly cause written notice of the assertion of any such claim or demand (an “Indemnity Claim”) of which it has knowledge to be forwarded to the Majority Shareholder in accordance

 

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with Section 11.01.  Any notice of an Indemnity Claim shall state specifically the provision with respect to which the Indemnity Claim is made, the facts giving rise to such alleged basis for the Indemnity Claim, and the amount of the liability asserted against the Majority Shareholder.  Within ten (10) days of the receipt of such written notice, the Majority Shareholder shall notify the Indemnitee in writing of his intent to contest the Indemnity Claim or to accept liability thereunder. In the event that no written notice is received by the Indemnitee within ten (10) days of the original receipt by the Majority Shareholder of the written notice of the Indemnity Claim, the Majority Shareholder hereby acknowledges and agrees to accept liability as proposed in the Indemnity Claim.

 

ARTICLE XI.

GENERAL PROVISIONS

 

11.01 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the first business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

 

(a) if to Parent or Merger Sub prior to the Effective Time, to:

 

Mascot Properties, Inc.

7985 113th Street, Suite 220

Seminole, Florida 33772

Attn: David Dreslin

Telephone: (727) 393-7439

 

with a copy to(which shall not constitute notice):

 

Jody M. Walker, Esq.

7841 South Garfield Way

Centennial, CO 80122

 

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(b) if to Parent or Merger Sub after the Effective Time, to:

 

Mascot Properties, Inc.

C/O MamaMancini’s, Inc.

25 Branca Road,

East Rutherford New Jersey 07073

Attn: Carl Wolf

Telephone: (201) 531-1212

 

with a copy to (which shall not constitute notice):

 

Lucosky Brookman LLP

33 Wood Avenue South, 6th Floor

Iselin, NJ 08830

Attn: Joseph M. Lucosky, Esq.

Telephone(732) 395-4400

 

(c) if to MamaMancini’s and/or the Surviving Corporation to:

 

MamaMancini’s, Inc.

25 Branca Road,

East Rutherford New Jersey 07073

Attn: Carl Wolf

Telephone: (201) 531-1212

 

with a copy to (which shall not constitute notice):

 

Lucosky Brookman LLP

33 Wood Avenue South, 6th Floor

Iselin, NJ 08830

Attn: Joseph M. Lucosky, Esq.

Telephone(732) 395-4400

 

(d) if to Majority Shareholder to:

 

David Dreslin 7985 113th Street, Suite 220

Seminole, Florida 33772

Telephone: (727) 393-7439

 

with a copy to (which shall not constitute notice):

 

Jody M. Walker, Esq.

7841 South Garfield Way

Centennial, CO 80122

 

11.02 Interpretation. When a reference is made in this Agreement to a Section, Exhibit or Schedule, such reference shall be to a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”.

 

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11.03 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the other agreements referred to herein constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement. This Agreement is not intended to confer upon any person other than the parties any rights or remedies.

 

11.04 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New Jersey without regard to principles of conflicts of laws. Any action brought by either party hereto against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New Jersey or in the federal courts located in the state of New Jersey. The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens. The parties hereto agree to submit to the in person am jurisdiction of such courts and hereby irrevocably waive trial by jury. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs.

 

11.05 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by any of the parties without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns.

 

11.06 Further Assurances. From time to time after the date hereof and without further consideration from MamaMancini’s, the Majority Shareholder shall execute and deliver, or cause to be executed and delivered, to MamaMancini’s such further instruments of sale, assignment, transfer and delivery, and take such other action as MamaMancini’s may reasonably request in order to consummate the transactions contemplated hereby.

 

11.07 Severability. Whenever possible, each provision or portion of any provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law but if any provision or portion of any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or portion of any provision in such jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision or portion of any provision had never been contained herein.

 

11.08 Counterparts. This Agreement may be executed in one or more identical counterparts, all of which shall be considered one and the same instrument and shall become effective when one or more such counterparts shall have been executed by each of the parties and delivered to the other parties.

 

11.09 Time. Time is of the essence in the performance of the parties respective obligations herein contained.

 

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11.10 Recitals, Disclosure Schedules and Exhibits. The Recitals, Disclosure Schedules and Exhibits to this Agreement are incorporated herein, by this reference, made a part hereof as if fully set forth herein.

  

[-signature page follows-]

 

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IN WITNESS WHEREOF, the undersigned have caused their duly authorized officers to execute this Agreement as of the date first above written.

 

 

MASCOT PROPERTIES, INC.,

as Parent

     
  By: /s/ David Dreslin
    Name: David Dreslin
    Title: Chief Executive Officer

 

 

MASCOT PROPERTIES ACQUISITION CORP.,

as Merger Sub

     
  By: /s/ David Dreslin
    Name: David Dreslin  
    Title: Chief Executive Officer  
     
    /s/ David Dreslin
    David Dreslin, as Majority Shareholder  
     
      MamaMancini’s, INC.
     
  By: /s/ David Dreslin
    Name: Carl Wolf  
    Title: Chief Executive Officer  

  

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EXHIBIT A

 

FORM OF CERTIFICATE OF MERGER

 

 STATE OF DELAWARE

CERTIFICATE OF MERGER OF

DOMESTIC CORPORATIONS

 

Pursuant to Title 8, Section 251(c) of the Delaware General Corporation Law, the undersigned corporation executed the following Certificate of Merger:

 

FIRST: The name of the surviving corporation is MamaMancini’s, Inc., and the name of the corporation being merged into this surviving corporation is Mascot Properties Acquisition Corp..

 

SECOND: The Agreement of Merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations.

 

THIRD: The name of the surviving corporation is MamaMancini’s, Inc. a Delaware corporation.

 

FOURTH: The Certificate of Incorporation of the surviving corporation shall be its Certificate of Incorporation.

 

FIFTH: The merger is to become effective on January 24, 2013 “For Accounting Purposes Only”.

 

SIXTH: The Agreement of Merger is on file at 25 Branca Road, East Rutherford, NJ 07073, the place of business of the surviving corporation.

 

SEVENTH: A copy of the Agreement of Merger will be furnished by the surviving corporation on request, without cost, to any stockholder of the constituent corporations.

 

IN WITNESS WHEREOF, said surviving corporation has caused this certificate to be signed by an authorized officer, the ______day of _______, A.D., _______.

 

  By: /s/ David Dreslin
  Name: DAVID DRESLIN
    Print or Type
  Title: PRESIDENT

  

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SCHEDULE I

 

MamaMancini’s Stockholders (Accredited Investors)

  

Number of Shareholders   Common Stock Owned
96   20,054,000

  

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Exhibit 3.3

 

 

 

 

 
 

 

 

 
 

 

Exhibit 3.4

 

BY-LAWS

 

OF

 

MAMAMANCINI’S INC.

 

ARTICLE 1 - OFFICES

 

The registered office of the corporation shall be at 160 Greentree Drive, Ste. 101, Dover, Delaware, 19904, or at such other location in the State of Delaware as the Board of Directors may determine from time to time. The corporation may also have offices at such other places as the Board of Directors may from time to time determine or as the business of the corporation may require.

 

ARTICLE 2 - SEAL

 

The corporation seal shall have inscribed thereon the name of the corporation, the year of its organization and the words “Corporate Seal, Delaware.”

 

ARTICLE 3 - SHAREHOLDERS’ MEETINGS

 

3.1 Meetings of the shareholders may be held at the registered office of the corporation or at such other place or places, either within or outside the State of Delaware, as may from time to time be selected by the Board of Directors. Meetings of the shareholders may also be held by means of the internet or other electronic communication technology, as may be from time to time fixed or determined by the Board of Directors, and need not be held at a particular geographic location so long as the meeting is held in a fashion pursuant to which the shareholders have the opportunity to read or hear the proceedings substantially concurrently with their occurrence, vote on matters submitted to the shareholders and pose questions to the directors.

 

3.2 The annual meeting of the shareholders shall be held in April of each year at a date and time to be established by the Board of Directors. At the annual meeting, the shareholders shall elect a Board of Directors, and transact such other business as may properly be brought before the meeting. If the annual meeting shall not be called and held within six months after the designated time, any shareholder may call such meeting at any time thereafter.

 

3.3 The presence, in person or by proxy, of shareholders entitled to cast at least a majority of the votes which all shareholders are entitled to cast on a particular matter shall constitute a quorum for the purpose of considering such matter. Unless otherwise prohibited by statute, the acts carried out at a duly organized meeting of the shareholders present, in person or by proxy, entitled to cast at least a majority of the votes which all shareholders present are entitled to cast (a quorum) shall be recognized as the acts of the shareholders in whole. The shareholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Adjournment or adjournments of any annual or special meeting may be taken, but any meeting at which directors are to be elected shall be adjourned only from day to day, or for such longer periods not exceeding fifteen (15) days each, as

 

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may be directed by shareholders who are present in person or by proxy and who are entitled to cast at least a majority of the votes which all such shareholders would be entitled to cast at an election of directors (a quorum) until such directors have been elected. If a meeting cannot be organized because a quorum has not attended, those present and entitled to vote thereat may, except as otherwise provided by statute, adjourn the meeting to such time and place as they may determine, but (i) in the case of any meeting called for the election of directors, those who attend the second of such adjourned meetings, although less than a quorum, shall nevertheless constitute a quorum for the purpose of electing directors and (ii) in the case of any other meeting that has been previously adjourned for one or more periods aggregating at least fifteen (15) days because of an absence of a quorum, those shareholders entitled to vote who attend such adjourned meeting, although less than a quorum, shall nevertheless constitute a quorum for the purpose of acting at any such meeting, if the original notice for such meeting or the notice for such adjourned meeting states that those shareholders who attend such adjourned meeting shall nevertheless constitute a quorum for the purpose of acting at any such meeting.

 

3.4 Every shareholder entitled to vote at a meeting of shareholders, or to express consent or dissent to corporate action in writing without a meeting, may authorize another person or persons to act for him or her by proxy. Every proxy shall be executed in writing by the shareholder, or by his or her duly authorized attorney in fact, and filed with the Secretary of the corporation. Notwithstanding any other agreement or any provision in the proxy to the contrary, a proxy shall be revocable at will, but the revocation of a proxy shall not be effective until notice thereof has been given to the Secretary of the corporation. No unrevoked proxy shall be valid after three years from the date of its execution, unless a longer time is expressly provided therein. A proxy shall not be revoked by the death or incapacity of the maker unless before the vote is counted or the authority is exercised, written notice of such death or incapacity is given to the Secretary of the corporation. A shareholder shall not sell his or her vote or execute a proxy to any person for any sum of money or anything of value. Elections for directors shall be by ballot. Each shareholder is entitled to cast the same number of votes as directorships available, but in no event can any shareholder vote more than once for any candidate. A shareholder shall vote his or her full block of shares with each vote cast for a director position, meaning that there shall be no cumulative voting for the election of directors. All shares standing in the name of a shareholder on the books of the corporation may be voted, subject to the terms of any subscription agreement affecting such shares.

 

3.5 Written notice of the annual meeting shall be given to each shareholder entitled to vote thereat, at least ten (10) days prior to the meeting.

 

3.6 Special meetings (all meetings other than the annual meeting) of the shareholders for any purpose or purposes, unless otherwise prescribed by statute or the Articles of Incorporation, may be called at any time by the President, or the Board of Directors, or shareholders entitled to cast at least one-fifth of the votes which all shareholders are entitled to cast at the particular meeting, upon written request delivered to the Secretary of the Corporation. Such request shall state the purpose or purposes of the meeting. At any time, upon written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary to fix the date of the meeting, to be held not less than fifteen nor more than sixty days after the receipt of the request, and to give notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, within ten days of the date of request, the person or persons calling the meeting may do so.

 

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3.7 Business transacted at all special meetings shall be confined to the objects stated in the notice and matters germane thereto, unless all shareholders entitled to vote are present and consent.

 

3.8 Written notice of a special meeting of the shareholders stating the time and place and specifying the general nature of business to be transacted, shall be given to each shareholder entitled to vote thereat at least ten (10) days before such meeting unless a greater period of notice is required by statute in a particular case.

 

3.9 The officer or agent having charge of the transfer books shall make at least five (5) days before each meeting of shareholders, a complete list of the shareholders entitled to vote at the meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list shall be subject to inspection by any shareholder at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting, and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this State, shall be prima facie evidence as to who are the shareholders entitled to examine such list of share ledger or transfer book, or to vote in person or by proxy at any meeting of shareholders.

 

ARTICLE 4 - DIRECTORS

 

4.1. The business of the corporation shall be managed by its Board of Directors, which shall initially be five in number. The size of the Board of Directors may be changed annually by the Board of Directors prior to the meetings of the Nominating Committee. The directors need not be residents of this State or shareholders in the corporation. The directors shall be elected by the shareholders at the annual meeting of shareholders of the corporation, and each director shall be elected for the term of one year, and until his successor has been elected and qualified, or until his earlier death, resignation or removal. Any director may resign at any time upon written notice to the corporation, which resignation shall be effective upon receipt by the corporation or at such subsequent time as shall be specified in the notice of resignation. Resignations need not be accepted by the corporation to be effective.

 

4.2. In addition to the powers and authorities by these By-Laws expressly conferred upon them, the Board may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles or by these By-Laws directed or required to be exercised or done by the shareholders.

 

4.3. The meetings of the Board of Directors may be held at such place within this State, or elsewhere, as a majority of the directors may from time to time appoint, or as may be designated in the notice calling the meeting.

 

4.4. Each newly elected Board may meet at such place and time as shall be fixed by the shareholders at the meeting at which such directors are elected and no notice shall be necessary to the newly elected directors in order legally to constitute the meeting, or they may meet at such place and time as may be fixed by the consent in writing of all the directors.

 

4.5. Regular or special meetings of the Board may be called by the Chairman of the Board or the President on two days’ confirmed notice to each director. Special meetings shall be called by the Chairman of the Board, President or Secretary in like manner with like notice upon the written request of a majority of the directors in office.

 

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4.6. A majority of the directors in office shall be necessary to constitute a quorum for the transaction of business, and the acts of a majority of the directors present at a meeting at which a quorum is present shall be the acts of the Board of Directors. Any action required or permitted to be taken at a meeting of the directors may be taken without a meeting if, prior or subsequent to the action, a consent or consents thereto by all of the directors in office is filed with the Secretary of the corporation.

 

4.7. Directors as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board provided, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor.

 

ARTICLE 5 - COMMITTEES OF THE BOARD

 

5.1. The Board of Directors may, by resolution adopted by a majority of the entire Board, alter or eliminate the committees of the Board described in this Article 5 or designate one or more other committees, each committee to consist of one or more directors. Any such committee, to the extent provided in such resolution or these by-laws, shall have and exercise all of the authority of the Board of Directors in the management of the corporation, except that a committee shall not have any power or authority as to (i) the submission to shareholders of any action requiring approval of shareholders under any law adopted in lieu thereof, (ii) the creation or filling of vacancies in the board of directors, (iii) the adoption, amendment or repeal of these Bylaws, (iv) the amendment or repeal of any resolution of the board that by its terms is amendable or repealable only by the board, and (v) action on matters committed by the Articles of Incorporation, these Bylaws or resolution of the board of directors exclusively to another committee of the board. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. The Chairman of the Board or the President shall nominate directors to serve as the members of any such committee and fill any vacancy in any such committee, and shall nominate one or more directors to serve as alternate members of any such committee to act in the absence or disability of members of any such committee with all powers of such absent or disabled members. All such nominations shall be subject to approval of a majority of the entire Board. By resolution adopted by a majority of the entire Board, any such committee may be abolished at its pleasure, and any committee member may be removed from membership on such committee at any time, with or without cause.

 

5.2. Each committee of the Board of Directors formed pursuant to this Article 5 shall keep regular minutes of its meetings and actions taken at a meeting of any such committee shall be reported to the Board at its next meeting following such committee meeting; except that, when the meeting of the Board is held within two days after the committee meeting, such report shall, if not made at the first meeting, be made to the Board at its second meeting following such committee meeting unless otherwise required by law to be earlier reported.

