INNOVATIVE FOOD HOLDINGS INC 10-K

ITEM 8. Financial Statements 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 TAMPA BAY : 4920 W Cypress Street, Suite 102 | Tampa, FL 33607 | Office: 813.443.5048 | Fax: 813.443.5053 JACKSONVILLE : 4720 Salisbury Road, Suite 223 | Jacksonville, FL 32256 | Office: 888.410.2323 | Fax: 813.443.5053 ORLANDO: 1800 Pembrook Drive, Suite 300 | Orlando, FL 32810 | Office: 888.410.2323 | Fax: 813.443.5053 SOUTH FLORIDA : 2000 Banks Road, Suite 218 | Margate, FL 33063 | Office: 754.800.3400 | Fax: 813.443.5053 www.assurancedimensions.com 28 Index 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. See Note 19. 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. Conclusion 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 29 Index REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Directors of: Innovative Food Holdings, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance 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 These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. 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 audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 30 Index Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Contingencies As described in Note 17 to the consolidated financial statements, the Company is involved in a number of legal proceedings and has made accruals with respect to certain of these matters. Where a liability is reasonably possible and may be material, such matters have been disclosed. Management exercised judgment and assessed the probability of occurrence based on the ability to predict the number of claims that may be filed and whether it can reasonably estimate any loss or range of loss that may arise from that proceeding. Auditing management’s accounting for, and disclosure of, loss contingencies was highly judgmental as it involved our assessment of the significant judgments made by management when assessing the probability of occurrence or when determining whether an estimate of the loss or range of loss could be made. To test the Company’s assessment of the probability of occurrence or determination of an estimate of loss, or range of loss, among other procedures, we read the legal documentations, reviewed opinions provided to the Company by certain outside legal counsel, read letters received directly by us from external counsel, and evaluated the current status of contingencies based on discussions with legal counsel. We also evaluated the appropriateness of the related disclosures. /s/ Liggett & Webb, P.A. We have served as the Company’s auditor since 2012 Boynton Beach, Florida March 31, 2022 31 Index Innovative Food Holdings, Inc. Consolidated Balance Sheets December 31, December 31, 2022 2021 ASSETS Current assets Cash and cash equivalents $ 4,899,398 $ 6,122,671 Accounts receivable, net 4,969,395 3,256,764 Inventory, net 3,053,852 3,109,984 Other current assets 289,432 314,107 Total current assets 13,212,077 12,803,526 Property and equipment, net 7,921,561 8,186,227 Investments - 286,725 Right of use assets, operating leases, net 152,425 232,381 Right of use assets, finance leases, net 570,323 669,039 Other amortizable intangible assets, net 30,994 72,218 Tradenames and other unamortizable intangible assets 1,532,822 1,532,822 Total assets $ 23,420,202 $ 23,782,938 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable and accrued liabilities $ 6,853,253 $ 5,702,905 Accrued interest, current portion 18,104 29,349 Deferred revenue 1,558,155 1,631,406 Line of Credit 2,014,333 2,000,000 Notes payable - current portion, net of discount 5,711,800 412,961 Lease liability - operating leases, current 64,987 74,088 Lease liability - finance leases, current 191,977 159,823 Contingent liability - current portion - 187,000 Total current liabilities 16,412,609 10,197,532 Lease liability - operating leases, non-current 87,438 158,293 Lease liability - finance leases, non-current 333,092 499,240 Contingent liability - long-term - 108,600 Note payable - long term portion, net - 5,409,172 Total liabilities 16,833,139 16,372,837 Commitments & Contingencies (see note 16) Stockholders' equity Common stock: $ 0.0001 par value; 500,000,000 shares authorized; 50,927,237 and 48,879,331 shares issued, and 48,089,657 and 46,041,751 shares outstanding at December 31, 2022 and 2021, respectively 5,088 4,885 Additional paid-in capital 42,189,471 41,662,710 Treasury stock: 2,623,171 shares outstanding at December 31, 2022 and 2021 ( 1,141,370 ) ( 1,141,370 ) Accumulated deficit ( 34,466,126 ) ( 33,116,124 ) Total stockholders' equity 6,587,063 7,410,101 Total liabilities and stockholders' equity $ 23,420,202 $ 23,782,938 See notes to consolidated financial statements. 32 Index Innovative Food Holdings, Inc. Consolidated Statements of Operations For the For the Year Ended Year Ended December 31, December 31, 2022 2021 Revenue $ 80,102,964 $ 62,212,148 Cost of goods sold 61,414,765 45,261,401 Gross margin 18,688,199 16,950,747 Selling, general and administrative expenses 19,725,593 20,540,229 Total operating expenses 19,725,593 20,540,229 Operating loss ( 1,037,394 ) ( 3,589,482 ) Other income (expense:) Impairment of investment ( 286,725 ) ( 209,850 ) Other income 294,000 - Gain on forgiveness of debt - 3,425,015 Gain on contingent liability 295,600 - Loss on extinguishment of debt ( 40,556 ) - Other leasing income 11,226 10,840 Interest expense, net ( 586,153 ) ( 352,854 ) Total other income (expense) ( 312,608 ) 2,873,151 Net loss before taxes ( 1,350,002 ) ( 716,331 ) Income tax expense - - Net loss $ ( 1,350,002 ) $ ( 716,331 ) Net loss per share - basic $ ( 0.03 ) $ ( 0.02 ) Net loss per share - diluted $ ( 0.03 ) $ ( 0.02 ) Weighted average shares outstanding - basic 47,129,511 39,448,041 Weighted average shares outstanding - diluted 47,129,511 39,448,041 See notes to consolidated financial statements. 