UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM
For the quarterly period ended
For the transition period from to .
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or Other Jurisdiction of Incorporation or Organization) | (IRS Employer I.D. No.) |
(Address of Principal Executive Offices)
(
(Registrant’s Telephone Number, Including Area Code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act: None.
Title of each class |
| Trading Symbol(s) |
| Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒ NO ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒ NO ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
(Check One):
Large Accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company |
Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Regulation 12b-2 of the Exchange Act): YES ☐
State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
INNOVATIVE FOOD HOLDINGS, INC.
TABLE OF CONTENTS TO FORM 10-Q
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PART I. |
FINANCIAL INFORMATION |
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Item 1. |
3 |
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3 |
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4 |
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Consolidated Statement of Stockholders’ Equity | 5 | |
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6 |
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7 |
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Item 2. |
27 |
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Item 4. |
36 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
37 |
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Item 2. |
37 |
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Item 3. |
37 |
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Item 4. |
37 |
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Item 5. |
37 |
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Item 6. |
38 |
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39 |
PART I. FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
Innovative Food Holdings, Inc.
Consolidated Balance Sheets
September 30, |
December 31, |
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2022 |
2021 |
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(unaudited) |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net |
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Inventory |
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Other current assets |
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Total current assets |
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Property and equipment, net |
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Investments |
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Right of use assets, operating leases, net |
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Right of use assets, finance leases, net |
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Other amortizable intangible assets, net |
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Tradenames and other unamortizable intangible assets |
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Total assets |
$ | $ | ||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable and accrued liabilities |
$ | $ | ||||||
Accrued interest, current portion |
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Deferred revenue |
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Line of Credit |
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Notes payable - current portion, net of discount |
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Lease liability - operating leases, current |
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Lease liability - finance leases, current |
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Contingent liability - current portion |
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Total current liabilities |
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Lease liability - operating leases, non-current |
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Lease liability - finance leases, non-current |
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Contingent liability - long-term |
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Note payable - long term portion, net |
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Total liabilities |
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- | ||||||||
Commitments & Contingencies (see note 17) |
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Stockholders' equity |
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Common stock: $ |
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Additional paid-in capital |
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Treasury stock: |
( |
) |
( |
) |
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Accumulated deficit |
( |
) |
( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
$ | $ |
See condensed notes to these unaudited consolidated financial statements.
Innovative Food Holdings, Inc.
Consolidated Statements of Operations
(unaudited)
For the Three |
For the Three |
For the Nine |
For the Nine |
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Months Ended |
Months Ended |
Months Ended |
Months Ended |
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September 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||
2022 |
2021 |
2022 |
2021 |
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Revenue |
$ | $ | $ | $ | ||||||||||||
Cost of goods sold |
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Gross margin |
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Selling, general and administrative expenses |
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Total operating expenses |
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Operating (loss) income |
( |
) |
( |
) |
( |
) |
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Other income (expense:) |
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Impairment of investment |
( |
) |
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Gain on interest rate swap |
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Gain on forgiveness of debt |
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Loss on extinguishment of debt |
( |
) |
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Other leasing income |
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Interest expense, net |
( |
) |
( |
) |
( |
) |
( |
) |
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Total other income (expense) |
( |
) |
( |
) |
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Net (loss) income before taxes |
( |
) |
( |
) |
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Income tax expense |
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Net (loss) income |
$ | $ | $ | ( |
) |
$ | ( |
) |
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Net (loss) income per share - basic |
$ | $ | $ | ( |
) |
$ | ( |
) |
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Net (loss) income per share - diluted |
$ | $ | $ | ( |
) |
$ | ( |
) |
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Weighted average shares outstanding - basic |
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Weighted average shares outstanding - diluted |
See condensed notes to these unaudited consolidated financial statements.
Innovative Food Holdings, Inc.
