What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2023-03-31 compared with 2022-03-31 · 108 added, 125 removed, 146 unchanged (61% of the section changed)

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Prior thereto, our common stock traded under the symbol “FBSN”.

46,041,751 shares of our common stock were outstanding as of March 1, 2022.

At March 28, 2023, there were 48,756,694 shares of our common stock outstanding.

Security Holders

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During the year ended December 31, 2022, the Company had the following equity related, nonregistered transactions:

On August 26, 2021 the Company issued 9,375,000 shares of common stock to investors with a fair value of $3,580,372 for cash.

During the year ended December 31, 2021, the Company accrued the amount of $385,000 representing 961,897 shares of common stock issuable at an average price of $0.4177 per share to its Chief Executive Officer pursuant to his compensation agreement.

During the year ended December 31, 2021, the Company accrued the amount of $17,116 representing 59,016 shares of common stock issuable at an average price of $0.29 per share to its Chief Strategy Officer pursuant to his compensation agreement.

During the year ended December 31, 2021, the Company accrued the amount of $90,000 representing 200,282 shares of common stock issuable to two Directors.

During the year ended December 31, 2021, the Company issued 74,076 shares with a fair value of $31,861 as a bonus.

During the year ended December 31, 2022, the Company accrued the amount of $466,186 representing 1,768,348 shares of common stock issuable at an average price of $0.29 per share to its then Chief Executive Officer pursuant to his compensation agreement.

During the year ended December 31, 2022, the Company issued 142,857 shares with a value of $48,543 to a service provider.

During the year ended December 31, 2022, the Company issued 33,445 shares issued with a value of $11,405 to an employee as compensation.

During the year ended December 31, 2022, the Company accrued a total of $40,000 representing 103,256 shares of common stock issuable to two Directors.

All of the issuances described above were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 for the following reasons:

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Weighted-average exercise price of outstanding options, warrants, and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Number of securities remaining available for future issuance under equity compensation plans

Equity compensation plans approved by security holders

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The general volatility of the capital markets and the establishment of a market for our shares, and

Disruption in the economic and financial conditions primarily from the impact of past terrorist attacks in the United States, threats of future attacks, police and military activities overseas and other disruptive worldwide political and economic events, health pandemics, rising inflation and environmental weather conditions.

We are also subject to other risks detailed from time to time in our other filings with the SEC and elsewhere in this report.

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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.

These estimates include certain assumptions related to doubtful accounts receivable, stock-based services, valuation of financial instruments, operating right to use assets and liabilities, and income taxes.

These estimates include certain assumptions related to, among others, doubtful accounts receivable, valuation of stock-based services, operating right of use assets and liabilities, and income taxes.

On an on-going basis, we evaluate these estimates, including those related to revenue recognition and concentration of credit risk.

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Risk-free interest rates

Doubtful Accounts Receivable

The Company maintained an allowance in the amount of $375,931 and $343,832 for doubtful accounts receivable at December 31, 2021 and 2020.

Provision for Doubtful Accounts Receivable

The Company maintained an allowance in the amount of $340,225 and $375,931 for doubtful accounts receivable at December 31, 2022 and 2021, respectively.

The Company has an operational relationship of several years with our major customers, and we believe this experience provides us with a solid foundation from which to estimate our expected losses on accounts receivable.

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These estimates have been accurate in the past.

The Company has a history of losses, and as such has recorded no liability for income taxes.

Until such time as the Company begins to provide evidence that a continued profit is a reasonable expectation, management will not determine that there is a basis for accruing an income tax liability.

These estimates have been accurate in the past.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with accounting principles generally accepted in the United States of America.

The estimated fair values approximate their carrying value because of the short-term maturity of these instruments or the stated interest rates are indicative of market interest rates.

These fair values have historically varied due to the market price of the Company’s stock at the date of valuation.

The Company uses the liability method of accounting for income taxes.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards.

The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law.

The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized.

At December 31, 2022, the Company has a net operating loss carryforward of approximately $15,800,000.