33 Index Innovative Food Holdings, Inc. Consolidated Statement of Changes in Stockholders' Equity For the Years Ended December 31, 2022 and 2021 Additional Common Stock Paid-in Treasury Stock Accumulated Amount Value Capital Amount Value Deficit Total Balance - December 31, 2020 38,209,060 $ 3,817 $ 37,415,155 2,623,171 $ ( 1,141,370 ) $ ( 32,399,793 ) $ 3,877,809 Shares issued for compensation 1,295,271 130 523,847 - - - 523,977 Vesting of stock options - - 144,274 - - - 144,274 Common stock sold for cash, net of costs 9,375,000 938 3,579,434 - - - 3,580,372 Net loss for the year ended December 31, 2021 - - - - - ( 716,331 ) ( 716,331 ) Balance - December 31, 2021 48,879,331 $ 4,885 $ 41,662,710 2,623,171 $ ( 1,141,370 ) $ ( 33,116,124 ) $ 7,410,101 Shares issued for compensation 1,871,604 186 506,000 - - - 506,186 Vesting of stock options - - 8,738 - - 8,738 Offering expenses for stock previously sold for cash - - ( 50,000 ) - - - ( 50,000 ) Common stock issued for services 176,302 17 59,931 - - - 59,948 Fair value of options issued to consultant - - 2,092 - - - 2,092 Net loss for the year ended December 31, 2022 - - - - - ( 1,350,002 ) ( 1,350,002 ) Balance - December 31, 2022 50,927,237 $ 5,088 $ 42,189,471 2,623,171 $ ( 1,141,370 ) $ ( 34,466,126 ) $ 6,587,063 See notes to consolidated financial statements. 34 Index Innovative Food Holdings, Inc. Consolidated Statements of Cash Flows For the For the Year Ended Year Ended December 31, December 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 1,350,002 ) $ ( 716,331 ) Adjustments to reconcile net loss to net cash used in operating activities: Gain on forgiveness of debt - ( 3,425,015 ) Gain on contingent liabilities ( 295,600 ) - Impairment of investment 286,725 209,850 Depreciation and amortization 562,072 526,854 Amortization of right of use asset 66,740 102,715 Amortization of prepaid loan fees 115,760 12,525 Stock based compensation 576,964 668,251 Loss on extinguishment of debt 40,556 - Provision (recoveries) for doubtful accounts ( 1,915 ) 31,756 Changes in assets and liabilities: Accounts receivable, net ( 1,710,716 ) ( 930,595 ) Inventory and other current assets, net 80,807 604,890 Accounts payable and accrued liabilities 1,169,514 650,516 Deferred revenue ( 73,251 ) ( 1,286,270 ) Contingent liabilities - ( 8,000 ) Operating lease liability ( 66,740 ) ( 102,715 ) Net cash used in operating activities ( 599,086 ) ( 3,661,569 ) Cash flows from investing activities: Acquisition of property and equipment ( 114,966 ) ( 24,511 ) Net cash used in investing activities ( 114,966 ) ( 24,511 ) Cash flows from financing activities: Payment of offering costs for stock previously issued ( 50,000 ) - Proceeds from sale of common stock, net of costs 3,580,372 Proceeds from Payroll Protection Plan Loan - 1,748,414 Principal payments on debt ( 172,422 ) ( 433,087 ) Principal payments financing leases ( 176,494 ) ( 146,963 ) Cost of debt financing ( 110,305 ) - Net cash provided by (used in) financing activities ( 509,221 ) 4,748,736 Increase (decrease) in cash and cash equivalents ( 1,223,273 ) 1,062,656 Cash and cash equivalents at beginning of period 6,122,671 5,060,015 Cash and cash equivalents at end of period $ 4,899,398 $ 6,122,671 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 461,563 $ 298,481 Taxes $ - $ - Non-cash investing and financing activities: (Decrease) Increase in right to use assets & liabilities $ ( 13,216 ) $ 88,359 Finance lease for fixed assets $ 42,500 $ 21,885 Debt to Fifth Third Bank paid directly by Maple Mark Bank $ 7,686,481 $ - Reclassification of accounts receivable to other assets $ - $ 22,380 See notes to consolidated financial statements. 35 Index INNOVATIVE FOOD HOLDINGS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 and 2021 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business Activity Our business is currently conducted by our wholly owned subsidiaries, some of which are non-operating, Artisan Specialty Foods, Inc. (“Artisan”), Food Innovations, Inc. (“FII”), Food New Media Group, Inc. (“FNM”), Organic Food Brokers, LLC (“OFB”), Gourmet Foodservice Group, Inc. (“GFG”), Gourmet Foodservice Group Warehouse, Inc. (“GFW”), Gourmeting, Inc. (“Gourmeting”), Haley Food Group, Inc. (“Haley”), Oasis Sales Corp. (“Oasis”), 4 The Gourmet, Inc. (d/b/a For The Gourmet, Inc.), (“Gourmet”), Innovative Food Properties, LLC (“IFP”), Plant Innovations, Inc. (“Plant Innovations”), Innovative Gourmet, LLC (“Innovative Gourmet” or “igourmet”), Food Funding, LLC (“Food Funding”), Logistics Innovations, LLC (L Innovations”), M Innovations, LLC (“M Innovations” 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. All material intercompany transactions have been eliminated upon consolidation of these entities. Overall, our business activities are focused around the creation and growth of a platform which provides distribution or the enabling of distribution of high quality, unique specialty food and food related products ranging from specialty foodservice products to Consumer-Packaged Goods (“CPG”) products through a variety of sales channels ranging from national partnership based and regionally based foodservice related sales channels to e-commerce sales channels offering products both direct to consumers (“D2C”) and direct to business (“B2B”). In our business model, we receive orders from our customers and then work closely with our suppliers and our warehouse facilities to have the orders fulfilled. In order to maintain freshness and quality, we carefully select our suppliers based upon, among other factors, their quality, uniqueness, reliability and access to overnight courier services. FII, through its relationship with the producers, growers, and makers of thousands of unique specialty foodservice products and through its relationship with US Foods, Inc. (“U.S. Foods” or “USF”), has been in the business of providing premium restaurants, within 24 – 72 hours, with the freshest origin-specific perishable, and healthcare products shipped directly from our network of vendors and from our warehouses. Our customers include restaurants, hotels, country clubs, national chain