Consolidated Statements of Stockholders' Equity
Three and Nine Months Ended September 30, 2022 and 2021
(unaudited)
Additional |
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Common Stock |
Paid-in |
Treasury Stock |
Accumulated |
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Amount |
Value |
Capital |
Amount |
Value |
Deficit |
Total |
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Balance - June 30, 2021 |
$ | $ | $ | ( |
) |
$ | ( |
) |
$ | |||||||||||||||||||
Fair value of vested stock and stock options |
- | - | - | |||||||||||||||||||||||||
Common stock sold for cash, net of costs |
- | - | - | |||||||||||||||||||||||||
Net income for the three months ended September 30, 2021 |
- | - | - | - | - | |||||||||||||||||||||||
Balance - September 30, 2021 |
$ | $ | $ | ( |
) |
$ | ( |
) |
$ | |||||||||||||||||||
Balance - June 30, 2022 |
( |
) |
( |
) |
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Fair value of vested stock and stock options |
- | - | - | |||||||||||||||||||||||||
Net income for the three months ended September 30, 2022 |
- | - | - | - | - | |||||||||||||||||||||||
Balance - September 30, 2022 |
$ | $ | $ | ( |
) |
$ | ( |
) |
$ | |||||||||||||||||||
Balance - December 31, 2020 |
$ | $ | $ | ( |
) |
$ | ( |
) |
$ | |||||||||||||||||||
Fair value of vested stock and stock options |
- | - | - | |||||||||||||||||||||||||
Common stock sold for cash, net of costs |
- | - | - | |||||||||||||||||||||||||
Net loss for the nine months ended September 30, 2021 |
- | - | - | - | - | ( |
) |
( |
) |
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Balance - September 30, 2021 |
$ | $ | $ | ( |
) |
$ | ( |
) |
$ | |||||||||||||||||||
Balance - December 31, 2021 |
( |
) |
( |
) |
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Fair value of vested stock and stock options |
- | - | - | |||||||||||||||||||||||||
Offering expenses for stock previously sold for cash |
- | - | ( |
) |
- | - | - | ( |
) |
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Common stock issued for services |
- | - | - | |||||||||||||||||||||||||
Fair value of options issued to consultant |
- | - | - | - | - | |||||||||||||||||||||||
Net loss for the nine months ended September 30, 2022 |
- | - | - | - | - | ( |
) |
( |
) |
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Balance - September 30, 2022 |
$ | $ | $ | ( |
) |
$ | ( |
) |
$ |
See condensed notes to these unaudited consolidated financial statements.
Innovative Food Holdings, Inc.
Consolidated Statements of Cash Flows
(unaudited)
For the Nine |
For the Nine |
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Months Ended |
Months Ended |
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September 30, |
September 30, |
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2022 |
2021 |
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(unaudited) |
(unaudited) |
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Cash flows from operating activities: |
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Net loss |
$ | ( |
) |
$ | ( |
) |
||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Gain on forgiveness of debt |
( |
) |
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Impairment of investment |
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Depreciation and amortization |
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Amortization of right-of-use asset |
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Amortization of prepaid loan fees |
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Stock based compensation |
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Loss on extinguishment of debt |
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Provision for doubtful accounts | ||||||||
Changes in assets and liabilities: |
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Accounts receivable, net |
( |
) |
( |
) |
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Inventory and other current assets, net |
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Accounts payable and accrued liabilities |
( |
) |
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Deferred revenue |
( |
) |
( |
) |
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Contingent liabilities |
( |
) |
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Operating lease liability |
( |
) |
( |
) |
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Net cash (used in) operating activities |
( |
) |
( |
) |
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Cash flows from investing activities: |
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Acquisition of property and equipment |
( |
) |
( |
) |
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Net cash used in investing activities |
( |
) |
( |
) |
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Cash flows from financing activities: |
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Payment of offering costs for stock previously issued |
( |
) |
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Proceeds from sale of common stock, net of costs |
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Proceeds from Payroll Protection Plan Loan |
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Principal payments on debt |
( |
) |
( |
) |
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Principal payments financing leases |
( |
) |
( |
) |
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Cost of debt financing |
( |
) |
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Net cash provided by (used in) financing activities |
( |
) |
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Decrease in cash and cash equivalents | ( |
) |
( |
) |
||||
Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
$ | $ | ||||||
Supplemental disclosure of cash flow information: |
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Cash paid during the period for: |
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Interest |
$ | $ | ||||||
Taxes |
$ | $ | ||||||
Non-cash investing and financing activities: |
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Increase in right of use assets & liabilities – new leases |
$ | $ | ||||||
Decrease in right of use assets & liabilities – cancellation of lease |
$ | $ | ||||||
Finance lease for fixed assets |
$ | $ | ||||||
Debt to Fifth Third Bank paid directly by Maple Mark Bank |
$ | $ | ||||||
Reclassification of accounts receivable to other assets |
$ | $ |
See condensed notes to these unaudited consolidated financial statements.
INNOVATIVE FOOD HOLDINGS, INC.
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2022
(Unaudited)
1. BASIS OF PRESENTATION
Basis of Presentation
The accompanying unaudited interim consolidated financial statements of Innovative Food Holdings, Inc., and its 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”), 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.