 

5.3. The Board of Directors may appoint a Chairman of the Board who shall preside over all actions of the Board of Directors.

 

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ARTICLE 6 - OFFICERS

 

6.1. The executive officers of the corporation shall be chosen by the directors and shall be a President, Secretary and Treasurer. The Board of Directors may also choose such other officers as it shall deem necessary, who shall hold their offices for such terms and shall have such authority and shall perform such duties as from time to time shall be prescribed by the Board. Any number of offices may be held by the same person. It shall not be necessary for the officers to be directors.

 

6.2. The compensation of all officers of the corporation shall be determined by the Board of Directors.

 

6.3. The officers of the corporation shall hold office for one year and until their successors are chosen and have qualified, or until their earlier death, resignation or removal. Any officer elected or appointed by the Board may be removed by the Board of Directors by the affirmative vote of a majority of the board of directors in office.

 

6.4. The Chief Executive Officer of the corporation shall preside at all meetings of the shareholders and directors. He or she may also, between meetings of the Board, appoint ad hoc advisory committees to the Board, which appointments shall be subject to the approval of the Board at its next meeting and, subject to approval by a majority of the Board, select the members of such committees. He or she shall have general and active management of the business of the corporation, shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the Chief Executive Officer, to any other officer or officers of the corporation. He or she shall be ex-officio a member of all committees, and shall have the general powers and duties of supervision and management usually vested in the office of the Chief Executive Officer of a corporation.

 

6.5. The President of the corporation shall, subject to the Chief Executive Officer, have general and active management of the business of the corporation, shall see that all orders and resolutions of the Board and the Chief Executive Officer are carried into effect, subject, however, to the right of the directors and the Chief Executive Officer to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the corporation. He or she shall have the general powers and duties of supervision and management usually vested in the office of the President of a corporation.

 

6.6. The Secretary shall attend all meetings of the Board and all meetings of the shareholders and act as clerk thereof, and record all the votes of the corporation and the minutes of all its transactions in a book to be kept for that purpose; and shall perform like duties for all committees of the Board of Directors when required. He or she shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, Chief Executive Officer or President, and under whose supervision he or she shall be. He or she shall keep in safe custody the corporate seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it.

 

6.7. The Treasurer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall keep the moneys of the corporation in a separate account to the credit of the corporation. He or she shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his or her transactions as Treasurer and of the financial condition of the corporation.

 

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ARTICLE 7 - VACANCIES

 

7.1. If the office of any officer, one or more, becomes vacant for any reason, the Board of Directors may choose a successor or successors, who shall hold office for the unexpired term in respect of which such vacancy occurred.

 

7.2. Vacancies in the Board of Directors arising from a Director’s inability to complete the remaining term shall be filled by a vote of a majority of the remaining members of the Board, even though such remaining members may constitute less than a quorum, or by a sole remaining director, and each person so elected shall be a director to serve until his or her successor is elected by the shareholders, who may make such election at the next annual meeting of the shareholders or at any special meeting duly called for that purpose and held prior thereto.

 

ARTICLE 8 - CORPORATE RECORDS

 

8.1. There shall be kept at the registered office or principal place of business of the corporation an original or duplicate record of the proceedings of the shareholders and of the directors, and the original or a copy of its By-Laws, including all amendments or alterations thereto to date, certified by the Secretary of the corporation. An original or duplicate share register shall also be kept at the registered office or principal place of business or at the office of a transfer agent or registrar, giving the names of the shareholders, their respective addresses and the number and classes of shares held by each.

 

8.2. Every shareholder shall, upon written demand under oath stating the purpose thereof, have a right to examine, in person or by agent or attorney, during the usual hours for business for any proper purpose, the share register, books or records of account, and records of the proceedings of the shareholders and directors, and make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a shareholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorized the attorney or other agent to so act on behalf of the shareholder. The demand under oath shall be directed to the corporation at its registered office in this State or at its principal place of business.

 

ARTICLE 9 - SHARE CERTIFICATES, DIVIDENDS, ETC.

 

9.1. The share certificates of the corporation shall be numbered and registered in the share ledger and transfer books of the corporation as they are issued. They shall bear the corporate seal and shall be signed by the Chief Executive Officer or President, and by the Secretary.

 

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9.2. Transfer of shares shall be made on the books of the corporation upon surrender of the certificates therefor, endorsed by the person named in the certificate or by attorney, lawfully constituted in writing. No transfer shall be made which is inconsistent with law.

 

9.3. The Board of Directors may fix a time , not more than fifty days, prior to the date of any meeting of shareholders, or the date fixed for the payment of any dividend or distribution, or the date for the allotment of rights, or the date when any change or conversion or exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, or to vote at, any such meeting, or entitled to receive payment of any such dividend or distribution, or to receive any such allotment of rights, or to exercise the rights in respect to any such change, conversion or exchange of shares. In such case, only shareholders of record on the date so fixed shall be so entitled to notice of, or to vote at, such meeting or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after any record date fixed as aforesaid. The Board of Directors may close the books of the corporation against transfers of shares during the whole or any part of such period, and in such case, written or printed notice thereof shall be mailed at least ten days before the closing thereof to each shareholder of record at the address appearing on the records of the corporation or supplied by him to the corporation for the purpose of notice. While the stock transfer books of the corporation are closed, no transfer of shares shall be made thereon. If no record date is fixed for the determination of shareholders entitled to receive notice of, or vote at, a shareholders’ meeting, transferees or shares which are transferred on the books of the corporation within ten days next preceding the date of such meeting shall not be entitled to notice of or to vote at such meeting.

 

9.4. In the event that a share certificate shall be lost, destroyed or mutilated, a new certificate may be issued therefor upon such terms and indemnity to the corporation as the Board of Directors may prescribe.

 

9.5. The Board of Directors may declare and pay distributions upon the outstanding shares of the corporation, from time to time and to such extent as they deem advisable, in the manner and upon the terms and conditions provided by statute and the Articles of Incorporation.

 

9.6. Before payment of any distribution there may be set aside out of the net profits of the corporation such sum or sums as the directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may abolish any such reserve in the manner in which it was created.

 

ARTICLE 10 - MISCELLANEOUS PROVISIONS

 

10.1. All checks or demands for money and notes of the corporation shall be signed by such officer or officers as the Board of Directors may from time to time designate.

 

10.2. The fiscal year of the corporation shall begin on January 1 of each year.

 

10.3. Whenever written notice is required to be given to any person, it may be given to such person, either personally or by sending a copy thereof by:

 

10.3.1. First class mail, postage prepaid, or by overnight express service, charges prepaid, to his or her postal address appearing on the books of the corporation, or, in the case of directors, supplied by him or her to the corporation for the purpose of notice. Notice pursuant to this paragraph 10.3.1 shall be deemed to have been given to the person entitled thereto when deposited in the United States mail or with a courier service for delivery to such person; or

 

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10.3.2. Facsimile transmission, email or other electronic communication to his facsimile number or address for email or other electronic communications supplied by him to the corporation for the purpose of notice. Notice pursuant to this paragraph 10.3.2 shall be deemed to have been given to the person entitled thereto when sent.

 

10.3.3. If the notice pertains to a meeting it shall specify the day and hour and geographic location, if any, of the meeting, and any other information required by these Bylaws or the Articles.

 

10.3.4. Whenever any written notice is required by statute, or by the Articles or By-Laws of this corporation, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Except in the case of a special meeting of shareholders, neither the business to be transacted at nor the purpose of the meeting need be specified in the waiver of notice of such meeting. Attendance of a person, either in person or by proxy, at any meeting shall constitute a waiver of notice of such meeting, except where a person attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened.

 

10.3.5. One or more persons may participate in a meeting of the Board or a committee of the Board by means of conference telephone or other electronic technology by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this section shall constitute being present in person at the meeting. The presence or participation, including voting and taking other action, at a meeting of shareholders or the expression of consent or dissent to corporate action by a shareholder by conference telephone or other electronic means, including, without limitation, the Internet, shall constitute the presence of, or vote or action by, or consent or dissent of the shareholders.

 

10.3.6. Except as otherwise provided in the Articles or By-Laws of this corporation, any action required or permitted to be taken at a meeting of the shareholders or of a class of shareholders may be taken without a meeting, if, prior to or subsequent to the action, a consent or consents thereto by all of the shareholders who would be entitled to vote at a meeting for such purpose shall be filed with the Secretary of the Corporation.

 

ARTICLE 11 - ANNUAL STATEMENT

 

The Chief Executive Officer or President, and the Board of Directors shall present at each annual meeting a full and complete statement of the business and affairs of the corporation for the preceding year. Such statement shall be prepared and presented in whatever manner the Board of Directors shall deem advisable and need not be verified by a certified public accountant.

 

ARTICLE 12 - AMENDMENTS

 

These By-Laws may be amended or repealed by the vote of shareholders entitled to cast at least a two-thirds majority of the votes which all shareholders are entitled to cast thereon, at any regular or special meeting of the shareholders, duly convened after notice to the shareholders of that purpose.

 

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ARTICLE 13 - INDEMNIFICATION OF DIRECTORS AND OFFICERS

 

To the maximum extent permitted by law, the Corporation shall indemnify, defend and hold harmless any director or officer of the corporation from and against any liability, cost or expense arising out of or in connection with any action or failure to act by such person if such person acted or failed to act in good faith, in a manner such person believed to be in the best interests of the corporation, and with such care, including reasonable inquiry, as an ordinary prudent person in a like position would use under similar circumstances. All rights under this Article shall be deemed a contract between the corporation and the director or officer of the corporation pursuant to which the corporation intends to be legally bound and each director and officer of the corporation shall be deemed to rely. Any repeal, amendment or modification hereof shall be prospective only and shall not affect any rights or obligations then existing.

 

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Exhibit 10.1

 

SUPPLY AGREEMENT

 

THIS SUPPLY AGREEMENT is made as of March 1, 2010 between MAMAMANCINI’S LLC, a New Jersey limited liability company having its principal offices at 627 Inwood Lane, South Orange, NJ 07079 (“MamaMancini’s”), and Joseph Epstein Foods, Inc. D/B/A Hors D’oeuvres Unlimited, a New Jersey corporation having a mailing address at 25 Branca Rd #B, East Rutherford, NJ 07073 (“HDU”).

 

Background

 

MamaMancini’s desires that HDU manufacture a line of beef meatballs with sauce, Italian sausage with sauce and other similar Italian meats with sauces for commercial distribution and sale (each a “Product” and collectively the “Products”), and sell the Products to MamaMancini’s on an exclusive basis, and HDU desires so to manufacture and sell the Products, upon the terms and conditions set forth below.

 

The parties hereby agree as follows:

 

1.     Appointment.

 

(a)      Grant. Upon the terms and conditions hereof, MamaMancini’s grants to HDU a license, revocable in accordance herewith, to use MamaMancini’s’s recipes, formulas methods and ingredients for the preparation and production of Products for manufacturing the Product and all future improvements, modifications, substitutions and replacements developed by MamaMancini’s therefor (collectively, the “Recipes”) which the parties acknowledge is a valuable trade secret, and HDU hereby accepts such grant. HDU hereby agrees to manufacture the Products for, and sell the Product to, MamaMancini’s and hereby grants unto MamaMancini’s, the exclusive right to purchase the Product.

 

(b)     Term. The term of this Agreement shall commence on the date hereof and shall continue until 11:59 P.M., February 28, 2015, and thereafter for successive additional periods of one (1) year each, unless and until terminated as of the expiration of the initial or any subsequent renewal term by either party upon written notice given to the other party at least nine (9) months prior to such termination date.

 

2.     Rights and Obligations of the Parties.

 

(a)      Manufacture of Products. HDU agrees to manufacture, package, and store the Products under the conditions and in accordance with the principles and practices according to the standards of the trade, and consistent with all applicable laws and regulations including without limitation, regulations of the United States Department of Agriculture (“USDA”). HDU shall ensure that the quality, materials and generally the characteristics of the Product (including, without limitation, taste, texture, color and overall appearance) are substantially similar to the Products previously supplied by HDU to, and approved by, MamaMancini’s. HDU shall maintain a quality assurance team which shall oversee production of the Product. Not less frequently than annually, HDU shall engage NSF-Cook & Thurber, or another independent third party expert acceptable to both HDU and MamaMancini’s, to conduct a process-based food safety and quality audit to determine whether HDU has appropriately designed systems that are being operated under continual control to assure product safety, quality, and consistency; and shall take any corrective actions required by such audit. HDU agrees to manufacture and package the Product itself, solely through its own employees, and shall not be permitted to delegate or sub license all or any part of such manufacture or packaging without the prior written consent of MamaMancini’s.

 

 
 

  

(b)     Product Expense. Except as otherwise provided below, any and all costs and expenses, direct and indirect, attributable to the manufacture, packaging, and storage of the Product shall be the sole responsibility and obligation of HDU which shall in no event be entitled to claim or receive reimbursement or indemnity from MamaMancini’s in connection therewith. If MamaMancini’s specifies any change in packaging or shipping materials which results in HDU incurring increased expense for packaging and shipping materials or in HDU being unable to utilize obsolete packaging or shipping materials in ordinary packaging or shipping, MamaMancini’s agrees to pay as additional product cost the additional cost for packaging and shipping materials and to purchase at cost such obsolete packaging and shipping materials. If MamaMancini’s requests any repackaging of the Product, other than due to defects in the original packaging, MamaMancini’s will reimburse HDU for any labor costs incurred in repackaging.

 

(c)      Orders for and Supply of Product. HDU agrees to manufacture and sell to MamaMancini’s such quantity of the Product as MamaMancini’s may at any time and from time to time order in writing from HDU during the term hereof, up to HDU’s capacity, and agrees to supply MamaMancini’s with the same.

 

(1)      Purchase Orders. MamaMancini’s agrees to place written Purchase Orders for each delivery of Product including deliveries orally requested by MamaMancini’s. HDU shall not be deemed to have received an order until actual receipt by it of the written Purchase Order. If a Purchase Order exceeds HDU’s capacity, HDU shall so notify MamaMancini’s within three (3) business days following receipt by HDU of such Purchase Order. Such notice shall include the date on which HDU is able to fill such Purchase Order. Within three (3) business days following receipt by MamaMancini’s of such notice, MamaMancini’s may revoke any portion of the Purchase Order that HDU is unable to deliver in accordance the terms thereof. Any portion of such Purchase Order which MamaMancini’s does not so revoke shall be deemed modified for delivery on the date specified by HDU in such notice.

 

(2)      Delivery. Subject to the foregoing paragraph, HDU shall deliver Product within twenty one (21) days after its receipt of a written Purchase Order for delivery from MamaMancini’s, or on such later date as may be specified in the Purchase Order. The Product shall be delivered by HDU for shipment to, and in accordance with the shipping instructions and at the expense of, MamaMancini’s, F.O.B. HDU’s premises. Notwithstanding the foregoing if any outstanding invoices from HDU to MamaMancini’s are past due, HDU may suspend shipment to MamaMancini’s until payments are brought current.

 

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(d)     Marketing of Product. MamaMancini’s shall market the Product, to such extent and in such manner as determined by MamaMancini’s in its sole discretion, and at its own cost and expense.

