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Item 8. Financial Statements and Supplementary Data

2023-03-31 compared with 2022-03-31 · 311 added, 256 removed, 477 unchanged (54% of the section changed)

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders’ and Board of Directors

Innovative Food Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Innovative Food Holdings, Inc.

and Subsidiaries (the Company) as of December 31, 2022, and the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the related consolidated notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

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 audit 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 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 control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the 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 financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit 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 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 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 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.

ASSURANCE DIMENSIONS CERTIFIED PUBLIC ACCOUNTANTS & ASSOCIATES

also d/b/a McNAMARA and ASSOCIATES, PLLC

4920 W Cypress Street, Suite 102 | Tampa, FL 33607 | Office:

813.443.5048 | Fax:

JACKSONVILLE :

4720 Salisbury Road, Suite 223 | Jacksonville, FL 32256 | Office:

888.410.2323 | Fax:

1800 Pembrook Drive, Suite 300 | Orlando, FL 32810 | Office:

888.410.2323 | Fax:

SOUTH FLORIDA :

2000 Banks Road, Suite 218 | Margate, FL 33063 | Office:

754.800.3400 | Fax:

www.assurancedimensions.com

Going Concern

Description of the matter and considerations leading to the matter

As described in Notes 11 and 12 to the consolidated financial statements, the Company has a revolving credit facility and term loan agreement with MapleMark which is due to mature on May 27, 2023, resulting in negative working capital as of December 31, 2022.

This raises substantial doubt about the ability of the Company to continue as a going concern for a period of one year from the date of our report if (i) the maturity date is not extended by the bank and (ii) the loan becomes in default and payable on demand as per the terms of the loan agreements.

Given that the Company did not have a sufficient cash balance at December 31, 2022 or thereafter to pay down the loans and given that net cash was used in operations during the year ended December 31, 2022, the Company may not be able to repay the loan balance if called upon by the bank which resulted in the going concern risk noted.

Furthermore, as discussed in Note 11 and 12, the Company is waiting on the approval of a guarantee from the US Department of Agriculture (USDA) which the bank has applied for and would (i) guarantee the loan up to 80% and (ii) extend the maturity date to 2052.

As of the date of the audit opinion the guarantee had not been received which further added to the going concern risk noted above.

As a result of the foregoing, management has developed plans which it determined alleviate the substantial doubt regarding its ability to continue as a going concern.

Description of how the matter was addressed

We obtained management’s assessment of going concern and their plans to meet financial obligations in the instance the guarantee is not obtained which included (i) proposed financing by various lenders of two owned buildings with an appraised value greater than the loan amount along with working capital financing collateralized by accounts receivable and inventory evidenced by multiple term sheets;

(ii) the ability to refinance with the current bank and extend the loan maturity date supported by written correspondence from the lender ;

and (iii) management’s development of and review of projections showing increased sales and projected cash flows from operations, supporting the basis for the term sheets and other financing correspondence from the various lenders.

In addition, we reviewed the conditional commitment issued by the USDA to the Company which outlines the terms and conditions of the guarantee and conditions to be met by the Company and which will be presented to the USDA committee for approval.

We had conversations with the Company’s bank representative who corroborated the status of the application and that conditional commitment terms have been met and the willingness of the bank to assist the Company with refinance or other options if the guarantee is not obtained from the USDA.

Based on management’s plans and related evidence obtained, substantial doubt about the Company’s ability to continue as a going concern is alleviated and as such, we did not include a going concern emphasis of a matter in our report herein.

We have served as the Company’s auditor since 2022

Margate, Florida

March 31, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of:

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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.

We have audited the accompanying consolidated balance sheet of Innovative Food Holdings, Inc.

and Subsidiaries (the “Company”) as of December 31, 2021 the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the year 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 the results of its operations and its cash flows for the year ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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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.

