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Item 8. Financial Statements and Supplementary Data

2024-03-21 compared with 2023-03-31 · 462 added, 363 removed, 425 unchanged (66% of the section changed)

Financial Statements

Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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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.

and Subsidiaries (the Company) as of December 31, 2023 and 2022 and the related consolidated statements of operations, stockholders’ equity and cash flows for the each of the two years in the period ended December 31, 2023 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, 2023 and 2022, and the results of its operations and its cash flows for the each of the two years in the period ended December 31, 2023, 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.

These consolidated 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 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 audit in accordance with the standards of 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 financial statements are free of material misstatement, whether due to error or fraud.

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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.

Our audits 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.

Our audits 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 audits provide a reasonable basis for our opinion.

Critical Audit Matters

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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.

We did not identify any critical audit matters that need to be communicated.

We have served as the Company’s auditor since 2022

Margate, Florida

March 21, 2024

ASSURANCE DIMENSIONS CERTIFIED PUBLIC ACCOUNTANTS & ASSOCIATES

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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:

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.

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

Innovative Food Holdings, Inc.

Consolidated Balance Sheets

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Other current assets

Assets held for sale

Current assets - discontinued operations

Total current assets

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Accounts payable and accrued liabilities

Accrued interest, current portion

Accrued separation costs, related parties, current portion

Accrued interest

Deferred revenue

Line of Credit

Notes payable - current portion, net of discount

Stock appreciation rights liability

Notes payable - current portion

Lease liability - operating leases, current

Lease liability - finance leases, current

Contingent liability - current portion

Current liabilities - discontinued operations

Total current liabilities

Note payable, net of discount

Accrued separation costs, related parties, non-current

Lease liability - operating leases, non-current

Lease liability - finance leases, non-current

Contingent liability - long-term

Note payable - long term portion, net

Total liabilities

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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

52,538,100 and 49,427,297 shares issued, and 49,714,929 and 46,589,717 shares outstanding at December 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Common stock to be issued, 0 and 1,499,940 shares at December 31, 2023 and December 31, 2022, respectively

Treasury stock:

2,623,171 shares outstanding at December 31, 2022 and 2021

2,623,171 shares outstanding at December 31, 2023 and December 31, 2022

Accumulated deficit

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Selling, general and administrative expenses

Separation costs - executive officers

Impairment of intangible assets

Total operating expenses

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Other income (expense:)

Impairment of investment

Gain on forgiveness of debt

Interest expense, net

Loss on sale of subsidiaries

Gain on sale of assets

Other leasing income

Gain on contingent liability

Impairment of investment

Loss on extinguishment of debt

Other leasing income

Interest expense, net

Total other income (expense)

Total other expense

Net loss before taxes

Income tax expense

Net loss per share - basic

Net loss per share - diluted

Net loss from continuing operations

Net loss from discontinued operations

Consolidated net loss

Net loss per share from continuing operations - basic

Net loss per share from continuing operations - diluted

Net loss per share from discontinued operations - basic

Net loss per share from discontinued operations - diluted

Weighted average shares outstanding - basic

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For the Years Ended December 31, 2023 and 2022

Additional Paid-in

Treasury Stock

Balance - December 31, 2021

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

Fair value of vested stock and stock options

Common stock issued for services

Offering expenses for stock previously sold for cash

Shares issued to management and employees, previously accrued

Net loss for year ended December 31, 2022

Balance - December 31, 2022

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

Shares issued to management and employees from common stock subscribed

Fair value of shares under compensation plan

Shares issued under severance agreement

Common stock issued to employees for compensation

Common stock issued under management compensation plan

Common stock issued from common stock subscribed

Common stock issued for cashless exercise of stock options

Net loss for year ended December 31, 2023

Balance – December 31, 2023

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

Gain on forgiveness of debt

Gain on contingent liabilities

Gain on disposition of asset

Loss on sale of subsidiaries

Impairment of investment

Impairment of intangible assets

Depreciation and amortization

Allowance for slow moving and obsolete inventory

Amortization of right of use asset

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Stock based compensation

Value of stock appreciation rights

Loss on extinguishment of debt

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Accounts payable and accrued liabilities

Accrued separation costs - related parties

Deferred revenue

Contingent liabilities

Operating lease liability

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Acquisition of property and equipment

Cash received from sale of subsidiaries

Cash received from disposition of asset

Net cash used in investing activities

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Payment of offering costs for stock previously issued

Proceeds from sale of common stock, net of costs

Proceeds from Payroll Protection Plan Loan

Cash received from notes payable, net of costs

Principal payments on debt

Principal payments financing leases

Principal payments on line of credit

Cost of debt financing

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Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Cash and cash equivalents at end of period – continuing operations

Cash and cash equivalents at end of period – discontinued

Cash and cash equivalents at end of period – total

Supplemental disclosure of cash flow information:

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Non-cash investing and financing activities:

(Decrease) Increase in right to use assets & liabilities

(Decrease) Increase in right of 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

Par value of shares issued, previously accrued

Issuance of common stock for severance agreement previously accrued

Reclassify fixed assets as held for sale

See notes to consolidated financial statements.

