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.
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).
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. |
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Item 2. |
29 |
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Item 4. |
37 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
38 |
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Item 2. |
38 |
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Item 3. |
38 |
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Item 4. |
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Item 5. |
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Item 6. |
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40 |
PART I. FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
Innovative Food Holdings, Inc.
Consolidated Balance Sheets
September 30, |
December 31, |
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2023 |
2022 |
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(unaudited) | ||||||||
ASSETS |
||||||||
Current assets |
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Cash and cash equivalents |
$ | $ | ||||||
Accounts receivable, net |
||||||||
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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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 |
||||||||
Current liabilities |
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Accounts payable and accrued liabilities |
$ | $ | ||||||
Accrued separation costs, related parties, current portion |
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Accrued interest |
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Deferred revenue |
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Line of Credit |
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Stock appreciation rights liability |
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Notes payable - current portion |
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Lease liability - operating leases, current |
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Lease liability - finance leases, current |
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Total current liabilities |
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Note payable, net of discount |
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Accrued separation costs, related parties, non-current |
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Lease liability - operating leases, non-current |
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Lease liability - finance leases, non-current |
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Total liabilities |
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Commitments & Contingencies (see note 16) |
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Stockholders' equity |
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Common stock: $ and |
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Additional paid-in capital |
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Common stock to be issued, |
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Treasury stock: |
( |
) | ( |
) | ||||
Accumulated deficit |
( |
) | ( |
) | ||||
Total stockholders' equity |
||||||||
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 |
|||||||||||||
Months Ended |
Months Ended |
Months Ended |
Months Ended |
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September 30, |
September 30, |
September 30, |
September 30, |
|||||||||||||
2023 |
2022 |
2023 |
2022 |
|||||||||||||
Revenue |
$ | $ | $ | $ | ||||||||||||
Cost of goods sold |
$ | |||||||||||||||
Gross margin |
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Selling, general and administrative expenses |
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Separation costs - executive officers |
||||||||||||||||
Total operating expenses |
||||||||||||||||
Operating income (loss) |
( |
) | ( |
) | ||||||||||||
Other income (expense:) |
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Other income - interest rate swap |
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Loss on extinguishment of debt |
( |
) | ||||||||||||||
Other leasing income |
||||||||||||||||
Interest expense, net |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Total other income (expense) |
( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Net income (loss) before taxes |
( |
) | ( |
) | ||||||||||||
Income tax expense |
||||||||||||||||
Net income (loss) |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||
Net income (loss) per share - basic |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||
Net income (loss) per share - diluted |
$ | $ | $ | ( |
) | $ | ( |
) | ||||||||
Weighted average shares outstanding - basic |
||||||||||||||||
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, 2023 and 2022
(unaudited)
Common Stock |
Additional |
|||||||||||||||||||||||||||||||||||
Common Stock |
to be issued |
Paid-in |
Treasury Stock |
Accumulated |
||||||||||||||||||||||||||||||||
Amount |
Value |
Amount |
Value |
Capital |
Amount |
Value |
Deficit |
Total |
||||||||||||||||||||||||||||
Balance -June 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||
Fair value of vested stock and options |
- | - | - | - | - | |||||||||||||||||||||||||||||||
Shares issued to management and employees, previously accrued |
( |
) | ( |
) | - | - | - | - | - | |||||||||||||||||||||||||||
Net income for the three months ended September 30, 2022 |
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Balance -September 30, 2022 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||
Balance -June 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||
Fair value of shares issuable under equity incentive plan |
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Common stock issued from common stock subscribed |
( |
) | ( |
