UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D. C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or15(d) of the Securities and Exchange Act of 1934

For the quarterly period ended ~~September 30, 2022~~March 31, 2023

☐ Transition report pursuant to Section 13 or 15(d) of the Exchange Act

For the transition period from to .

Commission File Number: 0-9376

INNOVATIVE FOOD HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

Florida

(State or Other Jurisdiction of Incorporation or Organization)

20-1167761

(IRS Employer I.D. No.)

28411 Race Track Rd.

Bonita Springs, Florida 34135

(Address of Principal Executive Offices)

(239) 596-0204

(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
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 for the past 90 days. YES ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

(Check One):

Large Accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒
Emerging growth company ☐

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 ☐ NO ☒

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: ~~47,779,010~~48,963,961 shares of common stock outstanding as of ~~November 8, 2022.~~May 9, 2023.

INNOVATIVE FOOD HOLDINGS, INC.

TABLE OF CONTENTS TO FORM 10-Q

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited)	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 (including cautionary statement)	2725
Item 4.	Controls and Procedures	3631

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	3732
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3732
Item 3.	Defaults Upon Senior Securities	3732
Item 4.	Mine Safety Disclosures	3732
Item 5.	Other Information	3732
Item 6.	Exhibits	3833
	Signatures	3934

PART I. FINANCIAL INFORMATION

ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS

Innovative Food Holdings, Inc.

Consolidated Balance Sheets

	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
	(unaudited)						(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	2,752,404		$	6,122,671		$	1,650,127		$	4,899,398
Accounts receivable, net		4,670,645			3,256,764			4,829,709			4,969,395
Inventory		2,937,098			3,109,984			3,021,465			3,053,852
Other current assets		336,350			314,107			372,857			289,432
Total current assets		10,696,497			12,803,526			9,874,158			13,212,077

Property and equipment, net		8,008,057			8,186,227			7,827,980			7,921,561
Investments		286,725			286,725
Right of use assets, operating leases, net		168,344			232,381
Right of use assets, finance leases, net		603,803			669,039
Right to use assets, operating leases, net								136,111			152,425
Right to use assets, finance leases, net								536,843			570,323
Other amortizable intangible assets, net		41,325			72,218			20,663			30,994
Tradenames and other unamortizable intangible assets		1,532,822			1,532,822			1,532,822			1,532,822
Total assets	$	21,337,573		$	23,782,938		$	19,928,577		$	23,420,202

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	6,070,249		$	5,702,905		$	4,796,700		$	6,853,253
Accrued separation costs, related parties, current portion								559,370			-
Accrued interest, current portion		18,008			29,349			18,198			18,104
Deferred revenue		1,094,649			1,631,406			1,238,790			1,558,155
Line of Credit		2,014,333			2,000,000			2,014,333			2,014,333
Notes payable - current portion, net of discount		5,667,485			412,961			5,709,043			5,711,800
Lease liability - operating leases, current		63,569			74,088			63,877			64,987
Lease liability - finance leases, current		188,818			159,823			193,226			191,977
Contingent liability - current portion		187,000			187,000
Total current liabilities		15,304,111			10,197,532			14,593,537			16,412,609

Accrued separation costs, related parties, non-current								1,041,425			-
Lease liability - operating leases, non-current		104,775			158,293			72,234			87,438
Lease liability - finance leases, non-current		382,286			499,240			285,036			333,092
Contingent liability - long-term		108,600			108,600
Note payable - long term portion, net		1,899			5,409,172
Total liabilities		15,901,671			16,372,837			15,992,232			16,833,139


Commitments & Contingencies (see note 16)
Stockholders' equity
Common stock: $0.0001 par value; 500,000,000 shares authorized; 50,569,327 and 49,427,297 shares issued, and 47,731,747 and 46,589,717 shares outstanding at March 31, 2023 and December 31, 2022, respectively								5,052			4,938
Additional paid-in capital								42,367,472			42,189,471
Common stock to be issued, 832,214 and 1,499,940 shares at March 31, 2023 and December 31, 2022, respectively								83			150
Treasury stock: 2,623,171 and 2,623,171 shares outstanding at March 31, 2023 and December 31, 2022, respectively.								(1,141,370	)		(1,141,370	)
Accumulated deficit								(37,294,892	)		(34,466,126	)
Total liabilities and stockholders' equity								3,936,345			6,587,063
					-

Commitments & Contingencies (see note 17)
Stockholders' equity
Common stock: $0.0001 par value; 500,000,000 shares authorized; 50,616,590 and 48,879,331 shares issued, and 47,779,010 and 46,041,751 shares outstanding at September 30, 2022 and December 31, 2021, respectively		5,057			4,885
Additional paid-in capital		42,132,756			41,662,710
Treasury stock: 2,623,171 and 2,623,171 shares outstanding at September 30, 2022 and December 31, 2021, respectively.		(1,141,370	)		(1,141,370	)
Accumulated deficit		(35,560,541	)		(33,116,124	)
Total stockholders' equity		5,435,902			7,410,101		$	19,928,577		$	23,420,202

Total liabilities and stockholders' equity	$	21,337,573		$	23,782,938

See condensed notes to these unaudited consolidated financial statements.

Table of Contents

Innovative Food Holdings, Inc.

Consolidated Statements of Operations

(unaudited)

													For the Three			For the Three
	For the Three			For the Three			For the Nine			For the Nine			Months Ended			Months Ended
	Months Ended			Months Ended			Months Ended			Months Ended			March 31,			March 31,
	September 30,			September 30,			September 30,			September 30,			2023			2022
	2022			2021			2022			2021

Revenue	$	20,059,982		$	15,207,353		$	56,226,249		$	41,362,816		$	16,995,200		$	15,643,111
Cost of goods sold		15,546,132			11,427,343			43,537,570			30,471,401			12,908,689			11,917,179
Gross margin		4,513,850			3,780,010			12,688,679			10,891,415			4,086,511			3,725,932

Selling, general and administrative expenses		4,320,981			4,998,673			15,015,456			14,512,803			4,799,086			5,172,426
Separation costs – executive officers														1,945,650			-
Total operating expenses		4,320,981			4,998,673			15,015,456			14,512,803			6,744,736			5,172,426

Operating (loss) income		192,869			(1,218,663	)		(2,326,777	)		(3,621,388	)
Operating loss														(2,658,225	)		(1,446,494	)

Other income (expense:)
Impairment of investment		-			-			-			(209,850	)
Gain on interest rate swap		-			-			294,000			-			-			294,000
Gain on forgiveness of debt		-			1,665,818			-			1,665,818
Loss on extinguishment of debt		-			-			(40,556	)		-
Other leasing income		785			1,900			8,169			8,940			1,900			5,090
Interest expense, net		(183,908	)		(82,029	)		(379,253	)		(257,889	)		(172,441	)		(82,973	)
Total other income (expense)		(183,123	)		1,585,689			(117,640	)		1,207,019			(170,541	)		216,117

Net (loss) income before taxes		9,746			367,026			(2,444,417	)		(2,414,369	)
Net loss before taxes														(2,828,766	)		(1,230,377	)

Income tax expense		-			-			-			-			-			-

Net (loss) income	$	9,746		$	367,026		$	(2,444,417	)	$	(2,414,369	)
Net loss													$	(2,828,766	)	$	(1,230,377	)

Net (loss) income per share - basic	$	0.00		$	0.01		$	(0.05	)	$	(0.06	)
Net loss per share - basic													$	(0.06	)	$	(0.03	)

Net (loss) income per share - diluted	$	0.00		$	0.01		$	(0.05	)	$	(0.06	)
Net loss per share - diluted													$	(0.06	)	$	(0.03	)

Weighted average shares outstanding - basic		47,390,976			40,253,543			46,838,377			37,254,290			48,462,234			46,256,160

Weighted average shares outstanding - diluted		47,390,976			40,253,543			46,838,377			37,254,290			48,462,234			46,256,160

See condensed notes to these unaudited consolidated financial statements.

Table of Contents

Innovative Food Holdings, Inc.

Consolidated Statements of Stockholders' Equity

Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~

(unaudited)

Additional

Common Stock

Paid-in

Treasury Stock

Accumulated

Amount

Value

Capital

Amount

Value

Deficit

Total

Balance - June 30, 2021
38,800,629 $ 3,877 $ 37,730,475 2,623,171 $ (1,141,370
)
$ (35,181,188
)
$ 1,411,794
Fair value of vested stock and stock options
335,252 34 160,718 - - - 160,752
Common stock sold for cash, net of costs
9,375,000 938 3,579,434 - - - 3,580,372
Net income for the three months ended September 30, 2021
- - - - - 367,026 367,026
Balance - September 30, 2021
48,510,881 $ 4,849 $ 41,470,627 2,623,171 $ (1,141,370
)
$ (34,814,162
)
$ 5,519,944

Balance - June 30, 2022
50,014,147 4,997 41,980,090 2,623,171 (1,141,370
)
(35,570,287
)
5,273,430
Fair value of vested stock and stock options
602,443 60 152,666 - - - 152,726
Net income for the three months ended September 30, 2022
- - - - - 9,746 9,746
Balance - September 30, 2022
50,616,590 $ 5,057 $ 42,132,756 2,623,171 $ (1,141,370
)
$ (35,560,541
)
$ 5,435,902

Balance - December 31, 2020
38,209,060 $ 3,817 $ 37,415,155 2,623,171 $ (1,141,370
)
$ (32,399,793
)
$ 3,877,809
Fair value of vested stock and stock options
926,821 94 476,038 - - - 476,132
Common stock sold for cash, net of costs
9,375,000 938 3,579,434 - - - 3,580,372
Net loss for the nine months ended September 30, 2021
- - - - - (2,414,369
)
(2,414,369
)
Balance - September 30, 2021
48,510,881 $ 4,849 $ 41,470,627 2,623,171 $ (1,141,370
)
$ (34,814,162
)
$ 5,519,944

Balance - December 31, 2021
48,879,331 4,885 41,662,710 2,623,171 (1,141,370
)
(33,116,124
)
7,410,101
Fair value of vested stock and stock options
1,560,957 155 458,023 - - - 458,178
Offering expenses for stock previously sold for cash
- - (50,000
)
- - - (50,000
)
Common stock issued for services
176,302 17 59,931 - - - 59,948
Fair value of options issued to consultant
- - 2,092 - - - 2,092
Net loss for the nine months ended September 30, 2022
- - - - - (2,444,417
)
(2,444,417
)
Balance - September 30, 2022
50,616,590 $ 5,057 $ 42,132,756 2,623,171 $ (1,141,370
)
$ (35,560,541
)
$ 5,435,902

											Additional
	Common Stock				Common Stock to be issued						Paid-in		Treasury Stock					Accumulated
	Amount		Value		Amount			Value			Capital		Amount		Value			Deficit			Total

Balance - December 31, 2021		48,114,557	$	4,809		764,774		$	76		$	41,662,710		2,623,171	$	(1,141,370	)	$	(33,116,124	)	$	7,410,101
Fair value of vested stock and stock options		-		-		464,515			46			152,680		-		-			-			152,726
Net loss for the three months ended March 31, 2022		-		-		-			-			-		-		-			(1,230,377	)		(1,230,377	)
Balance - March 31, 2022		48,114,557	$	4,809		1,229,289		$	122		$	41,815,390		2,623,171	$	(1,141,370	)	$	(34,346,501	)	$	6,332,450

Balance - December 31, 2022		49,427,297	$	4,938		1,499,940		$	150		$	42,189,471		2,623,171	$	(1,141,370	)	$	(34,466,126	)	$	6,587,063
Shares issued for compensation		-				207,274			20			45,660		-		-			-			45,680
Shares issued to management and employees, previously accrued		875,000		87		(875,000	)		(87	)		-		-		-			-			-
Fair value of shares under equity incentive plan		-		-		-			-			20,199		-		-			-			20,199
Common stock issued for services		267,030		27		-			-			112,142		-		-			-			112,169
Net loss for the three months ended March 31, 2023		-		-		-			-			-		-		-			(2,828,766	)		(2,828,766	)
Balance - March 31, 2023		50,569,327	$	5,052		832,214		$	83		$	42,367,472		2,623,171	$	(1,141,370	)	$	(37,294,892	)	$	3,936,345

See condensed notes to these unaudited consolidated financial statements.