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 condensed consolidated balance sheet.

Finance lease ROU assets are presented within other assets, and finance lease liabilities are presented within accrued liabilities.

ROU assets represent the right of use to 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.

We were initially formed in June 1979 as Alpha Solarco Inc., a Colorado corporation.

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

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.

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.

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 our 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 January 24, 2018, pursuant to an asset acquisition agreement (the “igourmet Asset Acquisition Agreement”), our wholly-owned subsidiary, Innovative Gourmet, LLC 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 and 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 $800,00 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 2018, 2019 and 2020 earnout milestones 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.

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 acquired certain assets of GBC Sub, Inc.

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

GiftBox, a privately held Nevada corporation controlled by David Polinsky, a director of the Company, was in the business of subscription-based ecommerce.

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.

Our strategy has been to increase our sales through a combination of acquisitions and organic growth;

through December 31, 2022 we have completed a total of eight acquisitions.

Transactions With a Major Customer

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Year Ended December 31, 2022 Compared to Year Ended December 31, 2021

Revenue increased by $10,536,120 or approximately 20% to $62,212,148 for the year ended December 31, 2021 from $51,676,028 prior year.

The increase in revenues is primarily attributable to an increase in specialty foodservice revenues which was driven by the nationwide opening of restaurants and other foodservice establishments previously affected by COVID-19.

As more foodservice establishments and restaurants have re-opened we have experienced improving foodservice revenues, although revenues still remain slightly below historical levels.

The increase in specialty foodservice revenue was partially offset with decreases mainly associated with e-commerce revenues.

Though e-commerce revenue remains significantly above historical levels, the decreases during the current period were the result of decreases in COVID-19 driven demand in 2021 compared to 2020.

Revenue increased by $17,890,816 or approximately 29% to $80,102,964 for the year ended December 31, 2022 from $62,212,148 in the prior year.

The increase in specialty foodservice revenue was partially offset with decreases in e-commerce revenues.

The decrease in e-commerce revenue during the current period was related to decreases in COVID-19 driven demand in 2022 compared to 2021 partially driven by the continued re-opening of bricks and mortar stores, and by decreases in digital marketing related in part to a more challenging digital marketing environment as compared to 2021 which has been driven partially by industrywide marketing challenges related to expanded privacy rules that significantly reduce data sharing.

We continue to assess the potential of new revenue sources from the manufacture and sale of proprietary food products, private label products and additional sales channel opportunities in both the foodservice and consumer space and will implement a strategy which based on our analysis provides the most beneficial opportunity for growth.

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Our cost of goods sold for the year ended December 31, 2022 was $61,414,765, an increase of $16,153,364 or approximately 36% compared to cost of goods sold of $45,261,401 for the year ended December 31, 2021.

The increase in cost of goods sold is attributed mainly to increases in revenues.

Cost of goods sold was made up of the following expenses for the year ended December 31, 2022:

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and cost of goods associated with logistics of $528,233.

Total gross margin was approximately 27.2% of sales in 2021 compared to approximately 26.7% of sales in 2020.

Gross margins as a percentage of sales improved slightly during the current period to 27.2% compared to 26.7% during the comparable period, primarily due to variation in product and revenue mix across our various selling channels.

In 2022, we continue to price our products in order to increase sales, gain market share and increase the number of our end users and customers.

Gross margins as a percentage of sales declined during the current period to 23.3% compared to 27.2% during the comparable period, primarily due to variation in product and revenue mix across our various selling channels, increases in fuel costs and fuel surcharges associated with the higher cost of fuel in the United States and higher shipping costs contributed to the decline in gross margins as a percentage of sales.

In 2022, we continued to price our products in order to increase sales, gain market share and increase the number of our end users and customers.

We currently expect, if market conditions, overall economic conditions, and our product revenue mix remain constant, that our cost of goods sold may increase and may result in a decrease in profit margin.

Selling, general, and administrative expenses

Selling, general, and administrative expenses increased by $1,008,411 or approximately 5% to $20,540,229 during the year ended December 31, 2021 compared to $19,531,818 for the year ended December 31, 2020.