) | - | - | - | - | - | |||||||||||||||||||||||||||
Net income for the three months ended September 30, 2023 |
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Balance -September 30, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||||||
Balance - December 31, 2021 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
Fair value of vested stock and stock options |
- | - | - | - | - | |||||||||||||||||||||||||||||||
Common stock issued for services |
- | - | - | - | - | |||||||||||||||||||||||||||||||
Offering expenses for stock previously sold for cash |
- | - | - | - | ( |
) | - | - | - | ( |
) | |||||||||||||||||||||||||
Shares issued to management and employees, previously accrued |
( |
) | ( |
) | - | - | - | - | - | |||||||||||||||||||||||||||
Net loss for the nine months ended September 30, 2022 |
- | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance - September 30, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
Balance - December 31, 2022 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
Shares issued for compensation |
- | - | - | - | - | |||||||||||||||||||||||||||||||
Shares issued to management and employees, previously accrued |
( |
) | ( |
) | - | - | - | - | - | |||||||||||||||||||||||||||
Fair value of shares under compensation plan |
- | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Shares issued under severance agreement |
- | - | - | - | - | |||||||||||||||||||||||||||||||
Common stock issued for services |
- | - | - | - | - | |||||||||||||||||||||||||||||||
Common stock issued from common stock subscribed |
( |
) | ( |
) | - | - | - | - | - | |||||||||||||||||||||||||||
Net loss for the nine months ended September 30, 2023 |
- | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance - September 30, 2023 |
$ | $ | $ | $ | ( |
) | $ | ( |
) | $ |
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 |
|||||||
Months Ended |
Months Ended |
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September 30, |
September 30, |
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2023 |
2022 |
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Cash flows from operating activities: |
||||||||
Net loss |
$ | ( |
) | $ | ( |
) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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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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Amortization of discount on notes payable |
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Stock based compensation |
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Value of stock appreciation rights |
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Loss on extinguishment of debt |
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Provision for doubtful accounts |
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Changes in assets and liabilities: |
||||||||
Accounts receivable, net |
( |
) | ( |
) | ||||
Inventory and other current assets, net |
||||||||
Accounts payable and accrued liabilities |
( |
) | ||||||
Accrued separation costs - related parties |
||||||||
Deferred revenue |
( |
) | ( |
) | ||||
Operating lease liability |
( |
) | ( |
) | ||||
Net cash used in operating activities |
( |
) | ( |
) | ||||
Cash flows from investing activities: |
||||||||
Acquisition of property and equipment |
( |
) | ( |
) | ||||
Net cash used in investing activities |
( |
) | ( |
) | ||||
Cash flows from financing activities: |
||||||||
Payment of offering costs for stock previously issued |
( |
) | ||||||
Cash received from notes payable, net of costs |
||||||||
Principal payments on debt |
( |
) | ( |
) | ||||
Principal payments financing leases |
( |
) | ( |
) | ||||
Principal payments on line of credit |
( |
) | ||||||
Cost of debt financing |
( |
) | ||||||
Net cash provided by (used in) financing activities |
( |
) | ||||||
Decrease in cash and cash equivalents |
( |
) | ( |
) | ||||
Cash and cash equivalents at beginning of period |
||||||||
Cash and cash equivalents at end of period |
$ | $ | ||||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Interest |
$ | $ | ||||||
Taxes |
$ | $ | ||||||
Non-cash investing and financing activities: |
||||||||
(Decrease) Increase in right of use assets & liabilities |
$ | $ | ( |
) | ||||
Finance lease for fixed assets |
$ | $ | ||||||
Debt to Fifth Third Bank paid directly by Maple Mark Bank |
$ | $ | ||||||
Par value of shares issued, previously accrued |
$ | $ | ||||||
Issuance of common stock for severance agreement previously accrued |
$ | $ |
See condensed notes to these unaudited consolidated financial statements.
INNOVATIVE FOOD HOLDINGS, INC.
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2023
(Unaudited)
1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited interim consolidated financial statements include those of Innovative Food Holdings, Inc. and all of its wholly-owned subsidiaries (collectively, the “Company”) and have been prepared in accordance with generally accepted accounting principles pursuant to Regulation S-X of the Securities and Exchange Commission and with the instructions to Form 10-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, 2022. 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, 2023 are not necessarily indicative of the results of operations to be expected for the full year.
Business Activity
We provide difficult-to-find specialty foods primarily to both Professional Chefs and Home Gourmets through our relationships with producers, growers, makers and distributors of these products worldwide. The distribution of these products primarily originates from our three unified warehouses and those of our drop ship partners, and is driven by our proprietary technology platform. In addition, we provide value-added services through our team of food specialists and Chef Advisors who offer customer support, menu ideas, and preparation guidance.