Table of Contents

Innovative Food Holdings, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	For the Nine			For the Nine			For the Three			For the Three
	Months Ended			Months Ended			Months Ended			Months Ended
	September 30,			September 30,			March 31,			March 31,
	2022			2021			2023			2022
	(unaudited)			(unaudited)
Cash flows from operating activities:
Net loss	$	(2,444,417	)	$	(2,414,369	)	$	(2,828,766	)	$	(1,230,377	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on forgiveness of debt		-			(1,665,818	)
Impairment of investment		-			209,850
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		423,844			407,704			145,387			138,361
Amortization of right-of-use asset		50,821			76,005
Amortization of right to use asset								16,314			19,691
Amortization of prepaid loan fees		70,618			9,368			-			3,088
Stock based compensation		520,218			476,132			178,048			152,726
Loss on extinguishment of debt		40,556			-
Provision for doubtful accounts		11,493			32,443
Provision (recoveries) for doubtful accounts								4,666			(1,115	)

Changes in assets and liabilities:
Accounts receivable, net		(1,425,374	)		(1,254,764	)		135,020			(164,124	)
Inventory and other current assets, net		150,643			869,165			(51,038	)		(175,367	)
Accounts payable and accrued liabilities		386,414			(747,187	)		(2,056,459	)		(1,216,020	)
Accrued separation costs – related parties								1,600,795			-
Deferred revenue		(536,757	)		(1,861,665	)		(319,365	)		(380,462	)
Contingent liabilities		-			(8,000	)
Operating lease liability		(50,821	)		(76,005	)		(16,314	)		(19,691	)
Net cash (used in) operating activities		(2,802,762	)		(5,947,141	)
Net cash used in operating activities								(3,191,712	)		(2,873,290	)

Cash flows from investing activities:
Acquisition of property and equipment		(107,045	)		(14,812	)		(7,995	)		(4,760	)
Net cash used in investing activities		(107,045	)		(14,812	)		(7,995	)		(4,760	)

Cash flows from financing activities:
Payment of offering costs for stock previously issued		(50,000	)		-
Proceeds from sale of common stock, net of costs					3,580,372
Proceeds from Payroll Protection Plan Loan		-			1,748,414
Principal payments on debt		(169,696	)		(299,924	)		(2,757	)		(92,816	)
Principal payments financing leases		(130,459	)		(108,528	)		(46,807	)		(40,637	)
Cost of debt financing		(110,305	)		-
Net cash provided by (used in) financing activities		(460,460	)		4,920,334
Net cash (used in) financing activities								(49,564	)		(133,453	)

Decrease in cash and cash equivalents		(3,370,267	)		(1,041,619	)		(3,249,271	)		(3,011,503	)

Cash and cash equivalents at beginning of period		6,122,671			5,060,015			4,899,398			6,122,671

Cash and cash equivalents at end of period	$	2,752,404		$	4,018,396		$	1,650,127		$	3,111,168

Supplemental disclosure of cash flow information:

Cash paid during the period for:
Interest	$	187,090		$	250,967		$	174,410		$	84,961

Taxes	$	-		$	-		$	-		$	-

Non-cash investing and financing activities:
Increase in right of use assets & liabilities – new leases	$	-		$	88,359
Decrease in right of use assets & liabilities – cancellation of lease	$	13,216		$	-
(Decrease) Increase in right to use assets & liabilities							$	-		$	(13,216	)
Finance lease for fixed assets	$	42,500		$	21,885		$	-		$	42,500
Debt to Fifth Third Bank paid directly by Maple Mark Bank	$	7,695,866		$	-
Reclassification of accounts receivable to other assets	$	-		$	22,380

See condensed notes to these unaudited consolidated financial statements.

Table of Contents

INNOVATIVE FOOD HOLDINGS, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2022~~March 31, 2023

(Unaudited)

1. ~~BASIS~~NATURE OF ~~PRESENTATION~~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 months ended March 31, 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 Chefs 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,~~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.~~Commission.. All material intercompany transactions have been eliminated upon ~~consolidation of these entities.~~

The accompanying unaudited interim consolidated financial statements have been prepared by the Company, in accordance with generally accepted accounting principles pursuant to Regulation S-X of the Securities and Exchange Commission and with the instructions to Form 10-Q. Certain information and footnote disclosures normally included in audited consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Accordingly, these interim financial statements should be read in conjunction with the Company’s audited financial statements and related notes as contained in Form 10-K for the year ended December 31, 2021. In the opinion of management, the interim unaudited consolidated financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented. The results of the operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results of operations to be expected for the full year.

~~2. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES~~

~~Business Activity~~

Our business is currently conducted by our wholly owned subsidiaries, some of which are non-operating, Artisan Specialty Foods, Inc. (“Artisan”), Food Innovations, Inc. (“FII”), Food New Media Group, Inc. (“FNM”), Organic Food Brokers, LLC (“OFB”), Gourmet Foodservice Group, Inc. (“GFG”), Gourmet Foodservice Group Warehouse, Inc. (“GFW”), Gourmeting, Inc. (“Gourmeting”), Haley Food Group, Inc. (“Haley”), Oasis Sales Corp. (“Oasis”), 4 The Gourmet, Inc. (d/b/a For The Gourmet, Inc.), (“Gourmet”), Innovative Food Properties, LLC (“IFP”), Plant Innovations, Inc. (“Plant Innovations”), Innovative Gourmet, LLC (“Innovative Gourmet” or “igourmet”), Food Funding, LLC (“Food Funding”), Logistics Innovations, LLC (L Innovations”), M Innovations, LLC (“M Innovations” or “Mouth”), MI Foods, LLC (“MIF”), M Foods Innovations, LLC (“M Foods”), P Innovations, LLC (“P Innovations”), PlantBelly, LLC (“PlantBelly”), Innovative Foods, Inc. (“IFI”) and Innovative Gourmet Partnerships, LLC (“IGP”), and collectively with IVFH and its other subsidiaries, the “Company” or “IVFH”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. All material intercompany transactions have been eliminated upon consolidation of these entities.

Overall, our business activities are focused around the creation and growth of a platform which provides distribution or the enabling of distribution of high quality, unique specialty food and food related products ranging from specialty foodservice products to Consumer-Packaged Goods (“CPG”) products through a variety of sales channels ranging from national partnership based and regionally based foodservice related sales channels to e-commerce sales channels offering products both direct to consumers (“D2C”) and direct to business (“B2B”). In our business model, we receive orders from our customers and then work closely with our suppliers and our warehouse facilities to have the orders fulfilled. In order to maintain freshness and quality, we carefully select our suppliers based upon, among other factors, their quality, uniqueness, reliability and access to overnight courier services.

FII, through its relationship with the producers, growers, and makers of thousands of unique specialty foodservice products and through its relationship with US Foods, Inc. (“U.S. Foods” or “USF”), has been in the business of providing premium restaurants, within 24 – 72 hours, with the freshest origin-specific perishable, and healthcare products shipped directly from our network of vendors and from our warehouses. Our customers include restaurants, hotels, country clubs, national chain accounts, casinos, hospitals and catering houses.consolidation.

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Gourmet has been in the business of providing specialty food via e-commerce through its own website at www.forthegourmet.com and through other ecommerce channels, with unique specialty gourmet food products shipped directly from our network of vendors and from our warehouses within 24 – 72 hours.

Artisan is a supplier of over 1,500 unique specialty foodservice products to over 500 customers such as chefs, restaurants, etc. in the Greater Chicago area and serves as a national fulfillment center for certain of the Company’s other subsidiaries.

~~GFG is focused on expanding the Company’s program offerings to additional specialty foodservice customers.~~

Haley is a dedicated foodservice consulting and advisory firm that works closely with companies to access private label and manufacturers’ private label food service opportunities with the intent of helping them launch and commercialize new products in the broadline foodservice industry and assists in the enabling of the distribution of products via national broadline food distributors.

~~IFP was formed to hold the Company’s real estate holdings including the recently acquired facility in Mountaintop, Pennsylvania.~~

OFB and Oasis function as outsourced national sales and brand management teams for emerging organic and specialty food CPG companies of a variety of sizes and business stages, and provides emerging and unique CPG specialty food brands with distribution and shelf placement access in all of the major metro markets in the food retail industry.

igourmet has been in the business of providing D2C specialty food via e-commerce through its own website at www.igourmet.com and through other channels such as www.amazon.com, www.ebay.com, and www.walmart.com. In addition, igourmet.com offers a line of B2B specialty foodservice items. Products are primarily shipped directly from igourmet.com’s approximately 100,000 square feet warehouse in Pennsylvania via igourmet.com owned trucks and via third party carrier directly to thousands of customers nationwide.

Mouth.com (www.mouth.com) is an online retailer of specialty foods, monthly subscription boxes and curated gift boxes to thousands of consumers and corporate customers across the United States. Mouth sources high quality specialty foods crafted in the US by independent and small batch makers, and expertly curates them into standout food gifts for both consumers and corporate customers. Mouth also has launched a private label brand, including several award-winning products.

P Innovations focus is to leverage acquired assets to expand the Company’s subscription-based e-commerce business activities and to launch new businesses leveraging the Company’s e-commerce platform.

~~Plant Innovations is focused on plant-based D2C brands and online retail within the e-commerce space.~~

~~L Innovations provides 3rd party warehouse and fulfillment services out of its location at the Company’s PA facility.~~

~~Use of Estimates~~

The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to revenue recognition and concentration of credit risk. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Accounts subject to estimate and judgements are accounts receivable reserves, income taxes, intangible assets, contingent liabilities, operating and finance right of use assets and liabilities, and equity-based instruments. Actual results may differ from these estimates under different assumptions or conditions. We believe our estimates have not been materially inaccurate in past years, and our assumptions are not likely to change in the foreseeable future.

~~Principles of Consolidation~~

The accompanying consolidated financial statements include the accounts of Innovative Food Holdings, Inc., and its wholly owned operating subsidiaries, Artisan, FII, FNM, OFB, GFG, GFW, Gourmeting, Haley, Oasis, Innovative Gourmet, Food Funding, IFP, L Innovations, M Innovations, P Innovations, MIF, M Foods, PlantBelly, Plant Innovations, IFI, IGP, and Gourmet. All material intercompany transactions have been eliminated upon consolidation of these entities.

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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,~~March 31, 2023 and 2022, ~~and December 31, 2021,~~ trade receivables from the Company’s largest customer amounted to ~~27%~~23% and ~~28%~~33%, respectively, of total trade receivables. During the ~~nine~~three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ sales from the Company’s largest customer amounted to ~~51%~~46% and ~~48%~~49% of total sales, respectively.

The Company maintains cash balances in excess of Federal Deposit Insurance Corporation limits. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the total cash in excess of these limits was ~~$403,255~~$681,246 and ~~$4,555,032,~~$3,205,568, respectively.

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.

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The following table represents the changes in deferred revenue as reported on the Company’s consolidated balance sheets:

Balance as of December 31, 2020
$ 2,917,676
Cash payments received
591,886
Net sales recognized
(2,376,151
)
Balance as of March 31, 2021 (unaudited)
$ 1,133,411

Cash payments received
375,115
Net sales recognized
(527,991
)
Balance as of June 30, 2021 (unaudited)
$ 980,535

Cash payments received
401,097
Net sales recognized
(325,621
)
Balance as of September 30, 2021 (unaudited)
$ 1,056,011

Balance as of December 31, 2021	$	1,631,406
Cash payments received		700,582
Net sales recognized		(1,081,044	)
Balance as of March 31, 2022 (unaudited)	$	1,250,944

Cash payments received
99,989
Net sales recognized
(128,686
)
Balance as of June 30, 2022 (unaudited)
$ 1,222,247

Balance as of December 31, 2022				$	1,558,155
Cash payments received		385,633			215,346
Net sales recognized		(513,231	)		(534,711	)
Balance as of September 30, 2022 (unaudited)	$	1,094,649
Balance as of March 31, 2023 (unaudited)				$	1,238,790

Disaggregation of Revenue

The following table represents a disaggregation of revenue for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021:~~2022:

	Three Months Ended				Three Months Ended
	September 30,				March 31,
	2022		2021		2023		2022
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Specialty Foodservice	$	17,630,515	$	12,060,223	$	13,804,785	$	11,540,835
E-Commerce		1,839,541		2,652,307		2,626,158		3,612,344
National Brand Management		336,766		260,934		315,688		284,147
Logistics		253,160		233,889		248,569		205,785
Total	$	20,059,982	$	15,207,353	$	16,995,200	$	15,643,111

Nine Months Ended

September 30,

2022

2021

(unaudited)

(unaudited)

Specialty Foodservice
$ 46,072,258 $ 29,049,060
E-Commerce
8,637,210 10,917,318
National Brand Management
872,732 751,865
Logistics
644,049 644,573
Total
$ 56,226,249 $ 41,362,816

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Cost of goods sold

We have included in cost of goods sold all costs which are directly related to the generation of revenue. These costs include primarily the cost of food and raw materials, packing and handling, shipping, and delivery costs.

We have also included all payroll costs as cost of goods sold in our leasing and logistics services business.

Basic and Diluted Earnings Per Share

Basic net earnings per share is based on the weighted average number of shares outstanding during the period, while fully-diluted net earnings per share is based on the weighted average number of shares of common stock and potentially dilutive securities assumed to be outstanding during the period using the treasury stock method. Potentially dilutive securities consist of options and warrants to purchase common stock, and convertible debt. Basic and diluted net loss per share is computed based on the weighted average number of shares of common stock outstanding during the period.

The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options and warrants for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculation. For the three and nine months ended September 30, 2022, 2,300,000 stock options were excluded from the calculation of fully diluted earnings per share because the effect would have been anti-dilutive. For the three and nine months ended September 30, 2021, 2,225,000 stock options were excluded from the calculation of fully diluted earnings per share because the effect would have been anti-dilutive.

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Dilutive shares at ~~September 30, 2022:~~March 31, 2023:

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:~~March 31, 2023:

				Weighted					Weighted
				Average					Average
				Remaining					Remaining
Exercise	Exercise	Number		Contractual		Exercise	Number		Contractual
Price	Price	of Options		Life (years)		Price	of Options		Life (years)
$	0.41		125,000		1.57	0.41		125,000		1.07
$	0.50		125,000		1.57	0.50		125,000		1.07
$	0.60		50,000		3.25	0.60		50,000		2.75
$	0.62		360,000		1.25	0.62		360,000		0.75
$	0.85		540,000		1.25	0.85		540,000		0.75
$	1.00		50,000		3.25	1.00		50,000		2.75
$	1.20		1,050,000		1.15	1.20		950,000		0.74
			2,300,000		1.33			2,200,000		0.87

Restricted Stock Awards

At ~~September 30, 2022,~~March 31, 2023, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those 300,000 restricted stock awards will vest as follows: 125,000 restricted stock awards will vest contingent upon the attainment of a stock price of $2.00 per share for 20 straight trading days, and an additional 175,000 restricted stock awards will vest contingent upon the attainment of a stock price of $3.00 per share for 20 straight trading days. The fair value of these RSUs at the date of the grants will be charged to operations upon vesting.

