INNOVATIVE FOOD HOLDINGS INC 10-K

ITEM 8. Financial Statements REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of: Innovative Food Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Innovative Food Holdings, Inc. and Subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as “the consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Contingencies As described in Note 17 to the consolidated financial statements, the Company is involved in a number of legal proceedings and has made accruals with respect to certain of these matters. Where a liability is reasonably possible and may be material, such matters have been disclosed. Management exercised judgment and assessed the probability of occurrence based on the ability to predict the number of claims that may be filed and whether it can reasonably estimate any loss or range of loss that may arise from that proceeding. Auditing management’s accounting for, and disclosure of, loss contingencies was highly judgmental as it involved our assessment of the significant judgments made by management when assessing the probability of occurrence or when determining whether an estimate of the loss or range of loss could be made. To test the Company’s assessment of the probability of occurrence or determination of an estimate of loss, or range of loss, among other procedures, we read the legal documentations, reviewed opinions provided to the Company by certain outside legal counsel, read letters received directly by us from external counsel, and evaluated the current status of contingencies based on discussions with legal counsel. We also evaluated the appropriateness of the related disclosures. /s/ Liggett & Webb, P.A. We have served as the Company’s auditor since 2012 Boynton Beach, Florida March 31, 2022 30 Index Innovative Food Holdings, Inc. Consolidated Balance Sheets December 31, December 31, 2021 2020 ASSETS Current assets Cash and cash equivalents $ 6,122,671 $ 5,060,015 Accounts receivable, net 3,256,764 2,380,305 Inventory 3,109,984 3,719,786 Other current assets 314,107 286,815 Total current assets 12,803,526 11,446,921 Property and equipment, net 8,186,227 8,550,401 Investments 286,725 496,575 Right to use assets, operating leases, net 232,381 246,737 Right to use assets, finance leases, net 669,039 776,439 Other amortizable intangible assets, net 72,218 100,380 Other unamortizable intangible assets 1,532,822 1,532,822 Total assets $ 23,782,938 $ 23,150,275 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities $ 5,702,905 $ 5,098,523 Accrued interest, current portion 29,349 28,873 Deferred revenue 1,631,406 2,917,676 Line of Credit 2,000,000 2,000,000 Notes payable - current portion, net of discount 412,961 1,741,571 Lease liability - operating leases, current 74,088 87,375 Lease liability - finance leases, current 159,823 146,004 Contingent liability - current portion 187,000 187,000 Total current liabilities 10,197,532 12,207,022 Lease liability - operating leases, non-current 158,293 159,362 Lease liability - finance leases, non-current 499,240 638,137 Contingent liability - long-term 108,600 116,600 Note payable - long term portion, net 5,409,172 6,151,345 Total liabilities 16,372,837 19,272,466 Commitments & Contingencies (see note 17) - - Stockholders' equity Common stock: $ 0.0001 par value; 500,000,000 shares authorized; 48,879,331 and 38,209,060 shares issued, and 46,041,751 and 35,371,480 shares outstanding at December 31, 2021 and 2020, respectively 4,885 3,817 Additional paid-in capital 41,662,710 37,415,155 Treasury stock: 2,623,171 shares outstanding at December 31, 2021 and 2020 ( 1,141,370 ) ( 1,141,370 ) Accumulated deficit ( 33,116,124 ) ( 32,399,793 ) Total stockholders' equity 7,410,101 3,877,809 Total liabilities and stockholders' equity $ 23,782,938 $ 23,150,275 See notes to consolidated financial statements. 31 Index Innovative Food Holdings, Inc. Consolidated Statements of Operations For the For the Year Ended Year Ended December 31, December 31, 2021 2020 Revenue $ 62,212,148 $ 51,676,028 Cost of goods sold 45,261,401 37,859,500 Gross margin 16,950,747 13,816,528 Selling, general and administrative expenses 20,540,229 19,531,818 Impairment of intangible assets - 1,698,952 Total operating expenses 20,540,229 21,230,770 Operating loss ( 3,589,482 ) ( 7,414,242 ) Other income (expense): Gain on forgiveness of debt 3,425,015 - Impairment of investment ( 209,850 ) - Gain on sale of fixed assets - 7,984 Other leasing income 10,840 43,810 Interest expense, net ( 352,854 ) ( 302,576 ) Total other income (expense) 2,873,151 ( 250,782 ) Net loss before taxes ( 716,331 ) ( 7,665,024 ) Provision for income tax expense - - Net loss $ ( 716,331 ) $ ( 7,665,024 ) Net loss per share - basic $ ( 0.02 ) $ ( 0.22 ) Net loss per share - diluted $ ( 0.02 ) $ ( 0.22 ) Weighted average shares outstanding - basic 39,448,041 34,871,785 Weighted average shares outstanding - diluted 39,448,041 34,871,785 See notes to consolidated financial statements. 32 Index Innovative Food Holdings, Inc. Consolidated Statements of Cash Flows For the For the Year Ended Year Ended December 31, December 31, 2021 2020 Cash flows from operating activities: Net loss $ ( 716,331 ) $ ( 7,665,024 ) Adjustments to reconcile net income to net cash used in operating activities: Gain on forgiveness of debt ( 3,425,015 ) - Impairment of intangible assets - 1,698,952 Impairment of investment 209,850 - Depreciation and amortization 526,854 703,941 Amortization of right-of-use asset 102,715 161,926 Amortization of prepaid loan fees 12,525 12,560 Stock based compensation 668,251 525,436 Gain on sale of fixed assets - ( 7,984 ) Provision for doubtful accounts 31,756 254,899 Changes in assets and liabilities: Accounts receivable, net ( 930,595 ) 674,626 Inventory and other current assets, net 604,890 ( 1,443,640 ) Accounts payable and accrued liabilities 650,516 1,108,451 Deferred revenue ( 1,286,270 ) 2,417,900 Contingent liabilities ( 8,000 ) ( 40,000 ) Operating lease liability ( 102,715 ) ( 161,926 ) Net cash used in operating activities ( 3,661,569 ) ( 1,759,883 ) Cash flows from investing activities: Cash paid for website development - ( 19,250 ) Acquisition of property and equipment ( 24,511 ) ( 431,137 ) Net cash used in investing activities ( 24,511 ) ( 450,387 ) Cash flows from financing activities: Proceeds from line of credit - 2,000,000 Proceeds from Payroll Protection Plan Loan 1,748,414 1,650,221 Proceeds from sale of common stock, net of costs 3,580,372 - Principal payments on debt ( 433,087 ) ( 278,668 ) Principal payments financing leases ( 146,963 ) ( 67,318 ) Net cash provided by financing activities 4,748,736 3,304,235 Increase in cash and cash equivalents 1,062,656 1,093,965 Cash and cash equivalents at beginning of year 5,060,015 3,966,050 Cash and cash equivalents at end of year $ 6,122,671 $ 5,060,015 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 298,481 $ 201,679 Taxes $ - $ - Non-cash investing and financing activities: Building improvements financed under note payable $ - $ 1,900,000 Increase in right to use assets & liabilities $ 88,359 $ 214,930 Reclassification of accounts receivable to other current assets and investment $ 22,380 $ 61,350 Capital lease for purchase of fixed assets $ 21,885 $ 677,021 See notes to consolidated financial statements. 33 Index Innovative Food Holdings, Inc. Consolidated Stockholders' Equity For the Years Ended December 31, 2021 and 2020 Additional Common Stock Paid-in Treasury Stock Accumulated Amount Value Capital Amount Value Deficit Total Balance - December 31, 2019 37,210,859 $ 3,718 $ 36,889,818 2,623,171 $ ( 1,141,370 ) $ ( 24,734,769 ) $ 11,017,397 Fair value of vested stock and stock options issued to management and directors 954,496 95 505,920 - - - 506,015 Fair value of shares issued to employees and service providers 43,705 4 19,417 - - - 19,421 Net loss for the year ended December 31, 2020 - - - - - ( 7,665,024 ) ( 7,665,024 ) Balance - December 31, 2020 38,209,060 $ 3,817 $ 37,415,155 2,623,171 $ ( 1,141,370 ) $ ( 32,399,793 ) $ 3,877,809 Fair value of vested stock and stock options issued to management and directors 1,295,271 130 668,121 - - - 668,251 Common stock sold for cash, net of costs 9,375,000 938 3,579,434 - - - 3,580,372 Net loss for the year ended December 31, 2021 - - - - - ( 716,331 ) ( 716,331 ) Balance - December 31, 2021 48,879,331 $ 4,885 $ 41,662,710 2,623,171 $ ( 1,141,370 ) $ ( 33,116,124 ) $ 7,410,101 See notes to consolidated financial statements. 