accounts, casinos, hospitals and catering houses. Gourmet has been in the business of providing specialty food via e-commerce through its own website at www.forthegourmet.com and through other ecommerce channels, with unique specialty gourmet food products shipped directly from our network of vendors and from our warehouses within 24 – 72 hours. Artisan is a supplier of over 1,500 unique specialty foodservice products to over 500 customers such as chefs, restaurants, etc. in the Greater Chicago area and serves as a national fulfillment center for certain of the Company’s other subsidiaries. GFG is focused on expanding the Company’s program offerings to additional specialty foodservice customers. Haley is a dedicated foodservice consulting and advisory firm that works closely with companies to access private label and manufacturers’ private label food service opportunities with the intent of helping them launch and commercialize new products in the broadline foodservice industry and assists in the enabling of the distribution of products via national broadline food distributors. IFP was formed to hold the Company’s real estate holdings including the recently acquired facility in Mountaintop, Pennsylvania. OFB and Oasis function as outsourced national sales and brand management teams for emerging organic and specialty food CPG companies of a variety of sizes and business stages, and provides emerging and unique CPG specialty food brands with distribution and shelf placement access in all of the major metro markets in the food retail industry. igourmet has been in the business of providing D2C specialty food via e-commerce through its own website at www.igourmet.com and through other channels such as www.amazon.com, www.ebay.com, and www.walmart.com. In addition, igourmet.com offers a line of B2B specialty foodservice items. Products are primarily shipped directly from igourmet.com’s approximately 100,000 square feet warehouse in Pennsylvania via igourmet.com owned trucks and via third party carrier directly to thousands of customers nationwide. 36 Index Mouth.com (www.mouth.com) is an online retailer of specialty foods, monthly subscription boxes and curated gift boxes to thousands of consumers and corporate customers across the United States. Mouth sources high quality specialty foods crafted in the US by independent and small batch makers, and expertly curates them into standout food gifts for both consumers and corporate customers. Mouth also has launched a private label brand, including several award-winning products. P Innovations focus is to leverage acquired assets to expand the Company’s subscription-based e-commerce business activities and to launch new businesses leveraging the Company’s e-commerce platform. Plant Innovations is focused on plant-based D2C brands and online retail within the e-commerce space. L Innovations provides 3rd party warehouse and fulfillment services out of its location at the Company’s PA facility. Use of Estimates The preparation of these 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, 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. We believe our estimates have not been materially inaccurate in past years, and our assumptions are not likely to change in the foreseeable future. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Innovative Food Holdings, Inc., and its wholly owned 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 The Company recognizes revenue upon product delivery. All of our products are shipped either same day or overnight or through longer shipping terms to the customer and the customer takes title to product and assumes risk and ownership of the product when it is delivered. Shipping charges to customers and sales taxes collectible from customers, if any, are included in revenues. For revenue from product sales (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: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. 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. Warehouse & logistics services revenues are recognized at the point in time when the services are rendered to the customer. 37 Index Disaggregation of Revenue The following table represents a disaggregation of revenue by from sales for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Specialty foodservice $ 64,012,458 $ 40,757,952 E-Commerce 13,992,138 19,518,169 National Brand Management 1,171,335 1,036,564 Warehouse and Logistic Services 927,033 899,463 Total $ 80,102,964 $ 62,212,148 Cost of goods sold We have included in cost of goods sold all costs which are directly related to the generation of revenue. These costs include primarily the cost of food and raw materials, packing and handling, shipping, and delivery costs. We have also included all payroll costs as cost of goods sold in our leasing and logistics services business. Selling, general, and administrative expenses We have included in selling, general, and administrative expenses all other costs which support the Company’s operations, but which are not includable as a cost of sales. These include primarily payroll, facility costs such as rent and utilities, selling expenses such as commissions and advertising, amortization of intangible assets, depreciation, and other administrative costs including professional fees and costs associated with non-cash stock compensation. Advertising costs are expensed as incurred. Cash and Cash Equivalents Cash equivalents include all highly liquid debt instruments with original maturities of three months or less which are not securing any corporate obligations. Concentrations of Credit Risk Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash in investments with credit quality institutions. At times, such investments may be in excess of applicable government mandated insurance limit. At December 31, 2022 and 2021, trade receivables from the Company’s largest customer amounted to 20 % and 28 %, respectively, of total trade receivables. During the year ended December 31, 2022 and 2021, sales from the Company’s largest customer amounted to 49 % and 46 % of total sales, respectively. The Company maintains cash balances in excess of Federal Deposit Insurance Corporation limits. At December 31, 2022 and 2021, the total cash in excess of these limits was $ 3,205,568 and $ 4,555,032 , respectively. Accounts Receivable The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. Accounts receivable are presented net of an allowance for doubtful accounts of $ 340,225 and $ 375,931 at December 31, 2022, and 2021, respectively. Property and Equipment Property and equipment are valued at cost. Depreciation is provided over the estimated useful lives up to five years using the straight-line method. Leasehold improvements are depreciated on a straight-line basis over the term of the lease. 