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FOR THE YEARS ENDED DECEMBER 31, 2023 and 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying audited consolidated financial statements include those of Innovative Food Holdings, Inc.

and all of its wholly-owned subsidiaries (collectively, the “Company”) and have been prepared in accordance with generally accepted accounting principles pursuant to Regulation S-X of the Securities and Exchange Commission and with the instructions to Form 10-K.

All intercompany transactions have been eliminated in consolidation.

In the opinion of management, the audited consolidated financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented.

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.

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.

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.

We provide difficult-to-find specialty foods primarily to both Professional Chefs and Home Gourmets through our relationships with producers, growers, makers and distributors of these products worldwide.

The distribution of these products primarily originates from our three unified warehouses and those of our drop ship partners, and is driven by our proprietary technology platform.

In addition, we provide value-added services through our team of food specialists and Chef Advisors who offer customer support, menu ideas, and preparation guidance.

Restructuring

During the fourth quarter of 2023 we made the decision to focus more on our Business to Business (B2B) activities and less on our Direct to Consumer (D2C) products.

Our subsidiaries GROW and Oasis were sold effective December 29, 2023;

Haley is being held for sale;

and the activities of P Innovations will be abandoned.

Our remaining D2C business, primarily operated within iGourmet and Mouth, will be downsized.

Discontinued Operations

During the fourth quarter of 2023 we made the decision to discontinue certain of our business activities.

Our subsidiaries GROW and Oasis were sold effective December 29, 2023;

Haley is being held for sale;

and the activities of P Innovations will be abandoned.

Pursuant to the guidance of ASC 205-20 Presentation of Financial Statements – Discontinued Operations, the accounts of these entities have been included in “Net loss from discontinued operations” in our consolidated statements of operations.

Additionally, the assets and liabilities of these entities have been presented as discontinued operations in our consolidated balance sheets as of December 31, 2023 and December 31, 2022.

Use of Estimates

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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.

Accounts subject to estimate and judgements are allowance for accounts receivable, allowance for slow moving and obsolete inventory, 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.

Reclassifications

Certain amounts presented in the financial statements of the prior period have been reclassified to conform with the current period presentation of discontinued operations.

Revenue Recognition

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Specialty foodservice

National Brand Management

Warehouse and Logistic Services

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Accounts Receivable

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts.

The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts pursuant to the guidance of Accounting Standards Update (ASU) 2016-13, Financial Instruments – Credit Losses (Topic 326) as codified in Accounts Standards Codification (ASC) 326, Financial Instruments – Credit Losses.

Under ASC 326, the Company utilizes a current and expected credit loss (CECL) impairment model.

ASU 2016-13 became effective for us on January 1, 2023.

The Company’s estimate is based on historical collection experience and a review of the current status of trade accounts receivable.

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Accounts receivable are presented net of an allowance for doubtful accounts of $ 46,477 and $ 340,225 at December 31, 2023, and 2022, respectively.

Assets Held for Sale

Assets held for sale include the net book value of property and equipment that the Company plans to sell within the next year.

Long-lived assets that meet the held for sale criteria are held for sale and reported at the lower of their carrying value or fair value, less estimated costs to sell.

If the determination is made that the Company no longer expects to sell an asset within the next year, the asset is reclassified out of assets held for sale.

Property and Equipment

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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.

In addition to an allowance for obsolete or slow moving inventory, 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.

Gift cards issued by the Company generally have an expiration of five years from the date of purchase.

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

Balance as of December 31, 2021

Cash payments received

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Balance as of December 31, 2023

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.

The Company accounts for income taxes under the asset and liability method in accordance with ASC 740.

The Company recognizes deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns.

Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

The components of the deferred tax assets and liabilities are classified as current and non-current based on their characteristics.

A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations.

This standard was adopted by the Company effective January 1, 2021.

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.

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.

The 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.

During the year ended December 31, 2023, the Company made the strategic decision to allocate fewer resources to our D2C products;

pursuant to this decision, we made the determination that the carrying value of the tradenames held by our subsidiaries iGourmet and Mouth could not be recovered.

Accordingly, the Company recorded impairment charges in the amounts of $ 1,055,400 and $ 260,422 against the tradenames held by iGourmet and Mouth, respectively, reducing the carrying value of these intangible assets to $ 0 .

Cost Method Investments

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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.

During the year ended December 31, 2023, the Company charged the amount of $ 293,334 to operations in connection with management stock-based compensation plans.

