UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM
For the quarterly period ended
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
N/A | N/A | N/A |
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
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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.
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State the number of shares outstanding of each
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INNOVATIVE FOOD HOLDINGS, INC.
TABLE OF CONTENTS TO FORM 10-Q
Page | ||
PART I. FINANCIAL INFORMATION | ||
Item 1. | Financial Statements | 3 |
Consolidated Balance Sheets | 3 | |
Consolidated Statements of Operations | 4 | |
Consolidated Statement of Stockholders’ Equity | 5 | |
Consolidated Statements of Cash Flows | 6 | |
Condensed Notes to the Consolidated Financial Statements | 7 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 26 |
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 31 |
Item 4. | Controls and Procedures | 31 |
PART II. OTHER INFORMATION | ||
Item 1. | Legal Proceedings | 32 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 32 |
Item 3. | Defaults Upon Senior Securities | 32 |
Item 4. | Mine Safety Disclosures | 32 |
Item 5. | Other Information | 32 |
Item 6. | Exhibits | 33 |
Signatures | 34 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Innovative Food Holdings, Inc.
Consolidated Balance Sheets
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Accounts receivable, net | ||||||||
Inventory, net | ||||||||
Other current assets | ||||||||
Assets held for sale | ||||||||
Current assets - discontinued operations | ||||||||
Total current assets | ||||||||
Property and equipment, net | ||||||||
Right of use assets - operating leases, net | ||||||||
Right of use assets - finance leases, net | ||||||||
Amortizable intangible assets, net | ||||||||
Tradenames and other unamortizable intangible assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued liabilities | $ | $ | ||||||
Accrued separation costs, related parties, current portion | ||||||||
Accrued interest | ||||||||
Deferred revenue | ||||||||
Stock appreciation rights liability | ||||||||
Notes payable - current portion | ||||||||
Lease liability - operating leases, current | ||||||||
Lease liability - finance leases, current | ||||||||
Contingent liability, current | ||||||||
Total current liabilities | ||||||||
Note payable, net of discount | ||||||||
Accrued separation costs, related parties, non-current | ||||||||
Lease liability - operating leases, non-current | ||||||||
Lease liability - finance leases, non-current | ||||||||
Total liabilities | ||||||||
Commitments & Contingencies (see note 21) | ||||||||
Stockholders’ equity | ||||||||
Common stock: $ |
||||||||
Common stock to be issued; |
||||||||
Additional paid-in capital | ||||||||
Treasury stock: |
( |
) | ( |
) | ||||
Accumulated deficit | ( |
) | ( |
) | ||||
Total stockholders’ equity | ||||||||
Total liabilities and stockholders’ equity | $ | $ |
See condensed notes to these unaudited consolidated financial statements.
3
Innovative Food Holdings, Inc.
Consolidated Statements of Operations
(unaudited)
For the Three | For the Three | |||||||
Months Ended | Months Ended | |||||||
March 31, | March 31, | |||||||
2025 | 2024 | |||||||
Revenue | $ | $ | ||||||
Cost of goods sold | ||||||||
Gross margin | ||||||||
Selling, general and administrative expenses | ||||||||
Total operating expenses | ||||||||
Operating income (loss) | ( | ) | ( | ) | ||||
Other income (expense:) | ||||||||
Interest expense, net | ( | ) | ( | ) | ||||
Gain on sale of assets | ||||||||
Gain (loss) on sale of subsidiary | ||||||||
Other leasing income | ||||||||
Total other income (expense) | ( | ) | ||||||
Net income (loss) before taxes | ( | ) | ||||||
Income tax expense | ||||||||
Net income (loss) from continuing operations | $ | ( | ) | $ | ||||
Net income (loss) from discontinued operations | $ | $ | ( | ) | ||||
Consolidated net income (loss) | $ | ( | ) | $ | ||||
Net income (loss) per share from continuing operations - basic | $ | ( | ) | $ | ||||
Net income (loss) per share from continuing operations - diluted | $ | ( | ) | $ | ||||
Net (loss) per share from discontinued operations - basic | $ | $ | ( | ) | ||||
Net (loss) per share from discontinued operations - diluted | $ | $ | ( | ) | ||||
Weighted average shares outstanding - basic | ||||||||
Weighted average shares outstanding - diluted |
See condensed notes to these unaudited consolidated financial statements.
4
Innovative Food Holdings, Inc.
Consolidated Statements of Stockholders’ Equity
Three Months Ended March 31, 2025 and 2024
(unaudited)
Common Stock | Common Stock to be issued |
Paid-in | Treasury Stock | Accumulated | ||||||||||||||||||||||||||||||||
Amount | Value | Amount | Value | Capital | Amount | Value | Deficit | Total | ||||||||||||||||||||||||||||
Balance - December 31, 2023 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
Shares returned to treasury from sale of subsidiary | - | - | - | - | ( |
) | ( |
) | - | ( |
) | |||||||||||||||||||||||||
Fair value of shares under compensation plan | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Net income for the three months ended March 31, 2024 | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Balance - March 31, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
Balance - December 31, 2024 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
Shares issued in cashless conversion of options | - | - | ( |
) | - | - | - | - | ||||||||||||||||||||||||||||
Fair value of shares under compensation plan | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
Shares earned under compensation plans | - | - | ( |
) | - | - | - | - | ||||||||||||||||||||||||||||
Shares issued under compensation plans | ( |
) | ( |
) | - | - | - | - | - | |||||||||||||||||||||||||||
Net loss for the three months ended March 31, 2025 | - | - | - | - | - | - | - | ( |
) | ( |
) | |||||||||||||||||||||||||
Balance - March 31, 2025 | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ |
See condensed notes to these unaudited consolidated financial statements.
5
Innovative Food Holdings, Inc.
Consolidated Statements of Cash Flows
(unaudited)
For the Three | For the Three | |||||||
Months Ended | Months Ended | |||||||
March 31, | March 31, | |||||||
2025 | 2024 | |||||||
Cash flows used in operating activities: | ||||||||
Net income (loss) | $ | ( | ) | $ | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Gain on disposition of assets | ( | ) | ||||||
(Gain) Loss on sale of subsidiaries | ( | ) | ||||||
Depreciation and amortization | ||||||||
Amortization of right of use asset | ||||||||
Amortization of discount on notes payable | ||||||||
Stock based compensation | ||||||||
Value of stock appreciation rights | ||||||||
Provision for credit losses | ||||||||
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 | ( | ) | ( | ) | ||||
Cash received from disposition of asset, net of loan payoff | ||||||||
Net cash provided by (used in) investing activities | ( | ) | ||||||
Cash flows from financing activities: | ||||||||
Principal payments on debt | ( | ) | ( | ) | ||||
Principal payments financing leases | ( | ) | ( | ) | ||||
Cash received from line of credit | ||||||||
Principal payments on line of credit | ( | ) | ||||||
Net cash 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 - continuing operations | $ | $ | ||||||
Cash and cash equivalents at end of period - discontinued operations | $ | $ | ||||||
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: | ||||||||
Reclassify fixed assets as held for sale | $ | $ | ||||||
Principal and accrued interest paid from escrow to Maple Mark Bank | $ | $ | ||||||
Issuance of common stock under compensation plans | $ | $ | ||||||
Issuance of stock for cashless exercise of options | $ | $ |
See condensed notes to these unaudited consolidated financial statements.