The increase in selling, general, and administrative expenses was primarily due to an increase in payroll and related costs of approximately $915,262 (net of an increase in non-cash compensation in the amount of $142,815), an increase in advertising and marketing costs of $550,770, an increase in insurance costs of $118,119, an increase in office, facilities, and vehicles costs $47,374, and an increase in taxes of $26,868.

These increases were partially offset by a decrease in bad debt expense of $223,143, a decrease in amortization and depreciation of $177,087, a decrease in banking and credit card fees of $125,877, a decrease in professional fees of $48,434, a decrease in IT and computer costs of $44,021.

The increases were driven mainly by additional costs including increases in costs including warehouse fulfillment costs associated with COVID-19, increased costs associated with additional personnel mainly related to warehouse operations, overall employee costs and insurance costs, increased legal, accounting, facility and IT costs including costs associated with the planned launch of new websites, and increased advertising associated with increased spending in digital marketing related to certain of the Company’s e-commerce websites.

Gain on forgiveness of debt

During the year ended December 31, 2021, the Company recorded a gain on forgiveness of debt in connection with the PPP Loans in the amount of $3,425,015, consisting of $3,398,635 of principal and $26,380 of accrued interest.

Impairment of goodwill and intangible assets

During the year-ended December 31, 2020, the Company performed impairment tests of our goodwill and intangible assets that incorporated 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 tests, the Company was required by applicable accounting rules to record an impairment of goodwill and intangible assets in the aggregate amount of $1,698,952.

There was no such comparable charge during the current period.

At December 31, 2021, the net carrying value of other amortizable and unamortizable assets on the Company’s balance sheet is $1,605,040.

Selling, general, and administrative expenses decreased by $814,636 or approximately 4% to $19,725,593 during the year ended December 31, 2022 compared to $20,540,229 for the year ended December 31, 2021.

The decrease in selling, general, and administrative expenses was primarily due to a decrease in advertising and digital marketing costs in the amount of $499,610, a decrease in payroll and related costs in the amount of $424,308, including a decrease of $91,287 in non-cash compensation;

and a decrease in banking and credit card fees of $187,156.

Other components of the decrease in selling, general, and administrative expenses include a decrease in bad debt expense in the amount of $33,671 and taxes in the amount of $7,589.

These decreases were partially offset by an increase in travel and entertainment costs of $105,297, an increase in office & facilities costs of $73,457, an increase in computer and IT expense of $52,115, an increase in professional fees of $47,371, an increase in amortization and depreciation of $36,344, and an increase in insurance costs of $23,263.

The decrease in sales, general, and administrative expenses represent the results of our overall cost-cutting efforts as well as the restructuring of our marketing and advertising programs.

Impairment of Investment

During the year ended December 31, 2022, we made the determination that our investments in seven food-related companies were unlikely to be recovered, and we recorded an impairment on these investments in the aggregate amount of $286,725.

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.

There was no such comparable transaction in the current period.

During the year ended December 31, 2022, the Company recognized other income in the amount of $294,000 in connection with the termination of the interest rate swap.

There was no comparable transaction in the prior period.

Gain on forgiveness of debt

During the year ended December 31, 2021, the Company recorded a gain on forgiveness of debt in connection with the IVFH PPP Loans in the amount of $3,425,015, consisting of $3,398,635 of principal and $26,380 of accrued interest.

There was no comparable transaction in the current period.

Gain on contingent liabilities

During the year ended December 31, 2022, the Company recorded a total of $295,600 in gains on contingent liabilities.

This was composed of two contingent liabilities recorded in connection with the igourmet acquisition on January 24, 2018, with a total remaining balance in the amount of $175,600;

and two contingent liabilities recorded in connection with the Mouth acquisition on July 6, 2018, with a total remaining balance in the amount of $120,000.

In each instance, the contingent event was not met and the payment period has passed;

accordingly, the Company has reversed these liabilities.

