INNOVATIVE FOOD HOLDINGS INC 10-K

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, 2026, there were 54,649,479 shares of our common stock outstanding. Security Holders On March 12, 2026, there were approximately 63 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, 2025 to Mar. 31, 2025 (1) 822,058 $ 1.60 Apr. 1, 2025 to Jun. 30, 2025 (2) 365,204 $ 2.05 Jul. 1, 2025 to Sep. 30, 2025 (3) 82,952 $ 1.98 Oct. 1, 2025 to Dec. 31, 2025 (4) 214,530 $ 1.60 Total 1,484,744 (1) Consists of shares issued to executive officers pursuant to executive compensation plans: 530,665 shares were issued to the predecessor CEO; 133,632 shares were issued to the COO; and 73,735 shares were issued to the successor CEO under the Prior CFO stock plan. Also includes cash conversion of options to purchase 310,000 shares of common stock for a net amount issued of 84,026 shares. These shares were classified as shares to be issued on the Company’s balance sheet at December 31, 2024. (2) Consists of shares issued to executive officers pursuant to stock compensation plans: 273,036 shares were issued to the predecessor CEO; and 92,168 shares were issued to the successor CEO under the Prior CFO stock plan. (3) Consists of shares issued to the COO pursuant to a stock compensation plan. (4) Consists of shares issued to the predecessor CEO pursuant to a stock compensation plan. All of the issuances described above were exempt from registration pursuant to Section 4(2) of the Securities Act for the following reasons: (i) none of the issuances involved a public offering or public advertising for the payment of any commissions or fees; (ii) the issuances to investors were to “accredited investors”; and (iii) all issuances to affiliates and to non-affiliates holding the securities for less than six months carried restrictive legends. Dilutive Securities None . 15 Table of Contents Securities Authorized for Issuance Under Equity Compensation Plans As of December 31, 2025, the following shares were 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 - $ N/A 97,872,500 Equity compensation plans not approved by shareholders - $ - $ - ITEM 6. [Reserved] 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, ● 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. 16 Table of Contents 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 Disposition 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. We exited this business during the year ended December 31, 2024. 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 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 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. The Company’s subsidiary, Innovative Properties, entered into an Agreement of Purchase and Sale dated July 28, 2025, as amended on September 11, 2025, September 29, 2025, and November 13, 2025, with Mountaintop Holdings. Pursuant to the agreement, Innovative Properties agreed to sell to Mountaintop Holdings certain real property located at 220 Oak Hill Road, Mountaintop, Pennsylvania 18707, together with all rights, title, improvements, easements, and appurtenant interests, which is improved with warehouse facilities, as well as certain personal property, contracts, and intangibles of Innovative Properties. The sale closed on March 6, 2026, at which time Innovative Properties received gross proceeds of $9.225 million. RESULTS OF OPERATIONS Overview 2025 represented a transitional year for IVFH as the Company shifted its focus toward strengthening its internal operating foundation to support sustainable growth. During the year, management prioritized improvements to core business processes, operational discipline, and supporting software and systems, with the objective of creating greater consistency, visibility, and scalability across the organization. These efforts included initiatives to better align procurement, forecasting, and order management processes, enhance operational workflows across distribution channels, and reinforce the Company’s core operating platform. 17 Table of Contents As part of this effort, the Company also took steps to streamline its operating footprint and improve overall efficiency. This included the planned exit and subsequent sale of the Pennsylvania facility, which was completed in the first quarter of 2026, and the transition of certain related activities into existing operating locations. These actions were intended to simplify the operating structure, reduce complexity, and allow management to focus resources on core distribution and digital channel operations. Financial Highlights For the fiscal year ended December 31, 2025, IVFH reported revenue of $60.7 million, a 2.1% increase compared to $59.5 million in 2024. Revenue Breakdown: ● Digital Channels: Largely made up of our distributor relationships and supported by our drop ship model. This category contributed $32.5 million, which is 54% of our total revenue from continuing operations. This represents a decrease of 7.2% from $35 million in 2024, primarily due to continued headwinds in our legacy drop ship business. ● National Distribution: Captures our partnerships with airline caterers. This category generated $12.9 million, or 21% of total revenue from continuing operations, marking a 4.8% increase from $12.3 million in 2024. 