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Accounts receivable, net

Inventory, net

Other current assets

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Property and equipment, net

Right to use assets, operating leases, net

Right to use assets, finance leases, net

Right of use assets, operating leases, net

Right of use assets, finance leases, net

Other amortizable intangible assets, net

Other unamortizable intangible assets

Tradenames and other unamortizable intangible assets

LIABILITIES AND STOCKHOLDERS' EQUITY

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Selling, general and administrative expenses

Impairment of intangible assets

Total operating expenses

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Other income (expense:)

Gain on forgiveness of debt

Impairment of investment

Gain on sale of fixed assets

Gain on forgiveness of debt

Gain on contingent liability

Loss on extinguishment of debt

Other leasing income

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Net loss before taxes

Provision for income tax expense

Income tax expense

Net loss per share - basic

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Innovative Food Holdings, Inc.

Consolidated Statement of Changes in Stockholders' Equity

For the Years Ended December 31, 2022 and 2021

Treasury Stock

Balance - December 31, 2020

Shares issued for compensation

Vesting of stock options

Common stock sold for cash, net of costs

Net loss for the year ended December 31, 2021

Balance - December 31, 2021

Shares issued for compensation

Vesting of stock options

Offering expenses for stock previously sold for cash

Common stock issued for services

Fair value of options issued to consultant

Net loss for the year ended December 31, 2022

Balance - December 31, 2022

See notes to consolidated financial statements.

Innovative Food Holdings, Inc.

Consolidated Statements of Cash Flows

Cash flows from operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Gain on forgiveness of debt

Impairment of intangible assets

Gain on contingent liabilities

Impairment of investment

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Stock based compensation

Gain on sale of fixed assets

Provision for doubtful accounts

Loss on extinguishment of debt

Provision (recoveries) for doubtful accounts

Changes in assets and liabilities:

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Cash flows from investing activities:

Cash paid for website development

Acquisition of property and equipment

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Cash flows from financing activities:

Proceeds from line of credit

Proceeds from Payroll Protection Plan Loan

Payment of offering costs for stock previously issued

Proceeds from sale of common stock, net of costs

Proceeds from Payroll Protection Plan Loan

Principal payments on debt

Principal payments financing leases

Net cash provided by financing activities

Increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Cost of debt financing

Net cash provided by (used in) financing activities

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information:

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Non-cash investing and financing activities:

Building improvements financed under note payable

Increase in right to use assets & liabilities

Reclassification of accounts receivable to other current assets and investment

Capital lease for purchase of fixed assets

See notes to consolidated financial statements.

Innovative Food Holdings, Inc.

Consolidated Stockholders' Equity

For the Years Ended December 31, 2021 and 2020

Treasury Stock

Balance - December 31, 2019

Fair value of vested stock and stock options issued to management and directors

Fair value of shares issued to employees and service providers

Net loss for the year ended December 31, 2020

Balance - December 31, 2020

Fair value of vested stock and stock options issued to management and directors

Common stock sold for cash, net of costs

Net loss for the year ended December 31, 2021

Balance - December 31, 2021

(Decrease) Increase in right to use assets & liabilities

Finance lease for fixed assets

Debt to Fifth Third Bank paid directly by Maple Mark Bank

Reclassification of accounts receivable to other assets

See notes to consolidated financial statements.

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(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.

(“Plant Innovations”), Innovative Gourmet, LLC (“Innovative Gourmet” or “igourmet”), Food Funding, LLC (“Food Funding”), Logistics Innovations, LLC (L Innovations”), M Innovations, LLC (“M Innovations” or “Mouth”), 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.

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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.

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.

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.

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.

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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.

The preparation of these consolidated 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.

Accounts subject to estimate and judgements are accounts receivable reserves, inventory reserves, income taxes, intangible assets, contingent liabilities, operating and finance right of use assets and liabilities, and equity-based instruments.

Actual results may differ from these estimates under different assumptions or conditions.

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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.

The accompanying consolidated financial statements include the accounts of Innovative Food Holdings, Inc., and its wholly owned subsidiaries, some of which are non-operating, Artisan, FII, FNM, OFB, GFG, GFW, Gourmeting, Haley, Oasis, igourmet, 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, some of which are non-operating.

Revenue Recognition

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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 ”.

For revenue from product sales (i.e., specialty foodservice and e-commerce), 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:

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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.