~~Stock Grants~~Stock-based compensation

~~At September 30, 2022, there were~~During the three months ended March 31, 2023, the Company incurred obligations to issue the following shares of common stock pursuant to employment agreements: an aggregate ~~86,236 unvested~~total of 400,007 shares of common stock with a market value of $93,600 were accrued for issuance to its prior Chief Executive Officer; of this amount, 207,839 with a market value of $52,919 were withheld for the payment of income taxes, and the net number of shares issuable to the prior Chief Executive Officer was 192,168 with a market value of $45,680. Also, during the period an aggregate total of 15,106 shares of common stock with a market value of $5,000 were accrued for issuance to two board members; these restricted stock grants ~~outstanding due~~are being amortized over their vesting periods of one to ~~the Company’s two independent directors. These grants will vest as follows: 25,816 per quarter through December 31, 2022, and 15,106 per quarter through September 30, 2023, and 15,102~~three years. Also during the ~~quarter ended December 31, 2023. The fair value~~period, the amount of ~~these stock grants at the date of the grant were~~$20,199 was charged to operations ~~upon vesting.~~in connection with an incentive stock plan for the Company’s Chief Executive Officer. During the three months ended March 31, 2023, the total amount of $178,048 was charged to non-cash compensation.

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Dilutive shares at ~~September 30, 2021:~~March 31, 2022:

Stock Options

Weighted

Average

Remaining

Exercise

Number

Contractual

Price

of Options

Life (years)

$
0.60

50,000

4.25

$
0.62

360,000

2.25

$
0.85

540,000

2.25

$
1.00

50,000

4.25

$
1.20

1,100,000

2.04

$
1.50

125,000

0.25

2,225,000

2.13

				Weighted
				Average
				Remaining
Exercise		Number		Contractual
Price		of Options		Life (years)
$	0.60		50,000		3.75
$	0.62		360,000		1.75
$	0.85		540,000		1.75
$	1.00		50,000		3.75
$	1.20		1,100,000		1.59
			2,100,000		1.76

~~During the three months ended September 30, 2021, the Company issued 50,000 two-year options with a fair value $2,270 to a director. The Company charged the amount~~

Table of ~~$35,878 and $107,836 to operations in connection with stock options during the three and nine months ended September 30, 2021, respectively.~~

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Restricted Stock Awards

At ~~September 30, 2021,~~March 31, 2022, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those 300,000 restricted stock awards will vest as follows: 125,000 restricted stock awards will vest contingent upon the attainment of a stock price of $2.00 per share for 20 straight trading days, and an additional 175,000 restricted stock awards will vest contingent upon the attainment of a stock price of $3.00 per share for 20 straight trading days.

Stock Grants

During the three months ended March 31, 2022, the Company incurred obligations to issue the following shares of common stock pursuant to compensation agreements: an aggregate of 25,812 shares of common stock to board members; and an aggregate total of 438,703 shares of common stock to Executive Officers. Some of these shares or other shares owned by the Company’s employees are included in a 10b5-1 selling plan.

The Company charged the amount of ~~$124,874 and $368,296~~$152,726 to operations in connection with stock grants during the three ~~and nine~~ months ended ~~September 30, 2021, respectively.~~March 31, 2022.

~~Significant Recent~~New Accounting Pronouncements

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326). ASU 2016-13 provides for a new impairment model which requires measurement and recognition of expected credit losses for most financial assets and certain other instruments, including but not limited to, accounts receivable. ASU 2016-13 will become effective for the Company on January 1, 2023 and early adoption is permitted. The Company does not anticipate that the adoption of this standard will have a material impact on our consolidated financial statements.

In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40)”. This ASU reduces the number of accounting models for convertible debt instruments and convertible Preferred Stock. As well as amend the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, this ASU improves and amends the related EPS guidance. This standard is effective for us on January 1, 2023; adoption of this standard is not expected to have a material effect on our consolidated financial statements and related disclosures.

Management does not believe that any other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the accompanying consolidated financial statements.

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3.2. 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 ~~$35,560,541~~$37,294,892 at ~~September 30, 2022~~March 31, 2023 and negative cash flow from operations in the amount of ~~$2,802,762~~$3,191,712 for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023. The Company’s current liabilities exceeded its current assets by ~~$4,607,614~~$4,719,379 as of ~~September 30, 2022.~~March 31, 2023. The Company has reported a net loss of ~~$2,444,417~~$2,828,766 for the ~~nine~~three months ended ~~September 30, 2022.~~March 31, 2023.

The Company is working to manage its current liabilities while it continues to make changes in operations to further improve its cash flow and liquidity position. Management believes the Company will generate sufficient capital from operations and, if additional financing is required, from debt and equity financing in order to satisfy current liabilities in the succeeding twelve months. Management’s belief is based, if necessary, on the Company’s operating plans, which in turn is based on assumptions that may prove to be incorrect.

On June 6, 2022, the Company entered into ~~the following~~three loan agreements with ~~MapleMark:~~MapleMark Bank: the MapleMark Revolver ~~with a balance at September 30, 2022~~in the amount of ~~$2,014,333;~~$2,014,333, the MapleMark Term Loan 1 ~~with a balance at September 30, 2022~~in the amount of ~~$5,324,733;~~$5,324,733, and the MapleMark Term Loan 2 with a balance at September 30, 2022 $356,800 (the “MapleMark Loans”). See notes 13 and 14. The total debt due to MapleMark at September 30, 2022 was $7,695,866. The purpose of the MapleMark Loans was to recapitalize the Company’s debt by the loans payable to Fifth Third Bank in the ~~aggregate~~ amount of ~~$5,665,456.~~

$356,800. See note 13. The ~~MapleMark Revolver has an initial maturity date~~aggregate principal amount of ~~November 28, 2022;~~these loans is $7,695,866 at December 31, 2022. Each of these loans is currently due on May 27, 2023. These loans were entered into with the ~~MapleMark Term Loans 1 and 2 have initial maturity dates~~expectation of ~~November 28, 2022. The Company has applied for, and expects to receive,~~receiving a loan ~~guarantees~~guarantee from the United States Department of ~~Agriculture pursuant~~Agriculture. The USDA Guarantee would provide the Company with the ability to: (i) increase the amount available under the MapleMark Revolver to ~~its Business~~a maximum of $3,000,000 and ~~Industry Guarantee Loan Program, though there can be no assurance that these guarantees will be received. Upon receipt of these loan guarantees,~~extend the ~~maturity~~due date ~~of the Revolver will be extended~~ to November 28, ~~2023,~~2023; (ii) increase the amount available under the MapleMark Term Loan 1 to $7,420,000 and extend the ~~maturity~~due date ofto June 6, 2052; and (iii) increase the amount available under the MapleMark Term ~~Loans will be extended~~Loan 2 to $1,637,840 and extend the due date to June 6, 2052. ~~See note 19.~~The Company has submitted its application for the USDA Guarantee, and a conditional commitment was signed by the USDA on May 11, 2023.

We maintain a dialogue with MapleMark Bank regarding the status of the USDA Guarantee and the MapleMark Loans. We have previously secured two 90 day extensions of the MapleMark loans, from November 26, 2022 to February 26, 2023; and to May 27, 2023. If the USDA Guarantee is not received by May 17, 2023, we will apply for an additional 90 day extension of the MapleMark Loans. If, by May 22, 2023, we are unable to obtain an additional extension from MapleMark or if the USDA Guarantee is denied, we will begin renewed negotiations with MapleMark for loans to replace the existing loans but with terms not supported by the USDA Guarantee. MapleMark has indicated their willingness to proceed along these lines if necessary. If we are unable to negotiate revised loan agreements with MapleMark by June 1, 2023, we will begin negotiations with other lenders who have previously expressed interest in providing the Company with debt financing. The Company has received appraisals of our land and buildings at a combined value of approximately $20,500,000 which would be available to collateralize any such loans. In the highly unlikely event that we are unable to secure alternative debt financing pursuant to these negotiations by June 15, 2023, we would enter into factoring arrangements in order to partially finance the payment of the MapleMark principal balances. At May 10, 2023, we had cash on hand of approximately $2,277,000 (unaudited) and accounts receivable of approximately $4,262,000 (unaudited) which would be available to pay down and collateralize further paydown of the MapleMark Loans.

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If the Company’s cash flow from operations is insufficient, the Company may require additional financing in order to execute its operating plan and continue as a going concern. The Company cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all. In any of these events, the Company may be unable to implement its current plans for expansion, repay its debt obligations as they become due or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations. The Company has not made any adjustments to the financial statements which would be necessary should the Company not be able to continue as a going concern.

4.3. ACCOUNTS RECEIVABLE

At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, accounts receivable consists of:

	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
	(unaudited)						(unaudited)
Accounts receivable from customers	$	5,036,296		$	3,632,695		$	4,846,393		$	5,309,620
Allowance for doubtful accounts		(365,651	)		(375,931	)		(16,684	)		(340,225	)
Accounts receivable, net	$	4,670,645		$	3,256,764		$	4,829,709		$	4,969,395

During the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022, the Company charged the amount of ~~$3,437~~$4,666 and ~~$11,473 to provision for doubtful accounts, respectively; during the previous period the Company charged the amount of $4,456 and $32,443~~$1,115 to provision for doubtful accounts, respectively.

5.4. INVENTORY

Inventory consists primarily of specialty food products. At ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, inventory consisted of the following:

September 30,
2022

December 31,
2021

(unaudited)

Finished Goods Inventory
$ 2,937,098 $ 3,109,984

	March 31, 2023		December 31, 2022
	(unaudited)
Finished goods inventory	$	3,021,465	$	3,053,852
Allowance for slow moving & obsolete inventory		-		-
Finished goods inventory, net	$	3,021,465	$	3,053,852

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6.5. PROPERTY AND EQUIPMENT

~~Acquisition~~A summary of ~~Building~~property and equipment at March 31, 2023 and December 31, 2022 is as follows:

The Company owns a building and property located at 28411 Race Track Road, Bonita Springs, Florida 34135. The property consists of approximately 1.1 acres of land and approximately 10,000 square feet of combined office and warehouse space, and was purchased as part of a bank short sale. The Company moved its operations to these premises on July 15, 2013. The purchase price of the property was $792,758.

On May 14, 2015, the Company purchased a building and property located at 2528 S. 27th Avenue, Broadview, Illinois 60155. The property consists of approximately 1.33 acres of land and approximately 28,711 square feet of combined office and warehouse space. The purchase price of $914,350 was initially financed primarily by a draw-down of $900,000 on the Company’s credit facility with Fifth Third Bank, National Association (“Fifth Third Bank”). On May 29, 2015, a permanent financing facility was provided by Fifth Third Bank in the form of a loan in the amount of $980,000. $900,000 of this amount was used to pay the balance of the credit facility; the additional $80,000 was used for refrigeration and other improvements at the property. The interest on the loan is at the LIBOR rate plus 3.0%. The building is used for office and warehouse space primarily for the Company’s Artisan subsidiary. We have also recently completed an additional property improvement and upgrade buildout at the Artisan building which include a fully functional commercial test kitchen and training center and conference room. The test kitchen and training room is used by Artisan and other subsidiaries of the Company for the purposes of new product testing and development and approval, Quality Assurance and Quality Control as well as sales presentations and customer demonstrations. In addition, we added a packaging room to the Artisan building, which is built to FDA, FSMA and SQF food safety standards and purchased new, technologically advanced semi-automated fillers for the packaging room. The packaging room addition will allow for expansion of private label product lines as well as packing of organic, non-GMO, diet specific and other specialty foods. The test kitchen, packaging room and additional improvements were financed by a loan from Fifth Third Bank.

	March 31, 2023			December 31, 2022
	(unaudited)
Land	$	1,256,895		$	1,256,895
Building		7,191,451			7,191,451
Computer and Office Equipment		609,018			609,018
Warehouse Equipment		386,952			378,957
Furniture and Fixtures		1,021,481			1,021,481
Vehicles		109,441			109,441
Total before accumulated depreciation		10,575,238			10,567,243
Less: accumulated depreciation		(2,747,258	)		(2,645,682	)
Total	$	7,827,980		$	7,921,561

Depreciation ~~on the building and the related improvements, furniture, fixtures, and equipment began when the Company occupied the facility in October, 2015.~~

On November 8, 2019 the Company, through a newly formed wholly-owned subsidiary, purchased a logistics and warehouse facility (the “Facility”) for $4.5 million. The Facility is approximately 200,000 square feet and is situated on approximately 15 acres in Mountain Top, Pennsylvania. The Facility’s appraised value by a third party appraisal firm in 2022 was $16,400,000. Related to the Facility purchase, the Company entered into a commercial loan agreement for both the purchase price and planned improvements to the Facility. The amount of the loan was $5,500,000, of which $3,600,000 had been utilized at December 31, 2021 in connection with the purchase of the Facility; the lender is Fifth Third Bank and the loan is secured by a mortgage on the property and other Company assets. The interest on the loan is LIBOR plus 2.75%, with interest only payments due through September 30, 2020, thereafter with principal amortized over 20 years with the balance due at maturity on September 2, 2025. Related to Facility purchase, the Company also acquired certain leases from certain tenants of the Facility, all of which were in good standing at the time of purchase. Depreciation on the building began when the Company commenced recognizing revenue from leasing and logistics services associated with the Facility. On October 5, 2020, the Company completed work to upgrade the Facility at a cost of $2,231,458 in order to better support the Company’s focus on e-commerce and logistics. Of the build out costs, $1,900,000 was funded by the loan described below. On June 9, 2022, the principal and interest due on this note in the amount of $5,168,000 and $14,967, respectively, were paid directly to Fifth Third Bank by MapleMark in connection with MapleMark Term Loan 1. (See note 14.)