Loss on extinguishment of debt

During the year ended December 31, 2022, we entered into a revolving line of credit agreement and two term loan agreements with MapleMark Bank, replacing our revolving line of credit and term loans with Fifth Third Bank.

We wrote off the existing discounts to the Fifth Third Bank loans in the amount of $40,556 resulting in a loss on extinguishment of debt.

There was no comparable transaction during the year ended December 31, 2021.

Other leasing income

On November 8, 2019 the Company purchased a logistics and warehouse facility located in Mountain Top, Pennsylvania and leased portions of this facility to a third party for a cell tower installation.

During the year ended December 31, 2021, the Company recognized revenue in the amount of $10,840 in connection with the lease of space in this facility compared to $43,810 during the year ended December 31, 2020 The decrease was due to (i) the Company recognized income in the amount of $22,380 in the current period as revenues in connection with customers for whom the Company provides other logistical services;

this category of income was classified as other leasing income during the prior year;

(ii) On January 18, 2021, the Company entered into a 50 year easement agreement for total proceeds of $380,000.

The 2021 revenue represents the recognition of the proceeds of the easement over the term of the agreement;

the Company recognized additional revenues in the amount of $10,879 from the previous short-term cell tower leasing agreement in the prior year.

Gain on disposal of fixed assets

During the year ended December 31, 2020, the Company recorded a gain on the sale of warehouse equipment in the amount of $7,984, compared to a gain on sale of equipment of $0 during the current period.

This type of transaction occurs infrequently.

During the year ended December 31, 2022, the Company recognized income in the amount of $11,226 in connection with the lease of space in our Mountaintop warehouse facility, an increase of $386 or approximately 4% compared to $10,840 during the year ended December 31, 2021.

Interest expense, net

Interest expense, net of interest income, increased by $233,299 or approximately 66% to $586,153 during the year ended December 31, 2022, compared to $352,854 during the year ended December 31, 2021.

The increase was due primarily to an increase in interest accrued or paid on the Company’s commercial loans and notes payable in the amount of $296,897 during the year ended December 31, 2020 to $348,864 during the year ended December 31, 2021.

The Company also recorded interest expense in connection with the amortization of prepaid loan fees in the amount of $12,525 during the year ended December 31, 2021 compared to $12,560 during the prior period.

The increase was due primarily to an increase in interest accrued or paid on the Company’s commercial loans and notes payable in the amount of $165,703 due to higher interest rates and an increase in loan fees in the amount of $103,235 due to loan fees incurred in connection with the MapleMark and Fifth Third loans.

These increases were partially offset by a decrease in the amount of $20,639 in connection with the interest rate swap, and a decrease in $14,852 related to the PPP loans.

For the reasons above, the Company had a net loss for the year ended December 31, 2022 of $1,350,002 compared to a net loss of $716,331 during the year ended December 31, 2021.

The loss for the year ended December 31, 2021 includes a total of $1,449,236 in non-cash charges, including amortization of intangible assets in the amount of $8,912;

The loss for the year ended December 31, 2022 includes a net total of $1,580,162 in non-cash charges, including charges for non-cash compensation in the amount of $576,964;

depreciation expense of $520,848;

charges for non-cash compensation in the amount of $668,251;

impairment of investment of $209,850;

impairment of investments of $286,725;

amortization of prepaid loan fees of $115,760;

and provision for doubtful accounts of $31,756.

These non-cash losses were offset by a gain on forgiveness of debt in the amount of $3,425,015.

The loss for the year ended December 31, 2020 includes a total of $3,159,751 in non-cash charges, including impairment of intangible assets in amount of $1,698,952;

amortization of intangible assets in the amount of $41,224;

and loss on extinguishment of debt of $40,556.

These charges were partially offset by a gain on contingent liabilities in the amount of $295,600 and provision for doubtful accounts of $1,915.