6
INNOVATIVE FOOD HOLDINGS, INC.
CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2025
(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, “we,” “our,” “us” or 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, 2024. 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 months ended March 31, 2025 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 through our relationships with producers, growers, makers and distributors of these products worldwide. The distribution of these products primarily originates from our two warehouses and those of our drop ship partners, and is driven by our proprietary technology platform. In addition, we provide value-added services through our team of food specialists and Chef Advisors who offer customer support, menu ideas, and preparation guidance.
Restructuring
During the fourth quarter of 2023, we made the decision to focus more on our Business to Business (B2B) activities and less on our Direct to Consumer (“D2C”) products. Our subsidiaries GROW and Oasis were sold effective December 29, 2023; Haley Food Group, Inc. (“Haley”) was sold effective February 26, 2024; and the igourmet platform and its D2C components were sold effective August 6, 2024. We continue to operate the B2B component, which remains part of our continuing operations. On October 8, 2024, we sold substantially all of the assets of Mouth. The activities of P Innovations (“Plantbelly”) were abandoned. See Note 2.
Discontinued Operations
Pursuant to the guidance of Accounts Standards
Codification (“ASC”) 205-20, Presentation of Financial Statements – Discontinued Operations, the accounts
of our discontinued entities GROW, Oasis, Haley, Plantbelly, and Mouth have been included in “Net loss from discontinued operations”
in our consolidated statements of operations. Additionally, the assets and liabilities of these entities have been presented as discontinued
operations in our consolidated balance sheets. On December 29, 2023, the Company completed the sales of its Grow and Oasis subsidiaries;
on February 26, 2024, the Company completed the sale of its Haley subsidiary (see Note 4); and on October 8, 2024, the Company completed
the sale of substantially all of the assets of Mouth. In addition, the operations of Plantbelly have been abandoned. The only remaining
discontinued operations on the Company’s balance sheet at December 31, 2024 is cash in the amount of $
Reclassifications
Certain amounts presented in the financial statements of the prior period have been reclassified to conform with the current period presentation of discontinued operations. See Note 2.
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 allowances for doubtful accounts, allowances for slow moving & obsolete inventory, 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.
7
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. As of March 31, 2025 and December 31, 2024, the Company’s largest customer, U.S. Foods, Inc. and its affiliates, accounted
for approximately
The Company maintains cash balances in excess
of Federal Deposit Insurance Corporation limits. At March 31, 2025 and December 31, 2024, the total cash in excess of these limits was
$
Accounts Receivable
The Company provides an allowance for credit losses equal to the estimated uncollectible amounts pursuant to the guidance of Accounting Standards Update (“ASU”) 2016-13,
Financial Instruments – Credit Losses (Topic 326) as codified in ASC 326, Financial Instruments – Credit
Losses. Under ASC 326, the Company utilizes a current and expected credit loss (CECL) impairment model. ASU 2016-13 became effective
for us on January 1, 2023. The Company’s estimate is based on historical collection experience and a review of the current status
of trade accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will
change. Accounts receivable are presented net of an allowance for doubtful accounts of $
Inventory
Inventory is valued at the lower of cost or market and is determined by the first-in, first-out method. The Company adjusts inventory based upon bi-weekly cycle counts and upon the expiration date of food products. In addition, the Company records an allowance for obsolete or slow moving inventory based upon historical loss history and management’s judgment.
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 FASB 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 logistics services revenues are primarily comprised of inventory management, order fulfilment and warehousing services. Warehouse and logistics services revenues are recognized at the point in time when the services are rendered to the customer.
8
Deferred Revenue
Deferred revenue relates to a long-term lease
agreement under which the Company received a one-time upfront payment associated with the installation of a telecommunications tower on
a building owned by the Company. This lease has a
The following table represents the changes in deferred revenue as reported on the Company’s consolidated balance sheets:
Balance as of December 31, 2023 | $ | |||
Cash payments received | ||||
Net sales recognized | ( | ) | ||
Balance as of March 31, 2024 (unaudited) | $ | |||
Balance as of December 31, 2024 | ||||
Cash payments received | ||||
Net sales recognized | ( | ) | ||
Balance as of March 31, 2025 (unaudited) | $ |
Disaggregation of Revenue
The following table represents a disaggregation of revenue for the three months ended March 31, 2025 and 2024:
Three Months Ended | ||||||||
March 31, | ||||||||
2025 | 2024 | |||||||
(unaudited) | (unaudited) | |||||||
Digital Channels | $ | $ | ||||||
National Distribution | ||||||||
Local Distribution | ||||||||
Direct-to-Consumer | ||||||||
Other Services | ||||||||
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 shares issuable under executive compensation plan. 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.
9
Dilutive Shares at March 31, 2025:
Stock Options
None.
Restricted Stock Awards
At March 31, 2025, there were
Stock-based Compensation
At March 31, 2025, there were a total of
Computation of basic and diluted EPS:
The Company recorded a net loss for the three months ended March 31, 2025, and all of potentially issuable shares are anti-dilutive. There is no difference between EPS and fully-diluted EPS for the three months ended March 31, 2025.
Dilutive shares at March 31, 2024:
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 March 31, 2024:
Weighted average | ||||||||||
Exercise Price | Number of Options | Remaining contractual life (years) | ||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
$ | ||||||||||
10
Restricted Stock Awards:
At March
31, 2024, there are
Stock-based Compensation:
At March 31, 2024, there were a total of 3,910,534 shares of common stock potentially issuable to the Company’s executive officers pursuant to compensation plans and contingent upon the achievement of certain performance goals; see notes 16 and 17.