38 Index The estimated service lives of property and equipment are as follows: Computer Equipment 3 years Warehouse Equipment 5 years Warehouse Equipment - Heavy 10 years Office Furniture and Fixtures 5 years Vehicles 5 years Buildings 30 years Inventories Inventory is valued at the lower of cost or market and is determined by the first-in, first-out method. 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 Certain customer arrangements in the Company's business such as gift cards and e-commerce subscription purchases result in deferred revenues when cash payments are received in advance of performance. Gift cards issued by the Company generally have an expiration of five years from date of purchase. The Company records a liability for unredeemed gift cards and advance payments for monthly club memberships as cash is received, and the liability is reduced when the card is redeemed or product delivered. The following table represents the changes in deferred revenue as reported on the Company’s consolidated balance sheets: Balance acquired as of December 31, 2020 $ 2,917,676 Cash payments received 2,392,745 Net sales recognized ( 3,679,015 ) Balance as of December 31, 2021 $ 1,631,406 Cash payments received 1,833,947 Net sales recognized ( 1,907,198 ) Balance as of December 31, 2022 $ 1,558,155 Income Taxes 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 The carrying amount of the Company’s cash and cash equivalents, accounts receivable, notes payable, line of credit, accounts payable and accrued expenses, none of which is held for trading, approximates their estimated fair values due to the short-term maturities of those financial instruments. The Company adopted ASC 820-10, “Fair Value Measurements”, which provides a framework for measuring fair value under GAAP. ASC 820-10 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820-10 requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. 39 Index Long-Lived Assets The Company reviews its property and equipment and any identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted operating cash flow expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. 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 Basic net earnings per share is based on the weighted average number of shares outstanding during the period, while fully-diluted net earnings per share is based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method. Potentially dilutive securities consist of options and warrants to purchase common stock, and convertible debt. Basic and diluted net loss per share is computed based on the weighted average number of shares of common stock outstanding during the period. The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options and warrants for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculation. Dilutive shares at December 31, 2022: Stock Options The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company at December 31, 2022: Weighted Average Remaining Exercise Number Contractual Price of Options Life (years) $ 0.41 125,000 1.32 $ 0.50 125,000 1.32 $ 0.60 50,000 2.99 $ 0.62 360,000 1.00 $ 0.85 540,000 1.00 $ 1.00 50,000 2.99 $ 1.20 1,050,000 0.90 $ 0.93 2,300,000 1.07 Restricted Stock Awards At December 31, 2022, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those 300,000 restricted stock awards will vest as follows: 125,000 restricted stock awards will vest contingent upon the attainment of a stock price of $2.00 per share for 20 straight trading days , and an additional 175,000 restricted stock awards will vest contingent upon the attainment of a stock price of $3.00 per share for 20 straight trading days . 40 Index Stock-based compensation During the year ended December 31, 2022, the Company incurred obligations to issue the following shares of common stock pursuant to employment agreements: 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, 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: Stock Options The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company at December 31, 2021: Weighted Average Remaining Exercise Number Contractual Price of Options Life (years) $ 0.60 50,000 3.99 $ 0.62 360,000 2.00 $ 0.85 540,000 2.00 $ 1.00 50,000 3.99 $ 1.20 1,100,000 1.84 $ 0.99 2,100,000 2.01 Restricted Stock Awards At December 31, 2021, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those 300,000 restricted stock awards will vest as follows: 125,000 restricted stock awards will vest contingent upon the attainment of a stock price of $2.00 per share for 20 straight trading days , and an additional 175,000 restricted stock awards will vest contingent upon the attainment of a stock price of $3.00 per share for 20 straight trading days . Stock-based compensation During the year ended December 31, 2021, the Company incurred obligations to issue the following shares of common stock pursuant to employment agreements: an aggregate total of 961,897 shares of common stock to its Chief Executive Officer; 59,016 to its Director of Strategic Acquisitions, an aggregate total of 200,282 shares to board members; and 74,076 shares to an employee. These restricted stock grants are being amortized over their vesting periods of one to three years. During the year ended December 31, 2021, the amount of $ 523,977 was charged to operations in connection with these grants. Leases The Company accounts for leases in accordance with Financial Accounting Standards Board (“FASB”) ASC 842, “Leases”. The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) and short-term and long-term lease liabilities are included on the face of the consolidated balance sheet. Finance lease ROU assets are presented within other assets, and finance lease liabilities are presented within current and long-term liabilities. 