The accompanying unaudited interim consolidated financial statements have been prepared by the Company, 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-Q. Certain information and footnote disclosures normally included in audited consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Accordingly, these interim financial statements should be read in conjunction with the Company’s audited financial statements and related notes as contained in Form 10-K for the year ended December 31, 2021. In the opinion of management, the interim unaudited consolidated financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented. The results of the operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results of operations to be expected for the full year.
2. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Our business is currently conducted by our wholly owned subsidiaries, some of which are non-operating, Artisan Specialty Foods, Inc. (“Artisan”), Food Innovations, Inc. (“FII”), Food New Media Group, Inc. (“FNM”), Organic Food Brokers, LLC (“OFB”), Gourmet Foodservice Group, Inc. (“GFG”), Gourmet Foodservice Group Warehouse, Inc. (“GFW”), Gourmeting, Inc. (“Gourmeting”), Haley Food Group, Inc. (“Haley”), Oasis Sales Corp. (“Oasis”), 4 The Gourmet, Inc. (d/b/a For The Gourmet, Inc.), (“Gourmet”), Innovative Food Properties, LLC (“IFP”), Plant Innovations, Inc. (“Plant Innovations”), Innovative Gourmet, LLC (“Innovative Gourmet” or “igourmet”), Food Funding, LLC (“Food Funding”), Logistics Innovations, LLC (L Innovations”), M Innovations, LLC (“M Innovations” or “Mouth”), MI Foods, LLC (“MIF”), M Foods Innovations, LLC (“M Foods”), P Innovations, LLC (“P Innovations”), PlantBelly, LLC (“PlantBelly”), Innovative Foods, Inc. (“IFI”) and Innovative Gourmet Partnerships, LLC (“IGP”), and collectively with IVFH and its other subsidiaries, the “Company” or “IVFH”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. All material intercompany transactions have been eliminated upon consolidation of these entities.
Overall, our business activities are focused around the creation and growth of a platform which provides distribution or the enabling of distribution of high quality, unique specialty food and food related products ranging from specialty foodservice products to Consumer-Packaged Goods (“CPG”) products through a variety of sales channels ranging from national partnership based and regionally based foodservice related sales channels to e-commerce sales channels offering products both direct to consumers (“D2C”) and direct to business (“B2B”). In our business model, we receive orders from our customers and then work closely with our suppliers and our warehouse facilities to have the orders fulfilled. In order to maintain freshness and quality, we carefully select our suppliers based upon, among other factors, their quality, uniqueness, reliability and access to overnight courier services.
FII, through its relationship with the producers, growers, and makers of thousands of unique specialty foodservice products and through its relationship with US Foods, Inc. (“U.S. Foods” or “USF”), has been in the business of providing premium restaurants, within 24 – 72 hours, with the freshest origin-specific perishable, and healthcare products shipped directly from our network of vendors and from our warehouses. Our customers include restaurants, hotels, country clubs, national chain accounts, casinos, hospitals and catering houses.
Gourmet has been in the business of providing specialty food via e-commerce through its own website at www.forthegourmet.com and through other ecommerce channels, with unique specialty gourmet food products shipped directly from our network of vendors and from our warehouses within 24 – 72 hours.
Artisan is a supplier of over 1,500 unique specialty foodservice products to over 500 customers such as chefs, restaurants, etc. in the Greater Chicago area and serves as a national fulfillment center for certain of the Company’s other subsidiaries.
GFG is focused on expanding the Company’s program offerings to additional specialty foodservice customers.
Haley is a dedicated foodservice consulting and advisory firm that works closely with companies to access private label and manufacturers’ private label food service opportunities with the intent of helping them launch and commercialize new products in the broadline foodservice industry and assists in the enabling of the distribution of products via national broadline food distributors.
IFP was formed to hold the Company’s real estate holdings including the recently acquired facility in Mountaintop, Pennsylvania.
OFB and Oasis function as outsourced national sales and brand management teams for emerging organic and specialty food CPG companies of a variety of sizes and business stages, and provides emerging and unique CPG specialty food brands with distribution and shelf placement access in all of the major metro markets in the food retail industry.
igourmet has been in the business of providing D2C specialty food via e-commerce through its own website at www.igourmet.com and through other channels such as www.amazon.com, www.ebay.com, and www.walmart.com. In addition, igourmet.com offers a line of B2B specialty foodservice items. Products are primarily shipped directly from igourmet.com’s approximately 100,000 square feet warehouse in Pennsylvania via igourmet.com owned trucks and via third party carrier directly to thousands of customers nationwide.