The following table illustrates the computation of basic and diluted EPS:
For the three months ended March 31, 2024 | ||||||||||||
Income | Shares | Per-Share | ||||||||||
(Numerator) | (Denominator) | Amount | ||||||||||
Income from continuing operations | $ | |||||||||||
Basic EPS | ||||||||||||
Income available to common shareholders | $ | |||||||||||
Effect of dilutive securities | ||||||||||||
Options | ||||||||||||
Executive compensation plan | ||||||||||||
Diluted EPS | $ | $ |
New Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures”. The amendments improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ASU is effective for annual reporting periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024 with early adoption permitted and can be applied on either a prospective or retroactive basis. The Company does not believe the adoption of this guidance will have a material effect on its Consolidated Financial Statements and segment disclosures.
In November 2024, the FASB issued ASU 2024-03, “Disaggregation of Income Statement Expenses (DISE)” which requires disaggregated disclosure of income statement expenses for public business entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The Company does not believe the adoption of this guidance will have a material effect on its Consolidated Financial Statements and segment disclosures.
2. DISCONTINUED OPERATIONS
During the fourth quarter of fiscal 2023, in connection with an analysis of the Company’s sales mix and profitability by service offering, management made the strategic decision to focus on the Company’s B2B service offering and to allocate fewer resources to and in some cases to sell certain of the Company’s subsidiaries involved in its D2C service offerings. Pursuant to this strategy, on December 29, 2023, the Company completed the sales of its Grow and Oasis subsidiaries; on February 26, 2024, the Company completed the sale of its Haley subsidiary (see Note 4); and on October 8, 2024, the Company sold substantially all of the assets of Mouth. In addition, the operations of Plantbelly were abandoned.
The following information presents the major classes of line item of assets and liabilities included as part of discontinued operations in the consolidated balance sheets:
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
Current assets - discontinued operations: | (unaudited) | |||||||
Cash | $ | $ | ||||||
Total current assets - discontinued operations | $ | $ |
11
The following information presents the major classes of line items constituting the after-tax loss from discontinued operations in the consolidated statements of operations:
Three Months Ended | ||||||||
March 31, | March 31, | |||||||
2025 | 2024 | |||||||
(unaudited) | (unaudited) | |||||||
Revenue | $ | $ | ||||||
Cost of goods sold | ( | ) | ||||||
Gross margin | ||||||||
Selling, general, and administrative expenses | ( | ) | ||||||
Interest income | ||||||||
Loss from discontinued operations, net of tax | $ | $ | ( | ) |
There were no major classes of line items which constituted significant operating and investing cash flow activities in the consolidated statements of cash flows relating to discontinued operations.
3. SALE OF ASSETS
On February 14, 2024, the Company sold its property located at 28411
Race Track Road, Bonita Springs, Florida, for net cash proceeds of $
4. SALE OF SUBSIDIARY
On February 26, 2024, the Company sold
5. ACCOUNTS RECEIVABLE
At March 31, 2025 and December 31, 2024, accounts receivable consists of:
March 31, 2025 |
December 31, 2024 |
|||||||
(unaudited) | ||||||||
Accounts receivable from customers | $ | $ | ||||||
Allowance for credit losses | ( |
) | ( |
) | ||||
Accounts receivable, net | $ | $ |
During the three months ended March 31, 2025 and
2024, the Company charged the amount of $
6. INVENTORY
Inventory consists primarily of specialty food products. At March 31, 2025 and December 31, 2024, inventory consisted of the following:
March 31, 2025 |
December 31, 2024 |
|||||||
(unaudited) | ||||||||
Finished goods inventory | $ | $ | ||||||
Allowance for slow moving & obsolete inventory | ||||||||
Finished goods inventory, net | $ | $ |
12
7. PROPERTY AND EQUIPMENT
A summary of property and equipment at March 31, 2025 and December 31, 2024 is as follows:
March 31, 2025 | December 31, 2024 | |||||||
(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 $
8. PROPERTY AND EQUIPMENT CLASSIFIED AS HELD FOR SALE
Assets held for sale include the net book value of property and equipment the Company plans to sell within the next year. Long lived assets that meet the criteria are held for sale and reported at the lower of their carrying value or fair value less estimated cost to sell.
As of December 31, 2023, the Company classified
the land, building, leasehold improvements, and certain equipment located at 28411 Race Track Road, Bonita Springs, Florida, 34135 (the
“Race Track Road Property”) as held for sale. On February 14, 2024, the Company finalized the sale of the Race Track Road
Property for cash in the amount of $
As of December 31, 2024, the Company classified the land and building located at 220 Oak Hill Road, Mountain Top, Pennsylvania, as held for sale.
The net book value of these assets consisted of the following at March 31, 2025 and December 31, 2024:
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
(unaudited) | ||||||||
Land | $ | $ | ||||||
Building | ||||||||
Furniture, fixtures, and equipment | ||||||||
Total | $ | $ |
9. 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 March 31, 2025 and 2024 was entirely comprised of operating leases and amounted to $
The Company’s ROU asset amortization for
the three months ended March 31, 2025 and 2024 was $
The weighted-average discount rate for operating
leases was
13
Right of use assets – operating leases are summarized below:
March 31, 2025 |
December 31, 2024 |
|||||||
(unaudited) | ||||||||
Building | $ | $ | ||||||
Vehicles | ||||||||
Warehouse equipment | ||||||||
Office equipment | ||||||||
Right of use assets, net | $ | $ |
Operating lease liabilities are summarized below:
March 31, 2025 |
December 31, 2024 |
|||||||
(unaudited) | ||||||||
Building | $ | $ | ||||||
Vehicles | ||||||||
Warehouse equipment | ||||||||
Office equipment | ||||||||
Lease liability | $ | $ | ||||||
Less: current portion | ( |
) | ( |
) | ||||
Lease liability, non-current | $ | $ |
Maturity analysis under these lease agreements are as follows:
For the period ended March 31, 2026 | $ | |||
For the period ended March 31, 2027 | ||||
For the period ended March 31, 2028 | ||||
For the period ended March 31, 2029 | ||||
For the period ended March 31, 2030 | ||||
Total | $ | |||
Less: Present value discount | ( | ) | ||
Lease liability | $ |
10. RIGHT OF USE ASSETS – FINANCING LEASES
The Company has financing leases for vehicles and warehouse equipment. Right of use asset – financing leases are summarized below:
March 31, 2025 |
December 31, 2024 |
|||||||
(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 March 31, 2025 and 2024 was $
The weighted-average interest rate for financing
leases was
14
Financing lease liabilities are summarized below:
March 31, 2025 | December 31, 2024 | |||||||
(unaudited) | ||||||||
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 August 23, 2019 in the original amount of $ | $ | $ | ||||||
Financing lease obligation under a lease agreement for warehouse equipment dated September 12, 2024 in the original amount of $ | $ | $ | ||||||
Total | $ | $ | ||||||
Current portion | $ | $ | ||||||
Long-term maturities | ||||||||
Total | $ | $ |
There was no accrued interest on financing leases at three months ended March 31, 2025 and December 31, 2024.