34 Index INNOVATIVE FOOD HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2021 and 2020 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Activity Our business is currently conducted by our wholly owned subsidiaries, some of which are non-operating, Artisan Specialty Foods, Inc. (“Artisan”), Food Innovations, Inc. (“FII”), Food New Media Group, Inc. (“FNM”), Organic Food Brokers, LLC (“OFB”), Gourmet Foodservice Group, Inc. (“GFG”), Gourmet Foodservice Group Warehouse, Inc. (“GFW”), Gourmeting, Inc. (“Gourmeting”), Haley Food Group, Inc. (“Haley”), Oasis Sales Corp. (“Oasis”), 4 The Gourmet, Inc. (d/b/a For The Gourmet, Inc.), (“Gourmet”), Innovative Food Properties, LLC (“IFP”), Plant Innovations, Inc. (“Plant Innovations”), Innovative Gourmet, LLC (“Innovative Gourmet” or “igourmet”), Food Funding, LLC (“Food Funding”), Logistics Innovations, LLC (L Innovations”), M Innovations, LLC (“M Innovations”), MI Foods, LLC (“MIF”), M Foods Innovations, LLC (“M Foods”), P Innovations, LLC (“P Innovations”), PlantBelly, LLC (“PlantBelly”), Innovative Foods, Inc. (“IFI”) and Innovative Gourmet Partnerships, LLC (“IGP”), and collectively with IVFH and its other subsidiaries, the “Company” or “IVFH”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. All material intercompany transactions have been eliminated upon consolidation of these entities. Overall, our business activities are focused around the creation and growth of a platform which provides distribution or the enabling of distribution of high quality, unique specialty food and food related products ranging from specialty foodservice products to Consumer-Packaged Goods (“CPG”) products through a variety of sales channels ranging from national partnership based and regionally based foodservice related sales channels to e-commerce sales channels offering products both direct to consumers (“D2C”) and direct to business (“B2B”). In our business model, we receive orders from our customers and then work closely with our suppliers and our warehouse facilities to have the orders fulfilled. In order to maintain freshness and quality, we carefully select our suppliers based upon, among other factors, their quality, uniqueness, reliability and access to overnight courier services. FII, though its relationship with the producers, growers, and makers of thousands of unique specialty foodservice products and through its relationship with US Foods, Inc. (“U.S. Foods” or “USF”), has been in the business of providing premium restaurants, within 24 – 72 hours, with the freshest origin-specific perishable, and healthcare products shipped directly from our network of vendors and from our warehouses. Our customers include restaurants, hotels, country clubs, national chain accounts, casinos, hospitals and catering houses. Gourmet has been in the business of providing specialty food via e-commerce through its own website at www.forthegourmet.com and through other ecommerce channels, with unique specialty gourmet food products shipped directly from our network of vendors and from our warehouses within 24 – 72 hours. Artisan is a supplier of over 1,500 unique specialty foodservice products to over 500 customers such as chefs, restaurants, etc. in the Greater Chicago area and serves as a national fulfillment center for certain of the Company’s other subsidiaries. GFG is focused on expanding the Company’s program offerings to additional specialty foodservice customers. Haley is a dedicated foodservice consulting and advisory firm that works closely with companies to access private label and manufacturers’ private label food service opportunities with the intent of helping them launch and commercialize new products in the broadline foodservice industry and assists in the enabling of the distribution of products via national broadline food distributors. IFP was formed to hold the Company’s real estate holdings including the recently acquired facility in Mountaintop, Pennsylvania. OFB and Oasis function as outsourced national sales and brand management teams for emerging organic and specialty food CPG companies of a variety of sizes and business stages, and provides emerging and unique CPG specialty food brands with distribution and shelf placement access in all of the major metro markets in the food retail industry. igourmet has been in the business of providing D2C specialty food via e-commerce through its own website at www.igourmet.com and through other channels such as www.amazon.com, www.ebay.com, and www.walmart.com. In addition, igourmet.com offers a line of B2B specialty foodservice items. Products are primarily shipped directly from igourmet.com’s approximately 100,000 square feet warehouse in Pennsylvania via igourmet.com owned trucks and via third party carrier directly to thousands of customers nationwide. 35 Index Mouth.com (www.mouth.com) is an online retailer of specialty foods, monthly subscription boxes and curated gift boxes to thousands of consumers and corporate customers across the United States. Mouth sources high quality specialty foods crafted in the US by independent and small batch makers, and expertly curates them into standout food gifts for both consumers and corporate customers. Mouth also has launched a private label brand, including several award-winning products. P Innovations focus is to leverage acquired assets to expand the Company’s subscription-based e-commerce business activities and to launch new businesses leveraging the Company’s e-commerce platform. Plant Innovations is focused on plant-based D2C brands and online retail within the e-commerce space. L Innovations provides 3rd party warehouse and fulfillment services out of its location at the Company’s PA facility. Use of Estimates The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to revenue recognition and concentration of credit risk. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accounts subject to estimate and judgements are accounts receivable reserves, income taxes, intangible assets, contingent liabilities, operating and finance right to use assets and liabilities, and equity-based instruments. Actual results may differ from these estimates under different assumptions or conditions. We believe our estimates have not been materially inaccurate in past years, and our assumptions are not likely to change in the foreseeable future. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Innovative Food Holdings, Inc., and its wholly owned operating subsidiaries, Artisan, FII, FNM, OFB, GFG, GFW, Gourmeting, Haley, Oasis, Innovative Gourmet, Food Funding, IFP, L Innovations, M Innovations, P Innovations, MIF, M Foods, PlantBelly, Plant Innovations, IFI, IGP, and Gourmet. All material intercompany transactions have been eliminated upon consolidation of these entities. Revenue Recognition The Company recognizes revenue upon product delivery. All of our products are shipped either same day or overnight or through longer shipping terms to the customer and the customer takes title to product and assumes risk and ownership of the product when it is delivered. Shipping charges to customers and sales taxes collectible from customers, if any, are included in revenues. For revenue from product sales, the Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 “ Revenue from Contracts with Customers ”. A five-step analysis must be met as outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Warehouse and logistic services revenue is primarily comprised of inventory management, order fulfilment and warehousing services. Warehouse & logistics services revenues are recognized at the point in time when the services are rendered to the customer. 36 Index Disaggregation of Revenue The following table represents a disaggregation of revenue by from sales for the years ended December 31, 2021 and 2020: Year Ended December 31, 2021 2020 Specialty foodservice $ 40,757,952 $ 27,544,188 E-Commerce 19,518,169 22,371,386 National Brand Management 1,036,564 1,099,735 Warehouse and Logistic Services 899,463 660,719 Total $ 62,212,148 $ 51,676,028 Cost of goods sold We have included in cost of goods sold all costs which are directly related to the generation of revenue. These costs include primarily the cost of food and raw materials, packing and handling, shipping, and delivery costs. We have also included all payroll costs as cost of goods sold in our leasing and logistics services business. Selling, general, and administrative expenses We have included in selling, general, and administrative expenses all other costs which support the Company’s operations, but which are not includable as a cost of sales. These include primarily payroll, facility costs such as rent and utilities, selling expenses such as commissions and advertising, amortization of intangible assets, depreciation, and other administrative costs including professional fees and costs associated with non-cash stock compensation. Advertising costs are expensed as incurred. Cash and Cash Equivalents Cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations. Concentrations of Credit Risk Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash in investments with credit quality institutions. At times, such investments may be in excess of applicable government mandated insurance limit. At December 31, 2021 and 2020, trade receivables from the Company’s largest customer amounted to 28 % and 22 %, respectively, of total trade receivables. During the year ended December 31, 2021 and 2020, sales from the Company’s largest customer amounted to 46 % and 40 % of total sales, respectively. The Company maintains cash balances in excess of Federal Deposit Insurance Corporation limits. At December 31, 2021 and 2020, the total cash in excess of these limits was $ 4,555,032 and $ 3,385,113 , respectively. Accounts Receivable The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. Accounts receivable are presented net of an allowance for doubtful accounts of $ 375,931 and $ 343,832 at December 31, 2021, and 2020, respectively. Property and Equipment Property and equipment are valued at cost. Depreciation is provided over the estimated useful lives up to five years using the straight-line method. Leasehold improvements are depreciated on a straight-line basis over the term of the lease. 