~~The following table summarizes property and equipment at September 30, 2022 and December 31, 2021:~~

September 30,
2022

December 31,
2021

(unaudited)

Land
$ 1,256,895 $ 1,256,895
Building
7,191,451 7,191,451
Computer and Office Equipment
607,384 593,566
Warehouse Equipment
376,667 376,667
Furniture and Fixtures
1,017,483 944,233
Vehicles
109,441 109,441
Total before accumulated depreciation
10,559,321 10,472,253
Less: accumulated depreciation
(2,551,264
)
(2,286,026
)
Total
$ 8,008,057 $ 8,186,227

~~Table of Contents~~

~~Depreciation and amortization~~ expense for property and equipment amounted to ~~$96,650~~$101,576 and ~~$97,797~~$96,949 for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021, respectively. Depreciation and amortization expense for property and equipment amounted to $285,215 and $298,362 for~~respectively, which is recorded in selling, general & administrating expenses on the ~~nine months ended September 30, 2022 and 2021, respectively.~~Company’s statement of operations.

7.6. 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 1 year to 3 years, some of which include options to extend.

Table of Contents

The Company’s lease expense for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was entirely comprised of operating leases and amounted to ~~$18,213~~$18,790 and ~~$30,861,~~$23,244, respectively. ~~The Company’s lease expense for the nine months ended September 30, 2022 and 2021 was entirely comprised of operating leases and amounted to $60,186 and $89,443, respectively.~~

The Company’s ROU asset amortization for the three months ended ~~September 30,~~March 31, 2023 and 2022 was $16,314 and ~~2021 was $15,659 and $26,305,~~$19,691, respectively. The ~~Company’s~~difference between the lease expense and the associated ROU asset amortization ~~for the nine months ended September 30, 2022 and 2021 was $50,821 and $76,005, respectively.~~consists of interest.

Right of use assets – operating leases are summarized below:

	September 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
	(unaudited)				(unaudited)
Warehouse equipment					$	31,710	$	36,170
Office	$	117,412	$	148,529		95,479		106,601
Warehouse equipment		40,558		55,047
Office equipment		10,374		12,677		8,922		9,654
Vehicles		-		16,128
Right of use assets - operating leases, net	$	168,344	$	232,381
Right of use assets, net					$	136,111	$	152,425

Operating lease liabilities are summarized below:

	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
	(unaudited)						(unaudited)
Warehouse equipment							$	31,710		$	36,170
Office	$	117,412		$	148,529			95,479			106,601
Warehouse equipment		40,558			55,047
Office equipment		10,374			12,677			8,922			9,654
Vehicles		-			16,128
Lease liability	$	168,344		$	232,381		$	136,111		$	152,425
Less: current portion		(63,569	)		(74,088	)		(63,877	)		(64,987	)
Lease liability, non-current	$	104,775		$	158,293		$	72,234		$	87,438

Maturity analysis under these lease agreements are as follows:

For the period ended September 30, 2023
$ 72,948
For the period ended September 30, 2024
71,901
For the period ended September 30, 2025
37,938
For the period ended September 30, 2026
890
For the period ended September 30, 2027
-
Total
$ 183,677
Less: Present value discount
(15,333
)
Lease liability
$ 168,344

For the period ended March 31, 2023	$	71,116
For the period ended March 31, 2024		68,055
For the period ended March 31, 2025		7,057
Total	$	146,228
Less: Present value discount		(10,117	)
Lease liability	$	136,111

~~Table~~

During the year ended December 31, 2022, the Company recorded the removal of ~~Contents~~

a right to use asset and lease liability in the amount of $13,216 due to damage to the asset.

8.7. RIGHT OF USE ASSETS – FINANCING LEASES

The Company has financing leases for vehicles and warehouse equipment. ~~(See note 15.)~~ Right of use asset – financing leases are summarized below:

	September 30, 2022			December 31, 2021			March 31, 2023			December 31, 2022
	(unaudited)						(unaudited)
Vehicles	$	404,858		$	362,358		$	404,858		$	404,858
Warehouse Equipment		555,416			555,416			555,416			555,416
Total before accumulated depreciation		960,274			917,774			960,274			960,274
Less: accumulated depreciation		(356,471	)		(248,735	)		(423,431	)		(389,951	)
Total right of use assets - financing leases, net	$	603,803		$	669,039
Total							$	536,843		$	570,323

Depreciation expense for the three months ended March 31, 2023 and 2022 was $33,480 and $31,181, respectively.

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During the three months ended March 31, 2023 and 2022, the Company recorded right of use assets ~~for~~and lease liabilities in the ~~three months ended September 30, 2022~~amount of $0 and ~~2021 was $37,128 and $35,036, respectively. Depreciation expense for right~~$31,181, respectively, due to the execution of ~~use assets for the nine months ended September 30, 2022 and 2021 was $107,736 and $100,732, respectively.~~

~~9. INVESTMENTS~~new financing lease agreements.

The Company has made investments in certain early stage food related companies which it expects can benefit from synergies with the Company’s various operating businesses. At September 30, 2022 and 2021 the Company has investments in seven food related companies in the aggregate amountFinancing lease liabilities are summarized below:

	March 31, 2023		December 31, 2022
	(unaudited)
Financing lease obligation under a lease agreement for a forklift dated July 12, 2021 in the original amount of $16,070 payable in thirty-six monthly installments of $489 including interest at the rate of 6.01%. During the three months ended March 31, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $1,347 and $119, respectively.	$	7,049	$	8,396

Financing lease obligation under a lease agreement for a pallet truck dated July 15, 2021 in the original amount of $5,816 payable in thirty-six monthly installments of $177 including interest at the rate of 6.01%. During the three months ended March 31, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $488 and $43, respectively.	$	2,552	$	3,040

Financing lease obligation under a lease agreement for warehouse furniture and equipment truck dated October 14, 2020 in the original amount of $514,173 payable in sixty monthly installments of $9,942 including interest at the rate of 6.01%. During the three months ended March 31, 2023, the Company made principal and interest payments on this lease obligation in the amount of $25,423 and $4,404, respectively.	$	276,303	$	301,726

Financing lease obligation under a lease agreement for a truck dated March 31, 2020 in the original amount of $152,548 payable in eighty-four monthly installments of $2,188 including interest at the rate of 5.44%. During the three months ended March 31, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $5,258 and $1,306, respectively.	$	92,427	$	97,685

Financing lease obligation under a lease agreement for a truck dated November 5, 2018 in the original amount of $128,587 payable in seventy monthly installments of $2,326 including interest at the rate of 8.33%. During the year ended December 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $6,118 and $859, respectively.	$	37,169	$	43,287

Financing lease obligation under a lease agreement for a truck dated August 23, 2019 in the original amount of $80,413 payable in eighty-four monthly installments of $1,148 including interest at the rate of 5.0%. During the three months ended March 31, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $2,892 and $552, respectively.	$	42,217	$	45,109

Financing lease obligation under a lease agreement for a truck dated February 4, 2022 in the original amount of $42,500 payable in twenty-four monthly installments of $1,963 including interest at the rate of 10.1%. During the three months ended March 31, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $5,281 and $609, respectively.	$	20,545	$	25,826

Total	$	478,262	$	525,069

Current portion	$	193,226	$	191,977
Long-term maturities		285,036		333,092
Total	$	478,262	$	525,069

Table of ~~$286,725. The Company does not have significant influence over the operations~~Contents

Aggregate maturities of ~~these companies.~~lease liabilities – financing leases as of March 31, 2023 are as follows:

~~The Company’s investments may take~~For the form of debt, equity, or equity in the future including convertible notes and other instruments which provide for future equity under various scenarios including subsequent financings or initial public offerings. The Company has evaluated the guidance in ASC No. 325-20, “Investments – Other”, in determining to account for the investment using the cost method since the equity securities are not marketable and do not give the Company significant influence.year ended March 31,

During the nine months ended September 30, 2021, the founder of one of the food related companies passed away in an untimely tragic accident, and as a result the food related company ceased operations and the Company recognized an impairment in the amount of $209,850 in connection with that investment.

2023	$	193,226
2024		161,001
2025		96,072
2026		27,963
Total	$	478,262

~~10.~~8. INTANGIBLE ASSETS

The Company acquired certain intangible assets pursuant to the acquisitions ~~through~~of Artisan, Oasis, ~~Innovative Gourmet,~~igourmet, OFB, Haley, and ~~M Innovations.~~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.

~~As detailed~~Other Amortizable Intangible Assets

Other amortizable intangible assets consist of $1,055,400 of trade names held by igourmet, $260,422 of trade names held by Mouth, and $217,000 of trade names held by Artisan. The Company followed the guidance of ASC 360 “Property, Plant, and Equipment” (“ASC 360”) in assessing these assets for impairment. ASC ~~350 “Intangibles - Goodwill and Other”, the Company tests for goodwill~~360 states that impairment ~~in the fourth quarter of each year and~~testing should be completed whenever events or changes in circumstances indicate ~~that~~ the asset’s carrying ~~amount of the asset exceeds its fair~~ value ~~and~~ may not be recoverable. ~~As detailed in ASC 350-20-35-3A, in performing its testing for goodwill impairment, management has completed a qualitative analysis to determine whether it was more likely than not~~In management’s judgment there are no indications that the fair value of the Company’s reporting unit is less than its carrying amount, including goodwill. To complete this review, management followed the steps in ASC 350-20-35-3C to evaluate the fair value of goodwill and considered all known events and circumstances that might trigger an impairment of goodwill.

COVID-19 has had a material negative impact on some of the Company’s foodservice customers. In an effort to limit the spread of the virus, federal, state and local governments have implemented measures that have resulted in the closure of non-essential businesses in many of the markets the Company serves, which has forced its customers in those markets to either transition their establishments to take-out service, delivery service or temporarily cease operations. These actions have led to a significant decrease in demand for certain of the Company’s foodservice products. The adverse impact to the Company’s foodservice customer base was a triggering event and accordingly, as required by ASC 350, the Company performed interim goodwill and long-lived asset quantitative impairment tests during the first quarter of 2020. While the triggering event was a result of the negative impact related to foodservice customers, the applicable accounting rules then required an impairment test targeted specifically to any available carrying value of ~~goodwill or intangible assets. During the first quarter of 2020, the Company performed the~~these trade names may not be recoverable, and it determined that impairment tests on certain intangible assets and goodwill pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet and M Innovations; the intangible assets acquired pursuant to the acquisitions of OFB and Haley were fully amortized at the time of the impairment test.

~~Table of Contents~~

~~Long-lived Impairment Test~~

Long-lived assets, including other intangible assets, were tested for recoverability at the asset group level. The Company estimated the net undiscounted cash flows expected to be generated from the asset group over the expected useful life of the asset group’s primary asset. Key assumptions include future revenues, growth rates, estimates of future levels of gross profit and operating profit and projected capital expenditures necessary to maintain the operating capacity of each asset group. As a result of the impairment test, ittesting was calculated that the net carrying values of other intangible assets exceeded the undiscounted cash flows for each of the Company’s asset groups by a total of $1,048,692, and the Company was required by the applicable accounting rules to record an impairment charge to operations during the year ended December 31, 2020. At September 30, 2022 and December 31, 2021, the net carrying value of other intangible assets on the Company’s balance sheet was $1,574,147 and $1,605,040, respectively.not required.

The Company acquired certain intangible assets pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet, OFB, Haley, and M Innovations. The following is the net book value of these assets:

	September 30, 2022 (unaudited)							March 31, 2023 (unaudited)
			Accumulated							Accumulated
	Gross		Amortization			Net		Gross		Amortization			Net
Non-Compete Agreement - amortizable	$	505,900	$	(505,900	)	$	-	$	505,900	$	(505,900	)	$	-
Customer Relationships - amortizable		3,068,034		(3,068,034	)		-		3,068,034		(3,068,034	)		-
Trade Names and other		1,532,822		-			1,532,822		1,532,822		-			1,532,822
Internally Developed Technology - amortizable		875,643		(875,643	)		-		875,643		(875,643	)		-
Website - amortizable		84,000		(42,675	)		41,325		84,000		(63,337	)		20,663
Total	$	6,066,399	$	(4,492,252	)	$	1,574,147	$	6,066,399	$	(4,512,914	)	$	1,553,485

	December 31, 2021							December 31, 2022
			Accumulated							Accumulated
	Cost		Amortization			Net		Cost		Amortization			Net
Non-Compete Agreement - amortizable	$	505,900	$	(505,900	)	$	-
Customer Relationships - amortizable		3,068,034		(3,068,034	)		-
Trade Names and other		1,532,822		-			1,532,822
Trade Name									1,532,822		-			1,532,822
Internally Developed Technology		875,643		(875,643	)		-		875,643		(875,643	)		-
Website		84,000		(11,782	)		72,218		84,000		(53,006	)		30,994
Total	$	6,066,399	$	(4,461,359	)	$	1,605,040	$	2,492,465	$	(928,649	)	$	1,563,816

Total amortization expense for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was $10,331 and ~~$2,870, respectively. Total amortization expense for the nine months ended September 30, 2022 and 2021 was $30,993 and $8,610,~~$10,231, respectively.