Aggregate maturities of lease liabilities:
For the twelve months ended March 31,
2026 | $ | |||
2027 | ||||
2028 | ||||
2029 | ||||
2030 | ||||
Total | $ |
11. INTANGIBLE ASSETS
The Company acquired certain intangible assets pursuant to the acquisitions of Artisan Specialty Foods, Inc. (“Artisan”), igourmet, 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
On August 6, 2024, the Company signed an agreement
to sell intangible assets of its consumer e-commerce business igourmet, generally consisting of customer lists, domains, and trademarks
for cash of $
15
On October 14, 2024, the Company acquired certain
assets of Goldan Organics, Inc. (the “GO Transaction”). See note 5. Pursuant to the GO Transaction, the Company recorded an
intangible asset in the amount of $
March 31, 2025 (unaudited) |
||||||||||||
Accumulated | ||||||||||||
Cost | Amortization | Net | ||||||||||
Total Trade Names | $ | $ | $ |
December 31, 2024 | ||||||||||||
Accumulated | ||||||||||||
Gross | Amortization | Net | ||||||||||
Total Trade Names | $ | $ | $ |
Total amortization expense for the three months
ended March 31, 2025 and 2024 was $
Other Non-Amortizable Intangible Assets
Other non-amortizable intangible assets consist
of $
The Company acquired certain intangible assets pursuant to the acquisitions through Artisan. The following is the net book value of these assets:
March 31, 2025 (unaudited) |
||||||||||||
Accumulated | ||||||||||||
Gross | Amortization | Net | ||||||||||
Total Trade Names | $ | $ | $ |
December 31, 2024 | ||||||||||||
Accumulated | ||||||||||||
Cost | Amortization | Net | ||||||||||
Total Trade Names | $ | $ | $ | |||||||||
12. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities at March 31, 2025 and December 31, 2024 are as follows:
March 31, 2025 | December 31, 2024 | |||||||
(unaudited) | ||||||||
Trade payables and accrued liabilities | $ | $ | ||||||
Accrued payroll and commissions | ||||||||
Total | $ | $ |
16
13. 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 (the “SK Agreements”) with Sam Klepfish, 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 $
On February 6, 2024, the Company entered into
a separation agreement (the “Tang Separation Agreement”) with Richard Tang, its Chief Financial Officer, effective as of December
31, 2023. Pursuant to the Tang Separation Agreement, the Company has agreed to pay to Mr. Tang, in equal installments over a five-month
period, the gross sum of $
During the three months ended March 31, 2025 and
2024, the Company paid cash in the amount of $
During the three months ended March 31, 2025 and
2024, the Company made the following payments in connection with the Wiernasz Separation Agreement: The Company made COBRA payments on
behalf of Mr. Weirnasz in the amount of $
During the three months ended March 31, 2025 and
2024, the Company made the following payments in connection with the Tang Separation Agreement: The Company paid cash to Mr. Tang in the
amount of $
17
The following table represents the amounts accrued, paid, and outstanding on these agreements as of March 31, 2025:
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 | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Mr. Tang: | ||||||||||||||||||||
Cash – over seventeen weeks | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
COBRA - over five months | ( | ) | ||||||||||||||||||
Total - Mr. Tang | $ | $ | ( | ) | $ | $ | $ | |||||||||||||
Total Company | $ | $ | ( | ) | $ | $ | $ |
14. STOCK APPRECIATION RIGHTS LIABILITY
Effective May 15, 2023, the Company issued
The change in valuation of the Smallwood SARs is summarized in the table below:
May 15, 2023 - fair value | $ | |||
(Gain) Loss on revaluation | ||||
December 31, 2023 -fair value | $ | |||
(Gain) Loss on revaluation | ||||
December 31, 2024 - fair value | $ | |||
(Gain) Loss on revaluation | ||||
March 31, 2025 - fair value | $ |
15. LINE OF CREDIT
March 31, 2025 | December 31, 2024 | |||||||
(unaudited) | ||||||||
On June 6, 2022, the Company entered into a revolving credit facility with MapleMark (the “MapleMark Revolver”) with a maturity date of August 25, 2025. The amount available under the MapleMark Revolver is $ | $ | $ |
18
16. NOTES PAYABLE
March 31, 2025 | December 31, 2024 | |||||||
(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 $ 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 MapleMark Term Loan 3 also provides that the Company and its subsidiaries on a consolidated basis, meet a Fixed Charge Coverage Ratio as described in detail in the MapleMark Term Loan 3. The MapleMark Term Loan 3 contains 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 Innovative Food Properties LLC 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 $ | $ | $ | ||||||
A note payable in the amount of $ | $ | $ | ||||||
A note payable in the amount of $ | $ | $ | ||||||
Total | $ | $ | ||||||
Discount | ( | ) | ( | ) | ||||
Net of discount | $ | $ | ||||||
Current portion | $ | $ | ||||||
Long-term maturities, net of discount | ||||||||
Total | $ | $ |
There was a total of $
19
Aggregate maturities of notes payable as of March 31, 2025 are as follows:
For the period ended December 31,
2025 | ||||
2026 | ||||
2027 | ||||
2028 | ||||
2029 | ||||
Thereafter | ||||
Total | $ |
17. EQUITY
Common Stock
As of March 31, 2025, total number of shares of common
stock issued and outstanding was
For the three months ended March 31, 2025:
On January 9, 2025, the Company issued
On January 13, 2025, the Company issued
On March 14, 2025, the Company issued the following
shares of common stock to its executive officers pursuant to executive compensation plans:
For the three months ended March 31, 2024:
Common Stock Received from Sale of Subsidiary
On February 26, 2024, the Company sold
20
Share based executive compensation plans
CEO Stock Plan
On February 3, 2023, the Company entered into an employment agreement with Bill Bennett to become the Company’s CEO. On November 3, 2023, the Company recognized that the hiring of Mr. Bennett was protracted, and the original employment agreement calculated the number of shares of common stock to be granted in connection with the CEO Stock Plan on the basis of the number of shares of common stock outstanding as of October 2022, which did not take into consideration the number of shares that were issued to a departing executive and to certain other employees of the Company thereafter. Accordingly, the number of shares issuable to Mr. Bennett at each price target was adjusted, effective as of the original date of the plan. Pursuant to this agreement, Mr. Bennett was provided with an incentive compensation plan (the “CEO Stock Plan”) whereby Mr. Bennett would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:
Number of Shares Granted - Lower of: | ||||||||||
Number of Shares Issued | Maximum | |||||||||
and Outstanding on | Number of | |||||||||
Stock Price Target | Grant Date Multiplied by: | Shares | ||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % |
The value of the CEO Stock Plan was
determined via a Monte Carlo market-based performance stock awards model to be $
On November 7, 2023, the Company issued
On March 19, 2024,
On May 28, 2024,
On July 30, 2024, the price target of $
On January 31, 2025, the price target of $
There are no shares unvested under the CEO Stock Plan at March 31, 2025.