37 Index The estimated service lives of property and equipment are as follows: Computer Equipment 3 years Warehouse Equipment 5 years Warehouse Equipment - Heavy 10 years Office Furniture and Fixtures 5 years Vehicles 5 years Buildings 30 years Inventories Inventory is valued at the lower of cost or market and is determined by the first-in, first-out method. Deferred Revenue Certain customer arrangements in the Company's business such as gift cards and e-commerce subscription purchases result in deferred revenues when cash payments are received in advance of performance. Gift cards issued by the Company generally have an expiration of five years from date of purchase. The Company records a liability for unredeemed gift cards and advance payments for monthly club memberships, as cash is received, and the liability is reduced when the card is redeemed or product delivered. The following table represents the changes in deferred revenue as reported on the Company’s consolidated balance sheets: Balance acquired as of December 31, 2019 $ 499,776 Cash payments received 3,060,226 Net sales recognized ( 642,326 ) Balance as of December 31, 2020 $ 2,917,676 Cash payments received 2,392,745 Net sales recognized ( 3,679,015 ) Balance as of December 31, 2021 $ 1,631,406 Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. Fair Value of Financial Instruments The carrying amount of the Company’s cash and cash equivalents, accounts receivable, notes payable, line of credit, accounts payable and accrued expenses, none of which is held for trading, approximates their estimated fair values due to the short-term maturities of those financial instruments. The Company adopted ASC 820-10, “Fair Value Measurements”, which provides a framework for measuring fair value under GAAP. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. 38 Index Long-Lived Assets The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The test for impairment is required to be performed by management at least annually. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Cost Method Investments The Company has made several investments in early stage private food related companies and are accounting for these investments under the cost method. Basic and Diluted Income Per Share Basic net earnings per share is based on the weighted average number of shares outstanding during the period, while fully-diluted net earnings per share is based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method. Potentially dilutive securities consist of options and warrants to purchase common stock, and convertible debt. Basic and diluted net loss per share is computed based on the weighted average number of shares of common stock outstanding during the period. The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options and warrants for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculation. Dilutive shares at December 31, 2021: Convertible notes and interest At December 31, 2021 there were no convertible notes outstanding. Warrants At December 31, 2021 there were no warrants outstanding. Stock Options The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company at December 31, 2021: Weighted Average Remaining Exercise Number Contractual Price of Options Life (years) $ 0.60 50,000 3.99 $ 0.62 360,000 2.00 $ 0.85 540,000 2.00 $ 1.00 50,000 3.99 $ 1.20 1,100,000 1.84 $ 0.99 2,100,000 2.01 39 Index Restricted Stock Awards At December 31, 2021, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those 300,000 restricted stock awards will vest as follows: 125,000 restricted stock awards will vest contingent upon the attainment of a stock price of $2.00 per share for 20 straight trading days, and an additional 175,000 restricted stock awards will vest contingent upon the attainment of a stock price of $3.00 per share for 20 straight trading days. Stock-based compensation During the year ended December 31, 2021, the Company incurred obligations to issue the following shares of common stock pursuant to employment agreements: an aggregate total of 961,897 shares of common stock to its Chief Executive Officer; 59,016 to its Director of Strategic Acquisitions, an aggregate total of 200,282 shares to board members; and 74,076 shares to an employee. These restricted stock grants are being amortized over their vesting periods of one to three years . During the year ended December 31, 2021, the amount of $ 523,977 was charged to operations in connection with these grants. Dilutive shares at December 31, 2020: Convertible notes and interest At December 31, 2020 there were no convertible notes outstanding. Warrants At December 31, 2020 there were no warrants outstanding. Stock Options The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company at December 31, 2020 Weighted Average Remaining Exercise Number Contractual Price of Options Life (years) $ 0.60 50,000 4.99 $ 0.62 360,000 1.00 $ 0.85 540,000 2.84 $ 1.00 50,000 4.99 $ 1.10 75,000 0.37 $ 1.20 1,050,000 2.84 $ 1.50 125,000 1.00 $ 1.02 2,250,000 2.82 Restricted Stock Awards At December 31, 2020, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those 300,000 restricted stock awards will vest as follows: 125,000 restricted stock awards will vest contingent upon the attainment of a stock price of $2.00 per share for 20 straight trading days , and an additional 175,000 restricted stock awards will vest contingent upon the attainment of a stock price of $3.00 per share for 20 straight trading days . 40 Index Stock-based compensation During the year ended December 31, 2020, the Company incurred obligations to issue the following shares of common stock pursuant to employment agreements: an aggregate total of 775,748 shares of common stock to its Chief Executive Officer; 38,892 to its Director of Strategic Acquisitions, an aggregate total of 139,854 shares to board members; 38,943 shares to an employee. These restricted stock grants are being amortized over their vesting periods of one to three years. During the year ended December 31, 2020, the amount of $ 380,638 was charged to operations in connection with these grants. Also, during the year ended December 31, 2020, the Company issued 4,762 shares of restricted common stock with a fair value of $ 2,286 to a service provider and charged this amount to operations . Reclassifications Certain reclassifications have been made to conform prior period data to the current presentation. Leases The Company accounts for leases in accordance with Financial Accounting Standards Board (“FASB”) ASC 842, “Leases”. The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) and short-term and long-term lease liabilities are included on the face of the consolidated balance sheet. Finance lease ROU assets are presented within other assets, and finance lease liabilities are presented within current and long-term liabilities. ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. For lease agreements with terms less than 12 months, the Company has elected the short-term lease measurement and recognition exemption, and it recognizes such lease payments on a straight-line basis over the lease term. New Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard effective January 1, 2021; we do not expect the adoption to have a material impact on our consolidated financial statements and related disclosures. In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2022, including interim periods within such fiscal year. Adoption is either a modified retrospective method or a fully retrospective method of transition. We are currently assessing the impact the new guidance will have on our consolidated financial statements. Management does not believe that any other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements. 2. ACCOUNTS RECEIVABLE At December 31, 2021 and 2020, accounts receivable consists of: 2021 2020 Accounts receivable from customers $ 3,632,695 $ 2,724,137 Allowance for doubtful accounts ( 375,931 ) ( 343,832 ) Accounts receivable, net $ 3,256,764 $ 2,380,305 41 Index During the years ended December 31, 2021 and 2020, the Company charged the amount of $ 31,756 and $ 254,899 , respectively, to bad debt expense. During the year ended December 31, 2021, the Company entered into a note receivable agreement with a customer in exchange for accounts receivable in the amount of $ 22,380 . This note bears an interest rate of 5 % per annum and is due in full on July 31, 2023. During the year ended December 31, 2020, the Company converted accounts receivable in the amount of $ 61,350 into an equity investment in a food related company (see note 7). 