41 Index 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. New Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company adopted this standard effective January 1, 2021; 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. 2. ACCOUNTS RECEIVABLE At December 31, 2022 and 2021, accounts receivable consists of: 2022 2021 Accounts receivable from customers $ 5,309,620 $ 3,632,695 Allowance for doubtful accounts ( 340,225 ) ( 375,931 ) Accounts receivable, net $ 4,969,395 $ 3,256,764 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. 3. INVENTORY Inventory consists of specialty food products. At December 31, 2022 and 2021, inventory consisted of the following: 2022 2021 Finished goods inventory $ 3,053,852 $ 3,109,984 Allowance for slow moving & obsolete inventory - - Finished goods inventory, net $ 3,053,852 $ 3,109,984 42 Index 4. PROPERTY AND EQUIPMENT A summary of property and equipment at December 31, 2022 and 2021 is as follows: December 31, 2022 December 31, 2021 Land $ 1,256,895 $ 1,256,895 Building 7,191,451 7,191,451 Computer and Office Equipment 609,018 593,566 Warehouse Equipment 378,957 376,667 Furniture and Fixtures 1,021,481 944,233 Vehicles 109,441 109,441 Total before accumulated depreciation 10,567,243 10,472,253 Less: accumulated depreciation ( 2,645,682 ) ( 2,286,026 ) Total $ 7,921,561 $ 8,186,227 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. 5. RIGHT OF USE ( “ ROU ” ) ASSETS AND LEASE LIABILITIES – OPERATING LEASES The Company has operating leases for offices, warehouses, vehicles, and office equipment. The Company’s leases have remaining lease terms of 1 year to 3 years, some of which include options to extend. The Company’s lease expense for the years ended December 31, 2022 and December 31, 2021 was entirely comprised of operating leases and amounted to $ 78,849 and $ 120,304 , respectively. The Company’s ROU asset amortization for the years ended December 31, 2022 and December 31, 2021 was $ 66,740 and $ 102,715 , respectively. The difference between the lease expense and the associated ROU asset amortization consists of interest. Right of use assets – operating leases are summarized below: December 31, 2022 December 31, 2021 Warehouse equipment $ 36,170 $ 55,047 Office 106,601 148,529 Office equipment 9,654 12,677 Vehicles - 16,128 Right to use assets, net $ 152,425 $ 232,381 Operating lease liabilities are summarized below: December 31, 2022 December 31, 2021 Warehouse equipment $ 36,170 $ 55,047 Office 106,601 148,529 Office equipment 9,654 12,677 Vehicles - 16,128 Lease liability $ 152,425 $ 232,381 Less: current portion ( 64,987 ) ( 74,088 ) Lease liability, non-current $ 87,438 $ 158,293 Maturity analysis under these lease agreements are as follows: Year ended December 31, 2023 $ 72,031 Year ended December 31, 2024 72,294 Year ended December 31, 2025 20,689 Total $ 165,014 Less: Present value discount ( 12,589 ) Lease liability $ 152,425 43 Index 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. 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. 6. RIGHT OF USE ASSETS – FINANCING LEASES The Company has financing leases for vehicles and warehouse equipment. (See note 15.) Right of use asset – financing leases are summarized below: December 31, 2022 December 31, 2021 Vehicles 404,858 362,358 Warehouse Equipment 555,416 555,416 Total before accumulated depreciation 960,274 917,774 Less: accumulated depreciation ( 389,951 ) ( 248,735 ) Total $ 570,323 $ 669,039 Depreciation expense for the year ended December 31, 2022 and 2021 was $ 141,216 and $ 129,285 , respectively. 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: December 31, 2022 December 31, 2021 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. $ 8,396 $ 13,588 Financing lease obligation under a lease agreement for a pallet truck dated July 15, 2021 in the original amount of $ 5,816 payable in thirty-six monthly installments of $177 including interest at the rate of 6.01 %. During the year ended December 31, 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. $ 3,040 $ 4,918 Financing lease obligation under a lease agreement for warehouse furniture and equipment truck dated October 14, 2020 in the original amount of $ 514,173 payable in sixty monthly installments of $9,942 including interest at the rate of 6.01 %. During the year ended December 31, 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. $ 301,726 $ 399,688 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. $ 97,685 $ 118,020 44 Index December 31, 2022 December 31, 2021 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. $ 43,287 $ 66,526 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. $ 45,109 $ 56,323 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. $ 25,826 $ - Total $ 525,069 $ 659,063 Current portion $ 191,977 $ 159,823 Long-term maturities 333,092 499,240 Total $ 525,069 $ 659,063 Aggregate maturities of lease liabilities – financing leases as of December 31, 2022 are as follows: For the year ended December 31, 2023 $ 191,977 2024 171,335 2025 124,235 2026 33,174 2027 4,348 Thereafter - Total $ 525,069 7. INVESTMENTS 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. The Company has evaluated the guidance in ASC No. 325-20, “Investments – Other”, in determining to account for the investment using the cost method since the equity securities are not marketable and do not give the Company significant influence. During the 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. 