What changed in this filing

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Item 1. Business

2023-03-31 compared with 2022-03-31 · 18 added, 61 removed, 131 unchanged (38% of the section changed)

2 unchanged sentences

We changed our name to Fiber Application Systems Technology, Ltd in February 2003.

In January 2004, we changed our state of incorporation by merging into Innovative Food Holdings, Inc.

(IVFH), a Florida corporation formed for that purpose.

As a result of the merger, we changed our name to that of Innovative Food Holdings, Inc.

In January 2004, we changed our state of incorporation by merging into Innovative Food Holdings, Inc., a Florida corporation formed for that purpose.

As a result of the merger, we changed our name to Innovative Food Holdings, Inc.

In January 2004, we also acquired Food Innovations, Inc.

(“FII” or “Food Innovations”), a Florida corporation, for 500,000 shares of our common stock.

On May 18, 2012, the Company executed a Stock Purchase Agreement to acquire all of the issued and outstanding shares of Artisan Specialty Foods, Inc., an Illinois corporation (“Artisan”), from its owner, Mr.

David Vohaska.

The purchase price was $1.2 million, with up to another $300,000 (with a fair value of $131,000) payable in the event certain financial milestones are met over the next one or two years.

Those milestones have been met.

On November 2, 2012, the Company entered into an asset purchase agreement (the “Haley Acquisition”) with The Haley Group, LLC whereby we acquired all existing assets of The Haley Group, LLC and its customers.

The Haley Acquisition was valued at a total cost of $119,645.

On June 30, 2014, pursuant to a purchase agreement, the Company purchased 100% of the membership interest of Organic Food Brokers, LLC, a Colorado limited liability company (“OFB”), for $300,000, 100,000 four year options at a price of $1.46 per share, and up to an additional $225,000 in earn-outs if certain milestones are met.

(“FII” or “Food Innovations”), a Florida corporation.

On May 18, 2012, the Company executed a Stock Purchase Agreement to acquire all of the issued and outstanding shares of Artisan Specialty Foods, Inc., an Illinois corporation (“Artisan”).

On November 2, 2012, the Company entered into an asset purchase agreement whereby we acquired all existing assets of The Haley Group, LLC.

On June 30, 2014, pursuant to a purchase agreement, the Company purchased 100% of the membership interest of Organic Food Brokers, LLC, a Colorado limited liability company (“OFB”).

On August 15, 2014, pursuant to a merger agreement, the Company acquired The Fresh Diet, Inc.

Effective February 23, 2016, the Company closed a transaction to sell 90% of its ownership in FD for consideration consisting primarily of a restructuring of our loans, which includes the ability to convert to additional amounts of FD under certain circumstances.

There is no continuing cash inflows or outflows from or to the discontinued operations.

Effective February 23, 2016, the Company closed a transaction to sell 90% of its ownership in FD.

There are no continuing cash inflows or outflows to or from FD.

Pursuant to an Asset Purchase Agreement dated as of January 1, 2017 the Company’s wholly-owned subsidiary, Oasis Sales Corp.

(“Oasis”), purchased substantially all of the assets of Oasis Sales and Marketing, L.L.C.

for $300,000 cash;

a $200,000 structured equity instrument which can be paid in cash or shares of the Company stock at the Company’s option, anytime under certain conditions, or is automatically payable via the issuance of 200,000 shares if the Company’s shares close above $1.00 for ten consecutive days;

a $100,000 note;

and up to an additional $400,000 in earn-outs over two years if certain milestones are met.

The Agreement also contains claw-back provisions if certain revenue conditions are not met.

The milestones have been met.

Effective January 24, 2018, pursuant to an asset acquisition agreement, our wholly-owned subsidiary, Innovative Gourmet LLC (“Innovative Gourmet”), acquired substantially all of the assets and certain liabilities of igourmet LLC and igourmet NY LLC, privately-held New York limited liability companies located in West Pittston, Pennsylvania (collectively, “Sellers”) engaged in the sale, marketing, and distribution of specialty food and specialty food items through www.igourmet.com, online marketplaces, additional direct-to-consumer platforms, distribution to foodservice, retail stores and other wholesale accounts, pursuant to the terms of an Asset Purchase Agreement.