3. INVENTORY Inventory consists of specialty food products. At December 31, 2021 and 2020, inventory consisted of the following: 2021 2020 Finished Goods Inventory $ 3,109,984 $ 3,719,786 4. PROPERTY AND EQUIPMENT Acquisition of Building The Company owns a building and property located at 28411 Race Track Road, Bonita Springs, Florida 34135. The property consists of approximately 1.1 acres of land and approximately 10,000 square feet of combined office and warehouse space, and was purchased as part of a bank short sale. The Company moved its operations to these premises on July 15, 2013. The purchase price of the property was $ 792,758 . On May 14, 2015, the Company purchased a building and property located at 2528 S. 27th Avenue, Broadview, Illinois 60155. The property consists of approximately 1.33 acres of land and approximately 28,711 square feet of combined office and warehouse space. The purchase price of $ 914,350 was initially financed primarily by a draw-down of $ 900,000 on the Company’s credit facility with Fifth Third Bank, National Association (“Fifth Third Bank”). On May 29, 2015, a permanent financing facility was provided by Fifth Third Bank in the form of a loan in the amount of $ 980,000 . $ 900,000 of this amount was used to pay the balance of the credit facility; the additional $ 80,000 was used for refrigeration and other improvements at the property. The interest on the loan is at the LIBOR rate plus 3.0 %. The building is used for office and warehouse space primarily for the Company’s Artisan subsidiary. We have also recently completed an additional property improvement and upgrade buildout at the Artisan building which include a fully functional commercial test kitchen and training center and conference room. The test kitchen and training room is used by Artisan and other subsidiaries of the Company for the purposes of new product testing and development and approval, Quality Assurance and Quality Control as well as sales presentations and customer demonstrations. In addition, we added a packaging room to the Artisan building, which is built to FDA, FSMA and SQF food safety standards and purchased new, technologically advanced semi-automated fillers for the packaging room. The packaging room addition will allow for expansion of private label product lines as well as packing of organic, non-GMO, diet specific and other specialty foods. The test kitchen, packaging room and additional improvements were financed by a loan from Fifth Third Bank. Depreciation on the building and the related improvements, furniture, fixtures, and equipment began when the Company occupied the facility in October, 2015. On November 8, 2019 the Company, through a newly formed wholly-owned subsidiary, purchased a logistics and warehouse facility (the “Facility”) for $ 4.5 million. The Facility is approximately 200,000 square feet and is situated on approximately 15 acres in Mountain Top, Pennsylvania. The Facility’s appraised value by a third party appraisal firm in 2022 was $16,400,000. Related to the Facility purchase, the Company entered into a commercial loan agreement for both the purchase price and planned improvements to the Facility. The amount of the loan was $ 5,500,000 , of which $ 3,600,000 had been utilized at December 31, 2021 in connection with the purchase of the Facility; the lender is Fifth Third Bank and the loan is secured by a mortgage on the property and other Company assets. The interest on the loan is LIBOR plus 2.75 %, with interest only payments due through September 30, 2020, thereafter with principal amortized over 20 years with the balance due at maturity on September 2, 2025. Related to Facility purchase, the Company also acquired certain leases from certain tenants of the Facility, all of which were in good standing at the time of purchase. Depreciation on the building began when the Company commenced recognizing revenue from leasing and logistics services associated with the Facility. On October 5, 2020, the Company completed work to upgrade the Facility at a cost of $ 2,231,458 in order to better support the Company’s focus on e-commerce and logistics. Of the build out costs, $ 1,900,000 was funded by the loan described below (See Note 12). 42 Index A summary of property and equipment at December 31, 2021 and 2020 is as follows: December 31, 2021 December 31, 2020 Land $ 1,256,895 $ 1,256,895 Building 7,191,451 7,191,451 Computer and Office Equipment 593,566 578,362 Warehouse Equipment 376,667 373,150 Furniture and Fixtures 944,233 938,471 Vehicles 109,441 109,441 Total before accumulated depreciation 10,472,253 10,447,770 Less: accumulated depreciation ( 2,286,026 ) ( 1,897,369 ) Total $ 8,186,227 $ 8,550,401 Depreciation and amortization expense for property and equipment amounted to $ 388,657 and $ 417,781 for the years ended December 31, 2021 and 2020, respectively. 5. RIGHT TO USE ASSETS AND LEASE LIABILITIES – OPERATING LEASES The Company has operating leases for offices, warehouses, vehicles, and office equipment. The Company’s leases have remaining lease terms of 1 year to 4 years, some of which include options to extend. The Company’s lease expense for the years ended December 31, 2021 and December 31, 2020 was entirely comprised of operating leases and amounted to $ 120,304 and $ 171,624 , respectively. The Company’s ROU asset amortization for the years ended December 31, 2021 and December 31, 2020 was $ 102,715 and $ 161,926 , respectively. The difference between the lease expense and the associated ROU asset amortization consists of interest. Right to use assets – operating leases are summarized below: December 31, 2021 December 31, 2020 Warehouse equipment $ 55,047 $ 12,695 Office 148,529 186,302 Office equipment 12,677 1,812 Vehicles 16,128 45,928 Right to use assets, net $ 232,381 $ 246,737 Operating lease liabilities are summarized below: December 31, 2021 December 31, 2020 Warehouse equipment $ 55,047 $ 12,695 Office 148,529 186,302 Office equipment 12,677 1,812 Vehicles 16,128 45,928 Lease liability $ 232,381 $ 246,737 Less: current portion ( 74,088 ) ( 87,375 ) Lease liability, non-current $ 158,293 $ 159,362 43 Index Maturity analysis under these lease agreements are as follows: Year ended December 31, 2022 $ 85,875 Year ended December 31, 2023 78,605 Year ended December 31, 2024 73,391 Year ended December 31, 2025 20,691 Total $ 258,562 Less: Present value discount ( 26,181 ) Lease liability $ 232,381 During the years ended December 31, 2021 and 2020, the Company recorded right to use assets and lease liabilities in the amount of $ 88,359 and $ 214,930 , respectively, due to the execution of new operating lease agreements. 6. RIGHT TO USE ASSETS – FINANCING LEASES The Company has financing leases for vehicles and warehouse equipment. See note 13. Right to use asset – financing leases are summarized below: December 31, 2021 December 31, 2020 Vehicles 362,358 362,358 Warehouse Equipment 555,416 533,531 Total before accumulated depreciation 917,774 895,889 Less: accumulated depreciation ( 248,735 ) ( 119,450 ) Total $ 669,039 $ 776,439 Depreciation expense for the year ended December 31, 2021 and 2020 was $ 129,285 and $ 73,258 , respectively. During the years ended December 31, 2021 and 2020, the Company recorded right to use assets and lease liabilities in the amount of $ 21,885 and $ 677,021 , respectively, due to the execution of new financing lease agreements. 7. INVESTMENTS The Company has made investments in certain early stage food related companies which it expects can benefit from synergies with the Company’s various operating businesses. At December 31, 2021 and 2020 the Company has investments in seven food related companies in the aggregate amount of $ 286,725 and $ 496,575 , respectively. The Company does not have significant influence over the operations of these companies. The Company’s investments may take the form of debt, equity, or equity in the future including convertible notes and other instruments which provide for future equity under various scenarios including subsequent financings or initial public offerings. The Company has evaluated the guidance in ASC No. 325-20, “Investments – Other”, in determining to account for the investment using the cost method since the equity securities are not marketable and do not give the Company significant influence. During the years ended December 31, 2021 and 2020, the Company converted accounts receivable in the amount of $ 0 and $ 61,350 , respectively, into an equity investment in a food related company. During the year ended December 31, 2021, the founder of one of the food related companies passed away in an untimely tragic accident, and as a result the food related company ceased operations and the Company recognized an impairment in the amount of $ 209,850 in connection with that investment. 8. INTANGIBLE ASSETS The Company acquired certain intangible assets pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet, OFB, Haley, and M Innovations. These assets include non-compete agreements, customer relationships, trade names, internally developed technology, and goodwill. The Company has also capitalized the development of its website. 