The loss for the year ended December 31, 2021 includes a total of $1,551,951 in non-cash charges, including charges for non-cash compensation in the amount of $668,251;

depreciation expense of $517,942;

charges for non-cash compensation in the amount of $525,436;

and amortization of prepaid loan fees of $12,560, and allowance for doubtful accounts of $218,862.

impairment of investment of $209,850;

provision for doubtful accounts of $31,756;

amortization of prepaid loan fees of $12,525;

and amortization of intangible assets in the amount of $8,912.

These non-cash losses were offset by a gain on forgiveness of debt in the amount of $3,425,015.

Liquidity and Capital Resources at December 31, 2022

As of December 31, 2022, the Company had current assets of $13,212,077, consisting of cash and cash equivalents of $4,899,398;

trade accounts receivable of $3,256,764 inventory of $3,109,984;

trade accounts, net receivable of $4,969,395;

inventory of $3,053,852;

and other current assets of $289,432.

Also at December 31, 2021, the Company had current liabilities of $10,197,532, consisting of trade payables and accrued liabilities of $5,702,905, accrued interest of $29,349, deferred revenue of $1,631,406, line of credit of $2,000,000, current portion of notes payable (net of discount) of $412,961, current portion of operating leases of $74,088, current portion of financing leases of $159,823, and current portion of contingent liabilities of $187,000.

Also at December 31, 2022, the Company had current liabilities of $16,412,609, consisting of trade payables and accrued liabilities of $6,853,253, accrued interest of $18,104, deferred revenue of $1,558,155, line of credit of $2,014,333, current portion of notes payable of $5,711,800, current portion of operating lease liability of $64,987, and current portion of financing lease liability of $191,977.

During the year ended December 31, 2022, the Company had cash used in operating activities of $599,086.

Cash flow used in operations consisted of the Company’s consolidated net loss of $716,331 subtracted by the depreciation and amortization of $526,854, non-cash compensation in the amount of $668,251, amortization of right-of-use assets of $102,715, provision for doubtful accounts of $31,756, and amortization of prepaid loan fees in the amount of $12,525.

These amounts were partially offset by a gain on the forgiveness of debt of $3,425,015, and proceeds from the sale of common stock.

The Company’s cash position increased by $1,072,174 as a result of changes in the components of current assets and current liabilities.

The Company had cash used in investing activities of $24,511 for the year ended December 31, 2021, which consisted of cash paid for the acquisition of property and equipment in the amount of $24,511.

The Company had cash provided by financing activities of $4,748,736 for the year ended December 31, 2021, which consisted of proceeds from a PPP loan in the amount of $1,748,414 and proceeds from the sale of common stock, net of issuances costs of $3,580,372;

these amounts were partially offset by principal payments on loans and notes payable in the amount of $433,087 and principal payments on financing leases in the amount of $146,963.

The Company had net working capital of $2,605,994 as of December 31, 2021.

The Company had cash used in operations during the year ended December 31, 2021 in the amount of $3,661,569, compared to cash used in operating activities of $1,759,883 during the year ended December 31, 2020.

Cash flow used in operations consisted of the Company’s consolidated net loss of $1,350,002 less depreciation and amortization of $562,072, stock-based compensation in the amount of $576,964, impairment of investment of $286,725, amortization of right-of-use assets of $66,740, and amortization of prepaid loan fees in the amount of $115,760, and loss on extinguishment of debt of $40,556.

These amounts were partially offset by a gain on contingent liabilities in the amount of $295,600 and recoveries of doubtful accounts of $1,915.

The Company’s cash position decreased by $600,386 as a result of changes in the components of current assets and current liabilities.

The Company had cash used in investing activities of $114,966 for the year ended December 31, 2022, which consisted of cash paid for the acquisition of property and equipment.

The Company had cash used in financing activities of $509,221 for the year ended December 31, 2022, which consisted of principal payments on loans and notes payable in the amount of $172,422;

principal payments on financing leases in the amount of $176,494;

cost of debt financing of $110,305;

and payment of offering costs for stock previously accrued of $50,000.

The Company had a net working capital deficit of $3,200,532 as of December 31, 2022.