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~~11.~~

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 are as follows:

	September 30, 2022		December 31, 2021		March 31, 2023		December 31, 2022
	(unaudited)				(unaudited)
Trade payables and accrued liabilities	$	5,835,854	$	5,414,731	$	4,576,928	$	6,599,903
Accrued payroll and commissions		234,395		288,174		219,772		253,350
Total	$	6,070,249	$	5,702,905	$	4,796,700	$	6,853,253

~~12.~~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 Chairman 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 $250,000 upon effectiveness and an additional $1,000,000 payable in weekly payments of $6,410.26 from March 8, 2023 through March 6, 2026. The $250,000 was paid into an escrow account with the requirement that they are released to Mr. Klepfish on his separation date. The $1,000,000 portion is in the form of an unsecured, non-interest bearing note payable to Mr. Klepfish; $25,641 of this amount was paid during the three months ended March 31, 2023. The SK Agreements also call for the delivery of 400,000 shares of the Company’s common stock; these shares were issued subsequent to March 31, 2023 and valued at $168,000 based upon the closing price of the Company’s common stock on Mr. Klepfish’s separation date of February 28, 2023 (see note 17); in addition, for delivery on June 1, 2027 of additional shares of the Company’s common stock equal to the greater of (i) the number of shares with an aggregate fair market value of $400,000 on such date, or (ii) 266,666 shares. The Company also agreed to pay a total of $1,199 of Cobra insurance costs on behalf of Mr. Klepfish over eighteen months.

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 $100,000 in cash as follows: $33,333 upon execution of the agreement, $33,333 on March 15, 2023, and $33,334 on April 15, 2023. The Company also agreed to make the Cobra insurance payments on behalf of Mr. Wiernasz in the amount of $2,548.36 per month for twelve months with a maximum of $26,451.

The following table represents the amounts accrued, paid, and outstanding on these agreements as of March31, 2023:

	Total		Paid			Balance		Current		Non-current
Mr. Klepfish:
Cash - through March 6, 2026	$	1,000,000	$	(25,641	)	$	974,359	$	333,334	$	641,025
Cash - upon agreement execution		250,000		(250,000	)		-		-		-
Stock - June 1, 2027		400,000		-			400,000		-		400,000
Stock - Issued in April 2023		168,000		-			168,000		168,000
Cobra - over eighteen months		1,199		-			1,199		799		400
Total - Mr. Klepfish	$	1,819,199	$	(275,641	)	$	1,543,558	$	502,133	$	1,041,425

Mr. Wiernasz:
Cash - three equal payments	$	100,000	$	(66,666	)	$	33,334	$	33,334	$	-
Cobra - over eighteen months		26,451		(2,548	)		23,903		23,903		-
Total - Mr. Wiernasz		126,451		(69,214	)		57,237		57,237		-

Total Company	$	1,945,650	$	(344,855	)	$	1,600,795	$	559,370	$	1,041,425

11. ACCRUED INTEREST

At ~~September 30, 2022,~~March 31, 2023, accrued interest - on notes outstanding was ~~$18,008. During the three months ended September 30,~~$18,198.

At December 31, 2022, ~~and 2021, the Company paid cash for~~accrued interest ~~in the aggregate amount~~- on notes outstanding was $18,104.

Table of ~~$58,292 and $88,331, respectively. During the nine months ended September 30, 2022 and 2021, the Company paid cash for interest in the aggregate amount of $187,090 and $250,967, respectively.~~Contents

12. REVOLVING CREDIT FACILITIES

	March 31, 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 $2,014,333. The borrowing base amount is based upon 80% of eligible accounts receivables and 60% of eligible inventory. This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction of the Fifth Third Bank Line of Credit. Any amounts borrowed under the MapleMark Revolver will bear interest at the greater of (a) the Base Rate (the rate of interest per annum quoted in the “Money Rates” section of The Wall Street Journal from time to time and designated as the “Prime Rate”) plus 0.25% per annum and (b) 3.50% per annum. At December 31, 2022, the interest rate was 7.75%. The MapleMark Revolver matures on May 27, 2023 and in the event United States Department of Agriculture issues a guarantee of repayment of the MapleMark Revolver in favor of the Company pursuant to its Business and Industry Loan Guarantee Program (the “USDA Guarantee”), at the Company’s option, the amount of the MapleMark Revolver can be expanded to $3,000,000 and its term extended to November 28, 2023. The Company has applied for a USDA Guarantee; at December 31, 2022, this guarantee had not yet been received. The MapleMark Revolver contains certain negative covenants. The Company is also subject to a fixed charge coverage ratio covenant for the Revolver Loan as described in more detail in the MapleMark Revolver. The Company recorded a discount to this loan in the amount of $29,832 in connection with financing costs which was amortized to interest expense during the year ended December 31, 2022. During the three months ended March 31, 2023, the Company paid interest in the amount of $39,839 on the MapleMark Revolver.	$	2,014,333	$	2,014,333

Total	$	2,014,333	$	2,014,333

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13. ~~REVOLVING CREDIT FACILITIES~~NOTES PAYABLE

September 30,
2022

December 31,
2021

(unaudited)

On June 6, 2022, the Company entered into a revolving credit facility with MapleMark Bank ("MapleMark”, the “MapleMark Revolver”) in the initial amount of $2,014,333. This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction of the Fifth Third Bank Line of Credit. Any amounts borrowed under the MapleMark Revolver will bear interest at the greater of (a) the Base Rate (the rate of interest per annum quoted in the “Money Rates” section of The Wall Street Journal from time to time and designated as the “Prime Rate”) plus 0.25% per annum and (b) 3.50% per annum. The MapleMark Revolver matures on November 28, 2022 and in the event United States Department of Agriculture issues a guarantee of repayment of the MapleMark Revolver in favor of the Company pursuant to its Business and Industry Loan Guarantee Program (the “USDA Guarantee”), at the Company’s option, the amount of the MapleMark Revolver can be expanded to $3,000,000 and its term extended to November 28, 2023. The Company has applied for a USDA Guarantee; at September 30, 2022, this guarantee had not yet been received. The MapleMark Revolver contains negative covenants that, subject to certain exceptions, limit 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 Company is also subject to a fixed charge coverage ratio covenant for the Revolver Loan as described in more detail in the MapleMark Revolver. The Company recorded a discount to this loan in the amount of $29,832 in connection with financing costs; $13,532 and $17,623 of this amount was amortized to interest expense during the three and nine months ended September 30, 2022, respectively. During the three and nine months ended September 30, 2022, the Company paid interest in the amount of $34,355 on the MapleMark Revolver.
$ 2,014,333 $ -

Line of credit facility with Fifth Third Bank in the original amount of $2,000,000 with an interest rate of LIBOR plus 3.00% (the “Fifth Third Bank Line of Credit”). Effective August 1, 2019, this credit facility was extended to August 1, 2021. Effective as of July 31, 2021 this credit facility was extended to November 1, 2021: effective as of October 29, 2021, this credit facility was extended to March 1, 2022; and effective March 1, 2022, this credit facility was extended to June 30, 2022. The debt covenants of this credit facility were waived until June 30, 2022. On March 20, 2020, the Company drew down the amount of $2,000,000. During the three and nine months ended September 30, 2022, the Company paid interest in the amount of $22,459 and $44,681 respectively, on the Fifth Third Bank Line of Credit. On June 9, 2022, the total outstanding principal in the amount of $2,000,000 and accrued interest in the amount of $14,333 were paid directly to Fifth Third Bank by MapleMark in connection with the MapleMark Revolver. The Fifth Third Bank Line of Credit is paid in full.
$ - $ 2,000,000

Total
$ 2,014,333 $ 2,000,000

	March 31, 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 $5,324,733. This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction the outstanding principal and interest due under existing loans with Fifth Third Bank. The MapleMark Term Loan 1 matures on May 27, 2023. Upon receipt of the USDA Guarantee, the Company will have the option of extending the term of the MapleMark Term Loan 1 to June 6, 2052. Amounts outstanding under the Term Loans will bear interest at the rate equal to the lesser of (a) the Maximum Lawful Rate, or (b) the greater of (i) WSJP (the “Prime Rate” as published by The Wall Street Journal) plus 1.25% per annum or (ii) 4.50% per annum. At December 31, 2022, the interest rate was 8.75%. The MapleMark loan matures on May 27, 2023 and in the event United States Department of Agriculture issues a guarantee of repayment of the MapleMark loan in favor of the Company pursuant to its Business and Industry Loan Guarantee Program (the “USDA Guarantee”), at the Company’s option, the amount of the MapleMark loan can be expanded to $7,420,000. The Company has applied for a USDA Guarantee; at December 31, 2022, this guarantee had not yet been received. The Term Loan Agreements contain 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 $57,106 in connection with financing costs which was amortized to interest expense during the year ended December 31, 2022. During the three months ended March 31, 2023, the Company accrued interest in the amount of $118,623 on this loan.	$	5,324,733	$	5,324,733

Table of Contents

~~14. NOTES PAYABLE~~

	March 31, 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 $356,800. This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction the outstanding principal and interest due under existing loans with Fifth Third Bank. The MapleMark Term Loan 2 matures on May 27, 2023. Upon receipt of the USDA Guarantee, the Company will have the option of extending the term of the Term Loan 2 to June 6, 2052. Amounts outstanding under the Term Loans will bear interest at the rate equal to the lesser of (a) the Maximum Lawful Rate, or (b) the greater of (i) WSJP (the “Prime Rate” as published by The Wall Street Journal) plus 1.25% per annum or (ii) 4.50% per annum. At December 31, 2022, the interest rate was 8.75%, The MapleMark loan matures on May 27, 2023 and in the event United States Department of Agriculture issues a guarantee of repayment of the MapleMark loan in favor of the Company pursuant to its Food & Supply Guaranteed Loan Facility (the “USDA Guarantee”), at the Company’s option, the amount of the MapleMark loan can be expanded to $1,637,840. The Company has applied for a USDA Guarantee; at December 31, 2022, this guarantee had not yet been received. The Term Loan Agreements contain 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 $23,367 in connection with financing costs which was amortized to interest expense during the year ended December 31, 2022. During the three months ended March 31, 2023, the Company accrued interest in the amount of $7,948 on this loan.	$	356,800	$	356,800

A note payable in the amount of $20,000. The Note was due in January 2006 and the Company is currently accruing interest on this note at 1.9%. During the three months ended March 31, 2023, the Company accrued interest in the amount of $94 on this note. At March 31, 2023, accrued interest on this note was $18,198.	$	20,000	$	20,000

Vehicle acquisition loan dated December 6, 2018 in the original amount of $51,088, payable in sixty monthly installments of $955 including interest at the rate of 4.61% maturing November 5, 2023. During the three months ended March 31, 2023, the Company made principal and interest payments in the amount of $2,757 and $108, respectively, on this loan.	$	7,510	$	10,267

September 30,
2022

December 31,
2021

(unaudited)

On June 6, 2022, the Company entered into a term loan agreement with MapleMark (the “MapleMark Term Loan 1”) for the original amount of $5,324,733. This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction the outstanding principal and interest due under existing loans with Fifth Third Bank. The MapleMark Term Loan 1 matures on November 28, 2022. Upon receipt of the USDA Guarantee, the Company will have the option of extending the term of the Term Loan 1 to June 6, 2052.

Amounts outstanding under the Term Loans will bear interest at the rate equal to the lesser of (a) the Maximum Lawful Rate, or (b) the greater of (i) WSJP (the “Prime Rate” as published by The Wall Street Journal) plus 1.25% per annum or (ii) 4.50% per annum. The Term Loan Agreements contain 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 $57,106 in connection with financing costs; $25,904 and $33,736 of this amount was amortized to interest expense during the three and nine months ended September 30, 2022, respectively. During the three and nine months ended September 30, 2022, the Company accrued interest in the amount of $88,856 and $108,380 on this loan, respectively.
$ 5,324,733 $ -

On June 6, 2022, the Company entered into a term loan agreement with MapleMark (the “MapleMark Term Loan 2”) for the original amount of $356,800. This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction the outstanding principal and interest due under existing loans with Fifth Third Bank. The MapleMark Term Loan 1 matures on November 28, 2022. Upon receipt of the USDA Guarantee, the Company will have the option of extending the term of the Term Loan 1 to June 6, 2052.