 

(e)      Insurance. HDU agrees to obtain and maintain in effect throughout the term of this Agreement products liability insurance with aggregate limits of One Million Dollars ($ 1,000,000) and a commercial umbrella policy with limits of Five Million Dollars ($5,000,000) in the aggregate. As long as HDU is able to do so, HDU shall include MamaMancini’s as an insured under such policies. Premiums for the products liability insurance shall be allocated between HDU and MamaMancini’s on a pro-rata basis, based on each of their respective gross sales (excluding inter-company sales); and premiums for the umbrella policy shall be shared equally between HDU and MamaMancini’s. If HDU is not able to include Mamamancini’s as an insured under its policies, HDU shall name MamaMancini’s as an additional insured to the extent its interest may appear. HDU shall cause MamaMancini’s to be given advance written notice of any cancellation of such insurance. If HDU is not able to include Mamamancini’s as an insured under its policies, MamaMancini’s agrees to obtain and maintain in effect throughout the term of this Agreement a general liability insurance policy with limits of One Million Dollars ($1,000,000) and a commercial umbrella insurance policy with limits of Five Million Dollars ($5,000,000); and to name HDU as an additional insured on said policies. MamaMancini’s shall cause HDU to be given advance written notice of any cancellation of such insurance.

 

(f)      Second Source of Product. MamaMancini’s shall then have the right to purchase Product from one or more other manufacturers, distributors or suppliers.

 

3.     Pricing and Payments.

 

(a)      Price. The price to be paid by MamaMancini’s to HDU with respect to the Product throughout the term of this Agreement (including any renewal or extension thereof) shall be $0.25 per pound, plus direct costs as agreed upon in advance and as set forth on Schedule A, attached hereto and made a part hereof. Schedule A may be modified, as agreed to by the parties. Such modifications, if any, shall be dated and signed by MamaMancini’s and HDU, and shall become effective on the date set forth therein which will be not less than thirty (30) days following the execution thereof. If the parties are unable to agree to a modification, either party may terminate this Agreement on 30 days written notice.

 

(b)      Net Purchase Price; Taxes, etc. Any present or future sales, use, excise, or similar tax applicable to the sale of the Products shall be paid by MamaMancini’s or, in lieu thereof, MamaMancini’s shall provide HDU with a tax exemption certificate acceptable to the applicable taxing authorities.

 

(c)      Payment Terms. HDU shall invoice MamaMancini’s for the purchase price respecting each shipment of the Product. Payment terms shall be net ten (10) days.

 

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4.     Trademark, Trade Names and Property Rights.

 

(a)      Use of Trademarks and Trade Names. MamaMancini’s shall market the Product in the Territory under the trademark “MAMAMANCINI’S” and/or such other trademark(s) and/or trade name(s) as MamaMancini’s shall from time to time deem desirable, whether or not registered or registrable, copyrighted or copyrightable, in whole or in part, in all or any portion of the Territory (collectively, the “MamaMancini’s Marks”).

 

(b)     Right to Marks.

 

(1)      MamaMancini’s Marks. All right, title and interest in and to the MamaMancini’s Marks shall be the sole and exclusive property of MamaMancini’s, and HDU acknowledges that it has no property or other rights in or to the MamaMancini’s Marks, including, without limitation, the right to use any of the MamaMancini’s Marks, either during or after the termination of this Agreement. HDU agrees that if at any time it shall acquire or otherwise obtain (by agreement, operation of law or otherwise) any right, title or interest in or to any of the MamaMancini’s Marks, it shall promptly notify MamaMancini’s of the facts and circumstances thereof and, in any event, shall assign the same to MamaMancini’s for and in consideration of the sum of one dollar ($1.00).

 

(c)      Unlawful Use of Marks. HDU agrees that it shall not, at any time during or after the term of this Agreement, directly or indirectly, take any action to contest the validity of the MamaMancini’s Marks or otherwise interfere with MamaMancini’s’s rights thereto or the goodwill represented thereby.

 

(d)      Infringement. HDU agrees to promptly notify MamaMancini’s of any information which comes to its attention from any source (i) respecting the infringement, imitation, illegal use or misuse of the MamaMancini’s Marks or the Product, or any attempt of the foregoing, and (ii) that the use of the MamaMancini’s Marks or the marketing of the Product in the Territory may infringe the trademarks, trade names, patents, designs or any other rights of third parties. MamaMancini’s agrees to indemnify, defend and hold harmless HDU and all of its shareholders, officers, directors, employees and agents (collectively, “Related Parties”) from and against all damages finally awarded against HDU and/or its Related Parties, and all reasonable expenses incurred by HDU and its Related Parties, as the result of any claim that the marketing of the Product or use of the MamaMancini’s Marks in the Territory infringes the trademarks, trade names, patents, designs or any other rights of third parties; provided, however, that (i) MamaMancini’s shall have the sole control of the defense of any such claim and all negotiations for its settlement and compromise (although HDU may participate therein through counsel of its own choice and at its sole cost and expense) and (ii) HDU and its Related Parties shall cooperate fully with MamaMancini’s in connection with such claim as herein provided.

 

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5.     Product Warranty; Exclusive Warranty.

 

(a)      Product Warranty. HDU warrants to MamaMancini’s that the Product sold to MamaMancini’s pursuant to this Agreement will be of good quality and ingredients, free of defects, merchantable and acceptable according to the standards of the trade, have a shelf life of twelve (12) months from the date of manufacture if properly handled and properly kept frozen, and will conform to the specifications agreed upon by the parties. This warranty shall survive any inspection, delivery, acceptance, payment or sale by MamaMancini’s, its employees or customers of the Product. In the event that any shipment (or part thereof) of the Product sold to MamaMancini’s hereunder proves to be not in compliance with the foregoing warranty, then the same may be rejected by MamaMancini’s at any time during the twenty (20) day period following its date of shipment, and delivered twenty (20) days after its date of rejection to HDU at the expense and risk of HDU, and HDU shall, at the option of MamaMancini’s, either (i) replace such shipment (or part thereof) and deliver the same, transportation charges prepaid, to MamaMancini’s or (ii) give MamaMancini’s credit for said returned shipment (or part thereof) of the Product, plus transportation charges paid thereon, if any, by MamaMancini’s.

 

(b)      Exclusive Warranty. THE WARRANTY SET FORTH IN THIS PARAGRAPH 5 IS THE ONLY WARRANTY GIVEN BY HDU CONCERNING THE PRODUCT AND IS EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.

 

6.     Confidentiality; Non-Competition.

 

(a)      Confidentiality. HDU covenants and agrees that it shall not (and shall use its best efforts to the utmost to ensure that its officers, directors, employees and agents do not), at any time during the term of this Agreement or thereafter, in any manner, directly or indirectly, reveal, divulge or make known to any person (other than its employees and agents with a “need to know”) or use for its own account or for the benefit of any third party, the identity of MamaMancinr s’s customers or other customer information, the terms and conditions of this Agreement, trade secrets or recipes (including the Recipe), and any other “know-how” relating to the manufacture of the Product or any secret or confidential information used by MamaMancini’s or which relates to MamaMancini’s’s business or affairs or the Product, which has been made known to HDU or come to the attention of HDU, its officers, directors, employees and agents (collectively, “Confidential Information”). HDU and its officers, directors, employees and agents shall retain all such Confidential Information in trust for the sole benefit of MamaMancini’s.

 

(b)      Non-Competition. HDU covenants and agrees that it shall not (and shall use its best efforts to the utmost to ensure that its officers, directors, employees and agents do not), (i) at any time during the term of this Agreement or thereafter, in any manner, directly or indirectly, develop, manufacture, sell, distribute or otherwise market, any product using the Recipe or any other Confidential Information; (iii) at any time during the term of this Agreement or for a period of two (2) years thereafter, in any manner, directly or indirectly, develop, manufacture, sell, distribute or otherwise market, any product that competes directly with the Product in or from the Territory. For purposes hereof, the Territory shall include the United States and export therefrom, directly or indirectly, to any and all other geographic locations worldwide.

 

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(c)      Non-Solicitation. MamaMancini’s and HDU each covenants and agrees that it shall not (and shall use its best efforts to the utmost to ensure that its officers, directors, employees and agents do not), at any time during the term of this Agreement or for a period of two (2) years thereafter solicit for employment or employ any employee (employed during the term of this Agreement) of the other provided, however, that (i) general solicitations of employment published in a journal, newspaper or other publication of general circulation and not specifically directed towards such employees, shall not be deemed to constitute a solicitation in violation of this Section; and (ii) no party shall be prohibited from employing any such person, who contacts them on his or her own initiative and without any solicitation.

 

(d)      Reasonableness. MamaMancini’s and HDU each agrees and acknowledges that the duration, scope and geographic areas applicable to the covenants described in this Section are fair, reasonable and necessary.

 

(e)      Injunctive Relief; Expenses. The covenants respecting confidentiality, non-competition and non-solicitation are essential elements hereof, the violation of which will cause irreparable injury to the non-breaching party, which may have no adequate remedy at law. Accordingly, upon the violation or threatened violation thereof by either party, its officers, directors, employees or agents, the non-breaching party shall have the right, in addition to any other rights or remedies it may have, to obtain in any court of competent jurisdiction injunctive relief to restrain such violation or threatened violation or otherwise specifically enforce any of the provisions of this Agreement. MamaMancini’s and HDU each agrees to reimburse the other for all costs and expenses, including reasonable attorneys’ fees, incurred by it by reason of any breach or threatened breach of the covenants contained in this Section 6.

 

(f)       MamaMancini’s and HDU each shall require each of its officers, directors, employees and agents to execute an agreement to abide by the foregoing provisions.

 

7.     Termination Upon Bankruptcy.

 

Either party may, at its option, immediately cancel this Agreement by giving written notice of such cancellation to the other party if:

 

(a)      the other party shall (i) file a petition commencing a voluntary case under any chapter of Title 11 of the United States Code, (ii) make a general assignment for the benefit of its creditors, (iii) admit in writing its inability to pay its debts as they mature, (iv) file an application for, or consent to, the appointment of any receiver or a permanent or interim trustee of such party or of all or any portion of its property, (v) file a petition seeking a reorganization of its financial affairs or to take advantage of any bankruptcy, reorganization, insolvency, readjustment of debt, dissolution or liquidation law or statute, or an answer admitting the material allegations of a petition filed against it in any proceeding under any such law or statute, or (vi) take any corporate action for the purpose of effecting any of the foregoing; or

 

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(b)      with respect to the other party (i) an involuntary case commenced against the other party by the filing of a petition under chapter 7 or chapter 11 of Title 11 of the United States Code and, within sixty (60) days after the filing thereof, either the petition is not dismissed or an order for relief is entered therein, (ii) an order, judgment or decree is entered appointing a receiver or a permanent or interim trustee of the other party or of all or any portion of its property and such order, judgment or decree shall continue unstayed and in effect for a period of sixty (60) days, or (iii) an order, judgment or decree is entered, without the approval or consent of the other party, approving or authorizing the reorganization, insolvency, readjustment of debt, dissolution or liquidation of the other party under any law or statute, and such order, judgment or decree shall continue unstayed and in effect for a period of sixty (60) days.

 

8.     Termination upon Default.

 

It shall be an “event of default” if, during the term of this Agreement, either party shall be in violation of any material provision of this Agreement. Whenever an event of default shall occur and be continuing, the non-defaulting party may, at its option, give written notice thereof to the defaulting party, whereupon the defaulting party shall have twenty (20) business days to correct any delinquency or violation. If such delinquency or violation has not been corrected by the expiration of said twenty (20) day period, the non-defaulting party may, upon further written notice to the defaulting party, terminate this Agreement or suspend its performance hereunder until such delinquency or violation has been cured. The non-defaulting party’s right to enforce its rights hereunder shall be in addition to, and not in substitution for, all other rights and remedies available to such party under this Agreement, by operation of law or otherwise.

 

9.     Consequences of Termination.

 

(a)     Delivery of Product. Upon termination of this Agreement for any reason, HDU shall immediately deliver to MamaMancini’s any and all packaging materials, specifications and other material, documents and papers whatsoever sent by MamaMancini’s to HDU relating to the business of MamaMancini’s or the manufacturing, marketing and distribution of the Product, and, except as set forth below, any and all property of MamaMancini’s in HDU’s possession or under its control. The right of MamaMancini’s to receive the aforementioned materials shall be absolute and unconditional, notwithstanding any claims which HDU may have or assert against MamaMancini’s, whether arising under this Agreement, by reason of its termination or otherwise; provided, however, that before delivery of such materials HDU may demand payment of the balance, if any, of the aggregate amount owed by MamaMancini’s to HDU on account of shipments of the Product previously delivered to and accepted by MamaMancini’s pursuant to this Agreement, less the aggregate amount of any claims by MamaMancini’s on account of shipments of the Product in breach of the warranty contained in Paragraph 5 hereof. HDU shall also deliver to MamaMancini’s any of the Product manufactured by HDU for MamaMancini’s pursuant to MamaMancini’s’s Purchase Order(s) before such termination, either on the dates specified by MamaMancini’s in its Purchase Order(s) or as provided herein or, if MamaMancini’s so directs, immediately upon such termination; provided, however, that if any order has not been fully completed prior to such termination, MamaMancini’s shall have the option of canceling the order with respect to that portion of the order not manufactured by HDU upon termination and shall not be required to accept any further amounts of the Product. In addition, upon termination of this Agreement for any reason, MamaMancini’s shall have the option to purchase any or all of the Product manufactured by HDU but not ordered by MamaMancini’s at the purchase price quoted with respect to the purchase order next preceding such termination. Upon termination, MamaMancini’s shall reimburse HDU its actual cost for any boxes, bags, and other packaging material utilized for the Product which are obsolete or specifically designed for the Product and returned to MamaMancini’s. All payments for any of the Product, boxes, bags and other packaging materials delivered after termination shall be C.O.D.

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(b)      Specific Performance. In view of the imminent and irreparable harm to MamaMancini’s which would result from even a short interruption in its supply of the Product, and the lack of an adequate remedy at law therefor, upon the violation or threatened violation of HDU’s obligations under Section 9, MamaMancini’s shall have the right, in addition to any other rights or remedies it may have, to obtain in any court of competent jurisdiction injunctive relief to compel HDU to deliver to MamaMancini’s all of HDU’s inventory of Products and packaging materials therefor, or otherwise specifically enforce such provisions.

 

10.   Notices.

 

All notices, requests, demands, consents and other communications required or permitted to be given or made under this Agreement shall be in writing and shall be deemed to have been duly given or made when delivered in person or when received after dispatch by certified or registered mail, postage prepaid, return receipt requested, to the parties hereto at their addresses first above set forth, or to such other address as either party shall hereafter specify by notice similarly given.

 

11.   Assignment.

 

In entering into this Agreement, MamaMancini’s has relied upon the expertise and capabilities of HDU. Accordingly, HDU may not directly or indirectly assign, sub license, delegate, encumber or in any other manner transfer or convey any of its rights, remedies, obligations, liabilities or interests in or arising under this Agreement, without the prior written consent of MamaMancini’s. Any attempted assignment, sub license, delegation, encumbrance or other transfer in violation of this Agreement shall be void and of no effect, and shall be considered the violation of a material provision hereof For purposes of this Section 10, a change of control of HDU shall be deemed an assignment, whether by stock transfer, merger or otherwise.

 

12.  Miscellaneous.

 

(a)     Modification and Waivers. This Agreement may not be modified or amended, nor may any rights hereunder be waived, except by an instrument signed by an authorized officer of the party against whom the same is sought to be enforced. A waiver by any party hereto of a breach of any term or provision of this Agreement shall not be construed as a waiver of any subsequent breach.

 

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(b)      Further Assurances. The parties hereto shall do and perform or cause to be done and performed all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as the other party hereto may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement.

 

(c)      Headings and Counterparts. Section and other headings contained in this Agreement are for reference purposes only and shall not be deemed to be part of this Agreement or to affect its meaning or interpretation. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

 

(d)      Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, with respect to the subject matter hereof.

 

(e)      Attorneys’ Fees. In the event of legal action to construe or enforce the provisions of this contract, the prevailing party shall be entitled to collect his reasonable attorneys’ fees, court costs, and related expenses from the losing party and the Court having jurisdiction of the dispute shall be authorized to determine the amount of such fees, costs and expenses and enter judgment there for. If either party defaults and said default is cured without the necessity of filing legal action, the party in default shall pay the other party’s reasonable attorneys’ fees and costs and expenses, if any, incurred as a result of said default.