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 $15.3 million, or 25% of total revenue from continuing operations, an increase of 26% from $12.1 million in 2024, supported by the expansion of local distribution channels and the acquisition of LoCo Foods. Cost of goods sold for the year was $45.0 million, compared to $44.4 million in 2024, an increase of 1.4%. Gross margin increased 49 basis points to 25.8%, primarily due to changes in revenue mix, including shifts in the relative sales volume by distributor within the drop ship channel. Operating Expenses Cash Operating Expenses (Cash OpEx): ● Payroll and Related Costs: Increased by $0.8 million to $9.4 million, primarily due to a $1.2 million increase related to the Denver warehouse acquired in late 2024, partially offset by a $0.4 million decrease in variable compensation and a $0.04 million decrease from headcount reductions. ● Computer and IT Costs: Increased by $69 thousand to $461 thousand, reflecting the Company’s efforts to build out the harvest platform ● Office, Facilities, and Vehicles Costs: Increased by $770 thousand to $1.4 million, driven by the newly acquired facility in Denver ($435K) and increased fleet cost of $170 thousand in the Chicago business. ● Advertising and Digital Marketing Costs: Increased by $27 thousand to $31 thousand, primarily resulting from our Harvest platform and fees associated with web design and platform fees. ● Professional and Legal Fees: Decreased by $109 thousand to $1.4 million, due to various legal and transactional activities related to acquisitions, divestitures, and other corporate actions. The total Cash OpEx increased by $1.4 million, primarily related to $2.0 million in operating expenses associated with the acquisition of the Denver business, offset by the items noted above. 18 Table of Contents Non-Cash Operating Expenses (Non-Cash OpEx): ● Share-Based Compensation: Decreased by $2.5 million to $(933) thousand, due to revaluation of stock appreciation rights. ● Depreciation and Amortization Costs: Increased by $139 thousand to $254 thousand, based on increased PPE assets associated with Denver acquisitions. ● Credit Loss Expense: Increased by $101 thousand to $106 thousand, primarily due to write offs within our local restaurant business and associated bankruptcies of certain customers. Total Non-Cash OpEx Reduction: The total Non-Cash OpEx decreased by $2.2 million, primarily due to the revaluation of stock appreciation rights. Non-Recurring Expenses: ● $174 thousand in separation costs in 2025, compared to $40 thousand in separation costs in 2024. Income Tax Expense: ● Increased to $81 thousand in 2025, compared to $0 in 2024. Net Income Net income from continuing operations declined by 39.1% to $2.5 million, compared to $4.2 million in 2024. Liquidity and Capital Resources As of December 31, 2025, IVFH had current assets of $16.8 million, including cash and cash equivalents of $0.9 million, and current liabilities of $12.4 million. The Company had net working capital of $4.4 million. Cash Flow Analysis : ● Operating Activities : Used $27 thousand, primarily due to the Company’s net loss. Changes in the Company’s working capital components contributed $630 thousand of working capital. The significant changes in working capital included: ● Accounts Receivable: Decreased by $3.3 million, reflecting shut down of the retail cheese business. ● Inventory: Decreased by $1.3 million, primarily due to retail cheese business shut down. ● Accounts Payable and Accrued Liabilities: Decreased by $3.5 million, mainly due to cheese business shut down and 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. ● Operating lease liability: Decreased by $246 thousand due to lease payments made during the period. ● Accrued separation cost – related parties: Decreased by $283 thousand due to periodic payments made. ● Investing Activities : Used $187 thousand due to the acquisition and disposition of property and equipment. ● Proceeds from Sale of Assets: $54 thousand from the sale of warehouse equipment. ● Acquisition of Property and Equipment: $242 thousand. ● Financing Activities : Used $645 thousand. Key financing activities included: ● Principal payments on debt: $180 thousand. ● Payment for taxes related to net share settlement of equity awards: $276 thousand. ● Principal Payments on Financing Leases: $189 thousand. 19 Table of Contents 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. 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 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. 20 Table of Contents 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 Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. In preparing our consolidated financial statements, we make assumptions, judgments, and estimates that can have a significant impact on amounts reported in our consolidated financial statements. We evaluate our estimates and assumptions on an ongoing basis. We base our assumptions, judgments, and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. Our significant accounting policies are described in Part II, Item 8, “Nature of Activities and Summary of Significant Accounting Policies,” Note 1, “Business and Summary of Significant Accounting Policies,” in the notes to consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements. We believe that of all our significant accounting policies, the following accounting policies and specific estimates involve a greater degree of judgment and complexity. Accordingly, these are the accounting policies we believe are the most critical to aid in fully understanding and evaluating our financial condition and results of operations. Stock Options and Stock Appreciation Rights 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, 2025 and 2024: December 31, 2025 2024 Black-Scholes model variables: Volatility 77.84-205.63 % 86.8-131.55 % Dividends 0.0 % 0.0 % Risk-free interest rates 3.48-4.10 % 3.66-4.71 % Term (years) 1.00-2.00 2.00-2.75 Allowance for Credit Losses The Company maintained an allowance in the amount of $218,319 and $40,002 for credit losses at December 31, 2025 and 2024, 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. 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. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. Accrued interest and penalties are included within income taxes payable in the consolidated balance sheet At December 31, 2025, the Company has a net operating loss carryforward of approximately $21,256,747. 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 long term 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. 21 Table of Contents