The Company also charged the amount of $ 112,169 to operations in connection 267,030 shares of common stock granted to three employees as compensation.

Dilutive shares at December 31, 2022:

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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;

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.

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

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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.

DISCONTINUED OPERATIONS

During the fourth quarter of fiscal 2023, in connection with an analysis of the Company’s sales mix and profitability by service offering, management made the strategic decision to focus on the Company’s Business to Business (B2B) service offering and to allocate fewer resources to and in some cases to sell certain of the Company’s subsidiaries involved in our Direct to Consumer (D2C) service offerings.

Pursuant to this strategy, on December 29, 2023, the Company completed the sales of its Grow and Oasis subsidiaries (see note 3).

In addition, Haley is being held for sale, and the operations of P Innovations will be abandoned.

We have recorded the accounts of these entities pursuant to the guidance of ASC 205-20 and have classified the accounts of these entities as discontinued operations in the Company’s financial statements for the years ended December 31, 2023 and 2022.

The following information presents the major classes of line item of assets and liabilities included as part of discontinued operations in the consolidated balance sheets:

Current assets - discontinued operations:

Accounts receivable

Other current assets

Total current assets - discontinued operations

Current liabilities - discontinued operations:

Accounts payable and accrued liabilities

Accrued payroll and related liabilities

Deferred revenue

Total current liabilities - discontinued operations

The following information presents the major classes of line items constituting the after-tax loss from discontinued operations in the consolidated statements of operations:

Cost of goods sold

Selling, general, and administrative expenses

Interest income

Loss from discontinued operations, net of tax

The following information presents the major classes of line items constituting significant operating and investing cash flow activities in the consolidated statements of cash flows relating to discontinued operations:

Accounts receivable

Accounts payable and accrued liabilities

Deferred revenue

SALE OF SUBSIDIARIES

On December 29, 2023, the Company sold 100 % of the equity interests in Organic Food Brokers, LLC (“OFB, GROW”) and Oasis Sales Corp.

“(Oasis”) to a single buyer for a purchase price of $ 75,000 .

The Company recorded a loss in the amount of $ 45,022 on this transaction.

ACCOUNTS RECEIVABLE

At December 31, 2023 and 2022, accounts receivable consists of:

Accounts receivable from customers

Allowance for doubtful accounts

Allowance for credit losses

Accounts receivable, net

During the years ended December 31, 2023 and 2022, the Company charged (recovered) the amount of $ 73,330 and $( 1,915 ), 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.

Inventory consists of specialty food products.

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Depreciation expense for property and equipment amounted to $ 392,354 and $ 379,632 for the years ended December 31, 2023 and 2022, respectively, which is recorded in selling, general & administrating expenses on the Company’s statement of operations.

During the year ended December 31, 2023, the Company disposed of a vehicle with a cost of $ 51,091 and accumulated depreciation of $ 49,380 .

PROPERTY AND EQUIPMENT CLASSIFIED AS HELD FOR SALE

Assets held for sale include the net book value of property and equipment the Company plans to sell within the next year.

Long lived assets that meet the criteria are held for sale and reported at the lower of their carrying value or fair value less estimated cost to sell.

As of December 31, 2023, the Company classified the land, building, leasehold improvements, and certain equipment located at 28411 Race Track Road, Bonita Springs, Florida, 34135.

These net book value of these assets consisted of the following at December 31, 2023:

Furniture, fixtures, and equipment

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

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Office equipment

Right to use assets, net

Right of use assets, net

Operating lease liabilities are summarized below:

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Year ended December 31, 2025

Present value discount

Lease liability

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, 2023, the Company recorded the removal of a right of use asset and lease liability in the amount of $ 72,150 due to the termination of an office lease.

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.

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accumulated depreciation

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.

Depreciation expense on right of use assets for the years ended December 31, 2023 and 2022 was $ 133,920 and $ 141,216 , respectively.

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

Financing lease liabilities are summarized below:

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During the year ended December 31, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $ 20,032 and $ 1,564 , respectively.

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

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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.

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.

INTANGIBLE ASSETS

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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.

During the year ended December 31, 2023, the Company made the strategic decision to allocate fewer resources to our D2C products;

pursuant to this decision, we made the determination that it was unlikely that the carrying value of tradenames held by igourmet in the amount were recoverable.

Accordingly, we recorded impairments to these assets in the amounts of $ 1,055,400 and $ 260,422 , respectively.

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:

The following is the net book value of these intangible assets:

December 31, 2023

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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, 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.

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Accrued payroll and commissions

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 .

ACCRUED SEPARATION COSTS – RELATED PARTIES

On February 3, 2023, the Company entered into a Severance Note, an Agreement and General Release, and a Side Letter thereto with Sam Klepfish (the “SK Agreements”), its prior CEO and a current board member.