44 Index As detailed in ASC 350 “Intangibles - Goodwill and Other”, the Company tests for goodwill impairment in the fourth quarter of each year and whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. As detailed in ASC 350-20-35-3A, in performing its testing for goodwill impairment, management has completed a qualitative analysis to determine whether it was more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount, including goodwill. To complete this review, management followed the steps in ASC 350-20-35-3C to evaluate the fair value of goodwill and considered all known events and circumstances that might trigger an impairment of goodwill. COVID-19 has had a material negative impact on some of the Company’s foodservice customers. In an effort to limit the spread of the virus, federal, state and local governments have implemented measures that have resulted in the closure of non-essential businesses in many of the markets the Company serves, which has forced its customers in those markets to either transition their establishments to take-out service, delivery service or temporarily cease operations. These actions have led to a significant decrease in demand for certain of the Company’s foodservice products. The adverse impact to the Company’s foodservice customer base was a triggering event and accordingly, as required by ASC 350, the Company performed interim goodwill and long-lived asset quantitative impairment tests during the first quarter of 2020. While the triggering event was a result of the negative impact related to foodservice customers, the applicable accounting rules then required an impairment test targeted specifically to any available carrying value of goodwill or intangible assets. During the first quarter of 2020, the Company performed the impairment tests on certain intangible assets and goodwill pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet and M Innovations. Goodwill Impairment Test The Company estimated the fair value of the Company’s reporting unit using an income approach that incorporates the use of a discounted cash flow model that involves many management assumptions that are based upon future growth projections which include estimates of COVID-19’s impact on our business. Assumptions include estimates of future revenues, growth rates which take into account estimated inflation rates, estimates of future levels of gross profit and operating profit, projected capital expenditures and discount rates based upon industry and competitor analyses. As a result of impairment test, it was calculated that the net carrying value of goodwill exceeded the fair value by $ 650,243 , and the Company was required by ASC 350 to record an impairment charge to operations during the year ended December 31, 2020. At December 31, 2021 and 2020, the net carrying value of goodwill on the Company’s balance sheet was $ 0 . Long-lived Impairment Test Long-lived assets, including other intangible assets, were tested for recoverability at the asset group level. The Company estimated the net undiscounted cash flows expected to be generated from the asset group over the expected useful life of the asset group’s primary asset. Key assumptions include future revenues, growth rates, estimates of future levels of gross profit and operating profit and projected capital expenditures necessary to maintain the operating capacity of each asset group. As a result of the impairment test, it was calculated that the net carrying values of other intangible assets exceeded the undiscounted cash flows for each of the Company’s asset groups by a total of $ 1,048,692 , and the Company was required by the applicable accounting rules to record an impairment charge to operations during the year ended December 31, 2020. At December 31, 2021 and 2020, the net carrying value of other intangible assets on the Company’s balance sheet was $ 1,605,040 and $ 1,633,202 , respectively. The Company acquired certain intangible assets pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet, OFB, Haley, and M Innovations. The following is the net book value of these assets: December 31, 2021 Accumulated Cost Amortization Net Non-Compete Agreement - amortizable $ 505,900 $ ( 505,900 ) $ - Customer Relationships - amortizable 3,068,034 ( 3,068,034 ) - Trade Name 1,532,822 - 1,532,822 Internally Developed Technology 875,643 ( 875,643 ) - Goodwill 650,243 ( 650,243 ) - Website 84,000 ( 11,782 ) 72,218 Total $ 6,716,642 $ ( 5,111,602 ) $ 1,605,040 45 Index December 31, 2020 Accumulated Cost Amortization Net Non-Compete Agreement - amortizable $ 505,900 $ ( 505,900 ) $ - Customer Relationships - amortizable 3,068,034 ( 3,068,034 ) - Trade Name 1,532,822 - 1,532,822 Internally Developed Technology 875,643 ( 875,643 ) - Goodwill 650,243 ( 650,243 ) - Website 103,250 ( 2,870 ) 100,380 Total $ 6,735,892 $ ( 5,102,690 ) $ 1,633,202 During the year ended December 31, 2021, the Company charged to operations amortization expense in the amount of $ 8,912 . During the year ended December 31, 2020, the Company charged to operations amortization expense in the amount of $ 212,902 in addition to the impairment charge of $ 1,698,952 . Amortization of finite life intangible assets as of December 31, 2021 is as follows: 2022 $ 41,325 2023 30,893 Total $ 72,218 The trade names are not considered finite-lived assets, and are not being amortized. The non-compete agreement is being amortized over a period of 48 months. The customer relationships acquired in these transactions are being amortized over periods of 24 to 36 months. The internally developed technology is being amortized over 60 months. The website is being amortized over a period of 36 months. 9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities at December 31, 2021 and December 31, 2020 are as follows: December 31, 2021 December 31, 2020 Trade payables and accrued liabilities $ 5,414,731 $ 4,914,050 Accrued payroll and commissions 288,174 184,473 Total $ 5,702,905 $ 5,098,523 10. ACCRUED INTEREST At December 31, 2021, accrued interest - on notes outstanding was $ 29,349 During the year ended December 31, 2021, the Company paid cash for interest in the aggregate amount of $ 298,481 . At December 31, 2020, accrued interest on a note outstanding was $ 28,873 . During the year ended December 31, 2020, the Company paid cash for interest in the aggregate amount of $ 201,679 . 46 Index 11. REVOLVING CREDIT FACILITIES December 31, 2021 December 31, 2020 Line of credit facility with Fifth Third Bank in the original amount of $ 2,000,000 with an interest rate of LIBOR plus 3.00 % (the “Fifth Third Bank Line of Credit”). Effective August 1, 2019, this credit facility was extended to August 1, 2021 . Effective as of July 31, 2021 this credit facility was extended to November 1, 2021 , effective as of October 29, 2021, this credit facility was extended to March 1, 2022 ; and effective March 1, 2022, this credit facility was extended to June 30, 2022 . The debt covenants of this credit facility were waived until December 31, 2022. On March 20, 2020, the Company drew down the amount of $2,000,000. During the year ended December 31, 2021 and 2020, the Company paid interest in the amount of $ 57,396 and $ 58,382 , respectively, on the Fifth Third Bank Line of Credit. $ 2,000,000 $ 2,000,000 Total $ 2,000,000 $ 2,000,000 12. NOTES PAYABLE December 31, 2021 December 31, 2020 (unaudited) Secured mortgage note payable for the acquisition of land and building in Bonita Springs, Florida in the amount of $ 546,000 . Principal payments of $ 4,550 plus interest at the rate of Libor plus 3 % are due monthly. The balance of the principal amount was originally due February 28, 2018 . On March 23, 2018 and effective February 26, 2018, this note was amended and renewed in the amount of $ 273,000 , with monthly payments of principal and interest of $ 4,550 payable through the maturity date of February 28, 2023 . During the year ended December 31, 2021, the Company made payments of principal and interest on this note in the amounts of $ 54,600 and $ 3,079 , respectively; during the year ended December 31, 2020, the Company made payments of principal and interest on this note in the amounts of $ 54,600 and $ 5,743 , respectively. $ 68,250 $ 122,850 Secured mortgage note payable for the acquisition of land and building in Broadview, Illinois in the amount of $ 980,000 . Principal payments of $ 8,167 plus interest at the rate of LIBOR plus 2.75 % are due monthly through April 2020, the remaining principal balance in the amount of $ 490,000 was originally due May 29, 2020 . Effective May 29, 2020, the note was amended and renewed such that principal payments of $ 8,303 plus accrued interest were due beginning June 29, 2020 and continuing for sixty months; the entire principal balance and all accrued interest will be due on May 29, 2025 . During the year ended December 31, 2021, the Company made payments of principal and interest on this note in the amounts of $ 98,000 and $ 11,826 , respectively; during the year ended December 31, 2020, the Company made payments of principal and interest on this note in the amounts of $ 81,667 and $ 17,532 , respectively. 351,165 449,166 Promissory note dated March 22, 2019 in the original amount of $ 391,558 (the “Artisan Equipment Loan”) payable to Fifth Third Bank. This loan is secured by the Company’s tangible and intangible personal property and bears interest at the rate of 5.20 %. The entire principal balance and all accrued interest is due on the maturity date of March 21, 2024 . Monthly payments in the amount of $ 7,425 including principal and interest commenced in April, 2019. During the year ended December 31, 2019, equipment financed under the Artisan Equipment Loan in the amount of $ 33,075 was returned for credit. During the year ended December 31, 2021, the Company made payments of principal and interest on this loan in the amounts of $ 70,618 and $ 10,957 , respectively; year ended December 31, 2020, the Company made payments of principal and interest on this loan in the amounts of $ 67,064 and $ 14,755 , respectively. 172,146 242,765 A note payable in the amount of $ 20,000 . The Note was due in January 2006 and the Company is currently accruing interest on this note at 1.9 %. During the years ended December 31, 2021 and 2020, the Company accrued interest in the amount of $ 378 and $ 372 , respectively, on this note; at December 31, 2021 and 2020, accrued interest on this note was $ 17,723 and $ 17,345 , respectively. 