21
COO Stock Plan
On April 14, 2023, the Company entered into an employment agreement with Brady Smallwood to become the Company’s COO, effective May 15, 2023. Pursuant to this agreement, Mr. Smallwood was provided with an incentive compensation plan (the “COO Stock Plan”) whereby Mr. Smallwood would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:
Number of Shares Granted - Lower of: | ||||||||||
Number of Shares Issued | Maximum | |||||||||
and Outstanding on | Number of | |||||||||
Stock Price Target | Grant Date Multiplied by: | Shares | ||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % |
The value of the COO Stock Plan was
determined via a Monte Carlo market-based performance stock awards model to be $
On April 17, 2024,
On July 25, 2024, the price target of $
On January 14, 2025, the price target of $
At March 31, 2025, a total of
CFO Stock Plan
On December 29, 2023, the Company entered into an employment agreement with Gary Schubert to become the Company’s CFO effective January 1, 2024. Pursuant to this agreement, Mr. Schubert was provided with an incentive compensation plan (the “CFO Stock Plan”) whereby Mr. Schubert would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:
Number of Shares Granted - Lower of: | ||||||||||
Number of Shares Issued | Maximum | |||||||||
and Outstanding on | Number of | |||||||||
Stock Price Target | Grant Date Multiplied by: | Shares | ||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % | |||||||||
$ | % |
The value of the CFO Stock Plan was
determined via a Monte Carlo market-based performance stock awards model to be $
22
On July 31, 2024,
On December 27, 2024,
At March 31, 2025, a total of
Stock Appreciation Rights
Effective May 15, 2023, the Company issued
The Smallwood SARs were valued using the Black-Scholes valuation model utilizing the following variables:
March 31, | December 31, | |||||||
2025 | 2024 | |||||||
Volatility | % | % | ||||||
Dividends | $ | - | $ | |||||
Risk-free interest rates | % | % | ||||||
Remaining expected term (years) |
Options
Transactions involving stock options are summarized as follows:
On January 9, 2025, the Company issued
On January 13, 2025, the Company issued
Number of Shares |
Weighted Average Exercise Price |
|||||||
Options outstanding at December 31, 2024 | $ | |||||||
Granted | $ | |||||||
Exercised | ( |
) | $ | |||||
Cancelled / Expired | $ | |||||||
Options outstanding at March 31, 2025 (unaudited) | $ | |||||||
Options exercisable at March 31, 2025 (unaudited) | $ |
Aggregate intrinsic value of options outstanding
and exercisable at March 31, 2025 was $
During the three months ended March 31, 2025 and
2024, the Company charged the amount of $
23
18. SEGMENTS
The CODM has determined that the Company operates
in
The analysis of the Company’s segments is determined by the Chief Operating Decision Maker (“CODM”). The Company’s CODM is a group consisting of our executive management team: Bill Bennett, CEO; Brady Smallwood, COO; and Gary Schubert, CFO.
The CODM uses net income to monitor budget versus actual results. The CODM also uses revenue by category to monitor the growth of the business in each of our target markets.
The following table presents our segment results:
March 31, | March 31, | |||||||||||||||||||||||
2025 | 2024 | |||||||||||||||||||||||
Amount | % | Amount | % | $ Change | % Change | |||||||||||||||||||
Revenue: | ||||||||||||||||||||||||
Digital Channels | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
National distribution | $ | % | $ | % | $ | ) | % | |||||||||||||||||
Local distribution | $ | % | $ | % | $ | % | ||||||||||||||||||
Direct to consumer | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
Other services | $ | % | $ | % | $ | % | ||||||||||||||||||
Total revenue | $ | % | $ | % | $ | % | ||||||||||||||||||
Cost of sales | $ | % | $ | % | $ | % | ||||||||||||||||||
Gross margin | $ | % | $ | % | $ | % | ||||||||||||||||||
Cash OpEx: | ||||||||||||||||||||||||
Payroll & related costs | $ | % | $ | % | $ | % | ||||||||||||||||||
Computer and IT | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
Office, facility, vehicles | $ | % | $ | % | $ | % | ||||||||||||||||||
Insurance | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
Commissions | $ | % | $ | % | $ | ( | ) | % | ||||||||||||||||
Travel & entertainment | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
Advertising & marketing | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
Banking and credit card processing | $ | % | $ | % | $ | % | ||||||||||||||||||
Professional fees | $ | % | $ | % | $ | % | ||||||||||||||||||
$ | % | $ | % | $ | % | |||||||||||||||||||
Non-cash OpEx: | ||||||||||||||||||||||||
Bad debt expense | $ | % | $ | % | $ | % | ||||||||||||||||||
Share based compensation | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
Depreciation & amortization | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
Taxes & fees | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
$ | % | $ | % | $ | ( | ) | - | % | ||||||||||||||||
Non-Operating (Income) Expense: | ||||||||||||||||||||||||
Interest expense | $ | % | $ | % | $ | ( | ) | - | % | |||||||||||||||
(Gain) loss on sale of subsidiaries | $ | % | $ | ( | ) | - | % | $ | - | % | ||||||||||||||
(Gain) loss on sale of assets | $ | % | $ | ( | ) | - | % | $ | - | % | ||||||||||||||
Other (income) expense | $ | ( | ) | % | $ | ( | ) | % | $ | ( | ) | % | ||||||||||||
Total other (income) expense | $ | % | $ | ( | ) | - | % | $ | - | % | ||||||||||||||
Net income (loss) from continuing operations | $ | ( | ) | - | % | $ | % | $ | ( | ) | - | % | ||||||||||||
Other segment disclosures: | ||||||||||||||||||||||||
Segment assets | $ | $ | ||||||||||||||||||||||
Expenditures for segment assets | $ | $ |
24
19. RELATED PARTY TRANSACTIONS
Payments to Prior Executive Officers under Separation Agreements
Three months ended March 31, 2025:
The
Company paid cash in the amount of $
Three months ended March 31, 2024:
The
Company paid cash in the amount of $
The
Company made Cobra payments on behalf of Mr. Weirnasz, its prior Director of Strategic Acquisitions and previous board member, in the
amount of $
The
Company made cash payments to Mr. Tang, its prior CFO, in the amount of $
20. MAJOR CUSTOMERS
During
the three months ended March 31, 2025 and 2024, the Company’s largest customer, U.S. Foods, Inc. and its affiliates, accounted
for approximately
21. COMMITMENTS AND CONTINGENCIES
Litigation
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.