 

(f)       Binding Effect; Benefits. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective legal representatives, successors and permitted assigns. Except as otherwise set forth herein, nothing in this Agreement, express or implied, is intended to confer on any person other than the parties hereto (or their respective legal representatives, successors or permitted assigns) any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

(g)      Governing Law and Separability. This Agreement shall be construed and governed in accordance with the laws of the State of New Jersey. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of Such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

  MAMAMANCINI’S LLC
   
  By: /s/ Carl Wolf
  Name: CARL WOLF
  Title: Managing Member
     
  JOSEPH EPSTEIN FOODS, INC. D/B/A
HORS D’OEUVRES UNLIMITED
   
  By: /s/ Matthew Brown
  Name: Matthew Brown
  Title: President

 

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MAMAMANCINI’S PRICING FROM HDU FOR 2010

 ALL PRICING AT DIRECT COSTS PLUS A S.25 PER LB FEE

 

UPC CODE     Product Description   Transfer  
872408002135     Whole Foods Foodservice 4.51b Tray   $ 53.73  
872408003132     15ct Foodservice 4.51b Tray (White Rose)   $ 51.84  
872408004139     Xanthan Gum 4.51b Tray (Fresh Market)   $ 47.52  
872408005136     30oz Tray Product   $ 40.27  
872408007130     20oz Grab and Go   $ 26.44  
872408008137     Original Foodservice 4.51b Tray   $ 46.95  
872408009134     Retail 24oz Frozen Box   $ 36.24  

 

 
 

 

Exhibit 10.2

 

DEVELOPMENT AND LICENSE AGREEMENT BETWEEN MARKET

FINDERS BROKERAGE, INC. AND DANIEL DAUGHERTY

 

This Development and License Agreement (“Agreement”) is made as of January 1, 2009 between Daniel Daugherty (“Licensor”), an individual residing at 625 Mountain Drive, South Orange, NJ 07079; and Market Finders Brokerage, Inc (“Licensee”), a New Jersey corporation with its principal place of business at 627 Inwood Lane, South Orange, NJ 07079.

 

1. Development, Manufacturing and Marketing of Product Line.

 

1.1     Development by Licensor. Licensor shall develop for Licensee a line of beef meat balls with sauce, Italian sausage with sauce and other similar Italian meats with sauces for commercial manufacture, distribution and sale (each a “Licensor Product” and collectively the “Licensor Products”). Licensor shall work with Licensee to develop Licensor Products that are acceptable to Licensee. Upon acceptance of a Licensor Product by Licensee, Licensor’s trade secret recipes, formulas methods and ingredients for the preparation and production of such Licensor Products (the “Recipes”) shall be subject to this Development and License Agreement. Upon acceptance of each Licensor Product, the parties shall prepare an Appendix hereto which shall include a description of such Licensor Product, the Recipe for such Licensor Product, and the date of acceptance of such Licensor Product, and shall be signed by each of the parties.

 

1.2     Other Products Not Subject to Agreement. Licensor acknowledges that Licensee has been, is currently, and will be engaged in the business of developing, manufacturing, distributing, marketing and selling hors d’oeuvres and other prepared food products that have been, are being and/or will be developed other than by Licensor, the recipes for which are not substantially derived from the Recipes (collectively, “Other Products”). Subject to the Section 1.5 below, such Other Products shall not be subject to this Agreement and Licensor shall have no rights with respect to such Other Products.

 

1.3     Manufacturing and Marketing by Licensee. Subject to Section 4.4 below, Licensee, at its sole expense, shall: purchase raw materials and packaging; develop nutritional information; develop package design; manufacture and inventory the Products; provide all marketing materials including samples, literature, and participation in trade shows; market, advertise, sell, ship and support the Products; invoice customers and collect invoices.

 

1.4     Licensee Improvements. Subsequent to the acceptance of a Product and the execution by the parties of an Appendix in accordance with Section 1.1 above, Licensee may make such modifications and changes to Recipes as Licensee may determine to be necessary or appropriate (“Licensee Improvements”). All rights, title and interest in any Licensee Improvements shall be the sole and exclusive property of Licensee.

 

 
 

 

1.5     Licensee Products. Licensee in its sole and absolute discretion may, at any time and from time to time, use the MamaMancini Marks (as defined in Section 6.1, below) in connection with marketing and selling Other Products. If and to the extent that Licensee uses the MamaMancini Marks in connection with marketing and selling Other Products, such Other Products shall be referred to as “Licensee Products” for purposes of this Agreement. Licensee Products, together with Licensor Products, shall be referred to as “Products” for purposes of this Agreement. Licensee in its sole and absolute discretion may, at any time and from time to time, cease using the MamaMancini Marks in connection with marketing and selling any or all Other Products in which event such Other Products shall cease to be “Licensee Products” or “Products” for purposes of this Agreement.

 

2.     Grant of License. Licensor hereby irrevocably grants to Licensee and Licensee’s affiliates, (a) a worldwide, exclusive, license during the Exclusive Term (as defined in Section 3.1 below); and (b) a worldwide, non-exclusive, perpetual license thereafter during the Non-Exclusive Term (as defined in Section 3.2 below), to utilize the Recipes to manufacture or have manufactured the Licensor Products, and to sell and distribute the Licensor Products in all channels of distribution (including, without limitation, wholesale, internet, retail, distributor, club store, mass market, specialty catalogue, and food service including national chains, and caterers, restaurants and hotels). Such License shall include the right to sublicense. In addition, Licensor hereby irrevocably grants to Licensee the worldwide, non-exclusive, perpetual, right to use all know-how (if any) related thereto (the “Know-How”) including without limitation sources of ingredients, pricing, standards and methods for quality control, and procedures for preparing, finishing, packaging and storing Licensor Products. The licenses granted under this Agreement are specifically set forth herein, and Licensor grants no licenses to Licensee by implication or estoppel.

 

3.     Exclusive Term; Non-Exclusive Term; Agreement Year. The term of this agreement (the “Term”) shall consist of the Exclusive Term (as defined in Section 3.1 below) and the Non-Exclusive Term (as defined in Section 3.2 below). The 12-month period beginning on each January 1 and ending on each December 31 is referred to herein as an “Agreement Year.”

 

3.1     Exclusive Term. The “Exclusive Term” begins on the date hereof (the “Effective Date”) and ends on the 50th anniversary of the Effective Date, unless terminated or extended as provided herein. Licensor, at its option, may terminate the Exclusive Term by notice in writing to Licensee, delivered between the 60th and the 90th day following the end of any Agreement Year if, on or before the 60th day following the end of such Agreement Year, Licensee has not paid Licensor Royalties (as defined in Section 4.1, below) with respect to such Agreement Year at least equal to the minimum royalty described in Section 4 below (the “Minimum Royalty”) for such Agreement Year. Subject to the foregoing sentence, and provided Licensee has not breached this Agreement and failed to cure such breach in accordance herewith, Licensee may extend the Exclusive Term for an additional twenty five (25) years, by notice in writing to Licensor, delivered on or before the 50th anniversary of the Effective Date.

 

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

 

3.3     Right to Terminate. Nothing contained in this paragraph shall be construed as limiting the right of either party to terminate this Agreement pursuant to Section 10 below.

 

4.      Royalties and Payments.

 

4.1     Royalties. During the Exclusive Term and the Non-Exclusive Term, subject to Section 4.13, Licensee will pay Licensor a royalty (each, a Royalty” and, collectively, the “Royalties”) equal to the royalty rate (the “Royalty Rate”), multiplied by Licensee’s “Net Sales” (as hereinafter defined) of Products. As used herein, “Net Sales” means gross invoiced sales of Products, directly or indirectly to unrelated third parties, less (a) discounts (including cash discounts), and retroactive price reductions or allowances actually allowed or granted from the billed amount (collectively “Discounts”); (b) credits, rebates, and allowances actually granted upon claims, rejections or returns, including recalls (voluntary or otherwise) (collectively, “Credits”); (c) freight, postage, shipping and insurance charges; (d) taxes, duties or other governmental charges levied on or measured by the billing amount, when included in billing, as adjusted for rebates and refunds; and (e) provisions for uncollectible accounts determined in accordance with reasonable accounting methods, consistently applied.

 

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

 

4.3     Minimum Royalties During Exclusive Term. In order to continue the Exclusive Term (as provided in Section 3.1 above), Licensee shall pay Licensor a Minimum Royalty with respect to the preceding Agreement Year as follows:

 

    Minimum Royalty to be
    Paid with Respect to
Agreement Year   Such Agreement Year
lst and 2nd   $ 0.00  
3rd and 4th   $ 50,000.00  
5th, 6th and 7th   $ 75,000.00  
8th and 9th   $ 100,000.00  
10th and thereafter     $125,000.00  

 

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4.4     Payment of Royalties. The Royalty owed Licensor shall be calculated on a quarterly calendar basis and shall be payable no later than 60 days following the close of each calendar quarter with respect to the preceding calendar quarter, as long as Licensee continues to sell Products. Licensee shall furnish to Licensor complete and accurate statements in a form reasonably acceptable to Licensor, signed by an officer of Licensee, indicating the number of Products sold, the number of Discounts and Credits (if any), and Royalties due for each calendar quarter.

 

4.5     Duty to Pay Royalty and Right to Terminate Exclusive Term Complete Satisfaction of Licensee’s Duty. Licensee’s duty to pay the Royalty hereunder and Licensor’s right to terminate the Exclusive Term if Licensee does not pay Licensor the Minimum Royalty, shall constitute complete satisfaction of any duty, whether express or implied, which could be imposed upon Licensee to commercially exploit the Products. Licensor accepts this duty and right in lieu of any best efforts obligation or other standard of diligence on the part of Licensee.

 

4.6     Accrual of Royalty Obligation. Royalty obligation shall accrue upon the sale of the Products regardless of the time of collection by Licensee. For purposes of this Agreement, a Product shall be considered “sold” upon the date when such Product is billed, invoiced, shipped, or paid for, whichever event occurs first. Licensee shall be entitled to a credit for any subsequent Discounts and Credits.

 

4.7     Effect of Acceptance. The receipt or acceptance by Licensor of any Royalty statement or Royalty payment shall not prevent Licensor from subsequently challenging the validity or accuracy of such statement or payment.

 

4.8     Survival of Royalty Obligation. Licensee’s obligations for the payment of a Royalty shall survive expiration or termination of this Agreement and will continue for so long as Licensee continues to manufacture, sell or otherwise market the Products.

 

4.9     Form of Payment. All payments due hereunder shall be made in United States currency drawn on a United States bank, unless otherwise specified between the parties.

 

4.10   Taxes. In addition to any other payments due under this Agreement, Licensee agrees to reimburse and hold Licensor harmless from any sales, use, excise, import or export, value added or similar tax or duty, any other tax not based on Licensor’s net income, and any governmental permit and license fees, customs fees and similar fees levied upon delivery of the deliverables and/or services hereunder which Licensor may incur in respect of this Agreement, except when such relate to the sale of Products by Licensor hereunder.

 

4.11   Interest. Late payments shall incur interest at the rate of one half percent (.5%) per month from the date such payments were originally due.

 

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4.12   Licensor Efforts to Market Products. Licensor may purchase Product from Licensee, for sale directly to individual consumers, but not to any other channel of distribution (including, without limitation, wholesale, internet, retail, distributor, club store, mass market, specialty catalogue, and food service including national chains, and caterers, restaurants and hotels). Licensee shall sell such Products to Licensor at a price that results in a gross profit (after freight and commissions) to Licensee equal to 40% of the total sales price (but in no event below Licensee’s cost). Such sales shall be excluded from “Net Sales” (as such term is used in Section 4.1 above) for purposes of calculating Royalties due hereunder.

 

4.13   Licensor Efforts to Support Licensee. Licensor will, as requested by Licensee, undertake the marketing and sales of the Products including sales presentations, in store demonstrations, and consumer trade publicity, on a as need basis. Licensor will, as requested by Licensee, provide such services not fewer than 80 hours per month. If Licensor is unable or unwilling (including, without limitation, due to Licensor’s retirement, disability, or death) to provide such services during any Agreement Year then, notwithstanding Sections 4.1 and 4.2 above, Royalties for such Agreement Year shall be limited to $200,000. The limitation on Royalties set forth in the preceding sentence shall be Licensee’s sole remedy for Licensor’s failure to comply with this Section 4.13.

 

4.14   Licensor Family History. Licensor grants full exclusive use of his family history to Licensee for the purposes of marketing the licensed Recipes during the Exclusive Term of this Agreement.

 

6.      Books and Records. Licensee and its affiliates shall keep accurate and complete books and records as they relate hereto for three (3) years after the close of each Agreement Year. Licensor shall have the right, upon at least five (5) days written notice and no more than once per calendar year, to cause its independent certified public accountants to inspect Licensee’s books and records and all other documents and material in the possession of or under the control of Licensee with respect to the subject matter of this Agreement at the place or places where such records are normally retained by Licensee. Licensor shall have free and full access thereto for such purposes and shall be permitted to make copies thereof and extracts therefrom. Such examination shall be at Licensor’s sole cost and expense provided that, if in an audit of Licensee’s or any such affiliate’s records determines that there is a shortfall of five percent (5%) or more in Royalties reported for any Agreement Year, Licensee shall reimburse Licensor for the reasonable fees of Licensor’s certified public accountants incurred in connection with such audit. Further, in the event that such inspection reveals a discrepancy in the amount of Royalty owed Licensor from what was actually paid, Licensee shall pay such discrepancy, plus interest, calculated at the rate of one half percent (.5 %) per month. Any information discovered in such an inspection may be used in any proceeding based on Licensee’s failure to pay its actual Royalty obligation.

 

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6.     Trademark Rights; Ownership of Recipes and Licensee Improvements.

 

6.1     MamaMancini Mark. Licensee is and shall be the sole and exclusive owner of all rights, title and interest in and to the trademarks and designs using the “MamaMancini” name (collectively, the “MamaMancini Marks”), and all goodwill associated therewith. Licensor hereby acknowledges that Licensee is the owner of the MamaMancini Marks, for use in connection with marketing and selling the Products.

 

6.2     Ownership of Recipes and Licensee Improvements. Except as expressly provided in this Agreement: (a) Licensor shall retain all right, title and interest in the original Recipes; and (b) Licensee shall retain all right, title and interest in any Licensee Improvements.

 

6.3     Cooperation. The parties agree to execute any documents reasonably requested by the other party to effect any of the above provisions.

 

6.4     Validity of MamaMancini Marks. Licensor acknowledges that, to Licensor’s knowledge, the MamaMancini Marks are unique and original to Licensee and that Licensee is the owner thereof. Licensor shall not, at any time during or after the effective Term, dispute or contest, directly or indirectly, Licensee’s exclusive right and title to the MamaMancini Marks or the validity thereof. Licensee, however, makes no representation or warranty with respect to the validity of any trademark or copyright that may issue or be granted therefrom.

 

6.5     Secondary Meaning of MamaMancini Marks. Licensor acknowledges that the MamaMancini Marks have acquired secondary meaning.

 

6.6     Trademark Notices; Infringement Litigation. Licensee will control absolutely all infringement litigation brought against third parties involving or affecting the Mama Mancini Marks. Licensor shall cooperate with Licensee in connection with all such litigation and will be compensated by Licensee for costs associated with such cooperation. Licensee shall have the sole and exclusive right, in its discretion, to institute and prosecute lawsuits against third persons for infringement of the MamaMancini Marks. All sums recovered in any such lawsuits, whether by judgment, settlement or otherwise, shall be retained solely by Licensee. Licensor agrees to fully cooperate with Licensee in the prosecution of any such suit against a third party and shall execute all papers, testify on all matters, and otherwise cooperate in every way necessary and desirable for the prosecution of any such lawsuit. The Licensee shall reimburse the Licensor for any costs associated with such cooperation.

