Item 5. Market for Registrant’s Common Equity
ITEM
5. Market For Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market
Information
Prices for our common stock are quoted on the OTCQB. Since March 2004,
our common stock has traded under the symbol “IVFH”. Prior thereto, our common stock traded under the symbol “FBSN”.
At March 12, 2025, there were 53,986,793 shares of our common stock outstanding.
Security
Holders
On March 5, 2025, there were approximately 1,450 record holders of
our common stock. In addition, we believe there are at least several hundred additional beneficial owners of our common stock whose shares
are held in “street name.”
Dividends
We
have not paid dividends during the three most recently completed fiscal years and have no current plans to pay dividends on our common
stock. We currently intend to retain all earnings, if any, for use in our business.
Recent
Sales and Other Issuances of Our Equity Securities
The
table below provides information regarding our issuance of stock during the periods indicated.
Period
Total
Number of
Shares
Issued
Average
Price
Issued
per Share
Jan. 1, 2024 to Mar. 31, 2024
None
N/A
Apr. 1, 2024 to Jun. 30, 2024 (1)
24,138
$ 0.60
Jul. 1, 2024 to Sep. 30, 2024 (2)
1,415,544
$ 1.25
Oct. 1 2024 to Dec. 31, 2024 (3)
2,031,250
$ 1.60
Total
3,470,932
(1) Cashless
conversion of options to purchase 50,000 shares of common stock by an ex-employee for a net
amount of 24,138 shares issued.
(2) Consists
of shares issued to executive officers pursuant to stock compensation plans based upon the
market price of the Company’s common stock. Shares were issued to the Company’s
CEO as follows: 731,350 shares when the market price was $1.16, and 487,567 shares when the
market price was $1.45. Shares were issued to the Company’s COO as follows: 196,627
shares when the market price was $1.23.
(3) Shares
of common stock sold for cash. On November 30, 2024 and December 4, 2024, the Company entered
into a series of securities purchase agreements with certain investors (the “Investors”),
pursuant to which, among other things, the Company issued the Investors an aggregate of 2,031,250
shares of common stock of the Company at a purchase price of $1.60 per share, for an aggregate
purchase price of $3,250,000.
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All
of the issuances described above were exempt from registration pursuant to Section 4(2) of the Securities Act for the following reasons:
(1) none of the issuances involved a public offering or public advertising for the payment of any commissions or fees; (2) the issuances
to investors were to “accredited investors”; (3) the issuances upon conversion of notes were for notes held at least 12 months
and did not involve the payment of any other consideration; and (4) all issuances to affiliates and to non-affiliates holding the securities
for less than six months carried restrictive legends.
Dilutive
Securities
As
of December 31, 2024, there were 310,000 options to purchase shares of the Company’s common stock with a weighted average remaining
contractual life of 1.42 years.
Securities
Authorized for Issuance Under Equity Compensation Plans
As
of December 31, 2024, the following shares are issuable pursuant to outstanding stock options, warrants, and rights issued under the
2011 Stock Option Plan:
Plan
Category
Number
of
securities
to be
issued upon
exercise of
outstanding
options,
warrants
and rights
Weighted-
average
exercise
price of
outstanding
options,
warrants,
and rights
Number
of
securities
remaining
available for
future
issuance
under
equity
compensation
plans
Equity compensation plans approved
by security holders
310,000
$ 1.42
97,772,500
Equity compensation plans not approved by shareholders
-
$ N/A
$ N/A
ITEM
6. [Reserved]
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ITEM
7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion should be read in conjunction with the consolidated financial statements and the related notes thereto, as well
as all other related notes, and financial and operational references, appearing elsewhere in this document.