45 Index 8. INTANGIBLE ASSETS 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. 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 Accumulated Cost Amortization Net Trade Name 1,532,822 - 1,532,822 Internally Developed Technology 875,643 ( 875,643 ) - Website 84,000 ( 53,006 ) 30,994 Total $ 2,491,925 $ ( 926,649 ) $ 1,563,276 December 31, 2021 Accumulated Cost Amortization Net Trade Name 1,532,822 - 1,532,822 Internally Developed Technology 875,643 ( 875,643 ) - Website 84,000 ( 11,782 ) 72,218 Total $ 2,491,925 $ ( 887,425 ) $ 1,604,500 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, 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 30,994 Total $ 30,994 The trade names are not considered finite-lived assets, and are not being amortized. 9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Accounts payable and accrued liabilities at December 31, 2022 and December 31, 2021 are as follows: December 31, 2022 December 31, 2021 Trade payables and accrued liabilities $ 6,599,903 $ 5,414,731 Accrued payroll and commissions 253,350 288,174 Total $ 6,853,253 $ 5,702,905 46 Index 10. ACCRUED INTEREST At December 31, 2022, accrued interest - on notes outstanding was $ 18,104 . At December 31, 2021, accrued interest - on notes outstanding was $ 29,349 . 11. REVOLVING CREDIT FACILITIES December 31, 2022 December 31, 2021 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. $ 2,014,333 $ - Line of credit facility with Fifth Third Bank in the original amount of $ 2,000,000 with an interest rate of LIBOR plus 3.00% (the “Fifth Third Bank Line of Credit”). Effective August 1, 2019, this credit facility was extended to August 1, 2021 . Effective as of July 31, 2021 this credit facility was extended to November 1, 2021 : effective as of October 29, 2021, this credit facility was extended to March 1, 2022 ; and effective March 1, 2022, this credit facility was extended to June 30, 2022 . The debt covenants of this credit facility were waived until June 30, 2022. On March 20, 2020, the Company drew down the amount of $ 2,000,000 . 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. $ - $ 2,000,000 Total $ 2,014,333 $ 2,000,000 47 Index 12. NOTES PAYABLE December 31, 2022 December 31, 2021 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. $ 5,324,733 $ - 48 Index December 31, 2022 December 31, 2021 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. 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 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 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 $ 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. $ 356,800 $ - Secured mortgage note payable for the acquisition of land and building in Bonita Springs, Florida in the amount of $ 546,000 . Principal payments of $ 4,550 plus interest at the rate of Libor plus 3 % are due monthly. The balance of the principal amount was originally due February 28, 2018 . On March 23, 2018 and effective February 26, 2018, this note was amended and renewed in the amount of $ 273,000 , with monthly payments of principal and interest of $ 4,550 payable through the maturity date of February 28, 2023 . During the year ended December 31, 2022, the Company made payments of principal and interest on this note in the amounts of $ 22,750 and $ 655 , 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. $ - $ 68,250 Secured mortgage note payable for the acquisition of land and building in Broadview, Illinois in the amount of $ 980,000 . Principal payments of $ 8,167 plus interest at the rate of LIBOR plus 2.75 % are due monthly through April 2020, the remaining principal balance in the amount of $ 490,000 was originally due May 29, 2020 . Effective May 29, 2020, the note was amended and renewed such that principal payments of $ 8,303 plus accrued interest were due beginning June 29, 2020 and continuing for sixty months; the entire principal balance and all accrued interest will be due on May 29, 2025 . During the year ended December 31, 2022, the Company made payments of principal and interest on this note in the amounts of $ 40,833 and $ 3,781 , 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. $ - $ 351,165 49 Index December 31, 2022 December 31, 2021 Promissory note dated March 22, 2019 in the original amount of $ 391,558 (the “Artisan Equipment Loan”) payable to Fifth Third Bank. This loan is secured by the Company’s tangible and intangible personal property and bears interest at the rate of 5.20 %. The entire principal balance and all accrued interest is due on the maturity date of March 21, 2024 . Monthly payments in the amount of $ 7,425 including principal and interest commenced in April, 2019. During the year ended December 31, 2019, equipment financed under the Artisan Equipment Loan in the amount of $ 33,075 was returned for credit. During 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. $ - $ 172,146 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 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 . $ 20,000 $ 20,000 Vehicle acquisition loan dated December 6, 2018 in the original amount of $ 51,088 , payable in sixty monthly installments of $ 955 including interest at the rate of 4.61 % maturing November 5, 2023 . During the year ended December 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. $ 10,267 $ 20,984 Secured mortgage facility in the amount of $ 5,500,000 with Fifth Third Bank for the acquisition of land and building in Mountaintop, Pennsylvania dated November 8, 2019 (the “Fifth Third Mortgage Facility”). The Fifth Third Mortgage Facility is secured by the assets acquired. During the year ended December 31, 2019, the Company drew down $ 3,600,000 of this facility. During the year ended December 31, 2020, the Company drew down an additional $ 1,900,000 of this facility. The interest rate is LIBOR plus 2.75 % with interest only due through September 30, 2020, thereafter with principal amortized at a 20 years amortization rate and the balance due on the maturity date of September 2, 2025 . The Company prepaid