 

7.     Representations and Warranties. Licensor represents and warrants that (a) Licensor has exclusive right, title and interest in and to the Recipes and the Know-How, including the right to license the Recipes and the Know-How to Licensee in accordance with the terms and conditions of this Agreement; and (b) to Licensor’s knowledge the Recipes and the Know-How do not, and will not, infringe any trademark or other intellectual property right of any third party.

 

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8.     Product Liability Insurance. Licensee will obtain and maintain at its own expense products liability and personal injury liability (including bodily injury and death) insurance in an amount not less than $2,000,000. Licensor shall not have any liability for any deductible.

 

9.     Product Quality, Safety & Inspection. Licensee shall comply with all applicable laws, regulations and standards, and shall manufacture the Products utilizing best practices in a USDA approved facility, following the Recipes. Licensor shall have the right to monitor and inspect the quality of the Product, at reasonable times and on reasonable notice, and prior to the commencement of manufacture and sale of the Products.

 

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

 

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

 

11.    Post Termination Rights.

 

11.1     Inventory. Not less than thirty (30) days prior to the expiration of this Agreement or immediately upon termination thereof, Licensee shall provide Licensor with a complete schedule of all inventory of Products then on-hand (the “Inventory”).

 

11.2     Right to Sell Inventory. Upon expiration or termination of this Agreement, except for reason of a breach of Licensee’s duty to comply with the quality control requirements, Licensee shall be entitled, for an additional period of three (3) months and on a nonexclusive basis, to continue to sell such Inventory. Such sales shall be made subject to all of the provisions of this Agreement and to an accounting for and the payment of a Royalty thereon. Such accounting and payment shall be due and paid within thirty (30) days after the close of the said three (3) month period.

 

11.3     Reversion of Rights. Upon the expiration or termination of this Agreement, except as set forth in this Section 11, Licensee’s rights under this Agreement to the Products and Recipes shall forthwith terminate and immediately revert to Licensor and Licensee shall immediately discontinue all use of the Recipes, at no cost whatsoever to Licensor. Notwithstanding the foregoing, Licensor shall not have any rights to the MamaMancini Marks or to the Licensee Improvements, of which Licensee shall remain the sole and exclusive owner.

 

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12.     Non-Competition. During the Exclusive Term, Licensor shall not, whether as an individual, sole proprietor, employee, consultant, or advisor or in any other capacity, engage in any business activity in competition with Licensee (except as expressly permitted herein). As used herein, “activity in competition with Licensee” shall specifically mean manufacturing, or selling any hors d’oeuvres in any channels of distribution (including, without limitation, wholesale, internet, retail, distributor, club store, mass market, specialty catalogue, and food service including national chains, and caterers, restaurants and hotels), or assisting any other person or entity to do so, except as provided in Section 4.12 above.

 

13.    Miscellaneous.

 

13.1.     Notices. Notices hereunder shall be in writing, and served personally, sent by overnight delivery service or by messenger, or mailed postage prepaid, return receipt requested in the U.S. mail, in each case against signature. Notices shall be effective and deemed delivered when served personally, when delivered by overnight delivery service or by messenger, or three (3) business days after being mailed. Notices shall be addressed to the parties at the following address, or such other address as may be provided by notice in accordance herewith:

 

If to Licensor:

 

Daniel Daugherty

625 Mountain Drive

South Orange, NJ 07079

 

with a duplicate copy of all notices to:

 

If to Licensee:

 

Carl Wolf

Market Finders Brokerage, Inc.

627 Inwood Lane

South Orange, NJ 07079

Telephone: 973 762 7986 office; 973 985 0280 cell

Fax: 973 556 1256

Email: cwolflakota@aol.com

 

with a duplicate copy of all notices to:

 

Steven B. Greenapple

Steiker, Fischer, Edwards & Greenapple, PC

6 South Street

Suite 201

Morristown, New Jersey 07960

Telephone: (973) 540-9292

Fax: (973) 540-9295

Email: sgreenapple@sfeglaw.com

 

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13.2.     Relationship. This Agreement does not create an agency, partnership, or joint venture relationship between Licensor and Licensee.

 

13.3.     Construction. This Agreement shall be construed pursuant to the laws of the State of New Jersey applicable to agreements entered into and fully performed therein. Each party hereto agrees that the State and federal courts located in the State of New Jersey shall have exclusive jurisdiction over any dispute arising in connection with this Agreement or the transactions contemplated hereby. Each party hereby (i) submits to the personal jurisdiction of such courts and agrees that service of process may be made upon it in the manner in which notices are given under paragraph 14.1 hereof; and (ii) waives any claim of improper venue or forum non conveniens with respect to such action. EACH PARTY HERETO WAIVES TRIAL BY JURY IN ANY SUIT ARISING IN CONNECTION WITH THIS AGREEMENT.

 

13.4.     Partial Invalidity. The invalidity of any provision of this Agreement shall not impair or affect the validity of the remaining portions hereof, and this Agreement shall be construed as if such invalid provision had not been included herein.

 

13.5.     Confidentiality; Non-Hiring/Non-Solicitation. Licensor and Licensee are prohibited from making disclosure of the financial terms of this Agreement to any third party without prior written consent, provided, however, that disclosure may be made: (i) to the extent necessary to comply with governmental disclosure requirements; (ii) to any financial or legal representatives, owners, parents, and partners; and (iii) as may be necessary and appropriate in connection with the performance and enforcement of this Agreement, with the prior written consent of the other party hereto. Any party to whom disclosure is made hereunder will likewise be bound by the terms of this paragraph. Licensor and Licensee each agree that they shall not, directly or indirectly, hire or solicit to hire, as employees, consultants, independent contractors, or in any other capacity, the employees, consultants, independent contractors employed or contracted by the other.

 

13.6.     Entire Agreement; Modifications; Waiver. This Agreement, including any Appendix hereto, expresses the entire understanding of the parties hereto and replaces any and all former agreements, understandings, representations or warranties relating to the subject matter hereof. No modification, alteration or amendment of this Agreement shall be valid or binding unless in writing and signed by the party to be charged with such modification, alteration or amendment. No waiver of any term or condition of this Agreement shall be construed as a waiver of any other term or condition; nor shall any waiver of any default under this Agreement be construed as a waiver of any other default. Any failure or delay by Licensor to enforce any of its rights under this Agreement shall not be deemed a continuing waiver or modification hereof.

 

9
 

 

13.7.      Prevailing Party’s Attorneys’ Fees. If either party hereto brings an action to enforce the terms hereof or to declare rights hereunder, or for the enforcement of any judgment, the prevailing party in such action shall be entitled to an award of reasonable costs of litigation including, without limitation, reasonable attorneys’ fees and costs, in such amount as may be determined by the Court having jurisdiction in such action.

 

13.8.     Agreement Binding On Successors. The provisions of the Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their heirs, administrators, successors and assigns.

 

13.9.     Assignability. The license granted hereunder is personal to Licensee and shall not be assigned by any act of Licensee or by operation of law unless in connection with a transfer of substantially all of the assets of Licensee or with the consent of Licensor.

 

Licensor and Licensee have executed this Agreement as of the day and date first set forth above.

 

MARKET FINDERS BROKERAGE, INC.

 

By: /s/ Marion F Wolf  
  Marion F. Wolf, President  
     
DANIEL DAUGHERTY  
/s/ DANIEL DAUGHERTY  

 

10
 

 

Appendix to Development and License Agreement

 

Description of Product:

 

Recipe for Product:

 

Date of acceptance of Product:

 

MARKET MARKET FINDERS BROKERAGE, INC.

 

By: /s/ Marion F. Wolf  
  Marion F. Wolf, President  
     
DANIEL DAUGHERTY  
/s /DANIEL DAUGHERTY  

 

11
 

 

Exhibit 16.1

 

SEALE and BEERS, CPAs

PCAOB & CPAB REGISTERED AUDITORS

www.sealebeers.com

 

January 24, 2013

 

Office Of the Chief Accountant

Securities and Exchange Commission

100 F Street, NE

Washington, D.C. 20549

 

Dear Sir/Madam:

 

We have read the statements included under Item 4.01 in the Form 8-K dated January 24, 2013, of Mascot Properties, Inc. (the “Company”) to be filed with the Securities and Exchange Commission and we agree with such statements insofar as they relate to our dismissal. We cannot confirm or deny that the appointment of Rosenberg Rich Baker Berman and Company was approved by the Board of Directors, or that they were not consulted prior to their appointment as auditors.

 

Very truly yours,  
   
/s/ Seale and Beers, CPAs  
Seale and Beers, CPAs  
Las Vegas, Nevada  

 

Seale and Beers, CPAs PCAOB & CPAB Registered Auditors
50 S. Jones Blvd, Ste 202, Las Vegas, NV 89107 (888)727-8251 Fax: (888)782-2351

 

 
 

 

Exhibit 99.1

 

DAVID G. DRESLIN
7985 113TH STREET
SUITE 220
SEMINOLE, FLORIDA 33772
(727) 393-7439

 

January 23, 2013

 

To the Members of
the Board of Mascot Properties, Inc.

 

Dear Sirs:

 

This letter shall serve as notice that effective immediately, I hereby resign from my positions as Chief Executive Officer, President and member of the board of directors of Mascot Properties, Inc. (the "Company"), and all other positions to which I have been assigned, regardless of whether I served in such capacity, of the Company. The resignation is not the result of any disagreement with the Company on any matter relating to the Company's operations, policies or practices.

 

Furthermore, pursuant to the Acquisition Agreement and Plan of Merger, dated January 22, 2013 by and among, Mascot Properties, Inc., Mascot Properties Acquisition Corp. and MamaMancini's Inc., I agree to voluntarily forgive any unpaid salary, bonuses or other forms of compensation in any form whatsoever, including any amounts that may be owed to me for accrued expenses, loans or for any other reason.

 

Sincerely,  
   
/s/ David Dreslin  
David Dreslin  

 

 
 

 

 

Exhibit 99.2

 

MAMAMANCINI’S, INC

FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 

 
 

  

MamaMancini’s, Inc.

Financial Statements

September 30, 2012

 

Table of Contents

 

    Page(s)
     
Balance Sheets as of September 30, 2012 and December 31, 2011   F-1
     
Statements of Operations For the Nine Months Ended September 30, 2012 and 2011    F-2
     
Statements of Changes in Stockholders’ Equity (Deficit) For the Period February 22, 2010 (inception) to September 30, 2012    F-3
     
Statements of Cash Flows For the Nine Months Ended September 30, 2012 and 2011    F-4
 
Notes to Financial Statements   F-5 - F-18

 

 
 

 

MamaMancini’s, Inc.

Balance Sheets

 

    September 30, 2012     December 31, 2011  
    (unaudited)        
                 
Assets:                
Cash   $ 1,249,528     $ 16,505  
Accounts receivable, net     427,997       581,479  
Inventories     143,496       101,110  
Prepaid expenses and other current assets     18,029       79,382  
Deposit with manufacturer - related party     233,918       100,000  
Total current assets     2,072,968       878,476  
                 
Property and equipment, net     20,711       20,015  
                 
Total assets   $ 2,093,679     $ 898,491  
                 
Liabilities and Stockholders’ Equity
                 
Liabilities:                
Accounts payable and accrued expenses   $ 220,481     $ 329,634  
Line of credit     200,000       500,000  
Due to related party     -       19,544  
Total current liabilities     420,481       849,178  
                 
Stockholders’ Equity                
Common stock, $0.001 par value; 40,000,000 shares authorized; 8,454,000 and 15,000,000 shares issued and outstanding, respectively     18,454       15,000  
Additional paid in capital     4,326,930       1,386,723  
Accumulated deficit     (2,672,186 )     (1,352,410 )
Total Stockholders’ Equity     1,673,198       49,313  
                 
Total Liabilities and Stockholders’ Equity   $ 2,093,679     $ 898,491  

 

See accompanying notes to financial statements

 

F-1
 

  

MamaMancini’s, Inc.

Statements of Operations

 

    For the Nine Months Ended     For the Nine Months Ended  
    September 30, 2012     September 30, 2011  
                 
Sales - net of slotting fees and discounts   $ 3,381,378     $ 2,243,610  
                 
Cost of sales     2,366,854       1,540,342  
                 
Gross profit     1,014,524       703,268  
               
Operating expenses Research and development     65,070       -  
General and administrative expenses     2,259,183       1,242,448  
Total operating Expenses     2,324,253       1,242,448  
                 
Loss from operations     (1,309,729 )     (539,180 )
                 
Other income (expenses)                
Interest expense     (10,047 )     (1,026 )
Total other income (expense)     (10,047 )     (1,026 )
                 
Net loss   $ (1,319,776 )   $ (540,206 )
                 
Net loss per common share - basic and diluted   $ (0.08 )   $ (0.04 )
                 
Weighted average common shares outstanding - basic and diluted     16,702,635       14,756,781  

  

See accompanying notes to financial statements

 

F-2
 

 

MamaMancini’s, Inc.

Statement of Changes in Stockholders’ Equity (Deficit)

For the Period February 22, 2010 (Inception) to September 30, 2012

 

    Common Stock     Additional     Accumulated     Stockholders’ Equity  
    Shares     Amount     Paid-In Capital     Deficit     (Deficit)  
                               
Balance February 22, 2010 (Inception)     -     $ -     $ -     $ -     $ -  
                                         
Common stock issued to founders     10,308,511       10,309       (10,309 )     -       -  
                                         
Common stock issued for cash     3,829,787       3,830       1,196,170       -       1,200,000  
                                         
Common stock issued for services     223,404       223       69,777       -       70,000  
                                         
Stock issuance costs     -       -       (68,277 )     -       (68,277 )
                                         
Net loss for the period February 22, 2010 (Inception) to December 31, 2010     -       -       -       (670,682 )     (670,682 )
Balance, December 31, 2010     14,361,702       14,362       1,187,361       (670,682 )     531,041  
                                         
Common stock issued for cash     638,298       638       199,362       -       200,000  
                                         
Net loss for the year ended December 31, 2011     -       -       -       (681,728 )     (681,728 )
                                         
Balance, December 31, 2011     15,000,000       15,000       1,386,723       (1,352,410 )     49,313  
                                         
Common stock issued for cash     3,454,000       3,454       3,450,546       -       3,454,000  
                                         
Warrants issued for services     -       -       293,898       -       293,898  
                                         
Stock issuance costs     -       -       (804,237 )     -       (804,237 )
                                         
Net loss for the nine months ended September 30, 2012     -       -       -       (1,319,776 )     (1,319,776 )
                                         
Balance, September 30, 2012     18,454,000     $ 18,454     $ 4,326,930     $ (2,672,186 )   $ 1,673,198  

  

See accompanying notes to financial statements

 

F-3
 

 

MamaMancini’s, Inc.

Statements of Cash Flows

 

    For the Nine Months Ended     For the Nine Months Ended  
    September 30, 2012     September 30, 2011  
             
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (1,319,776 )   $ (540,206 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation     9,304       6,709  
Changes in operating assets and liabilities:                
(Increase) Decrease in:                
Accounts receivable     153,482       (129,168 )
Inventories     (42,386 )     (14,110 )
Prepaid expenses and other assets     61,353       (36,619 )
Deposit with manufacturer - related party     (133,918 )     (100,000 )
Increase (Decrease) in:                
Accounts payable and accrued expenses     (109,153 )     123,676  
Due to related party     (19,544 )     -  
Net Cash Used in Operating Activities     (1,400,638 )     (689,718 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Cash paid for machinery and equipment     (10,000 )     (18,402 )
Investment in LLC     -       (6,942 )
Net Cash Used In Investing Activities     (10,000 )     (25,344 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from issuance of common stock     3,454,000       200,000  
Stock issuance costs     (510,339 )     -  
Proceeds from credit line     -       265,000  
Repayment of credit line     (300,000 )     -  
Net Cash Provided By Financing Activities     2,643,661       465,000  
                 
Net Increase (Decrease) in Cash     1,233,023       (250,062 )
                 
Cash - Beginning of Year/Period     16,505       292,774  
                 
Cash - End of Year/Period   $ 1,249,528     $ 42,712  
                 
SUPPLEMENTARY CASH FLOW INFORMATION:                
Cash Paid During the Period for:                
 Income taxes   $ -     $ -  
 Interest   $ 10,047     $ 1,026  
                 
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                
                 
Stock issuance costs paid in the form of warrants   $ 293,898     $ -  
Conversion of advance to Investment in LLC   $ -     $ 20,090  

 

See accompanying notes to financial statements

 

F-4
 

 

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

Note 1 Nature of Operations and Basis of Presentation

 

Nature of Operations

 

MamaMancini’s, Inc. (the “Company”) was organized on February 21, 2012 as a Delaware corporation.