Certain
information contained in this discussion and elsewhere in this report may include “forward-looking statements” within the
meaning of the Private Securities Litigation Reform Act of 1995, and is subject to the safe harbor created by that act. The safe harbor
created by the Private Securities Litigation Reform Act will not apply to certain “forward looking statements” because we
issued “penny stock” (as defined in Section 3(a)(51) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and Rule 3(a)(51-1) under the Exchange Act) during the three year period preceding the date(s) on which those forward looking
statements were first made, except to the extent otherwise specifically provided by rule, regulation or order of SEC. We caution readers
that certain important factors may affect our actual results and could cause such results to differ materially from any forward-looking
statements which may be deemed to have been made in this Report or which are otherwise made by or on our behalf. For this purpose, any
statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without
limiting the generality of the foregoing, words such as “may”, “will”, “expect”, “believe”,
“explore”, “consider”, “anticipate”, “intend”, “could”, “estimate”,
“plan”, “propose” or “continue” or the negative variations of those words or comparable terminology
are intended to identify forward-looking statements. Factors that may affect our results include, but are not limited to, the risks and
uncertainties associated with:
●
Our
ability to raise capital necessary to sustain our anticipated operations and implement our business plan,
●
Our
ability to implement our business plan,
●
Our
ability to generate sufficient cash to pay our lenders and other creditors,
●
Our
dependence on one major customer,
●
Our
ability to employ and retain qualified management and employees,
●
Our
dependence on the efforts and abilities of our current employees and executive officers,
●
Changes
in government regulations that are applicable to our current or anticipated business,
●
Changes
in the demand for our services and different food trends,
●
The
degree and nature of our competition,
●
The
lack of diversification of our business plan,
●
The
general volatility of the capital markets and the establishment of a market for our shares, and
●
Disruption
in the economic and financial conditions primarily from the impact of past terrorist attacks in the United States, threats of future
attacks, police and military activities overseas and other disruptive worldwide political and economic events, health pandemics,
rising inflation, bank failures, and environmental weather conditions.
We
are also subject to other risks detailed from time to time in our other filings with the SEC and elsewhere in this report. Any one or
more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking
statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from
those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking
statements, whether from new information, future events or otherwise.
Acquisitions
and Share Issuance
On
August 30, 2024, Innovative Gourmet, which is a wholly-owned subsidiary of the Company, and iGourmet, entered into an amended and restated
asset purchase agreement (the “Amended and Restates APA”). Pursuant to the Amended and Restates APA, Innovative Gourmet sold
to iGourmet substantially all of its assets related to marketing and selling certain artisan foods and related drop-ship fulfillment
services including the website www. igourmet.com (the “Purchased Assets”), for total consideration of $700,000. This transaction
was closed on October 23, 2024. In connection with the closing of the transaction, Innovative Gourmet and iGourmet entered into a Transition
Services Agreement, dated August 30, 2024, pursuant to which Innovative Gourmet provided certain inventory and fulfilment services related
to the Purchased Assets for a period of thirty days after closing pursuant to that certain Transition Services Agreement, dated August
30, 2024, with iGourmet.
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On
October 14, 2024, the Company entered into the Golden APA with Golden Organics, and David Rickard. Pursuant to the Golden APA, the Company
(i) purchased substantially all of the properties, business, and assets of Golden Organics used and/or useful in the operation of the
Golden Organics’ business of wholesaling bulk organic ingredients and other related food products and (ii) assume certain liabilities
and obligations of Golden Organics (such transaction, the “Golden Transaction”) for an aggregate purchase price of $1,580,000,
which consists of (a) a cash payment of $1,230,000 after taking into account certain working capital adjustments at the closing of the
Golden Transaction and (b) a Seller Financing Note of $350,000, payable to Golden Organics, with interest at six percent (6%) per annum
for a term of sixty (60) months payable in equal monthly installments with the first payment due one month after the closing. The Seller
Financing Note Need contains default, notice and acceleration provisions, including a default interest at twelve percent (12%), a five
(5) day grace period, a five percent (5%) late fee, no prepayment penalty and a right of set-off. Under the Golden APA, David Rickard
has agreed to provide assistance to the Company for a period of ninety (90) days following the closing with respect to the transitioning
of the business and developing new business opportunities without any compensation. The Golden Transaction closed on November 18, 2024.
On
November 30, 2024 and December 4, 2024, the Company entered into a series of securities purchase agreements with certain investors, pursuant
to which, among other things, the Company issued the investors an aggregate of 2,031,250 shares of common stock of the Company at a purchase
price of $1.60 per share, for an aggregate purchase price of $3,250,000.
On
December 20, 2024, the Company through its subsidiary, Golden Organics, acquired substantially all of LoCo’s properties, business,
and assets used and/or useful in the operation of LoCo’s business of sourcing and wholesaling food products, and agreed to assume
certain liabilities of LoCo for an aggregate purchase price of $304,269, which is payable to LoCo’s lenders for all outstanding
and unpaid indebtedness of LoCo, pursuant to the LoCo APA, with LoCo, Elizabeth G. Mozer and Benjamin Mozer. In addition, as an adjustment
to the purchase price, if earned, Golden Organics will pay $53,430 as earnout if, in the twelve-month period, LoCo achieves certain revenue
and adjusted EBITDA targets. In connection with the LoCo APA, Ms. Mozer entered into a consulting services agreement with Golden Organics
to provide consulting services for a period of twelve (12) months with the option to extend on a month-to-month basis with respect to
the transitioning of the relationships and knowledge concerning the LoCo’s business, which agreement also contains a two-year non-solicitation
provision.