Revenue from brand management services are comprised of fees and/or commissions associated with client sales.

Revenue from brand management services are recognized at the point in time when services are rendered to the client.

Warehouse and logistic services revenue is primarily comprised of inventory management, order fulfilment and warehousing services.

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Inventory is valued at the lower of cost or market and is determined by the first-in, first-out method.

In lieu of an inventory reserve, the Company adjusts inventory based upon bi-weekly cycle counts and upon the expiration date of food products.

Deferred Revenue

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Balance as of December 31, 2022

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.

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;

the adoption of this standard has not had a material impact on our consolidated financial statements and related disclosures.

Fair Value of Financial Instruments

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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.

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Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell.

No impairment of long-lived assets was deemed necessary at December 31, 2022.

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.

At December 31, 2022, the Company made the determination that it was unlikely to recover the cost of these investments, and recorded an impairment in the amount of $ 286,725 .

Basic and Diluted Income Per Share

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Dilutive shares at December 31, 2022:

Convertible notes and interest

At December 31, 2021 there were no convertible notes outstanding.

At December 31, 2021 there were no warrants outstanding.

Stock Options

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During the year ended December 31, 2022, 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.

an aggregate total of 2,149,384 shares of common stock with a market value of $ 561,600 were accrued for issuance to its Chief Executive Officer;

of this amount, 381,036 with a market value of $ 95,414 were withheld for the payment of income taxes, and the net number of shares issuable to the Chief Executive Officer was 1,768,348 with a market value of $ 466,186 .

Also during the period an aggregate total of 103,256 shares of common stock with a market value of $ 40,000 were accrued for issuance to two board members.

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.

During the year ended December 31, 2022, the total amount of $ 506,186 was charged to non-cash compensation and $ 95,414 was charged to cash compensation in connection with these grants.

Dilutive shares at December 31, 2021:

Convertible notes and interest

At December 31, 2020 there were no convertible notes outstanding.

At December 31, 2020 there were no warrants outstanding.

Stock Options

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59,016 to its Director of Strategic Acquisitions, an aggregate total of 200,282 shares to board members;

38,943 shares to an employee.

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.

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.

The Company accounts for leases in accordance with Financial Accounting Standards Board (“FASB”) ASC 842, “Leases”.

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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.

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.

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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.

the adoption of this standard has not had a material impact on our consolidated financial statements and related disclosures.

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.

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Accounts receivable, net

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 years ended December 31, 2022 and 2021, the Company charged (recovered) the amount of $( 1,915 ) and $ 31,756 , 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).

Inventory consists of specialty food products.

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Finished goods inventory

Allowance for slow moving & obsolete inventory

Finished goods inventory, net

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).

A summary of property and equipment at December 31, 2022 and 2021 is as follows:

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accumulated depreciation

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.

RIGHT TO USE ASSETS AND LEASE LIABILITIES – OPERATING LEASES

Depreciation expense for property and equipment amounted to $ 379,632 and $ 388,657 for the years ended December 31, 2022 and 2021, respectively, which is recorded in selling, general & administrating expenses on the Company’s statement of operations.

RIGHT OF USE ( “ ROU ” ) ASSETS AND LEASE LIABILITIES – OPERATING LEASES

The Company has operating leases for offices, warehouses, vehicles, and office equipment.

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The difference between the lease expense and the associated ROU asset amortization consists of interest.

Right to use assets – operating leases are summarized below:

Right of use assets – operating leases are summarized below:

December 31, 2022

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Year ended December 31, 2025

Present value discount

1 unchanged sentence

During the years ended December 31, 2022 and 2021, the Company recorded right to use assets and lease liabilities in the amount of $ 0 and $ 88,359 , respectively, due to the execution of new operating lease agreements.

RIGHT TO USE ASSETS – FINANCING LEASES

During the year ended December 31, 2022, the Company recorded the removal of a right to use asset and lease liability in the amount of $ 13,216 due to damage to the asset.

RIGHT OF USE ASSETS – FINANCING LEASES

The Company has financing leases for vehicles and warehouse equipment.