Mouth.com (www.mouth.com) is an online retailer of specialty foods, monthly subscription boxes and curated gift boxes to thousands of consumers and corporate customers across the United States. Mouth sources high quality specialty foods crafted in the US by independent and small batch makers, and expertly curates them into standout food gifts for both consumers and corporate customers. Mouth also has launched a private label brand, including several award-winning products.
P Innovations focus is to leverage acquired assets to expand the Company’s subscription-based e-commerce business activities and to launch new businesses leveraging the Company’s e-commerce platform.
Plant Innovations is focused on plant-based D2C brands and online retail within the e-commerce space.
L Innovations provides 3rd party warehouse and fulfillment services out of its location at the Company’s PA facility.
Use of Estimates
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to revenue recognition and concentration of credit risk. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accounts subject to estimate and judgements are accounts receivable reserves, 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 operating subsidiaries, Artisan, FII, FNM, OFB, GFG, GFW, Gourmeting, Haley, Oasis, Innovative Gourmet, Food Funding, IFP, L Innovations, M Innovations, P Innovations, MIF, M Foods, PlantBelly, Plant Innovations, IFI, IGP, and Gourmet. All material intercompany transactions have been eliminated upon consolidation of these entities.
Concentrations of Credit Risk
Financial instruments and related items, which potentially subject the Company to concentrations of credit risk, consist primarily of cash, cash equivalents and trade receivables. The Company places its cash and temporary cash in investments with credit quality institutions. At times, such investments may be in excess of applicable government mandated insurance limit. At September 30, 2022 and December 31, 2021, trade receivables from the Company’s largest customer amounted to
The Company maintains cash balances in excess of Federal Deposit Insurance Corporation limits. At September 30, 2022 and December 31, 2021, the total cash in excess of these limits was $
Leases
The Company accounts for leases in accordance with Financial Accounting Standards Board (“FASB”) ASC 842, “Leases”. The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) and short-term and long-term lease liabilities are included on the face of the consolidated balance sheet. Finance lease ROU assets are presented within other assets, and finance lease liabilities are presented within current and long-term liabilities.
ROU assets represent the right of use to an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. For lease agreements with terms less than 12 months, the Company has elected the short-term lease measurement and recognition exemption, and it recognizes such lease payments on a straight-line basis over the lease term.
Revenue Recognition
The Company recognizes revenue upon product delivery. All of our products are shipped either same day or overnight or through longer shipping terms to the customer and the customer takes title to product and assumes risk and ownership of the product when it is delivered. Shipping charges to customers and sales taxes collectible from customers, if any, are included in revenues.
For revenue from product sales, the Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers”. A five-step analysis must be met as outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Warehouse and logistic services revenue is primarily comprised of inventory management, order fulfilment and warehousing services. Warehouse & logistics services revenues are recognized at the point in time when the services are rendered to the customer.
Deferred Revenue
Certain customer arrangements in the Company's business such as gift cards and e-commerce subscription purchases result in deferred revenues when cash payments are received in advance of performance. Gift cards issued by the Company generally have an expiration of five years from date of purchase. The Company records a liability for unredeemed gift cards and advance payments for monthly club memberships, as cash is received, and the liability is reduced when the card is redeemed or product delivered.
The following table represents the changes in deferred revenue as reported on the Company’s consolidated balance sheets:
Balance as of December 31, 2020 |
$ | |||
Cash payments received |
||||
Net sales recognized |
( |
) |
||
Balance as of March 31, 2021 (unaudited) |
$ | |||
Cash payments received |
||||
Net sales recognized |
( |
) |
||
Balance as of June 30, 2021 (unaudited) |
$ |
Cash payments received |
||||
Net sales recognized |
( |
) |
||
Balance as of September 30, 2021 (unaudited) |
$ |
Balance as of December 31, 2021 |
$ | |||
Cash payments received |
||||
Net sales recognized |
( |
) |
||
Balance as of March 31, 2022 (unaudited) |
$ |
Cash payments received |
||||
Net sales recognized |
( |
) |
||
Balance as of June 30, 2022 (unaudited) |
$ |
Cash payments received |
||||
Net sales recognized |
( |
) |
||
Balance as of September 30, 2022 (unaudited) |
$ |
Disaggregation of Revenue
The following table represents a disaggregation of revenue for the three and nine months ended September 30, 2022 and 2021:
Three Months Ended |
||||||||
September 30, |
||||||||
2022 |
2021 |
|||||||
(unaudited) |
(unaudited) |
|||||||
Specialty Foodservice |
$ | $ | ||||||
E-Commerce |
||||||||
National Brand Management |
||||||||
Logistics |
||||||||
Total |
$ | $ |
Nine Months Ended |
||||||||
September 30, |
||||||||
2022 |
2021 |
|||||||
(unaudited) |
(unaudited) |
|||||||
Specialty Foodservice |
$ | $ | ||||||
E-Commerce |
||||||||
National Brand Management |
||||||||
Logistics |
||||||||
Total |
$ | $ |
Cost of goods sold
We have included in cost of goods sold all costs which are directly related to the generation of revenue. These costs include primarily the cost of food and raw materials, packing and handling, shipping, and delivery costs.