RESULTS
OF OPERATIONS
Overview
Innovative
Food Holdings, Inc. (IVFH) experienced a transformative year in 2024, marked by strategic initiatives aimed at stabilizing the business
and laying the foundation for future growth. The Company focused on enhancing its digital presence, expanding its specialty foodservice
platform, and diversifying its distribution channels. Key milestones included the acquisition of Golden Organics and LoCo, the sale of
non-core assets, and the onboarding of a new CFO.
Financial
Highlights
For
the fiscal year ended December 31, 2024, IVFH reported revenue of $72.1 million, a 2.5% increase compared to $70.4 million in
2023. Our organic revenue growth, which excludes the impact of divestitures and acquisitions, was an impressive 11.4% for the full year.
Revenue growth was particularly strong in Q4, with total revenue increasing 19.2% and organic revenue increasing 44.3%. These results
reflect our strategic efforts to enhance our market presence and expand our customer base.
Revenue
Breakdown:
● Digital
Channels: Largely made up of our Distributor Relationships and supported by our
Drop Ship model. This category contributed $37.9 million, which is 52.5% of our total revenue.
This represents a decrease of 3.9% from $39.4 million in 2023, primarily due to continued
headwinds in our legacy drop ship business.
● National
Distribution: Captures our growing partnerships with airline caterers and our new
national retail customer. This category generated $18.0 million, or 24.9% of total revenue,
marking a 67.4% increase from $10.7 million in 2023. These sales are generally delivered
to the customer through 3PL carriers or FedEx.
● Local
Distribution: Consists mainly of local sales team relationships and our local fleet
delivering direct from warehouse. This category brought in $12.1 million, or 16.8% of total
revenue, an increase of 21.8% from $9.9 million in 2023, supported by the expansion of local
distribution channels and the acquisition of LoCo Foods.
● Direct-to-Consumer: Divested,
however, will remain through 2025 as we overlap the historical revenues generated from the iGourmet.com in 2024. For 2024,
Direct-to-Consumer revenue was $3.1 million, or 4.3% of total revenue, a decrease of 66.2% from $9.2 million in 2023.
● Other
Services: Consists of numerous activities, mainly monetizing the excess space in
Pennsylvania. This category contributed $1.1 million, or 1.5% of total revenue, a decrease
of 4.6% from $1.2 million in 2023.
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Cost
of goods sold for the year was $55.3 million, an increase of 3.6% compared to $53.3 million in 2023. Gross margin declined by 85
basis points to 23.4%, primarily due to liquidation of inventory from divested businesses and the ramp-up of the lower-margin
retail business. However, this decline was offset by a reduction in operating expenses and positive non-operating income driven by
strategic divestments and cost reductions.
Operating
Expenses
Cash
Operating Expenses (Cash OpEx):
● Payroll
and Related Costs: Decreased by $272 thousand to $10.3 million, mainly dut to a lower incentive playout to our leadership and executive
teams compared to 2023.
● Computer
and IT Costs: Reduced by $122 thousand to $391 thousand, reflecting the Company’s efforts to
streamline IT operations and reduce software and hardware expenses.
● Office,
Facilities, and Vehicles Costs: Decreased by $227 thousand to $963 thousand, driven by the consolidation
of office spaces and more efficient use of facilities and vehicles.
● Advertising
and Digital Marketing Costs: Significant reduction of $555 thousand to $30 thousand, resulting from
the restructuring of marketing programs and a strategic shift away from direct-to-consumer
advertising.
● Professional
and Legal Fees: Increased by $310 thousand to $1.6 million, due to various legal and transactional
activities related to acquisitions, divestitures, and other corporate actions.
Total
Cash OpEx Reduction : The total Cash OpEx decreased by $904 thousand, reflecting the Company’s cost-cutting efforts and
restructuring initiatives.