Right to use asset – financing leases are summarized below:

(See note 15.) Right of use asset – financing leases are summarized below:

Warehouse Equipment

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Depreciation expense for the year ended December 31, 2022 and 2021 was $ 141,216 and $ 129,285 , 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.

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.

During the years ended December 31, 2022 and 2021, the Company recorded right of use assets and lease liabilities in the amount of $ 42,500 and $ 21,885 , respectively, due to the execution of new financing lease agreements.

Financing lease liabilities are summarized below:

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, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $ 5,192 and $ 675 , respectively.

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.

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, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $ 1,879 and $ 244 , respectively.

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.

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, 2022, the Company made principal and interest payments on this lease obligation in the amount of $ 97,964 and $ 21,337 , respectively.

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.

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, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $ 20,334 and $ 5,923 , respectively.

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.

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, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $ 23,240 and $ 4,669 , respectively.

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.

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, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $ 11,215 and $ 2,562 , respectively.

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.

Financing lease obligation under a lease agreement for a truck dated February 4, 2022 in the original amount of $ 42,500 payable in twenty-four monthly installments of $1,963 including interest at the rate of 10.1 %.

During the year ended December 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $ 16,675 and $ 740 , respectively.

Current portion

Long-term maturities

Aggregate maturities of lease liabilities – financing leases as of December 31, 2022 are as follows:

For the year ended December 31,

The Company has made investments in certain early stage food related companies.

At December 31, 2022 and 2021 the Company had investments in seven food related companies in the aggregate amount of $ 286,725 .

At December 31, 2022, the Company made the determination that it was unlikely to recover the cost of these investments, and recorded an impairment in the amount of $ 286,725 .

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.

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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.

INTANGIBLE ASSETS

The Company acquired certain intangible assets pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet, OFB, Haley, and M Innovations.

The Company acquired certain intangible assets pursuant to the acquisitions through Artisan, Oasis, igourmet, 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.

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.

Other Amortizable Intangible Assets

Other amortizable intangible assets consist of $ 1,055,400 of trade names held by igourmet, $ 260,422 of trade names held by Mouth, and $ 217,000 of trade names held by Artisan.

The Company followed the guidance of ASC 360 “Property, Plant, and Equipment” (“ASC 360”) in assessing these assets for impairment.

ASC 360 states that impairment testing should be completed whenever events or changes in circumstances indicate the asset’s carrying value may not be recoverable.

In management’s judgment there are no indications that the carrying value of these trade names may not be recoverable, and it determined that impairment testing was not required.

The Company acquired certain intangible assets pursuant to the acquisitions through Artisan, Oasis, igourmet, OFB, Haley, and M Innovations.

The following is the net book value of these assets:

December 31, 2022

Non-Compete Agreement - amortizable

Customer Relationships - amortizable

Internally Developed Technology

December 31, 2021

Non-Compete Agreement - amortizable

Customer Relationships - amortizable

Internally Developed Technology

During the year ended December 31, 2022, the Company charged to operations amortization expense in the amount of $ 41,224 .

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 .

During the year ended December 31, 2021, the Company charged to operations amortization expense in the amount of $ 8,912 .

Amortization of finite life intangible assets as of December 31, 2022 is as follows:

Twelve months ended December 31, 2023

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.

ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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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 .

At December 31, 2022, accrued interest - on notes outstanding was $ 18,104 .

At December 31, 2021, accrued interest - on notes outstanding was $ 29,349 .

REVOLVING CREDIT FACILITIES

On June 6, 2022, the Company entered into a revolving credit facility (the “MapleMark Revolver”) with MapleMark Bank ("MapleMark”) in the initial amount of $ 2,014,333 .

The borrowing base amount is based upon 80% of eligible accounts receivables and 60% of eligible inventory.

This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction of the Fifth Third Bank Line of Credit.

Any amounts borrowed under the MapleMark Revolver will bear interest at the greater of (a) the Base Rate (the rate of interest per annum quoted in the “Money Rates” section of The Wall Street Journal from time to time and designated as the “Prime Rate”) plus 0.25% per annum and (b) 3.50% per annum.

At December 31, 2022, the interest rate was 7.75%.