22. SUBSEQUENT EVENTS
On May 1, 2025, the Company agreed to a settlement
in the amount of $
25
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
References in this report to “we,” “us,” “IVFH” or the “Company” refer to Innovative Food Holdings, Inc. and all of its wholly-owned subsidiaries.
FORWARD-LOOKING STATEMENTS
The following discussion should be read in conjunction with the consolidated financial statements and the related notes thereto, as well as all other related notes, and financial and operational references, appearing elsewhere in this document.
Certain information contained in this discussion and elsewhere in this report may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Private Securities Litigation Reform Act”), and is subject to the safe harbor created by that act. The safe harbor created by the Private Securities Litigation Reform Act will not apply to certain “forward-looking statements” because we issued “penny stock” (as defined in Section 3(a)(51) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 3(a)(51-1) under the Exchange Act) during the three year period preceding the date(s) on which those forward-looking statements were first made, except to the extent otherwise specifically provided by rule, regulation or order of the Securities and Exchange Commission (the “SEC”). We caution readers that certain important factors may affect our actual results and could cause such results to differ materially from any forward-looking statements which may be deemed to have been made in this report or which are otherwise made by or on our behalf. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “will,” “expect,” “believe,” “explore,” “consider,” “anticipate,” “intend,” “could,” “estimate,” “plan,” “propose” or “continue” or the negative variations of those words or comparable terminology are intended to identify forward-looking statements. Factors that may affect our results include, but are not limited to, the risks and uncertainties associated with:
● | Our ability to raise capital necessary to sustain our anticipated operations and implement our business plan, |
● | Our ability to implement our business plan, including sale and acquisition of certain operations, |
● | Our ability to generate sufficient cash to pay our lenders and other creditors, |
● | Our dependence on three major customers, |
● | Our ability to employ and retain qualified management and employees, |
● | Our dependence on the efforts and abilities of our current employees and executive officers, |
● | Changes in government regulations that are applicable to our current or anticipated business, |
● | Changes in the demand for our services and different food trends, |
● | The imposition of tariffs or other trade restrictions that may increase costs or disrupt our supply chain, |
● | The degree and nature of our competition, |
● | The lack of diversification of our business plan, |
● | The general volatility of the capital markets and the establishment of a market for our shares, and |
● | Disruption in the economic and financial conditions primarily from the impact of past terrorist attacks in the United States, threats of future attacks, police and military activities overseas and other disruptive worldwide political and economic events, health pandemics, rising inflation and energy costs, and environmental weather conditions. |
We are also subject to other risks detailed from time to time in our other filings with the SEC and elsewhere in this report. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.
26
Critical Accounting Policy and Estimates
Use of Estimates in the Preparation of Financial Statements
The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. These estimates include certain assumptions related to, among others, doubtful accounts receivable, valuation of stock-based services, operating right of use assets and liabilities, and income taxes. On an on-going basis, we evaluate these estimates, including those related to revenue recognition and concentration of credit risk. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accounts subject to estimate and judgements are accounts receivable reserves, income taxes, intangible assets, contingent liabilities, and equity-based instruments. Actual results may differ from these estimates under different assumptions or conditions. We believe our estimates have not been materially inaccurate in past years, and our assumptions are not likely to change in the foreseeable future.
Provision for Doubtful Accounts Receivable
The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts pursuant to the guidance of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments – Credit Losses (Topic 326), as codified in Accounts Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses. Under ASC 326, the Company utilizes a current and expected credit loss (CECL) impairment model. ASU 2016-13 became effective for us on January 1, 2023. The Company’s estimate is based on historical collection experience and a review of the current status of trade accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. Accounts receivable are presented net of an allowance for doubtful accounts of $40,002 at March 31, 2025 and December 31, 2024.
Fair Value of Financial Instruments
The Company measures its financial assets and liabilities in accordance with accounting principles generally accepted in the United States of America. The estimated fair values approximate their carrying value because of the short-term maturity of these instruments or the stated interest rates are indicative of market interest rates. These fair values have historically varied due to the market price of the Company’s stock at the date of valuation.
Income Taxes
The Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to financial statements carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. The measurement of deferred tax assets and liabilities is based on provisions of applicable tax law. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance based on the amount of tax benefits that, based on available evidence, is not expected to be realized.
Leases
The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) and short-term and long-term lease liabilities are included on the face of the condensed consolidated balance sheet. Finance lease ROU assets are presented within other assets, and finance lease liabilities are presented within accrued liabilities.
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.
Our Business Activities
We build dynamic scalable businesses by selling specialty foods that are difficult to find through traditional channels. Our expertise is forging close relationships with the producers, growers, makers and distributors of specialty products, then carefully selecting our suppliers based on their quality, uniqueness and reliability.
The IVFH team is adept at evaluating and certifying the food safety and supply chain capabilities of small batch producers who don’t typically sell through broad-based sales channels. We seek out the freshest, most unique, origin-specific gourmet cheese, meat, produce, and premium ingredients available, and distribute them directly from our robust network of vendors and warehouses within 24 – 72 hours of an order being placed. We also source, package, and brand a meaningful segment of these products ourselves, enabling us to better control the assortment, offer more flexibility and variety to our customers, and capture additional margin.
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We leverage this unique, premium assortment to serve the needs of Professional Chefs in settings such as restaurants, hotels, country clubs, national chain accounts, casinos, hospitals and catering houses. We provide these premium customers with products that can’t typically be found through their broadline distributor’s warehouse assortment. We distribute these products directly to Professional Chefs in Chicago through our subsidiary, Artisan Specialty Foods, Inc., and nationally through our e-commerce businesses on Amazon.com and our own website. We also drop ship specialty foods to Professional Chefs nationally through the websites of broadline distributors, such as US Foods, Inc. Lastly, we sell these food to large retailers for resale on their shelves to the end customer. Between this variety of sales channels, we are able to serve our Professional Chef customers wherever they are located.