Use of Estimates
The preparation of these unaudited consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to revenue recognition and concentration of credit risk. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accounts subject to estimate and judgements are accounts receivable reserves, inventory reserves, income taxes, intangible assets, operating and finance right of use assets and liabilities, and equity-based instruments. Actual results may differ from these estimates under different assumptions or conditions. We believe our estimates have not been materially inaccurate in past years, and our assumptions are not likely to change in the foreseeable future.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Innovative Food Holdings, Inc., and its wholly owned subsidiaries, some of which are non-operating: Artisan 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.
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, 2023 and 2022, 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, 2023 and December 31, 2022, 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 (i.e., specialty foodservice and e-commerce), the Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers”. A five-step analysis must be met as outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.
Revenue from brand management services are comprised of fees and/or commissions associated with client sales. Revenue from brand management services are recognized at the point in time when services are rendered to the client.
Warehouse and logistic services revenue is primarily comprised of inventory management, order fulfilment and warehousing services. Warehouse & logistics services revenues are recognized at the point in time when the services are rendered to the customer.
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.
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) |
$ |
Balance as of December 31, 2022 |
$ | |||
Cash payments received |
||||
Net sales recognized |
( |
) |
||
Balance as of March 31, 2023 (unaudited) |
$ | |||
Cash payments received |
||||
Net sales recognized |
( |
) |
||
Balance as of June 30, 2023 (unaudited) |
$ | |||
Cash payments received |
||||
Net sales recognized |
( |
) |
||
Balance as of September 30, 2023 (unaudited) |
$ |
Disaggregation of Revenue
Three Months Ended |
||||||||
September 30, |
||||||||
2023 |
2022 |
|||||||
(unaudited) |
(unaudited) |
|||||||
Specialty Foodservice |
$ | $ | ||||||
E-Commerce |
||||||||
National Brand Management |
||||||||
Logistics |
||||||||
Total |
$ | $ |
Nine Months Ended |
||||||||
September 30, |
||||||||
2023 |
2022 |
|||||||
(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.
Dilutive shares at September 30, 2023:
Stock Options
Weighted |
||||||||||
average |
||||||||||
Remaining |
||||||||||
Exercise |
Number of |
contractual |
||||||||
Price |
Options |
life (years) |
||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
Restricted Stock Awards
At September 30, 2023, there are
Stock-based Compensation
At September 30, 2023, there were a total of
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:
Weighted |
||||||||||
Average |
||||||||||
Remaining |
||||||||||
Exercise |
Number |
Contractual |
||||||||
Price |
of Options |
Life (years) |
||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
Restricted Stock Awards
At September 30, 2022, there are
Stock-based Compensation
At September 30, 2023, there were a total of
New Accounting Pronouncements
Management does not believe that any other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements.
2. 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 continues to work to manage its current liabilities while making changes to operations in order to further improve its cash flow and liquidity position. Management believes the Company achieved significant progress in improving the Company’s liquidity during the three months ended September 30, 2023, as discussed below.