The MapleMark Revolver matures on May 27, 2023 and in the event United States Department of Agriculture issues a guarantee of repayment of the MapleMark Revolver in favor of the Company pursuant to its Business and Industry Loan Guarantee Program (the “USDA Guarantee”), at the Company’s option, the amount of the MapleMark Revolver can be expanded to $3,000,000 and its term extended to November 28, 2023.

The Company has applied for a USDA Guarantee;

at December 31, 2022, this guarantee had not yet been received.

The MapleMark Revolver contains certain negative covenants.

The Company is also subject to a fixed charge coverage ratio covenant for the Revolver Loan as described in more detail in the MapleMark Revolver.

The Company recorded a discount to this loan in the amount of $ 29,832 in connection with financing costs which was amortized to interest expense during the year ended December 31, 2022.

During the year ended December 31, 2022, the Company paid interest in the amount of $ 71,145 on the MapleMark Revolver.

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 ;

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.

The debt covenants of this credit facility were waived until June 30, 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.

During the year ended December 31, 2022, the Company paid interest in the amount of $ 47,389 on the Fifth Third Bank Line of Credit.

On June 9, 2022, the total outstanding principal in the amount of $ 2,000,000 and accrued interest in the amount of $ 14,333 were paid directly to Fifth Third Bank by MapleMark in connection with the MapleMark Revolver.

As of December 31, 2022, the Fifth Third Bank Line of Credit is paid in full.

NOTES PAYABLE

On June 6, 2022, the Company entered into a term loan agreement with MapleMark (the “MapleMark Term Loan 1”) for the original amount of $ 5,324,733 .

This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction the outstanding principal and interest due under existing loans with Fifth Third Bank.

The MapleMark Term Loan 1 matures on May 27, 2023 .

Upon receipt of the USDA Guarantee, the Company will have the option of extending the term of the MapleMark Term Loan 1 to June 6, 2052.

Amounts outstanding under the Term Loans will bear interest at the rate equal to the lesser of (a) the Maximum Lawful Rate, or (b) the greater of (i) WSJP (the “Prime Rate” as published by The Wall Street Journal) plus 1.25% per annum or (ii) 4.50% per annum.

At December 31, 2022, the interest rate was 8.75%.

The MapleMark loan matures on May 27, 2023 and in the event United States Department of Agriculture issues a guarantee of repayment of the MapleMark loan in favor of the Company pursuant to its Business and Industry Loan Guarantee Program (the “USDA Guarantee”), at the Company’s option, the amount of the MapleMark loan can be expanded to $7,775,680.

The Company has applied for a USDA Guarantee;

at December 31, 2022, this guarantee had not yet been received.

The Term Loan Agreements contain negative covenants that, subject to certain exceptions, limits the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates.

The Term Loan Agreements also provides that the Company and its subsidiaries on a consolidated basis, meet a Fixed Charge Coverage Ratio as described in detail in the Loan Agreements.

The Term Loan Agreements contain events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, and certain judgment defaults as specified in the Term Loan Agreements.

If an event of default occurs, the maturity of the amounts owed under the Term Loan Agreements may be accelerated.

The obligations under the Term Loan Agreements are guaranteed by the Company and IFP and are secured by mortgages on their real estate located in Florida, Illinois, and Pennsylvania and substantially all of their assets, in each case, subject to certain exceptions and permitted liens.

The Company recorded a discount to this loan in the amount of $ 57,106 in connection with financing costs which was amortized to interest expense during the year ended December 31, 2022.

During the year ended December 31, 2022, the Company accrued interest in the amount of $ 219,238 on this loan.

On June 6, 2022, the Company entered into a term loan agreement with MapleMark (the “MapleMark Term Loan 2”) for the original amount of $ 356,800 .

This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction the outstanding principal and interest due under existing loans with Fifth Third Bank.

The MapleMark Term Loan 2 matures on May 27, 2023.

Upon receipt of the USDA Guarantee, the Company will have the option of extending the term of the Term Loan 2 to June 6, 2052.