We operate our new retail business, as well as our airline catering distribution business, out of our 200,000 square foot facility in Mountain Top, Pennsylvania,. We also operate warehouse activities in our owned 28,000 square foot facility in the greater Chicago area. Once our acquisition of Golden Organics closes, we will have another warehouse, operating out of Denver, CO, measuring approximately 20,000 square feet. We have the capabilities to pack and ship frozen, refrigerated, and ambient products, enabling us to sell a broad range of specialty foods. We also have GFSI/SQF certifications, allowing compatibility with the highest standards of food handling supply chains in the world, and the quality and food safety that our premium customers expect from us. These warehouses have the ability to ship packages and pallets of all sizes through overnight shipping. We also leverage our own fleet of trucks to deliver directly to our Professional Chef customers within our reach.
Our proprietary technology platform underpins our entire business, driving transparency and efficiency up and down the supply chain. Orders flow in real time, whether to our warehouses or to our vendor partners, to allow for fast handling and fulfillment. Our picking is enabled by efficient scan-based, handheld devices, ensuring order and inventory accuracy. Our warehouse management software optimizes pick routes for common items and order types, recommends a box size, and calculates the appropriate amount of packaging and ice required based on forecasted temperatures along the delivery route.
We have built a team consisting of passionate, committed, and food-obsessed people: our average tenure (outside of seasonal workers) across the Company is over five years. Our merchandising team has deep connections within the specialty food space around the globe. Our customer service and sales teams, as ex-chefs themselves, go beyond customer service to offer our Professional Chefs customer support, menu ideas, and preparation guidance.
RESULTS OF OPERATIONS
This discussion may contain forward-looking statements that involve risks and uncertainties. Our future results could differ materially from the forward-looking statements discussed in this report. This discussion should be read in conjunction with our consolidated financial statements, the notes thereto and other financial information included elsewhere in the report.
Financial Highlights For the fiscal quarter ended March 31, 2025, IVFH reported revenue of $19.5 million, a 26% increase compared to $15.5 million in 2024. Our organic revenue growth, which excludes the impact of divestitures and acquisitions, was an impressive 23% for the full quarter. Revenue growth was particularly strong in our national distribution, with total revenue increasing 133%. These results reflect our strategic efforts to enhance our market presence and expand our customer base.
Q1 Revenue Breakdown:
● | Digital Channels: Largely made up of our Distributor Relationships and supported by our Drop Ship model. This category contributed $8.3 million, which is 42.5% of our total revenue. This represents a decrease of 7% from $8.9 million in 2024, primarily due to continued headwinds in our legacy drop ship business. |
● | National Distribution: Captures our growing partnerships with airline caterers and our new national retail customer. This category generated $6.6 million, or 33.6% of total revenue, marking a 133% increase from $2.8 million in 2024. These sales are generally delivered to the customer through 3PL carriers or FedEx. |
● | Local Distribution: Consists mainly of local sales team relationships and our local fleet delivering direct from warehouse. This category brought in $4.4 million, or 22.7% of total revenue, an increase of 88% from $2.3 million in 2024, supported by $2.0 million from the recent acquisitions of LoCo Foods and Golden Organics. |
● | Direct-to-Consumer: Divested; however, will continue to impact revenue throughout much of 2025 due to the historical revenues generated by igourmet.com through Q3 2024. In Q1 2025, Direct-to-Consumer revenue declined by 100%, compared to $1.2 million in Q1 2024. |
● | Other Services: Consists of numerous activities, mainly monetizing the excess space in Pennsylvania. This category contributed $253k, or 1.3% of total revenue, an increase of 22% from $208k in 2024. |
Cost of goods sold for the quarter increased 28.6% to $15.1 million compared to $11.7 million last year. Gross margin dropped by 157 basis points to 22.9%, mainly due to changes in our sales mix as we expanded our cheese business. Cheese products sold to retailers carry lower margins than our other offerings and accounted for 19% of Q1 2025 sales, versus 0% in Q1 2024. Excluding cheese, gross margins improved 282 bps. However, the cheese business is expected to improve with better volume costing and cutting efficiency. The margin decline was partially offset by lower shipping costs, which boosted 280 bps, representing 9.6% of revenue in Q1 2025 compared to 12.4% last year.
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Operating Expenses
Cash Operating Expenses (Cash OpEx):
● | Payroll and related costs increased by $377 thousand to $2.9 million. This increase was mainly due to higher headcount to support national distribution business, amounting to $320 thousand, and employees added through acquisitions completed in Q4 2024, which amounted to $307 thousand. These increases were partially offset by reduced benefits expense of $100 thousand, reduced payroll taxes of $70 thousand, and bonus accrual reduced by $91 thousand compared to the prior year period. |
● | Computer and IT Costs: Reduced by $37 thousand to $101 thousand, reflecting the Company’s efforts to streamline IT operations and reduce software and hardware expenses. |
● | Office expenses increased by $259 thousand. The increase is attributed to new office locations costing $139 thousand and larger truck fleet costs of $65k as a result of the acquisition of Golden Organics and LoCo Foods. As part of this acquisition, LoCo Foods relocated from Fort Collins to Denver, consolidating offices. By consolidating offices, Q1 results reflect $50 thousand in rent and utilities related to the closed facility that will not continue in subsequent quarters. Additionally, additional building-related costs at our cheese distribution facility amount to $56 thousand. These costs are anticipated to continue in subsequent quarters. |
● | Advertising and Digital Marketing Costs: Significant reduction of $166 thousand to $5 thousand, resulting from the restructuring of marketing programs and a strategic shift away from direct-to-consumer advertising. |
● | Professional and legal fees increased by $472 thousand to $762 thousand, with approximately $288 thousand attributable to various legal and transactional activities related to acquisitions, contractual dispute settlement, and other corporate actions which are not expected to recur. |
Total Cash OpEx increased: The total Cash OpEx increased by $835 thousand, reflecting growth in our national distribution channels and M&A activity in Q4 2024.
Non-Cash Operating Expenses (Non-Cash OpEx):
● | Share-Based Compensation: Decreased by $60 thousand to $161 thousand, due to revaluation of stock options and other equity-based incentives to attract and retain key personnel. |
● | Depreciation and amortization expense decreased by $2 thousand to $108 thousand, reflecting a similar net book value of property, plant, and equipment compared to the prior year period. |
● | Bad Debt Expense: Increased by $4 thousand to $27 thousand, as a result of customer shut downs in our local distribution sector. |
● | Impairment of Intangible Assets: No impairment costs in 2025 or 2024. |
Non-Recurring Expenses:
● | Gain on Sale of Assets: No transactions in Q1 2025 and $1.8 million in 2024, from the sale of the headquarters building |
● | Gain on Sale of Subsidiaries: No transactions in Q1 2025 and $21 thousand from the sale of Haley Group, Inc. in 2024 |
Net (Loss) Income
During the first quarter of 2025, the company reported a net loss from continuing operations of $430 thousand, compared to a net income of $1.4 million in 2024, representing a decline of $1.9 million.