The Company had cash used in operating activities during the year ended December 31, 2022 in the amount of $599,086, compared to $3,661,569 during the year ended December 31, 2021.

The Company intends to continue to focus on increasing market share and cash flow from operations by focusing its sales activities on specific market segments and new product lines and improving operating efficiencies.

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As we seek to increase our sales of new items and enter new markets, acquire new businesses as well as identify new food oriented products and services, we may use existing cash reserves, long-term financing, or other means to finance such diversification, although no assurance can be given that such growth will occur.

The Company intends to continue to focus on increasing market share and cash flow from operations by focusing its sales activities on specific market segments and new product lines.

As we seek to increase our sales of new items and enter new markets, acquire new businesses as well as identify new and other consumer and food service oriented products and services, we may use existing cash reserves, long-term financing, or other means to finance such diversification.

If the Company’s cash flow from operations is insufficient to fully implement its business plan, the Company may require additional financing in order to execute its operating plan.

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In any of these events, the Company may be unable to implement its current plans for expansion, repay its debt obligations as they become due or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations.

Since 2020 the world has been in the grip of a pandemic which has wreaked havoc on economies world-wide, including in the U.S., which is our primary market.

As a result of the pandemic, restaurants, hotels, country clubs, casinos, catering houses and other of our primary customers have either been closed completely or are only partially open with significantly reduced operations.

Accordingly, foodservice revenues, which historically have been a significant overall portion of our revenues have been significantly reduced as most foodservice establishments cross the United States closed or had limited operations.

As a result, foodservice revenue commencing in the second half of March 2020 and continuing throughout the year and into 2021, experienced unprecedented declines.

As the pandemic has begun to decline in the United States and foodservice establishments have begun to reopen, we have experienced improving foodservice revenues although our revenues have not yet reached its previous historical levels for the full year.

While the decline in the pandemic and the re-opening of bricks and mortar stores resulted in a decline of e-commerce revenues compared to the comparable quarter in 2020, ecommerce revenues remained significantly above pre-pandemic historical levels.

In April 2020 we applied for and received a loan of approximately $1,650,221 under a program established under a congressionally approved program which is administered by the U.S.

Small Business Administration.

In 2021 we applied for and received $1,748,414 in new loans under a similar government program administered by the U.S.

Small Business Administration.

During the year ended December 31, 2021, the Company received notifications from Fifth Third Bank, N.A.

that principal and accrued interest in the aggregate amounts of $3,398,635 and $26,380, respectively, due under the PPP Loans had been forgiven;

at December 31, 2021, the balance due under the PPP loans was $0.

Between cash on hand, access to outside capital, and our current expectations of incoming revenues, we believe we have sufficient resources to continue operating for at least the next 12 months.

However, inasmuch as we cannot predict the timing and the effect of the pandemic on general economic activities, we cannot predict the trajectory of the pandemic and the amount of economic stress we could experience if the pandemic were to worsen in the United States and worldwide.

While we intend to continue to focus on executing on our strategic growth plans, given the current economic conditions, we are not able to determine the exact timeframe in 2022, if at all, that we can then again consider fully implementing portions of the plans described below.

During 2022, we plan to expand our business by expanding our focus to additional specialty foods markets and by leveraging our e-commerce platform to launch and grow, either organically and/or through acquisition, new D2C brands and e-commerce sites within targeted consumer areas, on the Company’s e-commerce platform.

The world has been in the grip of a pandemic since March 2020 which has wreaked havoc on economies world-wide, including in the U.S., which is our primary market.

As a result of the pandemic, restaurants, hotels, country clubs, casinos, catering houses and other segments of our primary customer base were either closed completely or have only opened with significantly reduced operations.

Accordingly, foodservice revenues, which historically have been a significant portion of our overall revenues had been significantly reduced as most foodservice establishments cross the United States closed or had limited operations.

As a result, foodservice revenue commencing in the second half of March 2020 and through the end of 2021 experienced unprecedented declines.