We have also included all payroll costs as cost of goods sold in our leasing and logistics services business.
Basic and Diluted Earnings Per Share
Basic net earnings per share is based on the weighted average number of shares outstanding during the period, while fully-diluted net earnings per share is based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method. Potentially dilutive securities consist of options and warrants to purchase common stock, and convertible debt. Basic and diluted net loss per share is computed based on the weighted average number of shares of common stock outstanding during the period.
The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options and warrants for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculation. For the three and nine months ended September 30, 2022,
Dilutive shares at September 30, 2022:
Stock Options
The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company at September 30, 2022:
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Weighted |
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Average |
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Remaining |
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Exercise |
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Number |
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Contractual |
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|||
Price |
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of Options |
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Life (years) |
|
|||
$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Restricted Stock Awards
At September 30, 2022, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those
Stock Grants
At September 30, 2022, there were an aggregate
Dilutive shares at September 30, 2021:
Stock Options
The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company at September 30, 2021:
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Weighted |
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Average |
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Remaining |
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Exercise |
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Number |
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Contractual |
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|||
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Price |
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|
of Options |
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Life (years) |
|
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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During the three months ended September 30, 2021, the Company issued
Restricted Stock Awards
At September 30, 2021, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those 300,000 restricted stock awards will vest as follows:
Stock Grants
The Company charged the amount of $
Significant Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to, accounts receivable. ASU 2016-13 will become effective for the Company on January 1, 2023 and early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on our consolidated financial statements.
In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2023; adoption of this standard is not expected to have a material effect 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.
3. LIQUIDITY
The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company had an accumulated deficit of $
The Company is working to manage its current liabilities while it continues to make changes in operations to further improve its cash flow and liquidity position. Management believes the Company will generate sufficient capital from operations and, if additional financing is required, from debt and equity financing in order to satisfy current liabilities in the succeeding twelve months. Management’s belief is based, if necessary, on the Company’s operating plans, which in turn is based on assumptions that may prove to be incorrect.
On June 6, 2022, the Company entered into the following loan agreements with MapleMark: the MapleMark Revolver, with a balance at September 30, 2022 of $
The MapleMark Revolver has an initial maturity date of November 28, 2022; the MapleMark Term Loans 1 and 2 have initial maturity dates of November 28, 2022. The Company has applied for, and expects to receive, loan guarantees from the United States Department of Agriculture pursuant to its Business and Industry Guarantee Loan Program, though there can be no assurance that these guarantees will be received. Upon receipt of these loan guarantees, the maturity date of the Revolver will be extended to November 28, 2023, and the maturity date of the Term Loans will be extended to June 6, 2052. See note 19.
If the Company’s cash flow from operations is insufficient, the Company may require additional financing in order to execute its operating plan and continue as a going concern. The Company cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, the Company may be unable to implement its current plans for expansion, repay its debt obligations as they become due or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations. The Company has not made any adjustments to the financial statements which would be necessary should the Company not be able to continue as a going concern.
4. ACCOUNTS RECEIVABLE
At September 30, 2022 and December 31, 2021, accounts receivable consists of:
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
Accounts receivable from customers |
$ | $ | ||||||
Allowance for doubtful accounts |
( |
) |
( |
) |
||||
Accounts receivable, net |
$ | $ |
During the three and nine months ended September 30, 2022 the Company charged the amount of $
5. INVENTORY
Inventory consists primarily of specialty food products. At September 30, 2022 and December 31, 2021, inventory consisted of the following:
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
Finished Goods Inventory |
$ | $ |
6. PROPERTY AND EQUIPMENT
Acquisition of Building
The Company owns a building and property located at 28411 Race Track Road, Bonita Springs, Florida 34135. The property consists of approximately
On May 14, 2015, the Company purchased a building and property located at 2528 S. 27th Avenue, Broadview, Illinois 60155. The property consists of approximately
Depreciation on the building and the related improvements, furniture, fixtures, and equipment began when the Company occupied the facility in October, 2015.