loan fees in connection with this loan in the amount of $ 72,916 which are considered a discount to the loan and are being amortized over the term of the note; 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. $ - $ 5,235,600 50 Index December 31, 2022 December 31, 2021 Total $ 5,711,800 $ 5,868,145 Discount (- ) ( 46,012 ) Net of discount $ 5,711,800 $ 5,822,133 Current portion $ 5,711,800 $ 458,973 Long-term maturities - 5,409,172 Total $ 5,711,800 $ 5,868,145 Aggregate maturities of notes payable as of December 31, 2022 are as follows: For the year ended December 31, 2023 5,711,800 Total $ 5,711,800 13. RELATED PARTY TRANSACTIONS During the year ended December 31, 2021, the Company issued 50,000 two-year stock options with a fair value of $ 8,616 and an exercise price of $ 1.20 to a director. On August 26, 2021, the Company sold a total of 3,125,000 shares of common stock at a price of $ 0.40 per share to an entity controlled by Hank Cohn, a director of the Company; the Company sold 3,125,000 shares of common stock at a price of $ 0.40 per share to an entity controlled by Jefferson Gramm, a director of the Company; and the Company sold 3,125,000 shares of common stock at a price of $ 0.40 per share to an entity controlled by James C. Pappas, a director of the Company, for total proceeds, net of costs, of $ 3,580,372 . See note 15 for equity related transactions. 14. INCOME TAXES Deferred income taxes result from the temporary differences primarily attributable to amortization of intangible assets and debt discount and an accumulation of net operating loss carryforwards for income tax purposes with a valuation allowance against the carryforwards for book purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Included in deferred tax assets are Federal and State net operating loss carryforwards of approximately $ 15,808,000 , which can be carried forward indefinitely subject to limitation, except $ 4,900,000 which can be carried forward through 2037. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Due to significant changes in the Company’s ownership, the Company’s future use of its existing net operating losses may be limited. The provision (benefit) for income taxes for the years ended December 31, 2022 and 2021 consist of the following: 2022 2021 Current $ - $ - Deferred - - Total $ - $ - 51 Index The provision (benefit) for income taxes differs from the amount of income tax determined by applying the applicable statutory income tax rate of 27.6 % for the years ended December 31, 2022 and 2021 to the loss before taxes as a result of the following differences: 2022 2021 Income (loss) before income taxes $ ( 1,350,002 ) $ ( 716,331 ) Statutory tax rate 27.6 % 27.6 % Total tax (benefit) at statutory rate ( 373,000 ) ( 198,000 ) Permanent difference 176,000 ( 669,565 ) Other adjustments ( 219,136 ) 8,765 Changes in valuation allowance 416,136 858,800 Income tax expense $ - $ - Deferred income taxes reflect the tax impact of temporary differences between the amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. Deferred income taxes include the net tax effects of net operating loss (NOL) carryforwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of December 31, 2022, and 2021 significant components of the Company’s deferred tax assets are as follows: 2022 2021 Deferred Tax Assets: Net operating loss carryforwards $ 4,363,000 $ 4,016,400 Allowance for doubtful accounts 94,000 104,000 Property and equipment 158,200 158,200 Intangible assets 607,500 607,500 Net deferred tax assets 5,222,700 4,886,100 Valuation allowance ( 5,222,700 ) ( 4,886,100 ) Net deferred tax assets $ - $ - The Company’s tax returns for the previous three years remain open for audit by the respective tax jurisdictions. 15. EQUITY Common Stock 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 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: Options For the year ended December 31, 2022: 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. 52 Index For the year ended December 31, 2021: During the year ended December 31, 2021, the Company issued 50,000 two -year options with a fair value on the date of grant of $ 8,616 to a director at a price of $ 1.20 per share, vesting September 10, 2022, and expiring September 10, 2023. 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: Weighted Weighted Weighted average average average exercise exercise Range of Number of Remaining price of Number of price of exercise options contractual outstanding options exercisable Prices Outstanding life (years) Options Exercisable Options $ 0.41 125,000 1.32 $ 0.41 125,000 $ 0.41 $ 0.50 125,000 1.32 $ 0.50 125,000 $ 0.50 $ 0.60 50,000 2.99 $ 0.60 50,000 $ 0.60 $ 0.62 360,000 1.00 $ 0.62 360,000 $ 0.62 $ 0.85 540,000 1.00 $ 0.85 540,000 $ 0.85 $ 1.00 50,000 2.99 $ 1.00 50,000 $ 1.00 $ 1.20 1,050,000 0.90 $ 1.20 1,050,000 $ 1.20 2,300,000 1.07 $ 0.93 2,300,000 $ 0.93 Transactions involving stock options are summarized as follows: Number of Shares Weighted Average Exercise Price Options outstanding at December 31, 2020 2,525,000 $ 1.02 Granted 50,000 1.20 Exercised - - Cancelled / Expired ( 200,000 ) 1.35 Options outstanding at December 31, 2021 2,100,000 $ 0.99 Granted 250,000 0.46 Exercised - - Cancelled / Expired ( 50,000 ) 1.20 Options outstanding at December 31, 2022 2,300,000 $ 0.93 Aggregate intrinsic value of options outstanding and exercisable at December 31, 2022 and 2021 was $ 0 . Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $ 0.21 and $ 0.33 as of December 31, 2022 and 2021, respectively, and the exercise price multiplied by the number of options outstanding. 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 at grant dates in relation to the market price during 2022 and 2021 are as follows: 2022 2021 Exercise price lower than market price - - Exercise price equal to market price - - Exercise price exceeded market price $ 0.41 to 0.50 $ 0.62 to 1.50 As of December 31, 2022, and 2021, there were 0 and 87,500 , respectively, non-vested options outstanding. 