In 2022, as the pandemic began to recede and foodservice establishments reopened and travel resumed, we have experienced strong foodservice revenue growth.

Concurrently, while ecommerce revenues remained above pre-pandemic historical levels, lower deferred revenues recognized in the twelve months of 2022 and decreases in COVID-19 driven demand in 2022 compared to 2021 (partially driven by the continued re-opening of bricks and mortar stores), and an increasingly challenging digital marketing environment fueled by industry-wide marketing challenges, including expanded privacy rules that significantly reduce data sharing.

During 2023, as Mr.

Bennett has now recently taken the role of CEO, we will be doing a holistic review of the Company’s portfolio of businesses and go to market strategies.

In the meantime, we plan to continue to expand our business by expanding our focus on additional specialty foods markets and by leveraging our e-commerce platform to launch and grow new D2C brands and e-commerce sites within targeted consumer areas either organically and/or through acquisition of new D2C brands and e-commerce sites within targeted consumer areas.

In addition, we will continue exploring potential acquisition and partnership opportunities with influencers and other celebrities to continue to extend our focus in the specialty food market through the growth of the Company’s existing sales channels and through a variety of additional potential sales channel relationships.

Additionally, to further optimize the Company’s return on marketing spend, the company has meaningfully reduced its digital marketing spend in traditional digital marketing channels and has shifted focus to increasing our strategic loyalty and retention focused customer experience improvements across our branded online retailers.

Additional focus includes further improving the customer experience on our existing food subscription offerings, expanding our traditional monthly subscription offerings and launching a “subscribe and save” subscription offering.

In addition, we are currently exploring the introduction of, or have introduced into the market, a variety of new product categories and new product lines, including private label products and proprietary branded products to leverage our existing foodservice and consumer customer base.

Furthermore, the Company intends to continue to expand its activities in the direct to consumer space and the overall consumer packaged goods (CPG) space through leveraging its overall capabilities in the consumer space, including leveraging its direct to consumer e-commerce platform to reach both additional customers in multiple channels, and to expand availability of its e-commerce capabilities to additional products and markets.

Furthermore, the Company intends to continue to expand its activities in the direct-to-consumer space and the overall consumer packaged goods (CPG) space by leveraging its overall capabilities in the consumer space, including leveraging its direct to consumer e-commerce platform to reach both additional customers in multiple channels, and to expand availability of its e-commerce capabilities to additional products and markets.

The Company also plans on expanding its B2B offerings, including of its managed services which provide a complete customer backend experience solution for small to large brands by leveraging the platform's procurement, logistics and fulfillment capabilities.

The Company also manages monthly subscription offerings on behalf of third party B2B clients and the Company plans on expanding this offering in 2023.

In addition, the Company is focused on formally launching its B2B managed marketplace offerings, currently in beta testing, in which the Company offers its B2B customers a complete managed solution including warehousing fulfillment and listing management, for third party marketplace for marketplaces such as Amazon, Walmart and other third party marketplaces.

No assurances can be given that any of these plans will come to fruition or that if implemented that they will necessarily yield positive results.

1 unchanged sentence

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

In the opinion of management, inflation has not had a material effect on the Company’s financial condition or results of its operations.

In the opinion of management, inflation has had a material effect on the Company’s financial condition and results of its operations.

The Company has seen inflation across its costs for fuel, shipping, cost of goods, and marketing.

Balancing the management of these increases with the willingness of our customers to pay higher prices will be a key focus for the Company this year.

However, no assurance can be given that we will be successful and inflationary pressure on our profits will likely continue into 2023.

Transactions with Major Customers

The Company's largest customer, U.S.

and its affiliates, accounted for approximately 46% and 40% of total sales in each of the years ended December 31, 2021 and 2020, respectively;

and its affiliates, accounted for approximately 49% and 46% of total sales in the years ended December 31, 2022 and 2021, respectively;

and approximately 46% of total sales in the fourth quarter of 2022 compared to 40% of total sales in the fourth quarter of 2021.

5 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 5. Market for Registrant’s Common Equity