The consideration for and in connection with the acquisition consisted of:

(i) $1,500,000, which satisfied or reduced secured, priority and administrative debt of Sellers;

(ii) in connection with and prior to the acquisition, our wholly-owned subsidiary, Food Funding, LLC (“Food Funding”), funded advances of $325,000 to Sellers on a secured basis, pursuant to certain loan documents and as bridge loans, which loans were reduced by the proceeds of the Asset Purchase Agreement;

(iii) the purchase for $200,000 of certain debt owed by Sellers, to be paid out of, if available, Innovative Gourmet’s cash flow;

(iv) potential contingent liability allocation for a percentage of Sellers’ approximately $2,300,000 of certain debt, not purchased or assumed by Innovative Gourmet, which under certain circumstances, Innovative Gourmet may determine to pay;

and (v) additional purchase price consideration of (a) up to a maximum of $1,500,000, if EBITDA of Innovative Gourmet reaches $800,000 thousand in 2018, (b) up to a maximum of $1,750,000, if EBITDA of Innovative Gourmet in 2019 exceeds its EBITDA in 2018 by at least 20% and if its EBITDA reaches $5,000,000;

and (c) up to a maximum of $2,125,000, if EBITDA of Innovative Gourmet in 2020 exceeds its EBITDA in 2019 by at least 20% and if its EBITDA reaches $8,000,000.

The EBITDA based earnout shall be paid 37.5% in cash, 25% in IVFH shares valued at the time of the closing of this transaction and 37.5%, at Innovative Gourmet’s option, in IVFH shares valued at the time of the payment of the earnout or in cash.

The additional purchase price consideration milestone for 2018 and 2019 and 2020 were not met.

In connection with the acquisition, our wholly-owned subsidiary, Food Funding, purchased Seller’s senior secured note at a price of approximately $1,187,000, pursuant to the terms of a Loan Sale Agreement with UPS Capital Business Credit.

That note was reduced by the proceeds of the Asset Purchase Agreement.

See Item (i) above.

(“Oasis”), purchased substantially all of the assets of Oasis Sales and Marketing, LLC.

Effective January 24, 2018, pursuant to an asset acquisition agreement, our wholly-owned subsidiary, Innovative Gourmet LLC (“Innovative Gourmet”, “igourmet”), acquired substantially all of the assets and certain liabilities of igourmet LLC and igourmet NY LLC, privately-held New York limited liability companies located in West Pittston, Pennsylvania (collectively, “Sellers”) engaged in the sale, marketing, and distribution of specialty food and specialty food items through www.igourmet.com, online marketplaces, additional direct-to-consumer platforms, distribution to foodservice, retail stores and other wholesale accounts, pursuant to the terms of an Asset Purchase Agreement.

Effective July 6, 2018, pursuant to an asset purchase agreement between Mouth Foods, Inc.

(“Mouth”) and our wholly-owned subsidiary M Innovations LLC (“M Innovations”) (the “MFI APA”), the Company acquired certain assets of Mouth from MFI (assignment for the benefit of creditors), LLC, in connection with a Delaware assignment proceeding.

The MFI APA was accounted for as an acquisition of an ongoing business where the Company was treated as the acquirer and the acquired assets and assumed liabilities were recorded by the Company at their preliminary estimated fair values.

Mouth, a privately held New York company operating out of Brooklyn, was an expert curator and online retailer of high quality specialty foods from small-batch makers in the US.

The consideration for and in connection with the acquisition consisted of (i) closing related cash payments of $208,355;

(ii) additional revenue-based contingent liabilities valued by management at $100,000 related to certain future sales of purchased assets payable under the following terms:

payment of 5% of certain revenues, with no payments on the first $500,000 of revenues and no payments on revenues after June 30, 2020;

(iii) additional revenue based contingent liabilities of up to $185,000 associated with the purchase of certain debt of the seller;

and (iv) additional contingent liability consideration valued by management at approximately $20,000.

Effective July 23, 2019, P Innovations LLC (“P Innovations”) acquired certain assets of GBC Sub, Inc.

Effective July 23, 2019, through our subsidiary P Innovations LLC, we acquired certain assets of GBC Sub, Inc.

(d/b/a The GiftBox) (“GiftBox”) (the “GiftBox Asset Purchase Agreement”).

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The consideration for the assets purchased was a nominal amount of cash.

The GiftBox Asset Purchase Agreement also provides the sellers the option to acquire 30% of P Innovations subject to dilution for a period of thirty-six months following the date of the Giftbox Asset Purchase Agreement;

the option will only be exercisable if there is a spinoff of P Innovations to Innovative Food Holdings’ shareholders.

The Company is evaluating its preliminary purchase price allocation.

Our Operations

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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.