The Company reported a profit in the amount of $134,733 for the three months ended September 30, 2023 compared to a profit in the amount of $
3. ACCOUNTS RECEIVABLE
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
Accounts receivable from customers |
$ | $ | ||||||
Allowance for doubtful accounts |
( |
) |
( |
) |
||||
Accounts receivable, net |
$ | $ |
During the nine months ended September 30, 2023, the Company wrote-off accounts receivable in the amount of $
During the three and nine months ended September 30, 2023, the Company charged the amount of $
4. INVENTORY
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
Finished goods inventory |
$ | $ | ||||||
Allowance for slow moving & obsolete inventory |
||||||||
Finished goods inventory, net |
$ | $ |
5. PROPERTY AND EQUIPMENT
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
Land |
$ | $ | ||||||
Building |
||||||||
Computer and Office Equipment |
||||||||
Warehouse Equipment |
||||||||
Furniture and Fixtures |
||||||||
Vehicles |
||||||||
Total before accumulated depreciation |
||||||||
Less: accumulated depreciation |
( |
) |
( |
) |
||||
Total |
$ | $ |
Depreciation expense for property and equipment amounted to $
6. 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, 2023 and 2022 was entirely comprised of operating leases and amounted to $
The Company’s ROU asset amortization for the three months ended September 30, 2023 and 2022 was $
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
Warehouse equipment |
$ | $ | ||||||
Office |
||||||||
Office equipment |
||||||||
Right of use assets, net |
$ | $ |
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
Warehouse equipment |
$ | $ | ||||||
Office |
||||||||
Office equipment |
||||||||
Lease liability |
$ | $ | ||||||
Less: current portion |
( |
) |
( |
) |
||||
Lease liability, non-current |
$ | $ |
For the period ended September 30, 2024 |
$ | |||
For the period ended September 30, 2025 |
||||
For the period ended September 30, 2026 |
||||
Total |
$ | |||
Less: Present value discount |
( |
) |
||
Lease liability |
$ |
During the year ended December 31, 2022, the Company recorded the removal of a right of use asset and lease liability in the amount of $
7. RIGHT OF USE ASSETS – FINANCING LEASES
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
Vehicles |
$ | $ | ||||||
Warehouse Equipment |
||||||||
Total before accumulated depreciation |
||||||||
Less: accumulated depreciation |
( |
) |
( |
) |
||||
Total |
$ | $ |
Depreciation expense related to right of use assets for the three months ended September 30, 2023 and 2022 was $
During the nine months ended September 30, 2023 and 2022, the Company recorded right of use assets and lease liabilities in the amount of $
September 30, 2023 |
December 31, 2022 |
|||||||
(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 $ |
$ | $ |
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
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 |
$ | $ |
There was a total of $
For the twelve months ended September 30,
2024 |
$ | |||
2025 |
||||
2026 |
||||
2027 |
||||
Total |
$ |
8. INTANGIBLE ASSETS
The Company acquired certain intangible assets pursuant to the acquisitions of Artisan, Oasis, igourmet, OFB, Haley, and Mouth. These assets include non-compete agreements, customer relationships, trade names, internally developed technology, and goodwill. The Company has also capitalized the development of its website.
Other Amortizable Intangible Assets
Other amortizable intangible assets consist of $
The Company acquired certain intangible assets pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet, OFB, Haley, and M Innovations.
September 30, 2023 (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, 2022 |
||||||||||||
Accumulated |
||||||||||||
Cost |
Amortization |
Net |
||||||||||
Trade Name |
||||||||||||
Internally Developed Technology |
( |
) |
||||||||||
Website |
( |
) |
||||||||||
Total |
$ | $ | ( |
) |
$ |
Total amortization expense for the three months ended September 30, 2023 and 2022 was $
9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
Trade payables and accrued liabilities |
$ | $ | ||||||
Accrued payroll and commissions |
||||||||
Total |
$ | $ |
10. ACCRUED SEPARATION COSTS – RELATED PARTIES
On February 3, 2023, the Company entered into a Severance Note, an Agreement and General Release, and a Side Letter thereto with Sam Klepfish (the “SK Agreements”), its prior CEO and a current board member. The SK Agreements provide, among other things, for Mr. Kelpfish’s resignation from all positions with the Company and its subsidiaries on February 28, 2023, except that Mr. Klepfish will remain a director and member of the board of the Company, confidentiality and non-disparagement conditions, nomination of Mr. Klepfish for future election to the board of directors at least through the 2024 general meeting of shareholders based on certain minimum stock ownership and Board Observer rights when Mr. Klepfish is no longer a director but maintains certain minimum agreed upon stock ownership. The payment terms are $