 

On March 5, 2012, the Company entered into a share exchange (the “Reorganization”) with MamaMancini’s, LLC (the “LLC”) whereby the Unit holders of the LLC exchanged all 4,700 Ownership Units outstanding for 15,000,000 shares of Company common stock and 223,404 common stock options. All equity accounts have been retrospectively recast as a result of the Reorganization.

 

The Company will continue the existing business operations of the LLC. The historical financial statements of the Company are those of the LLC from the date of the Exchange and subsequent.

 

The Company is a manufacturer and distributor of a line of beef meatballs with sauce, turkey meatballs with sauce, Italian sausage with sauce and other similar Italian meats with sauces. The Company’s customers are located throughout the United States, with a large concentration in the Northeastern and Southeastern United States regions.

 

The financial statements presented for all periods through and including September 30, 2012 are those of the Company. As a result of this Reorganization, the equity sections of the LLC for all prior periods presented reflect the Reorganization described above and are consistent with the September 30, 2012 balance sheet presented for the Company.

 

Since the transaction is considered a Reorganization, the presentation of pro-forma financial information was not required.

 

Basis of Presentation

 

Basis of presentation – unaudited interim financial information

 

The accompanying unaudited interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These financial statements should be read in conjunction with the financial statements and notes of the Company for the years ended December 31, 2011 and 2010.

 

Note 2 Summary of Significant Accounting Policies

 

Use of estimates

 

The preparation of 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 financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following: allowance for bad debt, inventory obsolescence, the fair value of share-based payments.

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.

 

F-5
 

 

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

Risks and uncertainties

 

The Company operates in an industry that is subject to intense competition and change in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure.

 

The Company has experienced, and in the future expects to continue to experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the grocery industry, (ii) general economic conditions in the various local markets in which the Company competes, including the general downturn in the economy, and (iii) the volatility of prices pertaining to food and beverages in connection with the Company’s distribution of the product. These factors, among others, make it difficult to project the Company’s operating results on a consistent basis.

 

Cash

 

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company held no cash equivalents at September 30, 2012 and December 31, 2011.

 

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At September 30, 2012 and December 31, 2011, no cash balances exceeded the federally insured limit.

 

Accounts receivable and allowance for doubtful accounts

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded, which is the face amount of the receivable net of the allowance for doubtful accounts. As of September 30, 2012 and December 31, 2011, the Company had reserves of $2,000.

 

Inventories

 

Inventories are stated at average cost using the first-in, first-out (FIFO) valuation method. Inventory at September 30, 2012 and December 31, 2011:

 

      September 30, 2012       December 31, 2011  
Finished goods   $ 143,496     $ 101,110  

 

F-6
 

 

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

Depreciation

 

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

 

Asset lives for financial statement reporting of depreciation are:

 

Machinery and equipment 2-7 years

 

Fair Value of Financial Instruments

 

For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short term financial instruments approximates fair value due to the relatively short period to maturity for these instruments.

 

Stock Issuance Costs

 

Stock Issuance costs are capitalized as incurred. Upon the completion of the offering, the stock issuance costs are reclassified to equity. Offering costs recorded to equity for the nine months ended September 30, 2012 and 2011 was $668,292 and $0,respectively.

 

Research and Development

 

Research and development is expensed as incurred. Research and development expenses for the nine months ended September 30, 2012 and 2011 was $65,070 and $0,respectively.

 

Shipping and Handling Costs

 

The Company classifies freight billed to customers as sales revenue and the related freight costs as cost of sales.

 

Revenue recognition

 

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

 

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

 

    Nine Months Ended
September 30, 2012
    Nine Months Ended
September 30, 2011
 
Gross Sales     3,606,759     $ 2,331,295  
                 
Less:Slotting, Discounts, Allowances     225,381       87,685  
Net Sales   $ 3,381,378     $ 2,243,610  

 

F-7
 

 

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

Cost of sales

 

Cost of sales represents costs directly related to the production and manufacturing of the Company’s products. Costs include product development, freight, packaging, and print production costs.

 

Advertising

 

Costs incurred for producing and communicating advertising for the Company are charged to operations as incurred. Producing and communicating advertising expenses for the nine months ended September 30, 2012 and 2011 was $906,814 and $403,529, respectively.

 

Stock-based compensation

 

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

 

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

 

Share based payments, excluding restricted stock, are valued using a Black-Scholes option pricing model. Share based payment awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The grants are amortized on a straight-line basis over the requisite service periods, which is generally the vesting period. If an award is granted, but vesting does not occur, any previously recognized compensation cost is reversed in the period related to the termination of service. Stock based compensation expenses are included in cost of goods sold orselling, general and administrative expenses,depending on the nature of the services provided, in the Statement of Operations. For the nine months ended September 30, 2012 and 2011 share based compensation amounted to $293,898 and $0 respectively. The $293,898 recorded for the nine months ended September 30, 2012 was a direct cost of the stock offering and has been recorded as a reduction in additional paid in capital.

 

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

 

●        The risk-free interest rate assumption is based on the U.S. Treasury yield for a period consistent with the expected term of the option in effect at the time of the grant. The risk free rate used had a range of 0.63%-1.01%.

 

●        The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future. Therefore the expected dividend rate was $0.

 

●        The expected warrant term is the life of the warrant.

 

F-8
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

●        Given the Company is privately held, expected volatility was benchmarked against similar companies in a similar industry. The expected volatility used was 128%.

 

●        The forfeiture rate is based on the historical forfeiture rate for the Company’s unvested stock options, which was 0%.

 

Earnings per share

 

Basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted earnings (loss) per share is computed by dividing net income (loss), adjusted for changes in income or loss that resulted from the assumed conversion of convertible shares, by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.

 

The Company had the following potential common stock equivalents at September 30, 2012:

 

Common stock warrants, exercise price of $1.00     345,400  
Common stock options, exercise price of $1.00     223,404  
Total common stock equivalents     568,804  

 

The Company had no potential common stock equivalents at September 30, 2011.

 

Since the Company reflected a net loss in 2012 and 2011, the effect of considering any common stock equivalents, would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.

 

Income Taxes

 

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

 

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

 

Recent accounting pronouncements

 

There are no recent accounting pronouncements that are expected to have an effect on the Company’s financial statements.

 

Subsequent Events Evaluation

 

The Company has evaluated for any subsequent events through January 14, 2013, which is the date these financial statements were available to be issued.

 

F-9
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

Note 3 Going Concern

 

As reflected in the accompanying financial statements, the Company has a net loss and net cash used in operations of $1,319,776 and $1,400,638, respectively, for the nine months ended September 30, 2012.

 

The ability of the Company to continue its operations is dependent on Management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence.

 

The Company may require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future if it does not receive the anticipated additional funding. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis, if at all.

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 4 – Property, Plant and Equipment:

 

Property, plant and equipment on September 30, 2012 and December 31, 2011 are as follows:

 

    September 30, 2012     December 31, 2011  
Machinery and Equipment   $ 39,627     $ 29,627  
Less: Accumulated Depreciation     18,916       9,612  
    $ 20,711     $ 20,015  

 

Depreciation expense charged to income for the nine months ended September 30, 2012 and 2011 amounted to $9,304 and $6,709 respectively.

 

Note 5 Credit Line

 

On October 13, 2010 the Company signed a revolving note (the “Note”) with The Provident Bank (the “Bank”). The outstanding balance of this Note is limited to $1,000,000 and expired August 31, 2012. On November 16, 2012, the maturity date of the Note was extended to January 1, 2013 and on January 07, 2013 was further extended to May 1, 2013. The outstanding balance accrues interest at a variable rate of 1.00% over the Wall Street Journal prime rate with a floor of 4.50% per annum. Interest is payable monthly and the rate as of September 30, 2012 and December 31, 2011 was 4.50% and 4.50%,respectively.

 

Advances are limited to 80% of eligible receivables (75 days from invoice) and 35% of finished goods inventory. Inventory advances shall be capped at $250,000. Concentrations from any one customer exceeding 30% of total accounts receivable will be excluded from the borrowing base availability. The note is secured by accounts receivable, inventory, financial instruments, equipment, general intangibles and investment property and personal and unconditional guarantees of two of the shareholders of the Company.

 

F-10
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

The balance outstanding on the revolving note at September 30, 2012 and December 31, 2011 was $200,000 and $500,000, respectively.

 

Note 6 Investment in LLC

 

During 2010, the Company advanced $20,090 to an individual. There was an implied agreement that the advance would convert into an equity interest in a new entity.

 

During 2011 the Company acquired a 34.62% interest in Meatball Obsession, LLC (“MO”) for a total investment of $27,032, which includes the conversion of the $20,090 advance above. This investment is accounted for using the equity method of accounting. Accordingly, investments are recorded at acquisition cost plus the Company’s equity in the undistributed earnings or losses of the entity. At December 31, 2011 the investment was brought down to $0 due to losses incurred by MO.

 

During 2012 the Company’s ownership interest in MO fell to 28% due to dilution.

 

Summarized financial information for Meatball Obsession, LLC is as follows:

 

Balance Sheet Data

 

    September 30, 2012     December 31, 2011  
Assets                
Cash   $ 17,882     $ 246,100  
Accounts receivable     3,632       -  
Inventory     17,186       -  
Property & equipment     75,704       -  
Other assets     46,585       32,500  
 Total Assets   $ 160,989     $ 278,600  
                 
Liabilities and Members’ Equity                
Accounts payable     39,266       -  
Other current liabilities     3,749       -  
Total Current Liabilities     43,015       -  
Members’ Equity     117,974       278,600  
Total Liabilities and Members’ Equity   $ 160,989     $ 278,600  
                 
Statement of Operations Data
 
   

September 30, 2012

   

September 30, 2011

 
Revenues   $ 214,360     $ -  
Cost of goods sold     94,204       -  
Expenses     392,613       92,475  
Net operating loss     (272,457 )     (92,475 )
Other income (expenses)     (688 )     88  
Net loss   $ (273,145 )   $ (92,387 )

 

F-11
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

Note 7 Related Party Transactions

 

Supply Agreement

 

On March 1, 2010, the Company entered into a five year agreement with a manufacturer who is a related party. The manufacturer is owned by beneficial owners of the Company. Under the terms of the agreement, the Company grants to the manufacturer a license, revocable in accordance herewith, to use the Company’s recipes, formulas, methods and ingredients for the preparation and production of Company’s products, for manufacturing the Company’s product and all future improvements, modifications, substitutions and replacements developed by the Company. The manufacturer in turn grants the Company the exclusive right to purchase the product. Under the terms of the agreement the manufacturer agrees to manufacture, package, and store the Company’s products and the Company has the right to purchase products from one or more other manufacturers, distributors or suppliers. The agreement contains a perpetual automatic renewal clause for a period of one year after the expiration of the initial term. During the renewal period either party may cancel the contract with written notice nine months prior to the termination date.

 

Under the terms of the agreement if the Company specifies any change in packaging or shipping materials which results in the manufacturer incurring increased expense for packaging and shipping materials or in the manufacturer being unable to utilize obsolete packaging or shipping materials in ordinary packaging or shipping, the Company agrees to pay as additional product cost the additional cost for packaging and shipping materials and to purchase at cost such obsolete packaging and shipping materials. If the Company requests any repackaging of the product, other than due to defects in the original packaging, the Company will reimburse the manufacturer for any labor costs incurred in repackaging. Per the agreement, all product delivery shipping costs are the expense of the Company. At September 30, 2012 and December 31, 2011, the balance due to the manufacturer relating to these additional product costs amounted to $0 and $19,544, respectively.

 

During 2012 and 2011, the Company purchased substantially all of it’s inventory from this manufacturer. At September 30, 2012 and December 31, 2011, the Company has a deposit on inventory in the amount of $233,918 and $100,000, respectfully, to this manufacturer.

 

Note 8 Concentrations

 

Revenues

 

For the nine months ended September 30, 2012 and 2011, the Company had the following concentrations of revenues with customers:

 

Customer   September 30, 2012   September 30, 2011
A   23%   21%
B   15%   12%
C   8%   13%
D   39%   23%

  

F-12
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

Accounts Receivable

 

For the nine months ended September 30, 2012 and year ended December 31, 2011, the Company had the following concentrations of accounts receivable with customers:

 

Customer   September 30, 2012   December 31, 2011
B   15%   13%
C   8%   11%
D   31%   17%
E   3%   11%
F   -%   11%
G   -%   11%
H   13%   3%

  

Cost of Sales

 

For the nine months ended September 30, 2012 and 2011, the Company had the following concentrations of purchases from vendors:

 

Vendor   September 30, 2012   September 30, 2011
A (Related Party)   100%   100%

  

Note 9 Stockholders’ Equity

 

On March 5, 2012, the Company entered into a share exchange (the “Reorganization”) with MamaMancini’s, LLC (the “LLC”) whereby the Unit holders of the LLC exchanged all 4,700 Ownership Units outstanding for 15,000,000 shares of Company common stock and 223,404 common stock options. All equity accounts have been retrospectively recast as a result of the Reorganization.

 

(A) Common Stock Transactions

 

2010

 

The Company issued 10,946,809 shares to the founders of the Company. During 2010, the Company cancelled 638,298 of these shares.

 

The Company issued 3,829,787 shares for cash proceeds of $1,200,000 ($0.31/share). The Company incurred $68,277 in share issuance costs related to the issuance.

 

The Company issued 223,404 shares to consultants for services rendered, at a fair value of $70,000 ($0.31/share). These shares were valued using a best estimate of the price that would be paid in cash for similar services rendered.

 

2011

 

The Company issued 638,298 shares for cash proceeds of $200,000 ($0.31/share).

 

2012

 

The Company issued 3,454,000 shares for cash proceeds of $3,454,000 ($1.00/share).

 

F-13
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

(B) Options

 

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

 

    Options     Weighted Average Exercise Price  
             
Outstanding – January 01, 2011     -     $ -  
Exercisable – January 01, 2011     -     $ -  
Granted     -     $ -  
Exercised     -     $ -  
Forfeited/Cancelled     -     $ -  
Outstanding – December 31, 2011     -     $ -  
Exercisable – December 31, 2011     -     $ -  
Granted     223,404     $ 1.00  
Exercised     -     $ -  
Forfeited/Cancelled     -     $ -  
Outstanding – September 30, 2012     223,404     $ 1.00  
Exercisable – September 30, 2012     223,404     $ 1.00  

  

Options Outstanding               Options  Exercisable
                             
  Rang of
exercise
price
      Number
Outstanding
    Weighted Average
Remaining
Contractual Life (in
years)
    Weighted
Average
Exercise Price
    Number
Exercisable
    Weighted
Average
Exercise Price
 
$ 1.00       223,404     5 years   $ 1.00     223,404   $ 1.00  

 

At September 30, 2012 and December 31, 2011, the total intrinsic value of options outstanding and exercisable was $0.