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

Kelpfish’s resignation from all positions with the Company and its subsidiaries on February 28, 2023, except that Mr.

Klepfish will remain a director and member of the board of the Company, confidentiality and non-disparagement conditions, nomination of Mr.

Klepfish for future election to the board of directors at least through the 2024 general meeting of shareholders based on certain minimum stock ownership and Board Observer rights when Mr.

Klepfish is no longer a director but maintains certain minimum agreed upon stock ownership.

The payment terms are $ 250,000 upon effectiveness and an additional $ 1,000,000 payable in weekly payments of $ 6,410.26 from March 8, 2023 through March 6, 2026.

The $250,000 was paid into an escrow account with the requirement that they are released to Mr.

Klepfish on his separation date.

The $1,000,000 portion is in the form of an unsecured, non-interest bearing note payable to Mr.

The SK Agreements also call for the delivery of 400,000 shares of the Company’s common stock valued at $ 168,000 based upon the closing price of the Company’s common stock on Mr.

Klepfish’s separation date of February 28, 2023 (see note 16);

in addition, for delivery on June 1, 2027 of additional shares of the Company’s common stock equal to the greater of (i) the number of shares with an aggregate fair market value of $ 400,000 on such date, or (ii) 266,666 shares.

The Company also agreed to pay a total of $ 1,199 of Cobra insurance costs on behalf of Mr.

Klepfish over eighteen months.

The total amount accrued in connection with the SK Agreements was $ 1,819,199 .

On February 28, 2023, the Company entered into a separation agreement (the “Wiernasz Separation Agreement”) with Justin Wiernasz, its prior director and previous Director of Strategic Acquisitions.

Pursuant to the Wiernasz Separation Agreement, the Company agreed to a payment of $ 100,000 in cash as follows:

$ 33,333 upon execution of the agreement, $ 33,333 on March 15, 2023, and $ 33,334 on April 15, 2023.

The Company also agreed to make the Cobra insurance payments on behalf of Mr.

Wiernasz in the amount of $ 2,548 per month for twelve months with a maximum of $ 26,451 .

The total amount accrued in connection with the Wiernasz Separation Agreement was $ 126,451 .

On February 6, 2024, the Company entered into a separation agreement with Richard Tang, its Chief Financial Officer (the “Tang Separation Agreement”) effective as of December 31, 2023.

Pursuant to the Tang Separation Agreement, the Company will pay to Mr.

Tang, in equal installments over a five month period, the gross sum of $ 113,918 .

In addition, Mr.

Tang may submit for reimbursement up to $ 4,000 of legal expenses connected with the review of this separation agreement.

The severance payment will be made in the following installments:

(i) $ 25,890 to be paid the week of March 4, 2024;

(ii) $ 5,178 to be paid each successive week for seventeen weeks beginning the week of March 11, 2024, until the Severance Payment is completed.

In addition, if Tang timely elects to continue his group health insurance benefits under the Consolidated Omnibus Reconciliation Act (“COBRA”), the Company will reimburse Tang’s group health insurance premiums (“COBRA Premiums”) for the lesser of:

(a) the period of time Employee is eligible to continue his group health insurance benefits under COBRA and (b) the five-month period immediately following the Separation Date.

Reimbursements will be paid within thirty days of when Tang submits a request for reimbursement and supporting documentation.

During the year ended December 31, 2023, the Company made the following payments in connection with the SK Agreements:

The Company paid cash in the amount of $ 525,643 to Mr.

Klepfish and made Cobra payments on behalf of Mr.

Klepfish in the amount of $ 200 .

The Company also issued 400,000 shares of common stock with a fair value of $ 168,000 .

During the year ended December 31, 2023, the Company made the following payments in connection with the Wiernasz Separation Agreement:

The Company paid cash in the amount of $ 100,000 and made Cobra payments on behalf of Mr.

Weirnasz in the amount of $ 25,484 .

During the year ended December 31, 2023, the Company did not make any payments in connection with the Tan Separation Agreement.

The following table represents the amounts accrued, paid, and outstanding on these agreements as of December 31, 2023:

Paid / Issued

Cash – through March 6, 2026

Cash - upon agreement execution

Stock - June 1, 2027

Stock - Issued in April 2023

Cobra - over eighteen months

Cash - three equal payments

Cobra - over eighteen months

Cash – over seventeen weeks

Cobra - over five months

Total Company

STOCK APPRECIATION RIGHTS LIABILITY

Effective May 15, 2023, the Company issued 1,500,000 stock appreciation rights (the “Smallwood SARs”) to Brady Smallwood, its Chief Operating Officer.

The Smallwood SARs were valued utilizing the Black-Scholes valuation model, and had an aggregate fair value of $ 9,794 upon issuance;

this amount was charged to operations and credited to stock appreciation rights liability.