20,000 20,000 Vehicle acquisition loan dated December 6, 2018 in the original amount of $ 51,088 , payable in sixty monthly installments of $ 955 including interest at the rate of 4.61 % maturing November 5, 2023 . During the year ended December 31, 2021, the Company made principal and interest payments in the amount of $ 11,067 and $ 1,349 , respectively, on this loan; during the year ended December 31, 2020, the Company made principal and interest payments in the amount of $ 9,737 and $ 1,723 , respectively. 20,984 32,051 47 Index December 31, 2021 December 31, 2020 (unaudited) Secured mortgage facility in the amount of $ 5,500,000 with Fifth Third Bank for the acquisition of land and building in Mountaintop, Pennsylvania dated November 8, 2019 (the “Fifth Third Mortgage Facility”). The Fifth Third Mortgage Facility is secured by the assets acquired. During the year ended December 31, 2019, the Company drew down $ 3,600,000 of this facility. During the year ended December 31, 2020, the Company drew down an additional $ 1,900,000 of this facility. The interest rate is LIBOR plus 2.75 % with interest only due through September 30, 2020, thereafter with principal amortized at a 20 years amortization rate and the balance due on the maturity date of September 2, 2025 . The Company prepaid loan fees in connection with this loan in the amount of $ 72,916 which are considered a discount to the loan and are being amortized over the term of the note; $ 12,525 and $ 12,560 of this discount was amortized to interest expense during the years ended December 31, 2021 and 2020, respectively. During the year ended December 31, 2021 the Company made principal and interest payments in the amount of $ 198,800 and $ 142,073 , respectively, on this loan. During the year ended December 31, 2020, the Company paid principal and interest in the amount of $ 65,600 and $ 154,955 , respectively, on this loan. The Company also has in place an interest rate swap agreement (the “Fifth Third Interest Rate Swap”) with Fifth Third bank in connection with the Fifth Third Mortgage Facility. Pursuant to the Fifth Third Interest Rate Swap, the Company pays an additional base rate of 0.59% reduced by the difference between an initial LIBOR rate of 0.1513% and the month-end LIBOR rate. During the years ended December 31, 2021 and 2020, the Company paid additional interest in the amount of $ 26,258 and $ 6,084 , respectively, pursuant to the Fifth Third Interest Rate Swap. 5,235,600 5,434,400 Loan payable to Fifth Third Bank dated April 21, 2020 pursuant to the Paycheck Protection Program (the “IVFH PPP Loan”) established under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) in the principal amount of $ 1,650,221 . The term of the IVFH PPP Loan is two years, and the annual interest rate is 1 %. Under the terms of the CARES Act, PPP Loan recipients can apply for, and be granted forgiveness for, all or a portion of loans granted under the Paycheck Protection Program. No assurance is provided that the Company will obtain forgiveness of the IVFH PPP Loan in whole or in part. During the year ended December 31, 2021 and 2020, the Company accrued interest in the amount of $ 4,069 and $ 11,528 , respectively, on the IVFH PPP Loan. Effective July 8, 2021, the entire principal amount due under this loan of $ 1,650,221 and accrued interest of $ 15,597 was forgiven and the Company recorded a gain on forgiveness of debt during the year ended December 31, 2021. - 1,650,221 Five loans payable to Fifth Third Bank dated from February 12, 2021 to April 11, 2021 were received by subsidiaries of the Company pursuant to the Paycheck Protection Program (the “Additional PPP Loans”) established under the CARES Act in the aggregate principal amount of $ 1,748,414 . Each of the Additional PPP Loans are due five years from inception and the annual interest rate is 1 %. Under the terms of the CARES Act, PPP Loan recipients can apply for, and be granted forgiveness for, all or a portion of loans granted under the Paycheck Protection Program. No assurance is provided that the Company will obtain forgiveness of the Additional PPP Loans in whole or in part. During the year ended December 31, 2021 , the Company received cash in the aggregate amount of $ 1,748,414 under these loans. During the year ended December 31, 2021, the Company accrued interest in the amount of $ 10,783 , on the Additional PPP Loans. Effective between the dates October 5, 2021 through December 13, 2021, all of these loans in the aggregate principal amount of $ 1,748,414 and accrued interest of $ 10,783 were forgiven. - - Total 5,868,145 7,951,453 Discount ( 46,012 ) ( 58,537 ) Net of discount $ 5,822,133 $ 7,892,916 Current portion $ 458,973 $ 1,800,108 Long-term maturities 5,409,172 6,151,345 Total $ 5,868,145 $ 7,951,453 Aggregate maturities of long-term notes payable as of December 31, 2021 are as follows: For the year ended December 31, 2022 $ 458,973 2023 399,680 2024 330,026 2025 4,679,466 Total $ 5,868,145 48 Index 13. LEASE LIABILITIES - FINANCING LEASES December 31, 2021 December 31, 2020 Financing lease obligation under a lease agreement for a forklift dated July 12, 2021 in the original amount of $ 16,070 payable in thirty-six monthly installments of $489 including interest at the rate of 6.01 %. During the year ended December 31, 2021, the Company made principal and interest payments on this lease obligation in the amounts of $ 2,482 and $ 452 , respectively. $ 13,588 $ - Financing lease obligation under a lease agreement for a pallet truck dated July 15, 2021 in the original amount of $ 5,816 payable in thirty-six monthly installments of $177 including interest at the rate of 6.01 %. During the year ended December 31, 2021, the Company made principal and interest payments on this lease obligation in the amounts of $ 898 and $ 163 , respectively. 4,918 - Financing lease obligation under a lease agreement for warehouse furniture and equipment truck dated October 14, 2020 in the original amount of $ 514,173 payable in sixty monthly installments of $9,942 including interest at the rate of 6.01 %. During the year ended December 31, 2021, the Company made principal and interest payments on this lease obligation in the amount of $ 92,269 and $ 27,034 , respectively. During the year ended December 31, 2020, the Company made principal and interest payments on this lease obligation in the amount of $ 22,216 and $ 7,609 , respectively. 399,688 491,957 Financing lease obligation under a lease agreement for a truck dated March 31, 2020 in the original amount of $ 152,548 payable in eighty-four monthly installments of $2,188 including interest at the rate of 5.44 %. During the year ended December 31, 2021, the Company made principal and interest payments on this lease obligation in the amounts of $ 19,259 and $ 6,998 , respectively. During the year ended December 31, 2020, the Company made principal and interest payments on this lease obligation in the amounts of $ 15,270 and $ 6,612 , respectively. 118,020 137,278 Financing lease obligation under a lease agreement for a truck dated November 5, 2018 in the original amount of $ 128,587 payable in seventy monthly installments of $2,326 including interest at the rate of 8.33 %. During the year ended December 31, 2021, the Company made principal and interest payments on this lease obligation in the amounts of $ 21,388 and $ 6,521 , respectively. During the year ended December 31, 2020, the Company made principal and interest payments on this lease obligation in the amounts of $ 19,683 and $ 8,225 , respectively. 66,526 87,914 Financing lease obligation under a lease agreement for a truck dated August 23, 2019 in the original amount of $ 80,413 payable in eighty-four monthly installments of $1,148 including interest at the rate of 5.0 %. During the year ended December 31, 2021, the Company made principal and interest payments on this lease obligation in the amounts of $ 10,669 and $ 4,903 , respectively. During the year ended December 31, 2020, the Company made principal and interest payments on this lease obligation in the amounts of $ 10,148 and $ 3,626 , respectively. 