On February 28, 2023, the Company entered into a separation agreement (the “Wiernasz Separation Agreement”) with Justin Wiernasz, a director and previous Director of Strategic Acquisitions. Pursuant to the Wiernasz Separation Agreement, the Company agreed to a payment of $
During the three months ended September 30, 2023, the Company made the following payments in connection with the SK Agreements: The Company paid cash in the amount of $
During the three months ended September 30, 2023, the Company made the following payments in connection with separation agreements with Justin Weirnasz, its prior Director of Strategic Acquisitions and board member: The Company paid cash in the amount of $
Total |
Paid / Issued |
Balance |
Current |
Non-current |
||||||||||||||||
Mr. Klepfish: |
||||||||||||||||||||
Cash - through March 6, 2026 |
$ | $ | ( |
) |
$ | $ | $ | |||||||||||||
Cash - upon agreement execution |
( |
) |
||||||||||||||||||
Stock - June 1, 2027 |
||||||||||||||||||||
Stock - Issued in April 2023 |
( |
) |
||||||||||||||||||
Cobra - over eighteen months |
||||||||||||||||||||
Total – Mr. Klepfish |
$ | $ | ( |
) |
$ | $ | $ | |||||||||||||
Mr. Wiernasz: |
||||||||||||||||||||
Cash - three equal payments |
$ | $ | ( |
) |
$ | $ | $ | |||||||||||||
Cobra - over eighteen months |
( |
) |
||||||||||||||||||
Total - Mr. Wiernasz |
$ | $ | ( |
) |
$ | $ | $ | |||||||||||||
Total Company |
$ | $ | ( |
) |
$ | $ | $ |
11. STOCK APPRECIATION RIGHTS LIABILITY
Effective May 15, 2023, the Company issued
12. REVOLVING CREDIT FACILITIES
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
On June 6, 2022, the Company entered into a revolving credit facility (the “MapleMark Revolver”) with MapleMark Bank ("MapleMark”) in the initial amount of $ |
$ | $ | ||||||
Total |
$ | $ |
13. NOTES PAYABLE
September 30, 2023 |
December 31, 2022 |
|||||||
(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 $
At December 31, 2022, the interest rate was
The Maple Mark Term Loan 1 contains negative covenants that, subject to certain exceptions, limits the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. The Term Loan Agreements also provides that the Company and its subsidiaries on a consolidated basis, meet a Fixed Charge Coverage Ratio as described in detail in the Loan Agreements. The Term Loan Agreements contain events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, and certain judgment defaults as specified in the Term Loan Agreements. If an event of default occurs, the maturity of the amounts owed under the Term Loan Agreements may be accelerated. The obligations under the Term Loan Agreements are guaranteed by the Company and IFP and are secured by mortgages on their real estate located in Florida, Illinois, and Pennsylvania and substantially all of their assets, in each case, subject to certain exceptions and permitted liens.
The Company recorded a discount to this loan in the amount of $ |
$ | $ |
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
On June 13, 2023, the Company entered into a term loan with MapleMark Bank (the “MapleMark Term Loan 3”) in the amount of $
The MapleMark Term Loan 3 contains negative covenants that, subject to certain exceptions, limits the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. The Term Loan Agreements also provides that the Company and its subsidiaries on a consolidated basis, meet a Fixed Charge Coverage Ratio as described in detail in the Loan Agreements. The Term Loan Agreements contain events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, and certain judgment defaults as specified in the Term Loan Agreements. If an event of default occurs, the maturity of the amounts owed under the Term Loan Agreements may be accelerated. The obligations under the Term Loan Agreements are guaranteed by the Company and IFP and are secured by mortgages on their real estate located in Florida, Illinois, and Pennsylvania and substantially all of their assets, in each case, subject to certain exceptions and permitted liens.
The Company created a discount on the MapleMark Term Loan 3 for costs in the amount of $ |
$ | $ |
September 30, 2023 |
December 31, 2022 |
|||||||
(unaudited) |
||||||||
On June 6, 2022, the Company entered into a term loan agreement with MapleMark (the “MapleMark Term Loan 2”) for the original amount of $
The MapleMark Term Loan 2 contains negative covenants that, subject to certain exceptions, limits the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. The Term Loan Agreements also provides that the Company and its subsidiaries on a consolidated basis, meet a Fixed Charge Coverage Ratio as described in detail in the Loan Agreements. The Term Loan Agreements contain events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, and certain judgment defaults as specified in the Term Loan Agreements. If an event of default occurs, the maturity of the amounts owed under the Term Loan Agreements may be accelerated. The obligations under the Term Loan Agreements are guaranteed by the Company and IFP and are secured by mortgages on their real estate located in Florida, Illinois, and Pennsylvania and substantially all of their assets, in each case, subject to certain exceptions and permitted liens.