The Smallwood SARs are revalued each quarter, and any gain or loss in the fair value is charged to non-cash compensation expense.

At December 31, 2023, the Smallwood SARs had a fair value of $ 255,020 ;

the increase in fair value in the amount $ 245,226 was charged to non-cash compensation during the year ended December 31, 2023.

REVOLVING CREDIT FACILITIES

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At December 31, 2023, the interest rate was 8.50 %.

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 originally was due to mature on May 27, 2023.

The Company applied for a USDA Guarantee and on June 9, 2023, this guarantee was approved.

At this time, the Revolver was expanded to $ 3,000,000 and its term extended to May 27, 2024.

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 ;

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.

During the years ended December 31, 2023 and 2022, the Company paid interest in the amount of $ 115,429 and $ 71,145 , respectively, on the MapleMark Revolver.

During the year ended December 31, 2023, the Company made a principal payment in the amount of $ 2,014,333 on the MapleMark Revolver.

At December 31, 2023, this loan has been fully satisfied.

The amount of $ 2,014,333 is available to the Company under the MapleMark Revolver at December 31, 2023.

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.

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

Amounts outstanding under the Term Loans accrued 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 MapleMark loan was originally due to mature 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 $7,420,000.

Upon approval of the USDA Loan Guarantee on June 9, 2023, the Company refinanced its term loans with MapleMark Bank.

On June 14, 2023, the Company paid the principal and interest due on the MapleMark Term Loan 1 in the amount of $ 5,324,733 and $ 61,715 , respectively, with proceeds of the MapleMark Term Loan 3 (see below).

The Maple Mark Term Loan 1 contains 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.

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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.

During the year ended December 31, 2023, the Company accrued interest in the amount of $ 221,176 on the MapleMark Term Loan 1.

At December 31, 2023, this loan has been fully satisfied.

On June 13, 2023, the Company entered into a term loan with MapleMark Bank (the “MapleMark Term Loan 3”) in the amount of $ 9,057,840 .

Principal and interest due on the MapleMark Term Loan 1 in the amounts of $5,324,733 and $61,715, respectively, were paid with proceeds of the MapleMark Term Loan 3.

The MapleMark Term Loan 3 is payable in monthly installments of $ 80,025 commencing July 1, 2023 and continuing through June 13, 2048 .

Amounts outstanding under the Maple Mark Term Loan 3 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, 2023, the interest rate was 9.50 %.

The MapleMark Term Loan 3 matures on June 13, 2048.

The MapleMark Term Loan 3 contains 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 created a discount on the MapleMark Term Loan 3 for costs in the amount of $ 385,803 which will be amortized over the life of the loan.

During the year ended December 31, 2023, the Company amortized $ 3,297 of these costs to interest expense.

During the year ended December 31, 2023, the Company made principal payments in the amount of $ 72,198 on this loan.

During the year ended December 31, 2023, the Company accrued interest in the amount of $ 485,956 on the MapleMark term Loan 3.

At December 31, 2023, accrued interest on this note was $ 75,442 .

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.

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

The MapleMark Term Loan 2 originally matured on May 27, 2023.

On June 9, 2023, the USDA approved the Guarantee of MapleMark Term Loan 1 which allowed the Company to extend the term of the MapleMark Term Loan 2 from May 27, 2023 to May 27, 2033 with monthly payments in the amount of approximately $ 2,311 commencing July 1, 2023 and continuing through June 1, 2033.

On July 1, 2033, a final payment in the amount of approximately $ 303,536 will be due on the MapleMark Term Loan 2.

The MapleMark Term Loan 2 contains 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.

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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, 2023, the Company made principal payments in the amount of $ 3,895 on this loan.

During the year ended December 31, 2023, the Company accrued interest in the amount of $ 27,134 on this loan.

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.

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.

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.

At December 31, 2023, accrued interest on this note was $ 2,018 .

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.

During the year ended December 31, 2023, the Company accrued interest in the amount of $ 378 on this note.

At December 31, 2023, accrued interest on this note was $ 18,482 .

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.

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.

During the year ended December 31, 2023, the Company made principal and interest payments in the amount of $ 10,267 and $ 228

Net of discount

1 unchanged sentence

Long-term maturities

There was a total of $ 95,942 and $ 18,104 accrued interest on notes payable at December 31, 2023 and 2022, respectively.

Aggregate maturities of notes payable as of December 31, 2023 are as follows:

For the period ended December 31,

At December 31, 2023 and 2022 a total of 2,823,171 and 2,837,580 shares, respectively, were issued but deemed not outstanding by the Company.

For the year ended December 31, 2023:

On February 1, 2023, the Company issued 875,000 shares of common stock, net of 207,839 shares withheld for income taxes, to its previous Chief Financial Officer compensation.