Amounts outstanding under the Term Loans will bear interest at the rate equal to the lesser of (a) the Maximum Lawful Rate, or (b) the greater of (i) WSJP (the “Prime Rate” as published by The Wall Street Journal) plus 1.25% per annum or (ii) 4.50% per annum. The Term Loan Agreements contain 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 $23,367 in connection with financing costs; $10,599 and $13,804 of this amount was amortized to interest expense during the three and nine months ended September 30, 2022, respectively. During the three and nine months ended September 30, 2022, the Company accrued interest in the amount of $5,954 and $7,262 on this loan, respectively.
$ 356,800 $ -

Total	$	5,709,043	$	5,711,800
Discount		-		-
Net of discount	$	5,709,043	$	5,711,800

Current portion	$	5,709,043	$	5,711,800
Long-term maturities		-		-
Total	$	5,709,043	$	5,711,800

Table of Contents

Secured mortgage note payable for the acquisition of land and building in Bonita Springs, Florida in the amount of $546,000. Principal payments of $4,550 plus interest at the rate of Libor plus 3% are due monthly. The balance of the principal amount was originally due February 28, 2018. On March 23, 2018 and effective February 26, 2018, this note was amended and renewed in the amount of $273,000, with monthly payments of principal and interest of $4,550 payable through the maturity date of February 28, 2023. During the three months ended September 30, 2022, the Company made payments of principal and interest on this note in the amounts of $9,100 and $151, respectively; and during the nine months ended September 30, 2022, the Company made payments of principal and interest on this note in the amounts of $22,750 and $655, respectively. On June 9, 2022, the principal and interest due on this note in the amount of $45,500 and $66, respectively, were paid directly to Fifth Third Bank by MapleMark in connection with MapleMark Term Loan 2.
$ - $ 68,250

Secured mortgage note payable for the acquisition of land and building in Broadview, Illinois in the amount of $980,000. Principal payments of $8,167 plus interest at the rate of LIBOR plus 2.75% are due monthly through April 2020, the remaining principal balance in the amount of $490,000 was originally due May 29, 2020. Effective May 29, 2020, the note was amended and renewed such that principal payments of $8,303 plus accrued interest were due beginning June 29, 2020 and continuing for sixty months; the entire principal balance and all accrued interest will be due on May 29, 2025. During the three months ended September 30, 2022, the Company made payments of principal and interest on this note in the amounts of $16,333 and $1,305, respectively; during the nine months ended September 30, 2022, the Company made payments of principal and interest on this note in the amounts of $40,833 and $3,781, respectively. On June 9, 2022, the principal and interest due on this note in the amount of $310,333 and $901, respectively, were paid directly to Fifth Third Bank by Maple Mark in connection with MapleMark Term Loan 2.
$ - $ 351,165

Promissory note dated March 22, 2019 in the original amount of $391,558 (the “Artisan Equipment Loan”) payable to Fifth Third Bank. This loan is secured by the Company’s tangible and intangible personal property and bears interest at the rate of 5.20%. The entire principal balance and all accrued interest is due on the maturity date of March 21, 2024. Monthly payments in the amount of $7,425 including principal and interest commenced in April, 2019. During the year ended December 31, 2019, equipment financed under the Artisan Equipment Loan in the amount of $33,075 was returned for credit. During the three months ended September 30, 2022, the Company made payments of principal and interest on this loan in the amounts of $12,288 and $1,308, respectively; during the nine months ended September 30, 2022, the Company made payments of principal and interest on this loan in the amounts of $30,523 and $3,467, respectively. On June 9, 2022, the principal and interest due on this note in the amount of $141,623 and $143, respectively, were paid directly to Fifth Third Bank by MapleMark in connection with MapleMark Term Loan 1.
$ - $ 172,146

A note payable in the amount of $20,000. The Note was due in January 2006 and the Company is currently accruing interest on this note at 1.9%. During the three and nine months ended September 30, 2022, the Company accrued interest in the amount of $96 and $285, respectively, on this note. At September 30, 2022, accrued interest on this note was $18,008.
$ 20,000 $ 20,000

Vehicle acquisition loan dated December 6, 2018 in the original amount of $51,088, payable in sixty monthly installments of $955 including interest at the rate of 4.61% maturing November 5, 2023. During the three months ended September 30, 2022, the Company made principal and interest payments in the amount of $2,694 and $168, respectively, on this loan; during the nine months ended September 30, 2022, the Company made principal and interest payments in the amount of $7,991 and $601, respectively.
$ 12,992 $ 20,984

~~Table of Contents~~

September 30,
2022

December 31,
2021

(unaudited)

Secured mortgage facility in the amount of $5,500,000 with Fifth Third Bank for the acquisition of land and building in Mountaintop, Pennsylvania dated November 8, 2019 (the “Fifth Third Mortgage Facility”). The Fifth Third Mortgage Facility is secured by the assets acquired. During the year ended December 31, 2019, the Company drew down $3,600,000 of this facility. During the year ended December 31, 2020, the Company drew down an additional $1,900,000 of this facility. The interest rate is LIBOR plus 2.75% with interest only due through September 30, 2020, thereafter with principal amortized at a 20 years amortization rate and the balance due on the maturity date of September 2, 2025. The Company prepaid loan fees in connection with this loan in the amount of $72,916 which are considered a discount to the loan and are being amortized over the term of the note; during the three and nine months ended September 30, 2022, $0 and $5,456, respectively, of this discount was amortized to interest expense. During the three months ended September 30, 2022, the Company made principal and interest payments in the amount of $0 and $13,351, respectively, on this loan; during the nine months ended September 30, 2022, the Company made principal and interest payments in the amount of $0 and $51,151, respectively, on this loan. On June 9, 2022, the principal and interest due on this note in the amount of $5,168,000 and $14,967, respectively, were paid directly to Fifth Third Bank by MapleMark in connection with MapleMark Term Loan 1. The Company recorded a loss in the amount of $40,556 on this transaction in connection with the write-off of the unamortized portion of the discount.

The Company also had in place an interest rate swap agreement (the “Fifth Third Interest Rate Swap”) with Fifth Third bank in connection with the Fifth Third Mortgage Facility. Pursuant to the Fifth Third Interest Rate Swap, the Company paid an additional base rate of 0.59% reduced by the difference between an initial LIBOR rate of 0.1513% and the month-end LIBOR rate resulting in additional interest expense of $0 and $5,632, respectively, during the three and nine months ended September 30, 2022. On March 28, 2022 the Interest Rate Swap was terminated. Upon termination the Company received a cash payment of $294,000, which is reflected as a gain on the interest rate swap on the statement of operations for the nine months ended September 30, 2022.
$ - $ 5,235,600

Total
$ 5,714,526 $ 5,868,145
Discount
(45,142
)
(46,012
)
Net of discount
$ 5,669,384 $ 5,822,133

Current portion
$ 5,712,627 $ 458,973
Long-term maturities
1,899 5,409,172
Total
$ 5,714,526 $ 5,868,145

Aggregate maturities of long-term notes payable as of ~~September 30, 2022~~March 31, 2023 are as follows:

For the period ended ~~September 30,~~March 31,

2023

$
5,712,627

2024

1,899

2025

-

2026

-

2027

-

Total

$
5,714,526

2024		$	5,709,043
Total		$	5,709,043

14. EQUITY

Common Stock

At March 31, 2023 and December 31, 2022, a total of 2,837,580 shares are deemed issued but not outstanding by the Company.

For the three months ended March 31, 2023:

On February 28, 2023, the Company issued 267,030 shares with a value of $112,153 to three employees as compensation.

During the three months ended March 31, 2023, the Company incurred obligations to issue the following shares of common stock pursuant to employment agreements: an aggregate total of 400,007 shares of common stock with a market value of $93,600 were accrued for issuance to its previous Chief Executive Officer; of this amount, 207,839 with a market value of $52,919 were withheld for the payment of income taxes, and the net number of shares issuable to the previous Chief Executive Officer was 192,168 with a market value of $45,680. Also during the period, an aggregate total of 15,106 shares of common stock with a market value of $5,000 were accrued for issuance to two board members, and $19,428 was expensed during the quarter for the share based plan for the Chief Executive Officer (see below). These restricted stock grants are being amortized over their vesting periods of one to three years. During the three months ended March 31, 2023, the total amount of $178,048 was charged to non-cash compensation and $52,919 was charged to cash compensation in connection with these grants.

As of March 31, 2023, total common stock outstanding was 50,569,327 shares issued and 832,214 shares vested by management, directors, and consultants but not yet issued.

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
$	0.60		2.00	%		943,531
$	0.80		1.50	%		707,649
$	1.00		1.00	%		471,766
$	1.20		0.75	%		353,824
$	1.40		0.75	%		353,824
$	1.60		0.50	%		235,883
$	1.80		0.50	%		235,883
$	2.00		0.50	%		235,883

Table of Contents

~~15. LEASE LIABILITIES - FINANCING LEASES~~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:

September 30,
2022

December 31,
2021

(unaudited)

Financing lease obligation under a lease agreement for a forklift dated July 12, 2021 in the original amount of $16,070 payable in thirty-six monthly installments of $489 including interest at the rate of 6.01%. During the three months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $1,307 and $159, respectively. During the nine months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $3,865 and $536, respectively.
$ 9,723 $ 13,588

Financing lease obligation under a lease agreement for a pallet truck dated July 15, 2021 in the original amount of $5,816 payable in thirty-six monthly installments of $177 including interest at the rate of 6.01%. During the three months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $473 and $58, respectively. During the nine months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $1,398 and $194, respectively.
$ 3,520 $ 4,918

Financing lease obligation under a lease agreement for warehouse furniture and equipment truck dated October 14, 2020 in the original amount of $514,173 payable in sixty monthly installments of $9,942 including interest at the rate of 6.01%. During the three months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amount of $24,672 and $5,153, respectively. During the nine months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amount of $72,920 and $16,556, respectively.
$ 326,768 $ 399,688

Financing lease obligation under a lease agreement for a truck dated March 31, 2020 in the original amount of $152,548 payable in eighty-four monthly installments of $2,188 including interest at the rate of 5.44%. During the three months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $5,118 and $1,447, respectively. During the nine months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $15,147 and $4,546, respectively.
$ 102,873 $ 118,020

Financing lease obligation under a lease agreement for a truck dated November 5, 2018 in the original amount of $128,587 payable in seventy monthly installments of $2,326 including interest at the rate of 8.33%. During the three months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $5,869 and $1,109, respectively. During the nine months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $17,247 and $3,684, respectively.
$ 49,279 $ 66,526

Financing lease obligation under a lease agreement for a truck dated August 23, 2019 in the original amount of $80,413 payable in eighty-four monthly installments of $1,148 including interest at the rate of 5.0%. During the three months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $2,821 and $623, respectively. During the nine months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $8,358 and $1,974, respectively.
$ 47,965 $ 56,323

Financing lease obligation under a lease agreement for a truck dated February 4, 2022 in the original amount of $42,500 payable in twenty-four monthly installments of $1,963 including interest at the rate of 10.1%. During the three months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $5,022 and $868, respectively. During the nine months ended September 30, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $11,524 and $2,219, respectively.
$ 30,976 $ -

Total
$ 571,104 $ 659,063

Current portion
$ 188,818 $ 159,823
Long-term maturities
382,286 499,240
Total
$ 571,104 $ 659,063

	●	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.

~~Table~~

The plan was valued as of ~~Contents~~

February 3, 2023. The following variables were utilized:

Volatility		113.7	%
Dividends	$	0
Risk-free interest rates		4.29	%
Expected term (years)		2.91

~~Aggregate maturities~~

The value of ~~lease liabilities – financing leases~~the plan was determined to be $660,541. This amount will be recorded as a charge to additional paid-in capital on a straight-line basis over 34 months. During the three months ended March 31, 2023, the amount of ~~September 30, 2022 are as follows:~~$20,199 was charged to operations pursuant to the CEO Stock Plan.

~~For the period ended September 30,~~

2023

$
188,818

2024

183,361

2025

151,984

2026

36,148

2027

10,793

Thereafter

-

Total

$
571,104

~~16. RELATED PARTY TRANSACTIONS~~

~~For the nine~~Three months ended ~~September 30,~~March 31, 2022:

~~Vesting of shares to officers~~

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of ~~$30,000~~$10,000 for the vesting of a total of ~~77,440~~25,812 shares of common stock issuable to two of its independent board members, and ~~$421,200~~$140,400 for the vesting of a total of ~~1,483,517~~438,703 shares of common stock issuable to its prior Chief Executive Officer and its former Director of Strategic Acquisitions pursuant to ~~his~~their employment agreement. The Company also recognized non-cash compensation in the amount of ~~$6,978~~$2,326 during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 in connection with stock options issuable to management and board members.

~~For~~As of March 31, 2022, total common stock outstanding was 48,114,557 shares issued and 1,229,289 shares vested by management and directors pursuant to their compensation plans but not yet issued.

Table of Contents

Options

The following table summarizes the ~~nine~~options outstanding at March 31, 2023 and the related prices for the options to purchase shares of the Company’s common stock issued by the Company:

						Weighted				Weighted
				Weighted		average				average
				average		exercise				exercise
Range of		Number of		Remaining		price of		Number of		price of
exercise		options		contractual		outstanding		options		exercisable
Prices		Outstanding		life (years)		Options		Exercisable		Options
$	0.41		125,000		1.07	$	0.41		125,000	$	0.41
$	0.50		125,000		1.07	$	0.50		125,000	$	0.50
$	0.60		50,000		2.75	$	0.60		43,750	$	0.60
$	0.62		360,000		0.75	$	0.62		360,000	$	0.62
$	0.85		540,000		0.75	$	0.85		540,000	$	0.85
$	1.00		50,000		2.75	$	1.00		43,750	$	1.00
$	1.20		950,000		0.74	$	1.20		950,000	$	1.20
			2,200,000		0.87	$	0.93		2,200,000	$	0.93

Transactions involving stock options are summarized as follows:

	Number of Shares			Weighted Average Exercise Price
Options outstanding at December 31, 2022		2,300,000		$	0.93

Granted		-		$	-
Exercised		-		$	-
Cancelled / Expired		(100,000	)	$	1.20

Options outstanding at March 31, 2023 (unaudited)		2,200,000		$	0.93
Options exercisable at March 31, 2023 (unaudited)		2,200,000		$	0.93

Aggregate intrinsic value of options outstanding and exercisable at March 31, 2023 and 2022 was $0. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $0.35 and $0.30 as of March 31, 2023 and 2022, respectively, and the exercise price multiplied by the number of options outstanding.