Liquidity and Capital Resources at March 31, 2025
As of March 31, 2025, IVFH had current assets of $21.7 million, including cash and cash equivalents of $1.1 million, and current liabilities of $7.7 million. The company had net working capital of $14.0 million.
Cash Flow Analysis:
● | Operating Activities: Used $1.0 million, primarily due to changes in working capital components. The significant changes in working capital included: |
● | Accounts receivable decreased by $1.5 million, primarily reflecting the collection of receivables related to elevated cheese sales in Q4 2024. Cheese sales totalled approximately $5.4 million in Q4 compared to $3.8 million in Q1 2025, as the company completed the Q4 initial pipeline fill. The higher Q4 sales drove an increase in accounts receivable at year-end, and the subsequent collection of these balances contributed to the decrease in Q1 2025. There has been no material change in collection performance during the period. |
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● | Inventory increased by $617 thousand, primarily to support anticipated demand from new retail and airline customers and to replenish depleted inventory levels associated with the newly acquired LoCo Foods distribution business. This increase is consistent with the Company’s overall sales growth, as revenues increased approximately 26% year-over-year, and higher inventory levels were expected to support this expanded sales volume. |
● | Accounts payable and accrued liabilities decreased by $1.8 million, primarily due to paydowns of inventory purchases related to the elevated Q4 2024 cheese sales, which were settled in Q1 2025. In addition, the decrease reflects the payment of aged vendor payables associated with the acquired LocoFoods business. |
● | Investing activities: Net cash used in investing activities was $163 thousand, primarily related to purchases of property and equipment. These investments included equipment for cheese cutting operations and warehouse improvements to support the consolidation of Loco Foods and Golden Organics, acquired in Q4 2024. |
● | Financing Activities: Used $134 thousand, primarily from the principal payments on debt. |
Future Capital Needs IVFH anticipates significant capital expenditure in the coming years to support its growth initiatives and operational improvements. Key areas of investment include:
● | Expansion of Distribution Facilities: Upgrading and expanding warehouse and distribution facilities to accommodate increased demand and improve operational efficiency. |
● | Technology Investments: Enhancing the company’s digital platforms and IT infrastructure to support e-commerce growth and improve customer experience. |
● | Product Development: Investing in new product lines and innovations to meet changing customer preferences and expand market share. |
The Company plans to finance these capital needs through a combination of internal cash flows, debt financing, and potential equity offerings. IVFH is committed to maintaining a strong balance sheet and ensuring sufficient liquidity to support its strategic initiatives
Transactions with Major Customers
Transactions with a major customer and related economic dependence information is set forth below and following our discussion of Liquidity and Capital Resources.
The Company’s largest customer, U.S. Foods, Inc. and its affiliates, accounted for approximately 34% and 50% of total sales in the three months ended March 31, 2025 and 2024, respectively; Sam’s Club, a membership-based warehouse retailer and subsidiary of Walmart Inc. represented 19% and 0% of total sales, respectively; and Gate Gourmet, the leading global provider of airline catering solutions and provisioning services for airlines, represented 12% and 17% of total sales, respectively.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues, or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Inflation
In the opinion of management, inflation has had a material effect on the Company’s financial condition and results of its operations. The Company has seen the impact of inflation across its costs for fuel, shipping, cost of goods, and marketing. Balancing the management of these increases with the willingness of our customers to pay higher prices will continue to be a key focus for the Company this year. However, no assurance can be given that we will be successful and inflationary pressure on our profits will likely continue through 2025.
RISK FACTORS
The Company’s business and success is subject to numerous risk factors as detailed in its Annual Report on Form 10-K for the year ended December 31, 2024 and other of its Current Reports on Form 8-K, all of which reports are available at no cost at www.sec.gov.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this Item.
Item 4. Controls and Procedures
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit pursuant to the requirements of the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, among other things, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive and financial officers, as appropriate, to allow timely decisions regarding required disclosure.
(a) Evaluation of disclosure controls and procedures
Our Principal Executive Officer and Principal Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined as defined in Rule 13a-15(f) and 15d-(f) under the Exchange Act) as of the end of the period covered by this report, have determined that our disclosure controls and procedures were effective at March 31, 2025 at the reasonable assurance level. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013).
(b) Changes in internal control over financial reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Exchange Act Rules 13a-15(d) and 15d-15 that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 11, 2023, the Company entered into an agreement with High Impact Analytics, LLC (“High Impact”) whereby the latter would provide sales management and support services in exchange for a variable fee. The agreement contained a provision requiring 30 days’ written notice for “cancellation”, following which High Impact would be entitled to commissions for 120 days thereafter; the agreement also explicitly expired on September 11, 2024 (at which point, by its own terms, it was “no longer in force”), and was not renewed. High Impact demanded continuing variable fee payments on the grounds that the Company had not “cancelled” the agreement, and the Company responded that the agreement expressly terminated on September 11, 2024, such that no cancellation was required. On March 13, 2025, High Impact filed suit in Benton County, Arkansas, alleging that it is entitled to fees in the amount of $500,000, or alternatively treble damages under Ark. Code Ann. § 4-70-301. On May 1, 2025, the Company reached a settlement agreement to resolve a dispute with High Impact. In connection with the settlement, the Company will pay $210 thousand in Q2 2025. The related amount has been accrued for in the financial statements as of March 31, 2025.
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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Trading Arrangements
During
the quarterly period ended March 31, 2025, none of our directors or officers (as defined in Rule 16a-1(f) promulgated
under the Exchange Act)
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Item 6. Exhibits
* | Filed herewith. |
** | Furnished herewith. |
+ | Certain portions of this exhibit are omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K because they are not material and are the type that the Company treats as private or confidential. The Company hereby agrees to furnish a copy of any omitted portion to the SEC upon request. |
^ | Certain portions of the exhibit have been omitted pursuant to Item 601(a)(6) of Regulation S-K. The Company hereby agrees to furnish a copy of any omitted portion to the SEC upon request. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURE | TITLE | DATE | ||
/s/ Robert William Bennett | Chief Executive Officer and Director | May 15, 2025 | ||
Robert William Bennett | (Principal Executive Officer) | |||
/s/ Gary Schubert | Chief Financial Officer | May 15, 2025 | ||
Gary Schubert | (Principal Financial and Accounting Officer) |
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