These shares were previously accrued and were carried on the Company’s balance sheet as common stock to be issued.

On February 28, 2023, the Company issued 267,030 shares with a value of $ 112,169 to three employees as compensation.

On March 31, 2023, the Company accrued the issuance of 207,274 shares of common stock with a value of $ 45,680 to its then officers and directors for compensation.

These shares were recorded to common stock to be issued.

On April 26, 2023, the Company issued 400,000 shares of common stock to the previous Chief Executive Officer pursuant to the SK Agreements.

On June 30, 2023, the Company accrued the issuance of 15,106 shares of common stock with a value of $ 5,000 to two directors for compensation.

These shares were recorded to common stock to be issued.

On July 7, 2023, the Company issued 178,626 shares of common stock to a designee of its previous Chief Executive Officer as compensation.

These shares were previously accrued and were carried on the Company’s balance sheet as common stock to be issued.

On August 31, 2023, the Company issued 14,754 shares of common stock to its previous Director of Strategic Acquisitions as compensation.

These shares were previously accrued and were carried on the Company’s balance sheet as common stock to be issued.

On September 6, 2023, the Company issued 236,810 shares of common stock to a board member as compensation.

These shares were previously accrued and were carried on the Company’s balance sheet as common stock to be issued.

On September 6, 2023, the Company issued 222,401 shares of common stock, net of 14,409 shares owed to the Company from a previous transaction to a board member as compensation.

These shares were previously accrued and were carried on the Company’s balance sheet as common stock to be issued.

On September 6, 2023, the Company issued 320 shares of common stock to a previous employee as compensation.

These shares were previously accrued and were carried on the Company’s balance sheet as common stock to be issued.

On October 2, 2023, the Company issued 30,000 shares of common stock to a service provider as compensation.

These shares were previously accrued and were carried on the Company’s balance sheet as common stock to be issued.

On November 7, 2023, the Company issued 678,302 shares of common stock, net of 265,229 shares withheld for income tax purposes, to its Chief Executive Officer pursuant to his compensation plan.

The fair value of these shares at the inception of the plan in the amount of $ 190,072 is charged to operations over the thirty-four month life of the plan.

On December 30, 2023, the Company issued the net amount of 57,560 shares of common stock in a cashless exercise of 360,000 options at a price of $ 0.62 per share.

On February 15, 2024, the Company issued 150,000 shares of common stock to a previous director for options previously exercised.

These shares were recorded as issued on the Company’s balance sheet effective December 31, 2023.

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.

Stock Appreciation Rights

Effective May 15, 2023, the Company issued 1,500,000 stock appreciation rights (the “Smallwood SARs”) to Brady Smallwood, its Chief Operating Officer.

The Smallwood SARs vest upon issuance, and expire on December 31, 2026;

750,000 of the Smallwood SARs are priced at $ 1.50 per share, and 750,000 are priced at $ 2.00 per share.

It is the Company’s intention to settle the Smallwood SARs in cash.

The Smallwood SARs were valued utilizing the Black-Scholes valuation model, and had an aggregate fair value of $ 9,794 upon issuance.

This amount was charged to non-cash compensation and credited to a current liability on the Company’s balance sheet.

The Smallwood SARs will be revalued each reporting period and any change in value will be charged to compensation expense.

At December 31, 2023, the Smallwood SARs had a fair value of $ 255,020 ;

the increase in value in the amount of $ 245,226 was charged to compensation expense.

The Smallwood SARs were valued using the Black-Scholes valuation model utilizing the following variables:

Risk-free interest rates

Expected term (years)

Share-based Incentive Plans

CEO Stock Plan

On February 3, 2023, the Company entered into an employment agreement with Bill Bennett to become the Company’s CEO.

Pursuant to this agreement, Mr.

Bennett was provided with an incentive compensation plan (the “CEO Stock Plan”) whereby Mr.

Bennett would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:

Number of Shares Granted - Lower of:

Number of Shares Issued

and Outstanding on

Grant Date Multiplied by:

The CEO Stock Plan had a fair value of $ 660,541 at inception (see “Stock Plan Valuation” section below).

This amount is being amortized over the 34 month life of the plan.

During the year ended December 31, 2023, $195,047 of this amount was charged to operations.

During the year ended December 31, 2023, the first of the price targets under the CEO Stock Plan was achieved, and Mr.

Bennett was eligible to receive 943,531 shares of the Company’s common stock.

On November 7, 2023, 678,302 of these shares were issued to Mr.

Bennet and of 265,229 shares were withheld for income tax purposes.

COO Stock Plan

On April 14, 2023, the Company entered into an employment agreement with Brady Smallwood to become the Company’s COO effective May 15, 2023.

Pursuant to this agreement, Mr.