56,323 66,992 Total $ 659,063 $ 784,141 Current portion $ 159,823 $ 146,004 Long-term maturities 499,240 638,137 Total $ 659,063 $ 784,141 Aggregate maturities of lease liabilities – financing leases as of December 31, 2021 are as follows: For the year ended December 31, 2022 $ 159,823 2023 170,001 2024 167,456 2025 124,235 2026 33,173 Thereafter 4,375 Total $ 659,063 49 Index 14. RELATED PARTY TRANSACTIONS For the year ended December 31, 2021: Vesting of shares to officers During the year ended December 31, 2021 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $ 90,000 for the vesting of a total of 200,278 shares of common stock issuable to two of its independent board members, and $ 402,116 for the vesting of a total of 1,020,913 shares of common stock issuable to its Chief Executive Officer and its Director of Strategic Acquisitions pursuant to their employment agreements. The Company also recognized non-cash compensation in the amount of $ 144,274 during the year ended December 31, 2021 in connection with stock options issuable to management and board members. During the year ended December 31, 2021, the Company issued 50,000 two-year stock options with a fair value of $ 8,616 and an exercise price of $ 1.20 to a director. On August 26, 2021, the Company sold a total of 3,125,000 shares of common stock at a price of $ 0.40 per share to an entity controlled by Hank Cohn, a director of the Company; the Company sold 3,125,000 shares of common stock at a price of $ 0.40 per share to an entity controlled by Jefferson Gramm, a director of the Company; and the Company sold 3,125,000 shares of common stock at a price of $ 0.40 per share to an entity controlled by James C. Pappas, a director of the Company, for total proceeds, net of costs, of $ 3,580,372 . For the year ended December 31, 2020: Vesting of shares to officers During the year ended December 31, 2020 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $ 70,000 for the vesting of a total of 139,854 shares of common stock issuable to two of its independent board members, and $ 293,503 for the vesting of a total of 814,640 shares of common stock issuable to its Chief Executive Officer and its Director of Strategic Acquisitions pursuant to their employment agreements, which includes 330,758 shares with a market value of $ 113,887 received by the Chief Executive Officer subsequent to the expiration of a limited waiver provided through June 29, 2020 (see below). The Company also recognized non-cash compensation in the amount of $ 142,512 during the year ended December 31, 2020 in connection with stock options issuable to management and board members. The chief executive officer provided a limited waiver through June 29, 2020 of certain rights and benefits contained in his employment agreement following a Change in Control (as defined in the employment agreement). On January 30, 2020, the Company issued to each of two directors options to purchase 50,000 shares of common stock (an aggregate of 100,000 options) at a price of $ 1.20 per share, vesting January 30, 2021, and expiring January 30, 2023. On December 29, 2020, the Company issued to its Chief Financial Officer options to purchase 50,000 shares of common stock at a price of $ 0.60 per share, and options to purchase 50,000 shares of common stock at a price of $ 1.00 per share; these options vest quarterly over two years and expire December 28, 2025. 15. INCOME TAXES Deferred income taxes result from the temporary differences primarily attributable to amortization of intangible assets and debt discount and an accumulation of net operating loss carryforwards for income tax purposes with a valuation allowance against the carryforwards for book purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in deferred tax assets are Federal and State net operating loss carryforwards of approximately $ 15,800,000 , which can be carried forward indefinitely subject to limitation, except $ 4,900,000 which can be carried forward through 2037. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Due to significant changes in the Company’s ownership, the Company’s future use of its existing net operating losses may be limited. 50 Index The provision (benefit) for income taxes for the years ended December 31, 2021 and 2020 consist of the following: 2021 2020 Current $ - $ - Deferred - - Total $ - $ - The provision (benefit) for income taxes differs from the amount of income tax determined by applying the applicable statutory income tax rate of 27.6 % for the years ended December 31, 2021 and 2020 to the loss before taxes as a result of the following differences: 2021 2020 Income (loss) before income taxes $ ( 716,331 ) $ ( 7,665,024 ) Statutory tax rate 27.6 % 27.6 % Total tax (benefit) at statutory rate ( 198,000 ) ( 2,115,000 ) Permanent difference ( 669,565 ) 152,000 Other adjustments 8,765 1,100 Changes in valuation allowance 858,800 1,961,900 Income tax expense $ - $ - Deferred income taxes reflect the tax impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Deferred income taxes include the net tax effects of net operating loss (NOL) carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2021, and 2020 significant components of the Company’s deferred tax assets are as follows: 2021 2020 Deferred Tax Assets: Net operating loss carryforwards $ 4,016,400 $ 3,166,700 Allowance for doubtful accounts 104,000 94,900 Property and equipment 158,200 158,200 Intangible assets 607,500 607,500 Net deferred tax assets 4,886,100 4,027,300 Valuation allowance ( 4,886,100 ) ( 4,027,300 ) Net deferred tax assets $ - $ - The Company’s tax returns for the previous three years remain open for audit by the respective tax jurisdictions. 16. EQUITY Common Stock At December 31, 2021 and 2020 a total of 2,837,580 shares are deemed issued but not outstanding by the Company. For the year ended December 31, 2021: On August 26, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with each of JCP Investment Partnership LP, Bandera Master Fund LP and SV Asset Management LLC (collectively, the “Investors”). Pursuant to the SPA, each Investor purchased 3,125,000 shares of the Company’s common stock for an aggregate of 9,375,000 shares from the Company at a price of $ 0.40 per share. The Company received $ 3,580,372 proceeds from the sale of the shares, net of costs in the amount of $ 169,628 . JCP Investment Partnership, LP is controlled by James C. Pappas, a director of the Company; Bandera Master Fund LP is controlled by Jefferson Gramm, a director of the Company; and SV Asset Management LLC is controlled by Hank Cohn, a director of the Company. 51 Index During the year ended December 31, 2021 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $ 90,000 for the vesting of a total of 200,282 shares of common stock issuable to two of its independent board members, and $ 402,116 for the vesting of a total of 1,020,913 shares of common stock issuable to its Chief Executive Officer and its Director of Strategic Acquisitions pursuant to their employment agreements. The Company also recognized non-cash compensation in the amount of $ 144,274 during the year ended December 31, 2021 in connection with stock options issuable to management and board members, and $ 31,861 in connection with 74,076 shares of common stock issued to an employee as a bonus. For the year ended December 31, 2020: The Company charged the amount of $ 142,512 in connection with the vesting of stock options issuable to board members and employees in connection with their compensation agreements. The Company charged the amount of $ 363,503 in connection with the vesting of 954,496 shares of common stock issuable to board members and employees in connection with their employment agreements. These shares are included in common stock outstanding at December 31, 2020. The Company issued 38,943 shares of common stock with a fair value of $ 0.44 to an employee as a bonus. The fair value of $ 17,135 was charged to operations during the year ended December 31, 2020. The Company issued 4,762 shares of common stock with an average fair value of $ 0.48 to a service provider; the fair value of $ 2,286 was charged to operations during the year ended December 31, 2020. Treasury Stock At December 31, 2021 and 2020, the Company had 2,623,171 shares of treasury stock. Warrants The Company had no warrants outstanding at December 31, 2021 or 2020. Options For the year ended December 31, 2021: During the year ended December 31 2021, the Company issued 50,000 two-year options with a fair value on the date of grant of $ 8,616 to a director at a price of $ 1.20 per share, vesting September 10, 2022, and expiring September 10, 2023. For the year ended December 31, 2020: On January 30, 2020, the Company issued to each of two directors options to purchase 50,000 shares of common stock (an aggregate of 100,000 options) at a price of $ 1.20 per share, vesting January 30, 2021, and expiring January 30, 2023. Each grant of 50,000 options had a fair value of $ 1,216 on the date of the grant. On December 29, 2020, the Company issued to its Chief Financial Officer options to purchase 50,000 shares of common stock at a price of $ 0.60 per share with a fair value on the date of the grant of $ 7,775 , and options to purchase 50,000 shares of common stock at a price of $ 1.00 per share with a fair value on the date of the grant of $ 6,291 ; these options vest quarterly over two years and expire December 28, 2025. During the year ended December 31, 2020, an aggregate of 475,000 options to purchase shares of common stock at a weighted average price of $ 1.76 expired. 52 Index The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company as of December 31, 2021: Weighted Weighted Weighted average average average exercise exercise Range of Number of Remaining price of Number of price of exercise options contractual outstanding options exercisable Prices Outstanding life (years) Options Exercisable Options $ 0.60 50,000 3.99 $ 0.60 25,000 $ 0.60 $ 0.62 360,000 2.00 $ 0.62 360,000 $ 0.62 $ 0.85 540,000 2.00 $ 0.85 540,000 $ 0.85 $ 1.00 50,000 3.99 $ 1.00 25,000 $ 1.00 $ 1.20 1,100,000 1.84 $ 1.20 1,062,500 $ 1.20 2,100,000 2.01 $ 0.99 2,012,500 $ 0.99 The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company as of December 31, 2020: Weighted Weighted Weighted average average average exercise exercise Range of Number of Remaining price of Number of price of exercise options contractual outstanding options exercisable Prices Outstanding life (years) Options Exercisable Options $ 0.60 50,000 4.99 $ 0.60 - $ - $ 0.62 360,000 3.00 $ 0.62 240,000 $ 0.62 $ 0.85 540,000 3.00 $ 0.85 360,000 $ 0.85 $ 1.00 50,000 4.99 $ 1.00 - - $ 1.10 75,000 0.37 $ 1.10 75,000 $ 1.10 $ 1.20 1,050,000 2.84 $ 1.20 650,000 $ 1.20 $ 1.50 125,000 1.00 $ 1.50 125,000 $ 1.50 2,250,000 2.82 $ 1.02 1,450,000 $ 1.04 Transactions involving stock options are summarized as follows: Number of Shares Weighted Average Exercise Price Options outstanding at December 31, 2019 2,525,000 $ 1.23 Granted 200,000 1.00 Exercised - - Cancelled / Expired ( 475,000 ) 1.76 Options outstanding at December 31, 2020 2,250,000 $ 1.02 Granted 50,000 1.20 Exercised - - Cancelled / Expired ( 200,000 ) 1.35 Options outstanding at December 31, 2021 2,100,000 $ 0.99 Aggregate intrinsic value of options outstanding and exercisable at December 31, 2021 and 2020 was $ 0 . Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $ 0.33 and $ 0.29 as of December 31, 2021 and 2020, respectively, and the exercise price multiplied by the number of options outstanding. 53 Index During the year ended December 31, 2021 and 2020, the Company charged $ 144,274 and $ 142,512 , respectively, to operations related to recognized stock-based compensation expense for stock options. The exercise price grant dates in relation to the market price during 2021 and 2020 are as follows: 2021 2020 Exercise price lower than market price - - Exercise price equal to market price - - Exercise price exceeded market price $ 0.62 to 1.20 $ 0.62 to 1.50 As of December 31, 2021, and 2020, there were 87,500 and 800,000 , respectively, non-vested options outstanding. Accounting for warrants and stock options The Company valued warrants and options using the Black-Scholes valuation model utilizing the following variables: December 31, December 31, 2021 2020 Volatility 71.26 % 41.7 - 82.7 % Dividends $ - $ - Risk-free interest rates 0.23 % 0.37 - 1.37 % Term (years) 2.00 3.00 - 5.00 17. COMMITMENTS AND CONTINGENT LIABILITIES Contingent Liability Pursuant to the igourmet Asset Purchase Agreement, the Company recorded contingent liabilities in the original amount of $ 787,800 . This amount relates to certain performance-based payments over the twenty-four months following the acquisition date as well as to certain additional liabilities that the Company has evaluated and has recorded on a contingent basis . During the year ended December 31, 2018, the Company reduced this amount by $ 392,900 as the performance goals for the first year were not met. During the year ended December 31, 2019, the Company reduced this amount by $ 132,300 as the performance goals for the second year were not met. During the year ended December 31, 2019, the Company paid the amount of $ 39,000 in connection with the additional liabilities. During the years ended December 31, 2021 and 2020, the Company paid the amount of $ 8,000 and $ 40,000 , respectively, in connection with the additional liabilities. At December 31, 2021 and 2020, the amount of $ 67,000 remains on the Company’s consolidated balance sheet as a current contingent liability, and $ 108,600 and $ 116,600 , respectively, as a long term contingent liability. Pursuant to the Mouth Foods LLC Asset Acquisition, the Company recorded contingent liabilities in the amount of $ 240,576 . These amounts relate to the estimate of certain performance-based payments following the acquisition date as well as to certain additional liabilities that the Company has evaluated and has recorded on a contingent basis. During the year ended December 31, 2019, the Company paid the amount of $ 120,576 in connection with these liabilities. At December 31, 2021 and 2020, $ 120,000 is classified as a current contingent liability. License Agreements In May 2019, the Company entered into a royalty-based license agreement, through December 31, 2022 with a lifestyle brand, which provides the exclusive right, with certain carve-outs and limitations, to sell and promote branded gift baskets for certain channels including: retail, warehouse club stores, certain of the Company’s current e-commerce channels, and other e-commerce channels such as amazon.com (the “May 2019 License Agreement”). Pursuant to the May 2019 License Agreement, the Company paid an initial royalty deposit in the amount of $ 50,000 towards the minimum royalty, which is classified as other current assets on the Company’s balance sheet at December 31, 2019. Future royalty amounts owed for minimum payments in connection with the May 2019 License Agreement will be deducted from this deposit The royalty rate is 5 % of net sales, and the Company is required, with certain exceptions and exclusions, to make minimum royalty payments of $ 100,000 through the end of 2020, $ 110,000 in 2021, and $ 125,000 in 2022, respectively. As of December 31, 2021, the Company has made the required minimum royalty payments. 54 Index Litigation On September 16, 2019, an action (the “PA Action”) was filed in the Court of Common Pleas of Philadelphia County, Trial Division, against, among others, the Company and its wholly-owned subsidiaries, Innovative Gourmet LLC and Food Innovations, Inc. Since that time, other parties involved in the incident have joined as plaintiffs in the PA Action. The complaint in the PA Action alleges, inter alia, wrongful death and negligence by a driver formerly employed by Innovative Gourmet, and plaintiffs filed a demand and offer to settle for fifty million dollars. We expect that should a settlement occur, the amount to resolve the Action would be substantially lower. The Company, its subsidiaries, and their employees had auto and umbrella insurance policies, among others, that were in effect for the relevant period. The Company and its subsidiaries’ insurers have agreed to defend the Company, its subsidiaries and the driver in the PA Action (and related actions), subject to a reservation of rights. The Company believes that the likely outcome would result in the liabilities being covered by its insurance carriers. However, if the Company was found responsible for damages in excess of its available insurance coverage, such damages in excess of the coverage could have a material adverse effect on the Company’s operations. On July 16, 2020, the court granted the Company's motion to stay the case through the final adjudication of an additional pending legal proceeding against the driver in connection with the events related to the case. It is not anticipated that the Company and its subsidiaries will be a party to any other legal proceedings in connection with this matter. Because the statute of limitations on the incident has now run, it is not anticipated that any new plaintiffs involved in the incident will come forward against the Company and its subsidiaries. From time to time, the Company has become and may become involved in certain lawsuits and legal proceedings which arise in the ordinary course of business, or as the result of current or previous investments, or current or previous subsidiaries, or current or previous employees, or current or previous directors, or as a result of acquisitions and dispositions or other corporate activities. The Company intends to vigorously defend its positions. 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 our financial position or our business, and the outcome of these matters cannot be ultimately predicted. 18. MAJOR CUSTOMER The Company’s largest customer, U.S. Foods, Inc. and its affiliates, accounted for approximately 46 % and 40 % of total sales in each of the years ended December 31, 2021 and 2020. A contract between our subsidiary, Food Innovations, and U.S. Foods entered an optional renewal period in December 2012 but was automatically extended for an additional 12 months in each of January 1, 2013 and 2014. On January 26, 2015 we executed a contract directly between Food Innovations, Inc., our wholly-owned subsidiary, and U.S. Foods, Inc. The term of the contract was from January 1, 2015 through December 31, 2016 and provided for a limited number of automatic annual renewals thereafter if no party gives the other 30 days’ notice of its intent not to renew. Based on the terms, the Agreement was extended through December 31, 2018. Effective January 1, 2018 the Agreement was further amended to remove the cap on renewals, and provide for an unlimited number of additional 12-month terms unless either party notifies the other in writing, 30 days prior to the end date, of its intent not to renew. 19. FAIR VALUE MEASUREMENTS Our short-term financial instruments, including cash, accounts payable and other liabilities, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of the Company’s stock option, convertible debt features and warrant instruments is determined using option pricing models. As a result of the adoption of ASC 815-40, the Company is required to disclose the fair value measurements required by ASC 820, “Fair Value Measurements and Disclosures.” Hierarchical levels, defined by ASC 820 are directly related to the amount of subjectivity associated with the inputs to fair valuations of these liabilities are as follows: Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2 - Inputs other than Level 1 inputs that are either directly or indirectly observable; and Level 3 - Unobservable inputs, for which little or no market data exist, therefore requiring an entity to develop its own assumptions. As December 31, 2021 and 2020, the Company did not have financial assets or liabilities that are required to be accounted for at fair value on a recurring basis. 20. SUBSEQUENT EVENTS None. 55 Index ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.