Non-Cash
Operating Expenses (Non-Cash OpEx):
● Share-Based
Compensation: Increased by $869 thousand to $1.5 million, due to revaluation of stock options and
other equity-based incentives to attract and retain key personnel.
●
Depreciation and Amortization Costs: Decreased by $279 thousand to $278 thousand, reflecting the Company’s efforts to optimize its asset base driven by the sale or our Florida headquarters building.
● Bad
Debt Expense: Decreased by $69 thousand to $5 thousand, as a result of improved credit management and
collection efforts.
●
Impairment of Intangible Assets: No impairment costs in 2024, compared to $1.1 million in 2023, due to the absence of significant write-downs of intangible assets.
Total
Non-Cash OpEx Reduction: The total Non-Cash OpEx decreased by $557 thousand, primarily due to the absence of impairment costs and
reduced depreciation and amortization expenses.
Non-Recurring
Expenses:
● No
separation costs in 2024, compared to $2.1 million in 2023 related to the departure of several
executive officers.
Non-Operating
Income (Expense):
During
the year, IVFH recorded several gains and losses:
●
Gain on
Sale of Assets: $2.8 million, including $1.8 million from the sale of the headquarters building and $1.0 million from the sale of
certain intangible assets.
● Gain
on Sale of Subsidiaries: $21 thousand from the sale of Haley Group, Inc.
● Other
Income: $6 thousand from leasing space in the Mountaintop warehouse facility.
The
total non-operating income was $1.8 million, contributing positively to the Company’s overall financial performance.
Net
Income
Net income from continuing operations improved
significantly, reaching $2.5 million compared to a net loss of $3.7 million in 2023.
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Liquidity
and Capital Resources
As
of December 31, 2024, IVFH had current assets of $23.9 million, including cash and cash equivalents of $2.3 million, and current liabilities
of $9.4 million. The company had net working capital of $14.5 million.
Cash
Flow Analysis :
● Operating
Activities : Used $6.3 million, primarily due to changes in working capital components.
The significant changes in working capital included:
●
Accounts Receivable: Increased by $3.8 million, reflecting higher sales from our new customers, indicating strong demand and expanding market reach.
●
Inventory: Increased by $1.9 million, primarily due to the acquisition of Golden Organics and LoCo, as well as higher inventory levels to support new retail and distribution channels.
●
Accounts Payable and Accrued Liabilities: Decreased by $850 thousand, mainly due to the lower annual incentive plan payout recorded in 2024 but paid in 2025, and the elimination of accrued liabilities related to the divestiture of eCommerce operations.
●
Deferred Revenue: Decreased by $791 thousand, primarily a result of the sale of our eCommerce business, we no longer sell or service gift cards or subscription services.
● Investing
Activities : Provided $1.2 million, mainly driven by the sales proceeds of assets, offset
by the acquisition of Golden Organics and property and equipment. Key investments and proceeds
included:
●
Proceeds from Sale of Assets: $2.1 million from the sale of the headquarters building.
●
Proceeds from Sale of Intangible Assets: $617 thousand from the sale of certain intangible assets associated with iGourmet.com.
●
Acquisition of Golden Organics: $1.2 million.
●
Acquisition of Property and Equipment: $317 thousand.
● Financing
Activities : Provided $2.0 million, primarily from the sale of common stock. Key financing
activities included:
●
Proceeds from Sale of Common Stock: $3.3 million.
●
Payment for taxes related to net share settlement of equity awards: $908 thousand.
●
Principal Payments on Financing Leases: $228 thousand.
●
Principal Payments on Notes Payable: $96 thousand.
Future
Capital Needs
IVFH
anticipates significant capital expenditures in the coming years to support its growth initiatives and operational improvements. Key
areas of investment include:
● Expansion
of Distribution Facilities : Upgrading and expanding warehouse and distribution facilities
to accommodate increased demand and improve operational efficiency.
● Technology
Investments : Enhancing the company’s digital platforms and IT infrastructure to
support e-commerce growth and improve customer experience.
● Product
Development : Investing in new product lines and innovations to meet changing customer
preferences and expand market share.
The
Company plans to finance these capital needs through a combination of internal cash flows, debt financing, and potential equity offerings.
IVFH is committed to maintaining a strong balance sheet and ensuring sufficient liquidity to support its strategic initiatives.
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Cash
Management Strategies
IVFH
employs several cash management strategies to ensure adequate liquidity and optimize financial performance:
● Cash
Flow Forecasting : Regularly updating cash flow projections to anticipate and manage cash
needs effectively.