Smallwood was provided with an incentive compensation plan (the “COO Stock Plan”) whereby Mr.

Smallwood would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:

Number of Shares Granted - Lower of:

Number of Shares Issued

and Outstanding on

Grant Date Multiplied by:

The COO Stock Plan had a fair value of $ 199,951 at inception (see “Stock Plan Valuation” section below).

This amount is being amortized over the 31.5-month life of the plan.

During the year ended December 31, 2023, $ 47,607 of this amount was charged to operations.

At December 31, 2023, none of the price targets under the COO Stock Plan have been achieved.

CFO Stock Plan

On December 29, 2023, the Company entered into an employment agreement with Gary Schubert to become the Company’s CFO effective January 1, 2024.

Pursuant to this agreement, Mr.

Schubert was provided with an incentive compensation plan (the “CFO Stock Plan”) whereby Mr.

Schubert would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:

Number of Shares Granted - Lower of:

Number of Shares Issued

and Outstanding on

Grant Date Multiplied by:

The CFO Stock Plan had a fair value of $ 238,747 at inception (see “Stock Plan Valuation” section below).

This amount will be amortized over the 30-month life of the plan beginning January 1, 2024.

During the year ended December 31, 2023, $ 0 of this amount was charged to operations.

At December 31, 2023, none of the price targets under the COO Stock Plan have been achieved.

Valuation of Stock Plans

The Company relied upon the guidance of Statement of Financial Account Standards No.

718 Compensation – Stock Compensation (“ASC 718”) in accounting for the CEO Stock Plan, the COO Stock Plan, and the CFO Stock Plan (collectively, the "Officer Stock Plans”).

A Monte Carlo market-based performance stock awards model was used in valuing the plan, with the following assumptions:

The stock price for each trading day would fluctuate with an estimated projected volatility using a normal distribution.

The stock price of the underlying instrument is modeled such that it follows a geometric Brownian motion with constant drift and volatility.

The Company would award the stock upon triggering the thresholds.

Annual attrition or forfeiture rates (i.e., pre–vesting forfeiture assumption) are assumed to be zero given the Holder’s position with the Company.

No Projected capital events were included in the adjustments to the shares issued and outstanding in the projected simulations.

Awards/Payouts were discounted at the risk–free rate.

The Officer Stock Plans were valued using the following variables:

103.9 %- 113.7

Risk-free interest rates

Expected term (years)

The following variables were utilized in valuing the Smallwood SARs:

Risk-free interest rates

Expected term (years)

For the year ended December 31, 2023:

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.

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, 2023:

Transactions involving stock options are summarized as follows:

Number of Shares

Weighted Average

Exercise Price

Options outstanding at December 31, 2021

Cancelled / Expired

Options outstanding at December 31, 2022

Cancelled / Expired

Options outstanding at December 31, 2023

Aggregate intrinsic value of options outstanding and exercisable at December 31, 2023 and 2022 was $ 77,530 and $ 0 , respectively.

Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $ 0.74 and $ 0.21 as of December 31, 2023 and 2022, respectively, and the exercise price multiplied by the number of options outstanding.

During the year ended December 31, 2023 and 2022, the Company charged $ 0 and $ 8,738 , 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 2023 and 2022 are as follows:

Exercise price lower than market price

Exercise price equal to market price

Exercise price exceeded market price

As of December 31, 2023, and 2022, there were no non-vested options outstanding.

Accounting for stock options

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

95.55 - 53.30

Risk-free interest rates

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.

Hiring of COO

On April 14, 2023, the Company entered into an Executive Employment Agreement with Brady Smallwood (the “Smallwood Agreement”).

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

Smallwood to become the Company’s Chief Operating Officer;

employment at-will with an initial term of employment from May 15, 2023 through December 31, 2025 with 9 months of Base Salary as severance payments if terminated without cause or resignation with Good Reason;

an annual Base Salary of $ 300,000 with at least 3 % annual increases with additional annual increases;

a $ 29,370 signing bonus;

an annual incentive bonus equal to at least $ 80,000 prorated for partial years;

and reimbursement of legal fees up to $ 5,000 .

In addition, Mr.

Smallwood was initially granted 1,500,000 stock options;

on June 8, 2023, this stock option grant was changed to a one-time grant of 1.5 million stock appreciation rights, with 750,000 SARs priced at $ 1.50 and 750,000 SARs priced at $ 2.00 ;

and participation in the Company’s benefit plans.

Smallwood is also subject to the Company’s clawback policies and certain restrictive covenants including confidentiality, non-compete and non-solicitation.

Smallwood is also eligible for stock grants based upon the market price of the Company’s common stock;

Hiring of CFO

On December 22, 2023, the board of directors of the Company appointed Mr.