On November 8, 2019 the Company, through a newly formed wholly-owned subsidiary, purchased a logistics and warehouse facility (the “Facility”) for $
The following table summarizes property and equipment at September 30, 2022 and December 31, 2021:
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
Land |
$ | $ | ||||||
Building |
||||||||
Computer and Office Equipment |
||||||||
Warehouse Equipment |
||||||||
Furniture and Fixtures |
||||||||
Vehicles |
||||||||
Total before accumulated depreciation |
||||||||
Less: accumulated depreciation |
( |
) |
( |
) |
||||
Total |
$ | $ |
Depreciation and amortization expense for property and equipment amounted to $
7. RIGHT OF USE (“ROU”) ASSETS AND LEASE LIABILITIES – OPERATING LEASES
The Company has operating leases for offices, warehouses, vehicles, and office equipment. The Company’s leases have remaining lease terms of
The Company’s lease expense for the three months ended September 30, 2022 and 2021 was entirely comprised of operating leases and amounted to $
The Company’s ROU asset amortization for the three months ended September 30, 2022 and 2021 was $
Right of use assets – operating leases are summarized below:
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
Office |
$ | $ | ||||||
Warehouse equipment |
||||||||
Office equipment |
||||||||
Vehicles |
||||||||
Right of use assets - operating leases, net |
$ | $ |
Operating lease liabilities are summarized below:
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
Office |
$ | $ | ||||||
Warehouse equipment |
||||||||
Office equipment |
||||||||
Vehicles |
||||||||
Lease liability |
$ | $ | ||||||
Less: current portion |
( |
) |
( |
) |
||||
Lease liability, non-current |
$ | $ |
Maturity analysis under these lease agreements are as follows:
For the period ended September 30, 2023 |
$ | |||
For the period ended September 30, 2024 |
||||
For the period ended September 30, 2025 |
||||
For the period ended September 30, 2026 |
||||
For the period ended September 30, 2027 |
||||
Total |
$ | |||
Less: Present value discount |
( |
) |
||
Lease liability |
$ |
8. RIGHT OF USE ASSETS – FINANCING LEASES
The Company has financing leases for vehicles and warehouse equipment. (See note 15.) Right of use asset – financing leases are summarized below:
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
Vehicles |
$ | $ | ||||||
Warehouse Equipment |
||||||||
Total before accumulated depreciation |
||||||||
Less: accumulated depreciation |
( |
) |
( |
) |
||||
Total right of use assets - financing leases, net |
$ | $ |
Depreciation expense for right of use assets for the three months ended September 30, 2022 and 2021 was $
9. INVESTMENTS
The Company has made investments in certain early stage food related companies which it expects can benefit from synergies with the Company’s various operating businesses. At September 30, 2022 and 2021
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 nine months ended September 30, 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 $
10. INTANGIBLE ASSETS
The Company acquired certain intangible assets pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet, OFB, Haley, and M Innovations. These assets include non-compete agreements, customer relationships, trade names, internally developed technology, and goodwill. The Company has also capitalized the development of its website.
As detailed in ASC 350 “Intangibles - Goodwill and Other”, the Company tests for goodwill impairment in the fourth quarter of each year and whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. As detailed in ASC 350-20-35-3A, in performing its testing for goodwill impairment, management has completed a qualitative analysis to determine whether it was more likely than not that the fair value of the Company’s reporting unit is less than its carrying amount, including goodwill. To complete this review, management followed the steps in ASC 350-20-35-3C to evaluate the fair value of goodwill and considered all known events and circumstances that might trigger an impairment of goodwill.
COVID-19 has had a material negative impact on some of the Company’s foodservice customers. In an effort to limit the spread of the virus, federal, state and local governments have implemented measures that have resulted in the closure of non-essential businesses in many of the markets the Company serves, which has forced its customers in those markets to either transition their establishments to take-out service, delivery service or temporarily cease operations. These actions have led to a significant decrease in demand for certain of the Company’s foodservice products. The adverse impact to the Company’s foodservice customer base was a triggering event and accordingly, as required by ASC 350, the Company performed interim goodwill and long-lived asset quantitative impairment tests during the first quarter of 2020. While the triggering event was a result of the negative impact related to foodservice customers, the applicable accounting rules then required an impairment test targeted specifically to any available carrying value of goodwill or intangible assets. During the first quarter of 2020, the Company performed the impairment tests on certain intangible assets and goodwill pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet and M Innovations; the intangible assets acquired pursuant to the acquisitions of OFB and Haley were fully amortized at the time of the impairment test.