● Working
Capital Management : Implementing strategies to optimize inventory levels, manage accounts
receivable, and extend payment terms with suppliers.
● Credit
Facilities : Maintaining access to credit lines and other financing options to provide
flexibility in managing short-term cash needs.
● Investment
of Excess Cash : Investing surplus cash in short-term, low-risk instruments to generate
returns while preserving liquidity.
Outlook
● Growth
Opportunities : IVFH aims to continue its growth trajectory by focusing on stabilizing
the business, growing the direct-to-chef specialty foodservice platform, diversifying the
drop ship business, and expanding the specialty food distribution business. The company is
well-positioned to capitalize on growth opportunities in the specialty foodservice market.
● Strategic
Initiatives : The Company plans to invest in digital transformation, enhance its e-commerce
capabilities, and expand its distribution network. These initiatives are expected to drive
revenue growth and improve profitability.
Risk
Factors
IVFH
faces several risks that could impact its financial performance. These include:
● Dependence
on Major Customers : The Company has historically derived a substantial portion of its
revenue from one client, U.S. Foods, Inc., and if this relationship were to change materially,
it could significantly impact IVFH’s operations.
● Economic
Conditions : Changes in economic conditions, including both COVID-19 related and non-related
conditions, can affect consumer confidence and spending, which in turn can impact IVFH’s
sales.
● Competition :
The specialty food and foodservice industries are highly competitive, and IVFH competes against
other providers of quality foods, some of which have significantly greater resources.
● Supply
Chain Disruptions : IVFH relies on outside vendors and shippers for its specialty food
products, and any interruption in the supply of these products or failure to adhere to quality
standards could negatively impact the company’s revenues.
● Regulatory
Compliance : Changes in government regulation and supervision could impair IVFH’s
sources of revenue and limit its ability to expand its business.
Off-Balance
Sheet Arrangements
IVFH
has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition,
changes in financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures, or capital resources that
are material to investors.
Critical
Accounting Policy and Estimates
Use of Estimates in the Preparation of Consolidated
Financial Statements
The preparation of these consolidated financial statements
requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. These estimates include certain assumptions related to, among others, doubtful accounts
receivable, valuation of stock-based services, operating right of use assets and liabilities, and income taxes. On an on-going basis,
we evaluate these estimates, including those related to revenue recognition and concentration of credit risk. 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 allowance for credit losses, income taxes, intangible assets, contingent 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.
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Stock options and stock appreciation rights (“SARS”):
The
Company accounts for options in accordance with FASB ASC 718-40. Options are valued upon issuance utilizing the Black-Scholes valuation
model. Option expense is recognized over the requisite service period of the related option award. The following table illustrates certain
key information regarding our options, SARS, and valuation assumptions at December 31, 2024 and 2023:
December
31,
2024
2023
Black-Scholes
model variables:
Volatility
24.43-131.55 %
53.3-95.5 %
Dividends
-
-
Risk-free
interest rates
2.63-4.64 %
3.67-5.03 %
Term
(years)
.00-2.75
3.00-3.63
Allowance for Credit Losses
The Company maintained an allowance in the amount
of $40,002 and $46,477 for credit losses at December 31, 2024 and 2023, respectively. The Company has an operational relationship of several
years with our major customers, and we believe this experience provides us with a solid foundation from which to estimate our expected
losses on accounts receivable. Should our sales mix change or if we develop new lines of business or new customers, these estimates and
our estimation process will change accordingly. These estimates have been accurate in the past.
Fair
Value of Financial Instruments
The
Company measures its financial assets and liabilities in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”). The estimated fair values approximate their carrying value because of the short-term maturity of
these instruments or the stated interest rates are indicative of market interest rates. These fair values have historically varied due
to the market price of the Company’s stock at the date of valuation.
Income
Taxes
The
Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry-forwards. The measurement of deferred tax assets and liabilities is based on provisions of applicable
tax law. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits
that, based on available evidence, is not expected to be realized. At December 31, 2024, the Company has a net operating loss carryforward
of approximately $3,875,000.
Leases
The
Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) and short-term
and long-term lease liabilities are included on the face of the condensed consolidated balance sheet. Finance lease ROU assets are presented
within other assets, and finance lease liabilities are presented within accrued liabilities. The Company used our incremental borrowing
rate of 6.75% in calculating the value of the ROU assets and liabilities.
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