Gary Schubert to the position of Chief Financial Officer of the Company, effective January 1, 2024 and on December 29, 2023 the Company entered into an Executive Employment Agreement with Mr.

Schubert (the “Schubert Agreement”).

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

Schubert to become the Company’s Chief Financial Officer;

employment at-will with an initial term of employment from January 1, 2024 through June 30, 2026 with 9 months of Base Salary as severance payments if terminated without cause or resignation with Good Reason;

an annual Base Salary of $ 280,000 with at least 3 % annual increases with additional annual increases;

a $ 30,000 signing bonus;

an annual incentive bonus equal to at least $ 60,000 prorated for partial years;

and reimbursement of legal fees up to $ 5,000 .

In addition, Mr.

Schubert was granted 1,500,000 stock options;

on June 8, 2023, this stock option grant was changed to a one-time grant of 1.5 million stock appreciation rights, with 750,000 SARs priced at $ 1.50 and 750,000 SARs priced at $ 2.00 ;

and participation in the Company’s benefit plans.

Smallwood is also subject to the Company’s clawback policies and certain restrictive covenants including confidentiality, non-compete and non-solicitation.

Smallwood is also eligible for stock grants based upon the market price of the Company’s common stock;

Separation of prior CEO and of a board member

During the year ended December 31, 2023, the Company made the following payments in connection with separation agreements with Sam Klepfish, its prior CEO and current board member, and Justin Weirnasz, its prior Director of Strategic Acquisitions and board member.

The Company paid cash in the amount of $ 525,643 to Mr.

The Company also issued 400,000 shares of common stock with a fair value of $ 168,000 .

The Company paid cash in the amount of $ 100,000 to Mr.

Weirnasz and made Cobra payments on behalf of Mr.

Weirnasz in the amount of $ 25,484 .

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.

25 unchanged sentences

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

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:

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.

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:

Transactions involving stock options are summarized as follows:

Number of Shares

Weighted Average

Exercise Price

Options outstanding at December 31, 2020

Cancelled / Expired

Options outstanding at December 31, 2021

Cancelled / Expired

Options outstanding at December 31, 2022

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:

Exercise price lower than market price

Exercise price equal to market price

Exercise price exceeded market price

As of December 31, 2022, and 2021, there were 0 and 87,500 , respectively, non-vested options outstanding.

Accounting for stock options

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

Risk-free interest rates

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

11 unchanged sentences

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.

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.

The case was set for trial for April 1, 2024.

The Company anticipates that such paperwork will be completed, and that the matter will be officially dismissed, in the second quarter of 2024.

The Company and its subsidiaries resolved all liabilities within the coverages of their insurance carriers.

MAJOR CUSTOMERS

7 unchanged sentences

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.

In addition, Gate Gourmet, the leading global provider of airline catering solutions and provisioning services for airlines, in partnership with igourmet, represented 13 % and 15 % of total sales for the year ended December 31, 2023 and 2022, respectively.

FAIR VALUE MEASUREMENTS

5 unchanged sentences

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.

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.

During the year ended December 31, 2023, the Company recorded the fair value of the Smallwood SARs at each reporting period.

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

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.

Settlement of Lawsuit

On January 5, 2024, all parties to the PA Action came to an agreement at Mediation on the material terms of settlement and on January 22, 2024, a settlement was agreed upon in an action 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.

On Monday, January 29, 2024, the Company received a settlement and release agreement from certain plaintiffs in the PA Action.

The Company and its subsidiaries resolved all liabilities within the coverages of their insurance carriers.

Lease of Office and Change of Primary Address

On January 18, 2024, the Company signed a one-year lease for 1,335 rentable square feet of office space located at 9696 Bonita Beach Road, Bonita Springs, Florida, 34135, and this location became the Company’s primary address.

Base rent for the Bonita Beach Road property is $ 1,891 per month plus approximately $ 723 in common area maintenance charges.

Sale of Building Held for Sale

On February 14, 2024, the Company closed on the sale of its warehouse located at 28411 Race Track Road, Bonita Springs FL 34135 (the “Warehouse”) to Tag Media Group LLC, dba “Gulf Coast Aluminum” The Warehouse consists of approximately 1.1 acres of land and close to 10,000 square feet of combined office and warehouse space.

Pursuant to a purchase and sale agreement between dated December 12, 2023 the Company agreed to sell the Warehouse, certain warehouse racking, and a forklift to Gulf Coast Aluminum for a total purchase price of $ 2,455,000 , prior to customary closing costs.

The Company received approximately $ 1.9 million in net proceeds from the transaction.

Sale of Haley Food Group Inc.

On February 27, 2024, the Company entered into a stock for stock exchange agreement whereby we exchanged 100 shares of stock of The Haley Food Group Inc., which represented 100 % of Haley’s outstanding stock, for 21,126 shares of our common stock.

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