Long-lived Impairment Test
Long-lived assets, including other intangible assets, were tested for recoverability at the asset group level. The Company estimated the net undiscounted cash flows expected to be generated from the asset group over the expected useful life of the asset group’s primary asset. Key assumptions include future revenues, growth rates, estimates of future levels of gross profit and operating profit and projected capital expenditures necessary to maintain the operating capacity of each asset group. As a result of the impairment test, it was calculated that the net carrying values of other intangible assets exceeded the undiscounted cash flows for each of the Company’s asset groups by a total of $
The Company acquired certain intangible assets pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet, OFB, Haley, and M Innovations. The following is the net book value of these assets:
September 30, 2022 (unaudited) |
||||||||||||
Accumulated |
||||||||||||
Gross |
Amortization |
Net |
||||||||||
Non-Compete Agreement - amortizable |
$ | $ | ( |
) |
$ | |||||||
Customer Relationships - amortizable |
( |
) |
||||||||||
Trade Names and other |
||||||||||||
Internally Developed Technology - amortizable |
( |
) |
||||||||||
Website - amortizable |
( |
) |
||||||||||
Total |
$ | $ | ( |
) |
$ |
December 31, 2021 |
||||||||||||
Accumulated |
||||||||||||
Cost |
Amortization |
Net |
||||||||||
Non-Compete Agreement - amortizable |
$ | $ | ( |
) |
$ | |||||||
Customer Relationships - amortizable |
( |
) |
||||||||||
Trade Names and other |
||||||||||||
Internally Developed Technology |
( |
) |
||||||||||
Website |
( |
) |
||||||||||
Total |
$ | $ | ( |
) |
$ |
Total amortization expense for the three months ended September 30, 2022 and 2021 was $
11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at September 30, 2022 and December 31, 2021 are as follows:
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
Trade payables and accrued liabilities |
$ | $ | ||||||
Accrued payroll and commissions |
||||||||
Total |
$ | $ |
12. ACCRUED INTEREST
At September 30, 2022, accrued interest on notes outstanding was $
13. REVOLVING CREDIT FACILITIES
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
On June 6, 2022, the Company entered into a revolving credit facility with MapleMark Bank ("MapleMark”, the “MapleMark Revolver”) in the initial amount of $ |
$ | $ | ||||||
Line of credit facility with Fifth Third Bank in the original amount of $ |
$ | $ | ||||||
Total |
$ | $ |
14. NOTES PAYABLE
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
On June 6, 2022, the Company entered into a term loan agreement with MapleMark (the “MapleMark Term Loan 1”) for the original amount of $
|
$ | $ | ||||||
On June 6, 2022, the Company entered into a term loan agreement with MapleMark (the “MapleMark Term Loan 2”) for the original amount of $
|
$ | $ |
Secured mortgage note payable for the acquisition of land and building in Bonita Springs, Florida in the amount of $ |
$ | $ | ||||||
Secured mortgage note payable for the acquisition of land and building in Broadview, Illinois in the amount of $ |
$ | $ | ||||||
Promissory note dated |
$ | $ | ||||||
A note payable in the amount of $ |
$ | $ | ||||||
Vehicle acquisition loan dated |
$ | $ |
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
Secured mortgage facility in the amount of $
|
$ | $ | ||||||
Total |
$ | $ | ||||||
Discount |
( |
) |
( |
) |
||||
Net of discount |
$ | $ | ||||||
Current portion |
$ | $ | ||||||
Long-term maturities |
||||||||
Total |
$ | $ |
Aggregate maturities of long-term notes payable as of September 30, 2022 are as follows:
For the period ended September 30,
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
- |
|
2026 |
|
|
- |
|
2027 |
|
|
- |
|
Total |
|
$ |
|
|
15. LEASE LIABILITIES - FINANCING LEASES
September 30, 2022 |
December 31, 2021 |
|||||||
(unaudited) |
||||||||
Financing lease obligation under a lease agreement for a forklift dated July 12, 2021 in the original amount of $ |
$ | $ | ||||||
Financing lease obligation under a lease agreement for a pallet truck dated July 15, 2021 in the original amount of $ |
$ | $ | ||||||
Financing lease obligation under a lease agreement for warehouse furniture and equipment truck dated October 14, 2020 in the original amount of $ |
$ | $ | ||||||
Financing lease obligation under a lease agreement for a truck dated March 31, 2020 in the original amount of $ |
$ | $ | ||||||
Financing lease obligation under a lease agreement for a truck dated November 5, 2018 in the original amount of $ |
$ | $ | ||||||
Financing lease obligation under a lease agreement for a truck dated August 23, 2019 in the original amount of $ |