The Company recorded a discount to this loan in the amount of $ |
$ | $ | ||||||
A note payable in the amount of $ |
$ | $ | ||||||
Vehicle acquisition loan dated |
$ | $ |
Total |
$ | $ | ||||||
Discount |
( |
) |
||||||
Net of discount |
$ | $ | ||||||
Current portion |
$ | $ | ||||||
Long-term maturities |
||||||||
Total |
$ | $ |
There was a total of $
For the period ended September 30,
2024 |
$ | |||
2025 |
||||
2026 |
||||
2027 |
||||
2028 |
||||
Thereafter |
||||
Total |
$ |
14. EQUITY
Common Stock
At September 30, 2023 and December 31, 2022, a total of
For the nine months ended September 30, 2023:
Common Stock Issued from Common Stock To Be Issued
During the three months ended September 30, 2023, the Company issued a total of
Shares issued to employees
On February 28, 2023, the Company issued
Shares issued to previous Chief Executive officer
The Company incurred obligations to issue the following shares of common stock pursuant to employment agreements: an aggregate total of
Shares accrued to be issued to board members
During the three and nine months ended September 30, 2023, a total of
Share based executive compensation plans
During the three and nine months ended September 30, 2023, the amounts of $
Stock Appreciation Rights
Effective May 15, 2023, the Company issued
The following variables were utilized in valuing the Smallwood SARs:
Volatility |
% |
|||
Dividends |
$ | |||
Risk-free interest rates |
% |
|||
Expected term (years) |
As of September 30, 2023, total common stock issued and outstanding was
Chief Executive Officer share-based incentive plan
On February 3, 2023, the Company entered into an employment agreement with Bill Bennett to become the Company’s CEO. See note 15. Pursuant to this agreement, Mr. Bennett was provided with an incentive compensation plan (the “CEO Stock Plan”) whereby Mr. Bennett would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:
Number of Shares Granted - Lower of: |
||||||||||
Stock |
Number of Shares Issued |
Maximum |
||||||||
Price |
and Outstanding on |
Number of |
||||||||
Target |
Grant Date Multiplied by: |
Shares |
||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |
% |
The Company relied upon the guidance of Statement of Financial Account Standards No. 718 Compensation – Stock Compensation (“ASC 718”) in accounting for the CEO Stock Plan. A Monte Carlo market-based performance stock awards model was used in valuing the plan, with the following assumptions:
|
● |
The stock price for each trading day would fluctuate with an estimated projected volatility using a normal distribution. The stock price of the underlying instrument is modeled such that it follows a geometric Brownian motion with constant drift and volatility. |
|
|
|
|
● |
The Company would award the stock upon triggering the thresholds. |
|
|
|
|
● |
Annual attrition or forfeiture rates (i.e., pre–vesting forfeiture assumption) are assumed to be zero given the Holder’s position with the Company. |
|
|
|
|
● |
No Projected capital events were included in the adjustments to the shares issued and outstanding in the projected simulations. |
|
|
|
|
● |
Awards/Payouts were discounted at the risk–free rate. |
The plan was valued as of February 3, 2023. The following variables were utilized:
Volatility |
% |
|||
Dividends |
$ | |||
Risk-free interest rates |
% |
|||
Expected term (years) |
The value of the plan was determined to be $
Chief Operating Officer share-based incentive plan
On April 14, 2023, the Company entered into an employment agreement with Brady Smallwood to become the Company’s COO effective May 15, 2023. See note 15. Pursuant to this agreement, Mr. Smallwood was provided with an incentive compensation plan (the “COO Stock Plan”) whereby Mr. Smallwood would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:
Number of Shares Granted - Lower of: |
||||||||||
Stock |
Number of Shares Issued |
Maximum |
||||||||
Price |
and Outstanding on |
Number of |
||||||||
Target |
Grant Date Multiplied by: |
Shares |
||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |
% |
|||||||||
$ |