At December 31, 2022, the interest rate was 8.75%, The MapleMark loan matures on May 27, 2023 and in the event United States Department of Agriculture issues a guarantee of repayment of the MapleMark loan in favor of the Company pursuant to its Food & Supply Guaranteed Loan Facility (the “USDA Guarantee”), at the Company’s option, the amount of the MapleMark loan can be expanded to $2,680,000.

The Company has applied for a USDA Guarantee;

at December 31, 2022, this guarantee had not yet been received.

The Term Loan Agreements also provides that the Company and its subsidiaries on a consolidated basis, meet a Fixed Charge Coverage Ratio as described in detail in the Loan Agreements.

If an event of default occurs, the maturity of the amounts owed under the Term Loan Agreements may be accelerated.

The Company recorded a discount to this loan in the amount of $ 23,367 in connection with financing costs which was amortized to interest expense during the year ended December 31, 2022.

During the year ended December 31, 2022, the Company accrued interest in the amount of $ 14,690 on this loan.

Secured mortgage note payable for the acquisition of land and building in Bonita Springs, Florida in the amount of $ 546,000 .

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During the year ended December 31, 2022, the Company made payments of principal and interest on this note in the amounts of $ 22,750 and $ 655 , 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.

On June 9, 2022, the principal and interest due on this note in the amount of $ 45,500 and $ 66 , respectively, were paid directly to Fifth Third Bank by MapleMark in connection with MapleMark Term Loan 2.

Secured mortgage note payable for the acquisition of land and building in Broadview, Illinois in the amount of $ 980,000 .

3 unchanged sentences

During the year ended December 31, 2022, the Company made payments of principal and interest on this note in the amounts of $ 40,833 and $ 3,781 , 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.

On June 9, 2022, the principal and interest due on this note in the amount of $ 310,333 and $ 901 , respectively, were paid directly to Fifth Third Bank by Maple Mark in connection with MapleMark Term Loan 2.

Promissory note dated March 22, 2019 in the original amount of $ 391,558 (the “Artisan Equipment Loan”) payable to Fifth Third Bank.

3 unchanged sentences

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.

During year ended December 31, 2022, the Company made payments of principal and interest on this loan in the amounts of $ 30,523 and $ 3,467 , respectively.

On June 9, 2022, the principal and interest due on this note in the amount of $ 141,623 and $ 143 , respectively, were paid directly to Fifth Third Bank by MapleMark in connection with MapleMark Term Loan 1.

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.

During the two years ended December 31, 2022, the Company accrued interest in the amount of $ 381 and $ 381 , respectively, on this note.

At December 31, 2022, accrued interest on this note was $ 18,104 .

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 30, 2022, the Company made principal and interest payments in the amount of $ 10,717 and $ 743 , respectively.

During the year ended December 30, 2021, the Company made principal and interest payments in the amount of $ 10,235 and $ 1,225 , respectively.

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”).

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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.

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.

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.

during the years ended December 31, 2022 and 2021, $ 0 and $ 12,525 , respectively, of this discount was amortized to interest expense.

During the years ended December 31, 2021, the Company made principal and interest payments in the amount of $ 198,800 and $ 142,073 , respectively, on this loan.

On June 9, 2022, the principal and interest due on this note in the amount of $ 5,168,000 and $ 14,967 , respectively, were paid directly to Fifth Third Bank by MapleMark in connection with MapleMark Term Loan 1.

The Company recorded a loss in the amount of $40,556 on this transaction in connection with the write-off of the unamortized portion of the discount.

The Company also had 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 paid 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 resulting in additional interest expense of $ 5,632 and $ 26,258 , respectively, during the years ended December 31, 2022 and 2021.

On March 28, 2022 the Interest Rate Swap was terminated.

Upon termination the Company received a cash payment of $ 294,000 , which is reflected as a gain on the interest rate swap on the statement of operations for the year ended December 31, 2022.

Net of discount

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Long-term maturities

Aggregate maturities of long-term notes payable as of December 31, 2021 are as follows:

For the year ended December 31,

LEASE LIABILITIES - FINANCING LEASES

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.

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.

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.

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.

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.

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.