 

(C) Warrants

 

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

 

    Options     Weighted Average Exercise Price  
             
Outstanding – January 01, 2011     -     $ -  
Exercisable – January 01, 2011     -     $ -  
Granted     -     $ -  
Exercised     -     $ -  
Forfeited/Cancelled     -     $ -  
Outstanding – December 31, 2011     -     $ -  
Exercisable – December 31, 2011     -     $ -  
Granted     345,400     $ 1.00  
Exercised     -     $ -  
Forfeited/Cancelled     -     $ -  
Outstanding – September 30, 2012     345,400     $ 1.00  
Exercisable – September 30, 2012     345,400     $ 1.00  

  

F-14
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

 

Warrants Outstanding               Warrants  Exercisable
                             
  Rang of
exercise
price
      Number
Outstanding
    Weighted Average
Remaining
Contractual Life (in
years)
    Weighted
Average
Exercise Price
    Number
Exercisable
    Weighted
Average
Exercise Price
 
$ 1.00       345,400     5 years   $ 1.00     345,400   $ 1.00  

 

At September 30, 2012 and December 31, 2011, the total intrinsic value of warrants outstanding and exercisable was $0.

 

Note 10 Commitments and Contingencies

 

Litigations, Claims and Assessments

 

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

 

Licensing and Royalty Agreements

 

On March 01, 2010, the Company was assigned a Development and License agreement (“the Agreement”). Under the terms of the Agreement the Licensor shall develop for the Company a line of beef meatballs with sauce, Italian sausage with sauce and other similar Italian meats with sauces for commercial manufacture, distribution and sale (each a “Licensor Product” and collectively the “Licensor Products”). Licensor shall work with Licensee to develop Licensor Products that are acceptable to Licensee. Upon acceptance of a Licensor Product by Licensee, Licensor’s trade secret recipes, formulas methods and ingredients for the preparation and production of such Licensor Products (the “Recipes”) shall be subject to this Development and License Agreement.

 

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

 

The Exclusive Term began on January 01, 2009 (the “Effective Date”) and ends on the 50th anniversary of the Effective Date, unless terminated or extended as provided herein. Licensor, at its option, may terminate the Exclusive Term by notice in writing to Licensee, delivered between the 60th and the 90th day following the end of any Agreement Year if, on or before the 60th day following the end of such Agreement Year, Licensee has not paid Licensor Royalties with respect to such Agreement Year at least equal to the minimum royalty (the “Minimum Royalty”) for such Agreement Year. Subject to the foregoing sentence, and provided Licensee has not breached this Agreement and failed to cure such breach in accordance herewith, Licensee may extend the Exclusive Term for an additional twenty five (25) years, by notice in writing to Licensor, delivered on or before the 50th anniversary of the Effective Date.

 

F-15
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

Agreement Year

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

 

The Company incurred $119,777 and $84,533 of royalty expenses for the nine months ended September 30, 2012 and 2011, respectively. Royalty expenses are included in general and administrative expenses on the Statement of Operations.

 

F-16
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

Agreements with Placement Agents and Finders

 

The Company entered into a Financial Advisory and Investment Banking Agreement with Spartan Capital Securities, LLC (“Spartan”) effective December 1, 2011 (the “Spartan Advisory Agreement”). Pursuant to the Spartan Advisory Agreement, Spartan will act as the Company’s exclusive financial advisor and placement agent to assist the Company in connection with a best efforts private placement (the “Financing”) of up to $6 million of the Company’s equity and/or debt securities and/or convertible instruments (the “Securities”).

 

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

 

Along with the above fees, the Company shall pay up to $40,000 for expenses incurred by Spartan in connection with this Financing, together with cost of background checks on the officers and directors of the Company.

 

The Company paid to Spartan a fee of $25,000 upon execution of the agreement to be credited against future closings.

 

F-17
 

  

MamaMancini’s, Inc.

Notes to Financial Statements

September 30, 2012

 

Under the terms of the agreement, the Company is required to acquire and install production equipment at the manufacturer’s facility to be used solely for the manufacturing of the Company’s products. The manufacturer will bear all costs of operating and maintaining the production equipment during the period in which the manufacturer is manufacturing products pursuant to the agreement. The production equipment shall be owned by the Company.

 

Note 11 Subsequent Event

 

The Company issued 1,600,000 common shares for cash proceeds of $1,600,000 ($1.00/share).

 

The Company issued 160,000 5 year warrants with an exercise price of $1.00 and paid commissions in the amount of $160,000 to an investment banking firm in connection with a stock offering.

 

F-18
 

  

MAMAMANCINI’S, LLC

FINANCIAL STATEMENTS

DECEMBER 31, 2011

AND FOR THE PERIOD

FEBRUARY 22, 2010 (INCEPTION)

TO DECEMBER 31, 2010

 

 
 

  

MamaMancini’s, LLC

Financial Statements

December 31, 2011 and for the Period

February 22, 2010 (Inception) to December 31, 2010

 

Table of Contents

 

  Pages(s)
     
Report of Independent Registered Public Accounting Firm   F-1
     
Balance Sheets as of December 31, 2011 and 2010   F-2
     
Statements of Operations For the Year Ended December 31, 2011 and For the Period February 22, 2010 (Inception) to December 31, 2010   F-3
     
Statements of Changes in Members’ Equity For the Year Ended December 31, 2011 and For the Period February 22, 2010 (Inception) to December 31, 2010   F-4
     
Statements of Cash Flows For the Year Ended December 31, 2011 and For the Period February 22, 2010 (Inception) to December 31, 2010   F-5
     
Notes to Financial Statements   F-6 - F-16

  

 
 

 

Report of Independent Registered Public Accounting Firm

 

To the Members of
MamaMancini’s LLC

 

We have audited the accompanying balance sheets of MamaMancini’s LLC as of December 31, 2011 and 2010, and the related statements of income, members’ equity, and cash flows for the year ended December 31, 2011 and for the period February 22, 2010 (inception) to December 31, 2010. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MamaMancini’s LLC as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the year ended December 31, 2011 and for the period February 22, 2010 (inception) to December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company’s operating losses since inception raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/ Rosenberg Rich Baker Berman & Company  

Somerset, New Jersey

February 3, 2012

 

F-1
 

 

MamaMancini’s, LLC

Balance Sheets

As of December 31, 2011 and 2010

 

    2011     2010  
             
Assets:
Cash   $ 16,505     $ 292,774  
Accounts receivable, net     581,479       171,362  
Inventories     101,110       124,090  
Prepaid expenses and other current assets     79,382       33,129  
Deposit with manufacturer - related party     100,000       -  
Total Current Assets     878,476       621,355  
                 
Property and equipment, net     20,015       11,225  
                 
Total Assets   $ 898,491     $ 632,580  
                 
Liabilities and Members’ Equity
 
Liabilities:                
Accounts payable and accrued expenses   $ 329,634     $ 101,539  
Line of credit     500,000       -  
Due to related party     19,544       -  
Total Current Liabilities     849,178       101,539  
                 
Total Members’ Equity     49,313       531,041  
                 
Total Liabilities and Members’ Equity   $ 898,491     $ 632,580  

 

The accompanying notes are an integral part of these financial statements.

 

F-2
 

 

  MamaMancini’s, LLC

Statements of Operations

For the Year Ended December 31, 2011 and

For the Period

February 22, 2010 (Inception) to December 31, 2010

 

    For the Year Ended
December 31, 2011
    Period from 
February 22, 2010
(Inception)
To December 31, 2010
 
             
Sales - net of slotting fees and discounts   $ 3,734,062     $ 1,512,220  
                 
Cost of sales     2,496,538       1,047,670  
                 
Gross profit     1,237,524       464,550  
                 
General and administrative expenses     1,885,084       1,135,232  
                 
Loss from operations     (647,560 )     (670,682 )
                 
Other Income (Expenses)                
Interest expense     (7,136 )     -
Loss on investment     (27,032 )     -
Total Other Income (Expense) - Net     (34,168 )     -
                 
Net loss   $ (681,728 )   $ (670,682 )

 

The accompanying notes are an integral part of these financial statements.

  

F-3
 

 

 MamaMancini’s, LLC
Statements of Changes in Members’ Equity
For the Year Ended December 31, 2011 and
For the Period
February 22, 2010 (Inception) to December 31, 2010

 

    Non-Preferential     Preferential        
    Members     Members     Total  
                   
Balance February 22, 2010 (Inception)   $ -     $ -     $ -  
                         
Member units issued for cash     -       1,200,000       1,200,000  
                         
Member units issued for services     70,000       -       70,000  
                         
Unit issuance costs     -       (68,277 )     (68,277 )
                         
Net loss for the period February 22, 2010 (Inception) to December 31, 2010     (491,833 )     (178,849 )     (670,682 )
                         
Balance, December 31, 2010     (421,833 )     952,874       531,041  
                         
Member units issued for cash     -       200,000       200,000  
                         
Net loss for the year ended December 31, 2011     (478,660 )     (203,068 )     (681,728 )
                         
Balance, December 31, 2011   $ (900,493 )   $ 949,806     $ 49,313  

 

The accompanying notes are an integral part of these financial statements.

  

F-4
 

 

MamaMancini’s, LLC

Statements of Cash Flows

For the Year Ended December 31, 2011 and

For the Period

February 22, 2010 (Inception) to December 31, 2010

 

          Period from  
          February 22, 2010  
    For the Year Ended     (Inception)  
    December 31, 2011     To December 31, 2010  
             
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (681,728 )   $ (670,682 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation     9,612       -  
Bad debt     -       2,000  
Share-based compensation     -       70,000  
Loss on investment     27,032       -  
Changes in operating assets and liabilities:                
(Increase) Decrease in:                
Accounts receivable     (410,117 )     (173,362 )
Inventories     22,980       (124,090 )
Prepaid expenses and other assets     (66,343 )     (33,129 )
Deposit with manufacturer - related party     (100,000 )     -  
Increase (Decrease) in:                
Accounts payable and accrued expenses     233,707       95,927  
Due to related party     19,544       -  
Net Cash Used in Operating Activities     (945,313 )     (833,336 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
Cash paid for machinery and equipment     (24,014 )     (5,613 )
Investment in LLC     (6,942 )     -  
Net Cash Used In Investing Activities     (30,956 )     (5,613 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from issuance of member units     200,000       1,200,000  
Unit issuance costs     -       (68,277 )
Proceeds from line of credit     500,000       -  
Net Cash Provided By Financing Activities     700,000       1,131,723  
                 
Net Increase (Decrease) in Cash     (276,269 )     292,774  
                 
Cash -Beginning of Year/Period     292,774       -  
                 
Cash -End of Year/Period     16,505       292,774  
                 
SUPPLEMENTARY CASH FLOW INFORMATION:                
Cash Paid During the Period for:                
Income Taxes   $ -     $ -  
Interest   $ 7,136       -  
                 
SUPPLEMENTARY DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:                
                 
Machinery and equipment purchased on account   $ -       5,612  
Conversion of advance to Investment in LLC   $ 20,090     $ -  

 

The accompanying notes are an integral part of these financial statements.

 

F-5
 

  

MamaMancini’s, LLC
Notes to Financial Statements
December 31, 2011 and For the Period
February 22, 2010 (Inception) to December 31, 2010

 

Note 1 Nature of Operations and Basis of Presentation

 

Nature of Operations

 

MamaMancini’s, LLC. (the “Company”) was organized on February 22, 2010 as a New Jersey limited liability company (“LLC”). The Company is a manufacturer and distributor of a line of beef meatballs with sauce, turkey meatballs with sauce, Italian sausage with sauce and other similar Italian meats with sauces. The Company’s customers are located throughout the United States, with a large concentration in the Northeastern and Southeastern United States regions.

 

Basis of Presentation

 

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Note 2 Summary of Significant Accounting Policies

 

Use of estimates

 

The preparation of 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 financial statements and accompanying notes. Such estimates and assumptions impact, among others, the following: allowance for bad debt, inventory obsolescence, the fair value of share-based payments.

 

Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from our estimates.

 

Risks and uncertainties

 

The Company operates in an industry that is subject to intense competition and change in consumer demand. The Company’s operations are subject to significant risk and uncertainties including financial and operational risks including the potential risk of business failure.

 

The Company has experienced, and in the future expects to continue to experience, variability in sales and earnings. The factors expected to contribute to this variability include, among others, (i) the cyclical nature of the grocery industry, (ii) general economic conditions in the various local markets in which the Company competes, including the general downturn in the economy, (iii) and the volatility of prices pertaining to food and beverages in connection with the Company’s distribution of product. These factors, among others, make it difficult to project the Company’s operating results on a consistent basis.

 

Cash

 

The Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. The Company held no cash equivalents at December 31, 2011 and 2010.

 

The Company minimizes its credit risk associated with cash by periodically evaluating the credit quality of its primary financial institution. The balance at times may exceed federally insured limits. At December 31, 2011 and 2010, no cash balances exceeded the federally insured limit.

 

F-6
 

  

MamaMancini’s, LLC

Notes to Financial Statements

December 31, 2011 and For the Period

February 22, 2010 (Inception) to December 31, 2010

 

Accounts receivable and allowance for doubtful accounts

 

Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company generally does not require collateral to support customer receivables. The Company provides an allowance for doubtful accounts based upon a review of the outstanding accounts receivable, historical collection information and existing economic conditions. The Company determines if receivables are past due based on days outstanding, and amounts are written off when determined to be uncollectible by management. The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded, which is the face amount of the receivable net of the allowance for doubtful accounts. As of December 31, 2011 and December 31, 2010, the Company had reserves of $2,000 and 2,000, respectively.

 

Inventories

 

Inventories are stated at average cost using the first-in, first-out (FIFO) valuation method. Inventory at December 31, 2011 and 2010 consist of the following:

 

    December 31, 2011     December 31, 2010  
Finished goods   $ 101,110     $ 124,090  

 

Depreciation

 

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

 

Asset lives for financial statement reporting of depreciation are:

 

Machinery and equipment 2-7 years

 

Fair Value of Financial Instruments

 

For purpose of this disclosure, the fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation. The carrying amount of the Company’s short term financial instruments approximates fair value due to the relatively short period to maturity for these instruments.

 

Deferred Offering Costs

 

Deferred offering costs are capitalized as incurred. Upon the completion of the offering, the deferred offering costs are reclassified to equity. Deferred offering costs for the year ended December 31, 2011 and for the period February 22, 2010 (inception) to December 31, 2010 was $62,000 and $0, respectively.

 

Research and Development

 

Research and development is expensed as incurred. Research and development expenses for the year ended December 31, 2011 and for the period February 22, 2010 (inception) to December 31, 2010 was $0 and $0, respectively.

 

F-7
 

  

MamaMancini’s, LLC

Notes to Financial Statements

December 31, 2011 and For the Period

February 22, 2010 (Inception) to December 31, 2010

 

Shipping and Handling Costs

 

The Company classifies freight billed to customers as sales revenue and the related freight costs as cost of sales.

 

Revenue recognition

 

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

 

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

 

    Year Ended
December 31, 2011
    For the Period
February 22, 2010
(Inception) to
December 31, 2010
 
Gross Sales     3,843,066     $ 1,526,173
                 
Less: Slotting, Discounts, Allowances     109,004       13,953  
Net Sales   $ 3,734,062     $ 1,512,220

  

Cost of sales

 

Cost of sales represents costs directly related to the production and manufacturing of the Company’s products. Costs include product development, freight, packaging, and print production costs.

 

Advertising

 

Costs incurred for producing and communicating advertising for the Company are charged to operations as incurred. Producing and communicating advertising expenses for the years ended December 31, 2011 and for the period February 22, 2010 (inception) to December 31, 2010 was $743,000 and $328,000, respectively.

 

Share-based payments

 

Generally, all forms of share-based payments, including share option grants, warrants, restricted share grants and share appreciation rights are measured at their fair value on the awards’ grant date, based on the estimated number of awards that are ultimately expected to vest. Share-based compensation awards issued to non-employees for services rendered are recorded at either the fair value of the services rendered or the fair value of the share-based payment, whichever is more readily determinable. The expense resulting from share-based payments are recorded in cost of goods sold or general and administrative expense in the statement of operations, depending on the nature of the services provided. For the year ended December 31, 2011 and for the period February 22, 2010 (inception) to December 31, 2010 share based compensation amounted to $0 and $70,000 respectively.