During the three months ended ~~September 30, 2021:~~March 31, 2023 and 2022, the Company charged $0 and $2,326, respectively, to operations to recognized stock-based compensation expense for employee and board member stock options.

15. RELATED PARTY TRANSACTIONS

~~Vesting~~Hiring of ~~shares~~CEO

On February 3, 2023, the Company entered into an Executive Employment Agreement with Robert William Bennett (the “RWB Agreement”). The RWB Agreement provides, among other things, for Mr. Bennett to ~~officers~~become our Company’s Chief Executive Officer; Mr. Bennett, and one designee, to be nominated to the Company’s Board of Directors during his tenure as CEO; employment at-will with an initial term of employment from February 28, 2023 through December 31, 2025 with 12 months of Base Salary as severance payments if terminated without cause or resignation with Good Reason; an annual Base Salary of $375,000 with at least 3% annual increases with additional annual increases of 20% if certain cash flow metrics are met; a $50,000 signing bonus; an additional Bonus, triggered based on certain conditions being met, of up to $300,000 payable over time; annual incentive bonus equal to at least 50% of Base Salary; reimbursement of legal fees up to $10,000; and participation in the Company’s benefit plans. Mr. Bennett is also subject to the Company’s clawback policies and certain restrictive covenants including confidentiality, non-compete and non-solicitation. Mr. Bennett is also eligible for stock grants based upon the market price of the Company’s common stock; see note 14.

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Separation of prior CEO and of a board member

During the ~~nine~~first quarter of 2023, the Company entered into a separation agreements with Sam Klepfish, it’s prior CEO and a current board member, with a total cost of $1,819,199, and with Justin Wiernasz, its prior Director of Strategic Acquisitions and board member, with a total cost of $126,451. See note 10.

During the three months ended ~~September 30, 2021~~March 31, 2023, the Company incurred obligations to issue the following shares of common stock pursuant to employment agreements: an aggregate total of 400,007 shares of common stock with a market value of $93,600 were accrued for issuance to its prior Chief Executive Officer; of this amount, 207,839 with a market value of $52,919 were withheld for the payment of income taxes, and the net number of shares issuable to the prior Chief Executive Officer was 192,168 with a market value of $45,680. Also, during the period an aggregate total of 15,106 shares of common stock with a market value of $5,000 were accrued for issuance to two board members. These restricted stock grants are being amortized over their vesting periods of one to three years. During the three months ended March 31, 2023, the total amount of $157,849 was charged to non-cash compensation and $52,919 was charged to cash compensation in connection with these grants.

During the three months ended March 31, 2022 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of ~~$67,500~~$10,000 for the vesting of a total of ~~150,210~~25,812 shares of common stock issuable to two of its independent board members, and ~~$300,796~~$140,400 for the vesting of a total of ~~776,611~~438,703 shares of common stock issuable to its prior Chief Executive Officer and its former Director of Strategic Acquisitions pursuant to their employment agreements. The Company also recognized non-cash compensation in the amount of ~~$107,836~~$2,326 during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 in connection with stock options issuable to management and board members.

~~During the nine months ended September 30, 2021, the Company issued 50,000 two-year stock options with a fair value of $2,270 and an exercise price of $1.20 to a director.~~

On August 26, 2021, the Company sold a total of 3,125,000 shares of common stock at a price of $0.40 per share to an entity controlled by Hank Cohn, a director of the Company; the Company sold 3,125,000 shares of common stock at a price of $0.40 per share to an entity controlled by Jefferson Gramm, a director of the Company; and the Company sold 3,125,000 shares of common stock at a price of $0.40 per share to an entity controlled by James C. Pappas, a director of the Company.

~~17.~~16. COMMITMENTS AND CONTINGENCIES

Contingent Liability

Pursuant to the ~~igourmet Asset Purchase Agreement,~~acquisition of the assets of Innovative Gourmet, LLC (‘igourmet”), the Company recorded contingent liabilities in the original amount of $787,800. This amount relates to certain performance-based payments over the twenty-four months following the acquisition date as well as to certain additional liabilities that the Company has evaluated and has recorded on a contingent basis. During the year ended December 31, 2018, the Company reduced this amount by $392,900 as the performance goals for the first year were not met. During the year ended December 31, 2019, the Company reduced this amount by $132,300 as the performance goals for the second year were not met. During the year ended December 31, 2019, the Company paid the amount of $39,000 in connection with the additional liabilities. During the ~~three~~years ended December 31, 2022 and ~~nine months ended September 30, 2022,~~2021, the Company paid the amount of $0$8,000 and ~~$8,000,~~80,000, respectively, in connection with the additional liabilities. ~~At September 30, 2022 and~~During the year ended December 31, ~~2021,~~2022, the Company determined that these contingent liabilities were no longer needed as the time period for attainment of the contingencies had lapsed; accordingly, the balances of the contingent liabilities in the amounts of $67,000 and $108,000 were de-recognized and credited to gain on contingent liabilities. At December 31, 2022, the amount of ~~$67,000 remains~~contingent liabilities on the Company’s ~~consolidated~~ balance sheet ~~as a current contingent liability, and $108,600 as a long term contingent liability.~~in connection with the igourmet acquisition was $0.

~~Table of Contents~~

Pursuant to the Mouth Foods LLC Asset Acquisition, the Company recorded contingent liabilities in the amount of $240,576. These amounts relate to the estimate of certain performance-based payments following the acquisition date as well as to certain additional liabilities that the Company has evaluated and has recorded on a contingent basis. During the year ended December 31, 2019, the Company paid the amount of $120,576 in connection with these liabilities. ~~At September 30, 2022 and~~During the year ended December 31, ~~2021,~~2022, the Company determined that these contingent liabilities were no longer needed as the time period for attainment of the contingencies had lapsed; accordingly, the balance of the contingent liabilities in the amount of $120,000 ~~is classified as a current~~was de-recognized and credited to gain on contingent ~~liability and is included in accounts payable and accrued~~ liabilities. At December 31, 2022 the amount of contingent liabilities on the Company’s balance sheet was $0.

License Agreements

In May 2019, the Company entered into a royalty-based license agreement, through December 31, 2022 with a lifestyle brand, which provides the exclusive right, with certain carve-outs and limitations, to sell and promote branded gift baskets for certain channels including: retail, warehouse club stores, certain of the Company’s current e-commerce channels, and other e-commerce channels such as amazon.com (the “May 2019 License Agreement”). Pursuant to the May 2019 License Agreement, the Company paid an initial royalty deposit in the amount of $50,000 towards the minimum royalty, which is classified as other current assets on the Company’s balance sheet at December 31, 2019. Future royalty amounts owed for minimum payments in connection with the May 2019 License Agreement will be deducted from this deposit. The royalty rate is 5% of net sales, and the Company is required, with certain exceptions and exclusions, to make minimum royalty payments of $100,000 through the end of 2020, $110,000 in 2021, and $125,000 in ~~2022.~~2022.At March 31, 2023, the amount of $25,000 remains as a payable on the Company’s balance sheet under this agreement.

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Litigation

On September 16, 2019, an action (the “PA Action”) was filed in the Court of Common Pleas of Philadelphia County, Trial Division, against, among others, the Company and its wholly-owned subsidiaries, ~~Innovative Gourmet LLC~~igourmet and Food Innovations, Inc. ("FII"). Since that time, other parties involved in the incident have joined as plaintiffs in the PA Action. The complaint in the PA Action alleges, inter alia, wrongful death and negligence by a driver employed by ~~Innovative Gourmet~~igourmet and indicates a demand and offer to settle for ~~fifty million dollars.~~$50,000,000. We expect that should a settlement occur the amount to resolve the Action would be substantially lower. The Company and its subsidiaries had auto and umbrella insurance policies, among others, that were in effect for the relevant period The Company and its subsidiaries’ insurers have agreed to defend the Company and its subsidiaries in the PA Action (and the related action), subject to a reservation of rights. The Company believes that the likely outcome would result in the liabilities being covered by its insurance carriers. However, if the Company was found responsible for damages in excess of its available insurance coverage, such damages in excess of the coverage could have a material adverse effect on the Company’s operations. The case has been set for trial for April 1, 2024. Because the statute of limitations on the incident has now run, it is not anticipated that any new plaintiffs involved in the incident will come forward against the Company and its subsidiaries.

From time to time, the Company has become and may become involved in certain lawsuits and legal proceedings which arise in the ordinary course of business, or as the result of current or previous investments, or current or previous subsidiaries, or current or previous employees, or current or previous directors, or as a result of acquisitions and dispositions or other corporate activities. The Company intends to vigorously defend its positions. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our financial position or our business and the outcome of these matters cannot be ultimately predicted.

~~18. EQUITY~~

~~Common Stock~~

~~At September 30, 2022 and December 31, 2021, a total of 2,837,580 shares are deemed issued but not outstanding by the Company. These include 2,623,171 shares of treasury stock.~~

~~Nine months ended September 30, 2022:~~

During the nine months ended September 30, 2022 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $30,000 for the vesting of a total of 77,440 shares of common stock issuable to two of its independent board members, and $421,200 for the vesting of a total of 1,483,517 shares of common stock issuable to its Chief Executive Officer pursuant to his employment agreement. The Company also recognized non-cash compensation in the amount of $6,978 during the nine months ended September 30, 2022 in connection with stock options issuable to management and board members.

~~On April 8, 2022, the Company issued 33,445 shares with a value of $11,405 to an employee as compensation.~~

~~On April 25, 2022, the Company issued 142,857 shares with a value of $48,543 to a service provider.~~

~~Table of Contents~~

~~Nine months ended September 30, 2021:~~

On August 26, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with each of JCP Investment Partnership LP, Bandera Master Fund LP and SV Asset Management LLC (collectively, the “Investors”). Pursuant to the SPA, each Investor purchased 3,125,000 shares of the Company’s common stock for an aggregate of 9,375,000 shares from the Company at a price of $0.40 per share. The Company received $3,580,372 proceeds from the sale of the shares, net of costs in the amount of $169,628. JCP Investment Partnership, LP is controlled by James C. Pappas, a director of the Company; Bandera Master Fund LP is controlled by Jefferson Gramm, a director of the Company; and SV Asset Management LLC is controlled by Hank Cohn, a director of the Company.

During the nine months ended September 30, 2021 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $67,500 for the vesting of a total of 150,210 shares of common stock issuable to two of its independent board members, and $300,796 for the vesting of a total of 776,611 shares of common stock issuable to its Chief Executive Officer and its Director of Strategic Acquisitions pursuant to their employment agreements. The Company also recognized non-cash compensation in the amount of $107,836 during the nine months ended September 30, 2021 in connection with stock options issuable to management and board members.

~~Options~~

~~The following table summarizes the options outstanding at September 30, 2022 and the related prices for the options to purchase shares of the Company’s common stock issued by the Company:~~

Weighted

Weighted

Weighted

average

average

average

exercise

exercise

Range of

Number of

Remaining

price of

Number of

price of

exercise

options

contractual

outstanding

options

exercisable

Prices

Outstanding

life (years)

Options

Exercisable

Options

$
0.41

125,000

1.57

$
0.41

125,000

$
0.41

$
0.50

125,000

1.57

$
0.50

125,000

$
0.50

$
0.60

50,000

3.25

$
0.60

43,750

$
0.60

$
0.62

360,000

1.25

$
0.62

360,000

$
0.62

$
0.85

540,000

1.25

$
0.85

540,000

$
0.85

$
1.00

50,000

3.25

$
1.00

43,750

$
1.00

$
1.20

1,050,000

1.15

$
1.20

1,050,000

$
1.20

2,300,000

1.33

$
0.93

2,287,500

$
0.93

~~Transactions involving stock options are summarized as follows:~~

Number of Shares

Weighted Average
Exercise Price

Options outstanding at December 31, 2021
2,100,000 $ 0.99

Granted
250,000 $ 0.46
Exercised
- $ -
Cancelled / Expired
(50,000
)
$ 1.20

Options outstanding at September 30, 2022 (unaudited)
2,300,000 $ 0.93
Options exercisable at September 30, 2022 (unaudited)
2,287,500 $ 0.93

Aggregate intrinsic value of options outstanding and exercisable at September 30, 2022 and 2021 was $0. Aggregate intrinsic value represents the difference between the Company’s closing stock price on the last trading day of the fiscal period, which was $0.19 and $0.49 as of September 30, 2022 and 2021, respectively, and the exercise price multiplied by the number of options outstanding.

~~Table of Contents~~

During the three months ended September 30, 2022 and 2021, the Company charged $2,326 and $35,878, respectively, to operations to recognized stock-based compensation expense for employee and board member stock options.