$ | $ | ||||||
Financing lease obligation under a lease agreement for a truck dated February 4, 2022 in the original amount of $ |
$ | $ | ||||||
Total |
$ | $ | ||||||
Current portion |
$ | $ | ||||||
Long-term maturities |
||||||||
Total |
$ | $ |
Aggregate maturities of lease liabilities – financing leases as of September 30, 2022 are as follows:
For the period ended September 30,
2023 |
|
$ |
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
2027 |
|
|
|
|
Thereafter |
|
|
- |
|
Total |
|
$ |
|
|
16. RELATED PARTY TRANSACTIONS
For the nine months ended September 30, 2022:
Vesting of shares to officers
During the nine months ended September 30, 2022 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $
For the nine months ended September 30, 2021:
Vesting of shares to officers
During the nine months ended September 30, 2021 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $
During the nine months ended September 30, 2021, the Company issued
On August 26, 2021, the Company sold a total of
17. COMMITMENTS AND CONTINGENCIES
Contingent Liability
Pursuant to the igourmet Asset Purchase Agreement, the Company recorded contingent liabilities in the original amount of $
Pursuant to the Mouth Foods LLC Asset Acquisition, the Company recorded contingent liabilities in the amount of $
License Agreements
In May 2019, the Company entered into a royalty-based license agreement, through December 31, 2022 with a lifestyle brand, which provides the exclusive right, with certain carve-outs and limitations, to sell and promote branded gift baskets for certain channels including: retail, warehouse club stores, certain of the Company’s current e-commerce channels, and other e-commerce channels such as amazon.com (the “May 2019 License Agreement”). Pursuant to the May 2019 License Agreement, the Company paid an initial royalty deposit in the amount of $
Litigation
On September 16, 2019, an action (the “PA Action”) was filed in the Court of Common Pleas of Philadelphia County, Trial Division, against, among others, the Company and its wholly-owned subsidiaries, Innovative Gourmet LLC and Food Innovations, Inc. Since that time, other parties involved in the incident have joined as plaintiffs in the PA Action. The complaint in the PA Action alleges, inter alia, wrongful death and negligence by a driver employed by Innovative Gourmet and indicates a demand and offer to settle for
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.
18. EQUITY
Common Stock
At September 30, 2022 and December 31, 2021, a total of
Nine months ended September 30, 2022:
During the nine months ended September 30, 2022 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $
On April 8, 2022, the Company issued
On April 25, 2022, the Company issued
Nine months ended September 30, 2021:
On August 26, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with each of JCP Investment Partnership LP, Bandera Master Fund LP and SV Asset Management LLC (collectively, the “Investors”). Pursuant to the SPA, each Investor purchased
During the nine months ended September 30, 2021 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $
Options
The following table summarizes the options outstanding at September 30, 2022 and the related prices for the options to purchase shares of the Company’s common stock issued by the Company:
|
|
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|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
||
|
|
|
|
|
|
|
|
|
Weighted |
|
|
average |
|
|
|
|
|
|
average |
|
|||
|
|
|
|
|
|
|
|
|
average |
|
|
exercise |
|
|
|
|
|
|
exercise |
|
|||
|
Range of |
|
|
Number of |
|
|
Remaining |
|
|
price of |
|
|
Number of |
|
|
price of |
|
||||||
|
exercise |
|
|
options |
|
|
contractual |
|
|
outstanding |
|
|
options |
|
|
exercisable |
|
||||||
|
Prices |
|
|
Outstanding |
|
|
life (years) |
|
|
Options |
|
|
Exercisable |
|
|
Options |
|
||||||
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
Transactions involving stock options are summarized as follows:
Number of Shares |
Weighted Average Exercise Price |
|||||||
Options outstanding at December 31, 2021 |
$ | |||||||
Granted |
$ | |||||||
Exercised |
$ | |||||||
Cancelled / Expired |
( |
) |
$ | |||||
Options outstanding at September 30, 2022 (unaudited) |
$ | |||||||
Options exercisable at September 30, 2022 (unaudited) |
$ |
Aggregate intrinsic value of options outstanding and exercisable at September 30, 2022 and 2021 was $
During the three months ended September 30, 2022 and 2021, the Company charged $
During the nine months ended September 30, 2022 and 2021, the Company charged $
19. SUBSEQUENT EVENTS
As previously disclosed, in June 2022 we entered into