Current portion

Long-term maturities

Aggregate maturities of lease liabilities – financing leases as of December 31, 2021 are as follows:

Aggregate maturities of notes payable as of December 31, 2022 are as follows:

For the year ended December 31,

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.

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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.

See note 15 for equity related transactions.

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.

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The Company’s tax returns for the previous three years remain open for audit by the respective tax jurisdictions.

At December 31, 2021 and 2020 a total of 2,837,580 shares are deemed issued but not outstanding by the Company.

At December 31, 2022 and 2021 a total of 2,837,580 shares are issued but deemed not outstanding by the Company.

For the year ended December 31, 2022:

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.

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.

On April 8, 2022, the Company issued 33,445 shares with a value of $ 11,405 to an employee as compensation.

On April 25, 2022, the Company issued 142,857 shares with a value of $ 48,543 to a service provider.

At December 31, 2022, total common stock outstanding in the amount of 48,089,657 includes 1,319,940 shares vested by management and directors pursuant to their compensation plans but not yet issued.

At December 31, 2021, total common stock outstanding in the amount of 46,041,751 includes 584,774 shares vested by management and directors pursuant to their compensation plans but not yet issued.

For the year ended December 31, 2021:

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.

The Company had no warrants outstanding at December 31, 2021 or 2020.

For the year ended December 31, 2022:

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.

The Company issued 125,000 two -year options with an exercise price of $ 0.41 per share and a grant date fair value of $ 1,708 to a service provider.

These options vested upon issuance and will expire on April 25, 2024.

The Company issued 125,000 two -year options with an exercise price of $ 0.50 per share and a grant date fair value of $ 384 to a service provider.

These options vested upon issuance and will expire on April 25, 2024.

For the year ended December 31, 2021:

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.

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:

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.

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, 2022:

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During the year ended December 31, 2022 and 2021, the Company charged $ 8,738 and $ 144,274 , 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:

The exercise price at grant dates in relation to the market price during 2022 and 2021 are as follows:

Exercise price lower than market price

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As of December 31, 2022, and 2021, there were 0 and 87,500 , 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:

Accounting for stock options

The Company valued stock options using the Black-Scholes valuation model utilizing the following variables:

Risk-free interest rates

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During the years ended December 31, 2022 and 2021, the Company paid the amount of $ 8,000 and 80,000 , 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.

During the year ended December 31, 2022, the Company determined that these contingent liabilities were no longer needed as the time period for attainment of the contingencies had lapsed;

accordingly, the balances of the contingent liabilities in the amounts of $ 67,000 and $ 108,000 were de-recognized and credited to gain on contingent liabilities.

At December 31, 2022, the amount of contingent liabilities on the Company’s balance sheet in connection with the igourmet acquisition was $ 0 .

Pursuant to the Mouth Foods LLC Asset Acquisition, the Company recorded contingent liabilities in the amount of $ 240,576 .

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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.

During the year ended December 31, 2022, the Company determined that these contingent liabilities were no longer needed as the time period for attainment of the contingencies had lapsed;

accordingly, the balance of the contingent liabilities in the amount of $ 120,000 was de-recognized and credited to gain on contingent liabilities.

At December 31, 2022 the amount of contingent liabilities on the Company’s balance sheet was $ 0 .

License Agreements

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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.

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.

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.

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.

The complaint in the PA Action alleges, inter alia, wrongful death and negligence by a driver employed by igourmet and indicates a demand and offer to settle for $ 50,000,000 .

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 and its subsidiaries 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 and its subsidiaries in the PA Action (and the related action), 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.

The case has been set for trial for April 1, 2024.

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.

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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.

MAJOR CUSTOMER

MAJOR CUSTOMERS

The Company’s largest customer, U.S.

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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.

In addition, Gate Gourmet, the leading global provider of airline catering solutions and provisioning services for airlines, in partnership with igourmet, represented 13 % of total sales for the year ended December 31, 2022.

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.

The fair value of the Company’s stock options 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:

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As December 31, 2022 and 2021, the Company did not have financial assets or liabilities that are required to be accounted for at fair value on a recurring basis.