The Company’s new management is reviewing the Company’s operations with a view to increasing sales levels, profit margins, and overall profitability.

FII, through its relationship with the producers, growers, and makers of thousands of unique specialty foodservice products and through its relationship with US Foods, Inc.

1 unchanged sentence

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.forethegourmet.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.

For The 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.

GFG is focused on expanding the Company’s program offerings to additional customers.

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Our logistics manager works directly with our suppliers on an ongoing basis, to ensure that the appropriate packaging and shipping specifications are in place at all times.

At the beginning of March 2020, as early signs were beginning to emerge that Covid-19 might potentially be a significant issue in the United states, we initiated additional preventative safety measure in our facilities and we continued adding additional preventative safety measures including protective gear for employees, temperature testing, ongoing onsite team of cleaning and sanitizing specialists, social distancing, special no contact package handling protocols and we continue to assess and modify as appropriate, measures targeted towards the safety of our employees and the safety of our facilities and our products.

At the beginning of March 2020, as early signs were beginning to emerge that Covid-19 might potentially be a significant issue in the United states, we initiated additional preventative safety measures in our facilities and we continued adding additional preventative safety measures including protective gear for employees, temperature testing, ongoing onsite team of cleaning and sanitizing specialists, social distancing, special no contact package handling protocols.

While we continue to assess and modify as appropriate, measures targeted towards the safety of our employees and the safety of our facilities and our products, as of December 31, 2022, we have returned to our pre-COVID-19 protocols.

Relationship with U.S.

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Growth Strategy

Due to the COVID-19 outbreak in the United States the economic outlook for restaurant-based specialty food remains unclear.

According to National Restaurant Association, restaurant and foodservice sales are expected to grow from $799 billion in 2021 to $898 Billion in 2022.

This projection would exceed the $846 in restaurant and foodservice sales for pre-Covid 2019 In addition, according to the National Restaurant Association, eating food that is not prepared at home continues to be a strong part of consumers lifestyles with 54% of adults and 72% of millennials saying that take out or food delivery is essential to the way they live.

Credit Suisse Group had also previously estimated that 80% of U.S.

household food spend now goes towards food-at-home vs.

food-away-from-home.

This is greater than the food-at-home spending share in 2018 of 47.6% and post-Great Recession peak of 50%, as per the United States Department of Agriculture’s Economic Research Service.

In addition, commentary from Neilsen indicates that with improvements in technology, infrastructure and experience, coupled with a reduction in barriers to trial, such as delivery length or shipping costs, buyer adoption of online CPG shopping has consistently increased over the last two years.

Yet while those changes have increased adoption of online ordering, COVID-19 has caused another step change in the way consumers shop.

These consumer behaviors have also accelerated e-commerce trends.

According to Satisa.com revenue from the e-commerce food and beverage industry in the United States stood at 34.2 billion U.S dollars in 2021.

The Statista Digital Market Outlook estimates further that by 2025, this figure will rise to 47.6 billion dollars.

In addition, The National Retail Federation predicts online sales will make up 20% of the grocery business within five years.

Prior to the onset of the COVID-19 outbreak, industry trends were very favorable towards market acceptance and continued growth of specialty food brands, which was a trend that boded well for us and our products.

To drive growth within the specialty food space, we intend to focus our efforts in demand driven active sales channels and leverage our ability to offer our products across multiple selling channels including to professional chefs within the restaurant channel as well as directly to consumer at home via ecommerce.

We expect to continue offering unique and premium quality products as well as new product introduction and innovation to our customers and potential customers.

1 unchanged sentence

We anticipate attempting to grow our business through:

Introduction of new products, suppliers, and food trends to customers across all of our sales channels.

Increased ecommerce conversion rates by improving the shopping experience on our website.

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Maximize sales of current product catalog to our existing customers and potential new customers.

Introduction of new products to customers.

Expansion of availability of branded products and new brands which are consistent with the changing demands of customers in the U.S.

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No assurance can be given that we will be able to identify and successfully conclude negotiations with any potential target.

The Company’s new management is reviewing the Company’s operations with a view to increasing sales levels, profit margins, and overall profitability.

While we face intense competition in the marketing of our products and services, it is our belief that there are few companies offering a platform similar to ours, which include expansive backend and front end capabilities in both ecommerce and foodservice in addition there are few companies offering a broad range of customer service oriented, quality, chef driven products and specialty gourmet products, for nationwide delivery from same day, depending on market location to 72 hours.

25 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business