 

F-8
 

  

MamaMancini’s, LLC

Notes to Financial Statements

December 31, 2011 and For the Period

February 22, 2010 (Inception) to December 31, 2010

 

Income Taxes

 

The Company elected to be taxed as a pass-through limited liability company under the Internal Revenue Code and is not subject to federal and state income taxes; accordingly, no provision has been made.

  

Recent accounting pronouncements

 

There are no recent accounting pronouncements that are expected to have an effect on the Company’s financial statements. 

 

Subsequent Events Evaluation

 

The Company has evaluated for any subsequent events through February 3, 2012, which is the date these financial statements were available to be issued.

 

Note 3 Going Concern

 

As reflected in the accompanying financial statements, the Company has a net loss and net cash used in operations of $681,728 and $945,313, respectively, for the year ended December 31, 2011.

 

The ability of the Company to continue its operations is dependent on Management’s plans, which include the raising of capital through debt and/or equity markets with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence.

 

The Company may require additional funding to finance the growth of its current and expected future operations as well as to achieve its strategic objectives. The Company believes its current available cash along with anticipated revenues may be insufficient to meet its cash needs for the near future if it does not receive the anticipated additional funding. There can be no assurance that financing will be available in amounts or terms acceptable to the Company, if at all. In that event, the Company would be required to change its growth strategy and seek funding on that basis, if at all.

 

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 4 – Property, Plant and Equipment:

 

Property, plant and equipment on December 31, 2011 and 2010 are as follows:

 

    2011     2010  
Machinery and Equipment   $ 29,627     $ 11,225  
Less: Accumulated Depreciation     9,612       -  
    $ 20,015     $ 11,225  

 

Depreciation expense charged to income for the year ended December 31, 2011 and the period February 22, 2010 to December 31, 2010 was $9,612 and $0, respectively.

 

F-9
 

  

MamaMancini’s, LLC

Notes to Financial Statements

December 31, 2011 and For the Period

February 22, 2010 (Inception) to December 31, 2010

 

Note 5 Credit Line

 

On October 13, 2010 the Company signed a revolving note (the “Note”) with The Provident Bank (the “Bank”). The outstanding balance of this Note is limited to $1,000,000 and expires August 31, 2012. The outstanding balance accrues interest at a variable rate of 1.00% over the Wall Street Journal prime rate with a floor of 4.50% per annum. Interest is payable monthly and the rate as of December 31, 2011 and 2010 was 4.50% and 4.50%, respectively.

 

Advances are limited to 80% of eligible receivables (75days from invoice) and 35% of finished goods inventory. Inventory advances shall be capped at $250,000. Concentrations from any one customer exceeding 30% of total accounts receivable will be excluded from the borrowing base availability. The note is secured by accounts receivable, inventory, financial instruments, equipment, general intangibles and investment property and personal and unconditional guarantees of two of the members of the Company.

 

The balance outstanding on the revolving note at December 31, 2011 and 2010 was $500,000 and $0, respectively.

 

Note 6 Investment in LLC

 

During 2010, the Company advanced $20,090 to an individual. There was an implied agreement that the advance would convert into an equity interest in a new entity.

 

During 2011 the Company acquired a 34.62% interest in Meatball Obsession, LLC (“MO”) for a total investment of $27,032, which includes the conversion of the $20,090 advance above. This investment is accounted for using the equity method of accounting. Accordingly, investments are recorded at acquisition cost plus the Company’s equity in the undistributed earnings or losses of the entity. At December 31, 2011 the investment was brought down to $0 due to losses incurred by MO.

 

Summarized financial information for Meatball Obsession, LLC is as follows:

 

      2011  
Balance Sheet Data        
Cash   $ 246,100  
Other assets     32,500  
Total Assets   $ 278,600  
         
Members’ Equity   $ 278,600  
         
Statement of Operations Data        
Revenues   $ -  
Cost of goods sold     4,950  
Expenses     143,772  
Net operating loss     (148,721 )
Other income (expenses)     289  
Net loss   $ (148,432 )

 

F-10
 

  

MamaMancini’s, LLC

Notes to Financial Statements

December 31, 2011 and For the Period

February 22, 2010 (Inception) to December 31, 2010

 

Note 7 Related Party Transactions

 

Supply Agreement

 

On March 01, 2010, the Company entered into a five year agreement with a manufacturer who is a related party. Under the terms of the agreement, the Company grants to the manufacturer a license, revocable in accordance herewith, to use the Company’s recipes, formulas, methods and ingredients for the preparation and production of Company’s products, for manufacturing the Company’s product and all future improvements, modifications, substitutions and replacements developed by the Company. The manufacturer in turn grants the Company the exclusive right to purchase the product. Under the terms of the agreement the manufacturer agrees to manufacture, package, and store the Company’s products and the Company has the right to purchase products from one or more other manufacturers, distributors or suppliers. The agreement contains a perpetual automatic renewal clause for a period of one year after the expiration of the initial term. During the renewal period either party may cancel the contract with written notice nine months prior to the termination date.

 

Under the terms of the agreement if the Company specifies any change in packaging or shipping materials which results in the manufacturer incurring increased expense for packaging and shipping materials or in the manufacturer being unable to utilize obsolete packaging or shipping materials in ordinary packaging or shipping, the Company agrees to pay as additional product cost the additional cost for packaging and shipping materials and to purchase at cost such obsolete packaging and shipping materials. If the Company requests any repackaging of the product, other than due to defects in the original packaging, the Company will reimburse the manufacturer for any labor costs incurred in repackaging. Per the agreement all product delivery shipping costs are the expense of the Company. At December 31, 2011 and 2010, the balance due to the manufacturer relating to these additional product costs amounted to $19,544 and $0, respectively.

 

During 2011, the Company purchased substantially all of its inventory from this manufacturer. At December 31, 2011, the Company has a deposit on inventory in the amount of $100,000 to this manufacturer.

 

Note 8 Concentrations

 

Revenues

 

For the year ended December 31, 2011 and the period February 22, 2010 (Inception) to December 31, 2010, the Company had the following concentrations of revenues with customers:

 

Customer   2011   2010
A   26%   0%
B   16%   25%
C   15%   17%
D   10%   15%
E   5%   16%

 

F-11
 

  

MamaMancini’s, LLC

Notes to Financial Statements

December 31, 2011 and For the Period

February 22, 2010 (Inception) to December 31, 2010

 

Accounts Receivable

 

For the year ended December 31, 2011 and the period February 22, 2010 (Inception) to December 31, 2010, the Company had the following concentrations of accounts receivable with customers:

 

Customer   2011   2010
A   13%   14%
B   11%   2%
C   17%   0%
D   11%   0%
E   11%   0%
F   11%   0%
G   4%   13%
H   9%   17%
I   3%   17%

 

Cost of Sales

 

For the year ended December 31, 2011 and the period February 22, 2010 (Inception) to December 31, 2010, the Company had the following concentrations of purchases from vendors:

 

Vendor   2011   2010
A (Related Party)   97%   100%

 

Note 9 Members’ Equity

 

Non-Preferential Units

 

2010

 

The Company issued 70 non-preferential units to consultants for services rendered, at a fair value of $70,000 ($1,000/share). These units were valued using a best estimate of the price that would be paid in cash for similar services rendered.

 

The Company issued 3,430 non-preferential units to the founders of the Company. During 2010, the Company cancelled 200 of these units.

 

Preferential Units

 

2011

 

The Company issued 200 preferential units for cash proceeds of $200,000 ($1,000/share).

 

2010

 

The Company issued 1,200 preferential units for cash proceeds of $1,200,000 ($1,000/share). The Company incurred $68,277 in share issuance costs related to the issuance.

 

F-12
 

  

Order and Priority of Distributions

 

(a) Distributions paid out of net cash from operations.
    Any distribution paid out of net cash from operations shall be distributed to the members in proportion to the number of units held by each.

  

(b) Distributions paid out of net cash from sales and re-financings.
    Any distribution paid out of net cash from sales or re-financings shall be distributed as follows:
     
    (i) first, to the holders of the preferential interests in proportion to and to the extent of the aggregate amount of the unreturned capital contributions represented by such interests;
     
    (ii) next, to the holders of the non-preferential interests in proportion to and to the extent of the aggregate amount of the unreturned notional amount represented by such interests; and
     
    (iii) finally, the balance, if any, to the members in proportion to the number of units held by each

   

Note 10 Commitments and Contingencies

 

Litigations, Claims and Assessments

 

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

  

Licensing and Royalty Agreements

 

On March 01, 2010, the Company was assigned a Development and License agreement (“the Agreement”). Under the terms of the Agreement the Licensor shall develop for the Company a line of beef meat balls with sauce, Italian sausage with sauce and other similar Italian meats with sauces for commercial manufacture, distribution and sale (each a “Licensor Product” and collectively the “Licensor Products”). Licensor shall work with Licensee to develop Licensor Products that are acceptable to Licensee. Upon acceptance of a Licensor Product by Licensee, Licensor’s trade secret recipes, formulas methods and ingredients for the preparation and production of such Licensor Products (the “Recipes”) shall be subject to this Development and License Agreement.

 

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

 

The Exclusive Term began on January 01, 2009 (the “Effective Date”) and ends on the 50th anniversary of the Effective Date, unless terminated or extended as provided herein. Licensor, at its option, may terminate the Exclusive Term by notice in writing to Licensee, delivered between the 60th and the 90th day following the end of any Agreement Year if, on or before the 60th day following the end of such Agreement Year, Licensee has not paid Licensor Royalties with respect to such Agreement Year at least equal to the minimum royalty (the “Minimum Royalty”) for such Agreement Year. Subject to the foregoing sentence, and provided Licensee has not breached this Agreement and failed to cure such breach in accordance herewith, Licensee may extend the Exclusive Term for an additional twenty five (25) years, by notice in writing to Licensor, delivered on or before the 50th anniversary of the Effective Date.

 

F-13
 

  

MamaMancini’s, LLC

Notes to Financial Statements

December 31, 2011 and For the Period

February 22, 2010 (Inception) to December 31, 2010

 

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

 

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

 

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

 

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

 

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

 

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

 

 

 

Agreement Year

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

 

The Company incurred $124,139 and $62,886 of royalty expenses for the year ended December 31, 2011 and for the period February 22, 2010 (Inception) to December 31, 2010, respectively. Royalty expenses are included in general and administrative expenses on the Statement of Operations.

 

F-14
 

  

MamaMancini’s, LLC

Notes to Financial Statements

December 31, 2011 and For the Period

February 22, 2010 (Inception) to December 31, 2010

 

Agreements with Placement Agents and Finders

 

The Company entered into a Financial Advisory and Investment Banking Agreement with Spartan Capital Securities, LLC (“Spartan”) effective December 1, 2011 (the “Spartan Advisory Agreement”). Pursuant to the Spartan Advisory Agreement, Spartan will act as the Company’s exclusive financial advisor and placement agent to assist the Company in connection with a best efforts private placement (the “Financing”) of up to $6 million of the Company’s equity and/or debt securities and/or convertible instruments (the “Securities”).

 

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

 

Along with the above fees, the Company shall pay up to $40,000 for expenses incurred by Spartan in connection with this Financing, together with cost of background checks on the officers and directors of the Company.

 

In connection with and as a condition to the Financing, the Company will become registered with the Securities and Exchange Commission and publicly traded on or before the initial closing of the Financing.

 

The Company paid to Spartan a fee of $25,000 upon execution of the agreement to be credited against future closings.

 

Supply Agreement

 

On October 03, 2011, the Company entered into a five year agreement with a non related party manufacturer. Under the terms of the agreement, the Company grants to the manufacturer a license, revocable in accordance herewith, to use the Company’s recipes, formulas, methods and ingredients for the preparation and production of Company’s products, for manufacturing the Company’s product and all future improvements, modifications, substitutions and replacements developed by the Company. The manufacturer in turn grants the Company the exclusive right to purchase the product. Under the terms of the agreement the manufacturer agrees to manufacture, package, and store the Company’s products and the Company has the right to purchase products from one or more other manufacturers, distributors or suppliers. The agreement contains a perpetual automatic renewal clause for a period of year after the expiration of the initial term. During the renewal period either party may cancel the contract with written notice nine months prior to the termination date.

 

Under the terms of the agreement if the Company specifies any change in packaging or shipping materials which results in the manufacturer incurring increased expense for packaging and shipping materials or in the manufacturer being unable to utilize obsolete packaging or shipping materials in ordinary packaging or shipping, the Company agrees to pay as additional product cost the additional cost for packaging and shipping materials and to purchase at cost such obsolete packaging and shipping materials. If the Company requests any repackaging of the product, other than due to defects in the original packaging, the Company will reimburse the manufacturer for any labor costs incurred in repackaging. Per the agreement all product delivery shipping costs are the expense of the Company.

 

F-15
 

  

MamaMancini’s, LLC

Notes to Financial Statements

December 31, 2011 and For the Period

February 22, 2010 (Inception) to December 31, 2010

 

Under the terms of the agreement, the Company is required to acquire and install production equipment at the manufacturer’s facility to be used solely for the manufacturing of the Company’s products. The manufacturer will bear all costs of operating and maintaining the production equipment during the period in which the manufacturer is manufacturing products pursuant to the agreement. The production equipment shall be owned by the Company.

 

Note 11 Subsequent Event

 

Subsequent to year end the members of the company approved a 5% option to the Preferential Members to convert their preferential units to non-preferential units

 

F-16
 

 

 

Exhibit 99.3

 

MAMAMANCINI’S INC.

PRO FORMA BALANCE SHEET

September 30, 2012

(Unaudited)

 

    As Reported     Pro Forma  
    MamaMancini’s Inc.     Mascot Properties, Inc.              
    9/30/2012     9/30/2012     Adjustments     Combined  
                         
ASSETS                                
                                 
CURRENT ASSETS:                                
Cash   $ 1,249,528     $ 1,550     $ 1,600,000 2   $ 2,851,078  
Accounts receivable, net     427,997       -       -       427,997  
Inventories     143,496       -       -          
Prepaid expenses and other current assets     18,029       -       -          
Deposit - related party     233,918       -       -       233,918  
                                 
Total Current Assets     2,072,968       1,550       1,600,000       3,674,518  
                                 
Property and equipment, net     20,711       -       -       20,711  
                                 
Total Assets   $ 2,093,679     $ 1,550     $ 1,600,000     $ 3,695,229  
                                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                                
                                 
CURRENT LIABILITIES:                                
Accounts payable and accrued expenses     220,481       3,210       -       223,691  
Note payable - related party     -       46,725       (46,725 )     3     -  
Line of credit     200,000       -       -       200,000  
                                 
Total Current Liabilities     420,481       49,935       (46,725 )     423,691  
                                 
STOCKHOLDERS’ EQUITY:                                
Common stock     18,454       1,042       1,358  1,2     20,854  
Additional paid-in capital     4,326,930       59,678       1,536,262  1,2,3     5,922,870  
Accumulated deficit     (2,672,186 )     (109,105 )     109,105 1     (2,672,186 )
                                 
Total Stockholders’ Equity     1,673,198       (48,385 )     1,646,725       3,271,538  
                                 
Total Liabilities and Stockholders’ Equity   $ 2,093,679     $ 1,550     $ 1,600,000     $ 3,695,229  

  

1 On January 24, 2013, the Company entered into a plan of Merger with Mascot Properties, Inc. The Company exchanged 20,054,000 shares for 20,054,000 shares of the public entity. In addition, certain shareholders of Mascot Properties, Inc. cancelled 103,408,000 shares of common stock.

 

2 The Company issued 1,600,000 common shares for cash proceeds of $1,600,000 ($1.00/share) subsequent September 30, 2012.

 

3 On January 24, 2013, the related party forgave the related party payable inconsideration for the transaction.