53 Index Accounting for stock options The Company valued stock options using the Black-Scholes valuation model utilizing the following variables: December 31, December 31, 2022 2021 Volatility 24.43 % 71.26 % Dividends $ - $ - Risk-free interest rates 2.63 % 0.23 % Term (years) 2.00 2.00 16. COMMITMENTS AND CONTINGENT LIABILITIES Contingent Liability Pursuant to the igourmet Asset Purchase Agreement, the Company recorded contingent liabilities in the original amount of $ 787,800 . This amount relates to certain performance-based payments over the twenty-four months following the acquisition date as well as to certain additional liabilities that the Company has evaluated and has recorded on a contingent basis . During the year ended December 31, 2018, the Company reduced this amount by $ 392,900 as the performance goals for the first year were not met. During the year ended December 31, 2019, the Company reduced this amount by $ 132,300 as the performance goals for the second year were not met. During the year ended December 31, 2019, the Company paid the amount of $ 39,000 in connection with the additional liabilities. During the years ended December 31, 2022 and 2021, the Company paid the amount of $ 8,000 and 80,000 , respectively, in connection with the additional liabilities. 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 . These amounts relate to the estimate of certain performance-based payments following the acquisition date as well as to certain additional liabilities that the Company has evaluated and has recorded on a contingent basis. During the year ended December 31, 2019, the Company paid the amount of $ 120,576 in connection with these liabilities. 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 In May 2019, the Company entered into a royalty-based license agreement, through December 31, 2022 with a lifestyle brand, which provides the exclusive right, with certain carve-outs and limitations, to sell and promote branded gift baskets for certain channels including: retail, warehouse club stores, certain of the Company’s current e-commerce channels, and other e-commerce channels such as amazon.com (the “May 2019 License Agreement”). Pursuant to the May 2019 License Agreement, the Company paid an initial royalty deposit in the amount of $ 50,000 towards the minimum royalty, which is classified as other current assets on the Company’s balance sheet at December 31, 2019. Future royalty amounts owed for minimum payments in connection with the May 2019 License Agreement will be deducted from this deposit. The royalty rate is 5 % of net sales, and the Company is required, with certain exceptions and exclusions, to make minimum royalty payments of $ 100,000 through the end of 2020, $ 110,000 in 2021, and $ 125,000 in 2022. Litigation On September 16, 2019, an action (the “PA Action”) was filed in the Court of Common Pleas of Philadelphia County, Trial Division, against, among others, the Company and its wholly-owned subsidiaries, igourmet and Food Innovations, Inc. Since that time, other parties involved in the incident have joined as plaintiffs in the PA Action. The complaint in the PA Action alleges, inter alia, wrongful death and negligence by a driver 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 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. 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. 54 Index From time to time, the Company has become and may become involved in certain lawsuits and legal proceedings which arise in the ordinary course of business, or as the result of current or previous investments, or current or previous subsidiaries, or current or previous employees, or current or previous directors, or as a result of acquisitions and dispositions or other corporate activities. The Company intends to vigorously defend its positions. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our financial position or our business and the outcome of these matters cannot be ultimately predicted. 17. MAJOR CUSTOMERS The Company’s largest customer, U.S. Foods, Inc. and its affiliates, accounted for approximately 49 % and 46 % of total sales in each of the years ended December 31, 2022 and 2021. A contract between our subsidiary, Food Innovations, and U.S. Foods entered an optional renewal period in December 2012 but was automatically extended for an additional 12 months in each of January 1, 2013 and 2014. On January 26, 2015 we executed a contract directly between Food Innovations, Inc., our wholly-owned subsidiary, and U.S. Foods, Inc. The term of the contract was from January 1, 2015 through December 31, 2016 and provided for a limited number of automatic annual renewals thereafter if no party gives the other 30 days’ notice of its intent not to renew. Based on the terms, the Agreement was extended through December 31, 2018. Effective January 1, 2018 the Agreement was further amended to remove the cap on renewals, and provide for an unlimited number of additional 12-month terms unless either party notifies the other in writing, 30 days prior to the end date, of its intent not to renew. 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. 18. 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 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: Level 1 Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2 Inputs other than Level 1 inputs that are either directly or indirectly observable; and Level 3 Unobservable inputs, for which little or no market data exist, therefore requiring an entity to develop its own assumptions. As December 31, 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. 19. LIQUIDITY 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 . See note 11. 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. 55 Index 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. 20. 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. Denver J. 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. 56 Index ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.