On June 6, 2022, the Company entered into three loan agreements with MapleMark Bank:

the MapleMark Revolver in the amount of $ 2,014,333 , the MapleMark Term Loan 1 in the amount of $ 5,324,733 , and the MapleMark Term Loan 2 in the amount of $ 356,800 .

The aggregate principal amount of these loans is $ 7,695,866 at December 31, 2022.

Each of these loans is currently due on May 27, 2023.

These loans were entered into with the expectation of receiving a loan guarantee from the United States Department of Agriculture.

The USDA Guarantee would provide the Company with the ability to:

(i) increase the amount available under the MapleMark Revolver to a maximum of $ 3,000,000 and extend the due date to November 28, 2023;

(ii) increase the amount available under the MapleMark Term Loan 1 to $ 7,775,680 and extend the due date to June 6, 2052;

and (iii) increase the amount available under the MapleMark Term Loan 2 to $ 2,680,000 and extend the due date to June 6, 2052.

The Company has submitted its application for the USDA Guarantee, but it has not been received as of March 28, 2023.

We maintain a dialogue with MapleMark Bank regarding the status of the USDA Guarantee and the MapleMark Loans.

We have previously secured two 90 day extensions of the MapleMark loans, from November 26, 2022 to February 26, 2023;

and to May 27, 2023.

If the USDA Guarantee is not received by May 6, 2023, we will apply for an additional 90 day extension of the MapleMark Loans.

If, by May 15, 2023, we are unable to obtain an additional extension from MapleMark or if the USDA Guarantee is denied, we will begin renewed negotiations with MapleMark for loans to replace the existing loans but with terms not supported by the USDA Guarantee.

MapleMark has indicated their willingness to proceed along these lines if necessary.

If we are unable to negotiate revised loan agreements with MapleMark by June 1, 2023, we will begin negotiations with other lenders who have previously expressed interest in providing the Company with debt financing.

The Company has received appraisals of our land and buildings at a combined value of approximately $ 19,900,000 which would be available to collateralize any such loans.

In the highly unlikely event that we are unable to secure alternative debt financing pursuant to these negotiations by June 15, 2023, we would enter into factoring arrangements in order to partially finance the payment of the MapleMark principal balances.

At March 28, 2023, we had cash on hand of approximately $ 1,895,000 (unaudited) and accounts receivable of approximately $ 4,262,000 (unaudited) which would be available to pay down and collateralize further paydown of the MapleMark Loans.

SUBSEQUENT EVENTS

Appointment of Bill Bennett as CEO and Director

On February 3, 2023, the Company entered into an Executive Employment Agreement with Robert William (Bill) Bennett (the “RWB Agreement”).

The RWB Agreement provides, among other things, for Mr.

Bennett to become the Company’s Chief Executive Officer and Mr.

Bennett, and one designee, to be nominated to the Company’s Board of Directors during his tenure as CEO.

Resignation of Sam Klepfish as CEO

On February 3, 2023, the Company entered into an Agreement and General Release and a Side Letter thereto with Sam Klepfish (the “SK Agreements”).

The SK Agreements provide, among other things, for Mr.

Kelpfish’s resignation from all positions with the Company and its subsidiaries on the Separation Date, except that Mr.

Klepfish will remain a director and Chairman of the Board of the Company.

Resignation of Justin Weirnasz as Director of Strategic Alliances and Director

Effective March 1, 2023, for personal reasons, Mr.

Justin Wiernasz resigned as our Director of Strategic Acquisitions and as a director.

Appointment of Denver Smith as Director

Effective March 13, 2023, Mr.

Smith was appointed to our Board of Directors.

Extension of MapleMark loans

On February 26, 2023, the MapleMark loans were extended to May 27, 2023.

Issuance of Common Stock

On February 28, 2023, the Company recorded 400,007 shares of common stock with a weighted average price of $ 0.23 per share issuable to Sam Klepfish, its Chairman and ex-CEO, pursuant to his employment agreement.

On February 28, 2023, the Company issued a total of 267,030 shares of common stock at a price of $ 0.37 per share as compensation to three employees.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data