During the nine months ended September 30, 2022 and 2021, the Company charged $6,978 and $107,836, respectively, to operations to recognized stock-based compensation expense for employee and board member stock options; the Company also charged $2,092 and $0, respectively, to operations to recognize the fair value of options issued to a service provider.

~~19.~~17. SUBSEQUENT EVENTS

~~As previously disclosed, in June 2022 we entered into three secured loan facilities with MapleMark Bank consisting~~

On April 24, 2023, the Company issued 400,000 shares of a $7,775,680 USDA B&I loan, a $2,680,000 USDA Food and Supply note, and a $3,000,000 Revolving Line of Credit, with total approved proceeds of $13,450,680, of which only $7,695,867 has been funded to date as the remaining funds are contingent of final USDA approval (the “MMB Facilities”). The MMB Facilities were originally approved as a 6-month bridge facility until full USDA approval was obtained. Duecommon stock pursuant to the ~~nationwide backup on USDA approvals, such approval has not been opened. Accordingly, by memo dated October 15, 2022,~~separation agreements with our prior CEO. See note 10.

On May 11, 2023, the Company ~~was advised that, effective November 28, 2022,~~received a signed conditional commitment from the ~~current maturity date~~USDA, a final step toward to potential full approval by the USDA board of the ~~MMB Facilities, the MMB Facilities would be extended for 90 days. We anticipate that~~Maple Mark Bank loan ~~modification agreements will be signed shortly as well.~~

guarantee.

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ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, 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 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. We caution readers that certain important factors may affect our actual results and could cause such results to differ materially from any forward-looking statements which may be deemed to have been made in this Report or which are otherwise made by or on our behalf. For this purpose, any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may”, “will”, “expect”, “believe”, “explore”, “consider”, “anticipate”, “intend”, “could”, “estimate”, “plan”, “propose” or “continue” or the negative variations of those words or comparable terminology are intended to identify forward-looking statements. Factors that may affect our results include, but are not limited to, the risks and uncertainties associated with:

●	Our ability to raise capital necessary to sustain our anticipated operations and implement our business plan,

●	Our ability to implement our business plan,

●	Our ability to generate sufficient cash to pay our lenders and other creditors,

●	Our dependence on one major customer,

●	Our ability to employ and retain qualified management and employees,

●	Our dependence on the efforts and abilities of our current employees and executive officers,

●	Changes in government regulations that are applicable to our current or anticipated business,

●	Changes in the demand for our services and different food trends,

●	The degree and nature of our competition,

●	The lack of diversification of our business plan,

●	The general volatility of the capital markets and the establishment of a market for our shares, and

●

Disruption in the economic and financial conditions primarily from the impact of past terrorist attacks in the United States, threats of future attacks, police and military activities overseas and other disruptive worldwide political and economic events, health pandemics, rising inflation 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.

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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, ~~stock-based services,~~ valuation of ~~financial instruments,~~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 maintained an allowance in the amount of ~~$365,651~~$16,684 for doubtful accounts receivable at ~~September 30, 2022,~~March 31, 2023, and ~~$375,931~~$340,225 at December 31, ~~2021.~~2022. The Company has an operational relationship of several years with our major customers, and we believe this experience provides us with a solid foundation from which to estimate our expected losses on accounts receivable. Should our sales mix change or if we develop new lines of business or new customers, these estimates and our estimation process will change accordingly. These estimates have been accurate in the past.

Fair Value of Financial Instruments

The Company measures its financial assets and liabilities in accordance with accounting principles generally accepted in the United States of America. 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.

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~~Background~~

We were initially formed in June 1979 as Alpha Solarco Inc., a Colorado corporation. From June 1979 through February 2003, we were either inactive or involved in discontinued business ventures. We changed our name to Fiber Application Systems Technology, Ltd in February 2003. In January 2004, we changed our state of incorporation by merging into Innovative Food Holdings, Inc. (“IVFH”), a Florida corporation formed for that purpose. As a result of the merger, we changed our name to that of Innovative Food Holdings, Inc. In January 2004, we also acquired Food Innovations, Inc. (“FII” or “Food Innovations”), a Delaware corporation, for 500,000 shares of our common stock.

On November 2, 2012, the Company entered into an asset purchase agreement (the “Haley Acquisition”) with The Haley Group, LLC whereby we acquired all existing assets of The Haley Group, LLC and its customers. The Haley Acquisition was valued at a total cost of $119,645.

On June 30, 2014, pursuant to a purchase agreement, the Company purchased 100% of the membership interest of Organic Food Brokers, LLC, a Colorado limited liability company (“OFB”), for $300,000, 100,000 four-year options at a price of $1.46 per share, and up to an additional $225,000 in earn-outs if certain milestones are met.

Pursuant to an Asset Purchase Agreement dated as of January 1, 2017 the Company’s wholly-owned subsidiary, Oasis Sales Corp. (“Oasis”), purchased substantially all of the assets of Oasis Sales and Marketing, L.L.C. for $300,000 cash; a $200,000 structured equity instrument which can be paid in cash or shares of the Company stock at the Company’s option, anytime under certain conditions, or is automatically payable via the issuance of 200,000 shares if the Company’s shares close above $1.00 for ten consecutive days; a $100,000 note; and up to an additional $400,000 in earn-outs over two years if certain milestones are met. The Agreement also contains claw-back provisions if certain revenue conditions are not met.

On August 15, 2014, pursuant to a merger agreement, the Company acquired The Fresh Diet, Inc. (“FD”). Effective February 23, 2016, the Company closed a transaction to sell 90% of our ownership in FD for consideration consisting primarily of a restructuring of our loans, which includes the ability to convert to additional amounts of FD under certain circumstances. There is no continuing cash inflows or outflows from or to the discontinued operations.

Effective January 24, 2018, pursuant to an asset acquisition agreement (the “igourmet Asset Acquisition Agreement”), our wholly-owned subsidiary, Innovative Gourmet, LLC acquired substantially all of the assets and certain liabilities of igourmet LLC and igourmet NY LLC, privately-held New York limited liability companies located in West Pittston, Pennsylvania and engaged in the sale, marketing, and distribution of specialty food and specialty food items through www.igourmet.com, online marketplaces, additional direct-to-consumer platforms, distribution to foodservice, retail stores and other wholesale accounts, pursuant to the terms of an Asset Purchase Agreement. The consideration for and in connection with the acquisition consisted of: (i) $1,500,000, which satisfied or reduced secured, priority and administrative debt of Sellers; (ii) in connection with and prior to the acquisition, our wholly-owned subsidiary, Food Funding, LLC (“Food Funding”), funded advances of $325,000 to Sellers on a secured basis, pursuant to certain loan documents and as bridge loans, which loans were reduced by the proceeds of the Asset Purchase Agreement; (iii) the purchase for $200,000 of certain debt owed by Sellers, to be paid out of, if available, Innovative Gourmet’s cash flow; (iv) potential contingent liability allocation for a percentage of Sellers’ approximately $2,300,000 of certain debt, not purchased or assumed by Innovative Gourmet, which under certain circumstances, Innovative Gourmet may determine to pay; and (v) additional purchase price consideration of (a) up to a maximum of $1,500,000, if EBITDA of Innovative Gourmet reaches $800,00 in 2018, (b) up to a maximum of $1,750,000, if EBITDA of Innovative Gourmet in 2019 exceeds its EBITDA in 2018 by at least 20% and if its EBITDA reaches $5,000,000; and (c) up to a maximum of $2,125,000, if EBITDA of Innovative Gourmet in 2020 exceeds its EBITDA in 2019 by at least 20% and if its EBITDA reaches $8,000,000. The EBITDA based earnout shall be paid 37.5% in cash, 25% in IVFH shares valued at the time of the closing of this transaction and 37.5%, at Innovative Gourmet’s option, in IVFH shares valued at the time of the payment of the earnout or in cash. The 2018, 2019 and 2020 earnout milestones were not met. In connection with the acquisition, our wholly owned subsidiary, Food Funding, purchased Seller’s senior secured note at a price of approximately $1,187,000, pursuant to the terms of a Loan Sale Agreement with UPS Capital Business Credit. That note was reduced by the proceeds of the Asset Purchase Agreement. See Item (i) above.

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Effective July 6, 2018, pursuant to an asset purchase agreement between Mouth Foods, Inc. (“Mouth”) and our wholly owned subsidiary M Innovations LLC (“M Innovations”) (the “MFI APA”), the Company acquired certain assets of Mouth from MFI (assignment for the benefit of creditors), LLC, in connection with a Delaware assignment proceeding. The MFI APA was accounted for as an acquisition of an ongoing business where the Company was treated as the acquirer and the acquired assets and assumed liabilities were recorded by the Company at their preliminary estimated fair values. Mouth, a privately held New York company operating out of Brooklyn, was an expert curator and online retailer of high quality specialty foods from small-batch makers in the US. The consideration for and in connection with the acquisition consisted of (i) closing related cash payments of $208,355; (ii) additional revenue-based contingent liabilities valued by management at $100,000 related to certain future sales of purchased assets payable under the following terms: payment of 5% of certain revenues, with no payments on the first $500,000 of revenues and no payments on revenues after June 30, 2020; (iii) additional revenue based contingent liabilities of up to $185,000 associated with the purchase of certain debt of the seller; and (iv) additional contingent liability consideration valued by management at approximately $20,000.

Effective July 23, 2019, P Innovations acquired certain assets of GBC Sub, Inc. (d/b/a The GiftBox) (“GiftBox”) (the “GiftBox Asset Purchase Agreement”). GiftBox, a privately held Nevada corporation controlled by David Polinsky, a director of the Company, was in the business of subscription-based ecommerce. The consideration for the assets purchased was a nominal amount of cash. The GiftBox Asset Purchase Agreement also provides the sellers the option to acquire 30% of P Innovations subject to dilution for a period of thirty-six months following the date of the Giftbox Asset Purchase Agreement; the option will only be exercisable if there is a spinoff of P Innovations to Innovative Food Holdings shareholders.

Transactions with a Major ~~Customer~~Customers

Transactions with a major customer and related economic dependence information is set forth ~~immediately~~ below and ~~above in Note 2 to the Condensed Consolidated Financial Statements and also in our Annual Report on Form 10-K for the year ended December 31, 2021 (1)~~ following our discussion of Liquidity and Capital ~~Resources, and (2) in Note 18 to the Consolidated Financial Statements.~~Resources.

~~Relationship with U.S. Foods~~

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We have historically sold the majority of our products, $7,885,725 and $7,659,459, respectively, representing 46% and 49% of total sales, respectively, in each of the three months ended March 31, 2023 and 2022, through a distributor relationship between FII, one of our wholly-owned subsidiaries, and ~~Next Day Gourmet, L.P., a subsidiary~~subsidiaries of U.S. Foods, a leading broadline distributor. These sales amounted to $10,672,314 (53% of total sales) and $7,978,329 (52% of total sales) for the three months ended September 30, 2022 and 2021, respectively. These sales amounted to $28,529,703 (51% of total sales) and $20,082,836 (48% of total sales) for the nine months ended September 30, 2022 and 2021, respectively. On January 26, 2015 we executed a contract directly between ~~Food Innovations, Inc., our wholly owned subsidiary,~~FII and U.S. Foods ~~Inc.~~(the “U.S. Foods Agreement”). The term of the U.S. Foods Agreement iswas from January 1, 2015 through December 31, 2016 and ~~provides~~provided for a limited number of automatic annual renewals thereafter if no party gives the other 30 days’ notice of its intent not to renew. Based on the terms, the U.S. Foods Agreement was extended through December 31, 2018. Effective January 1, 2018 the U.S. Foods Agreement was further amended to remove the cap on renewals, and provide for an unlimited number of additional 12-month terms unless either party notifies the other in writing, 30 days prior to the end date, of its intent not to renew. In addition, Gate Gourmet, the leading global provider of airline catering solutions and provisioning services for airlines, in partnership with igourmet, represented $2,751,356 and $981,759, or 16% and 6%, respectively, of total sales for the three months ended March 31, 2023 and 2022, respectively.

Our Business Activities

Overall, our business activities are focused on building scalable businesses selling specialty foods that are difficult to find through traditional channels. We build relationships with the producers, growers, makers, and distributors of specialty products, then carefully select our suppliers based upon their quality, uniqueness, reliability and experience in shipping with overnight courier services. In fact, we’ve built expertise in 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 then partner to seek out the freshest, most unique, origin-specific gourmet cheese, meat, produce, and premium ingredients available, and ship them directly from our network of vendors and warehouses within 24 – 72 hours. 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.

We leverage this unique, premium assortment to serve the needs of two key customer groups within the Specialty Foods category: Professional Chefs and Home Chefs.

First, we serve 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 warehoused 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 food to Professional Chefs nationally through the websites of broadline distributors, such as US Foods, Inc. Between this variety of sales channels, IVFH is able to serve our Professional Chef customers wherever they are located.

Second, we serve Home Chefs ranging from the casual host looking for a spread of freshly cut gourmet cheese and charcuterie, to the aspiring home menu planner looking to expand their palate, to the passionate foodie who can’t find their favorite ingredients at their local grocery store. Much of this business is based on the category trends we are seeing on the Professional side of the business, and in partnership with the same suppliers. We have used our understanding of the customer to build meaningful loyal segments of the business around gift baskets and subscriptions, as well as a la carte purchases. We sell this gourmet assortment through our iGourmet.com and Mouth.com websites as well as on third party marketplaces like Amazon.com, Walmart.com, and Kroger.com. Our Home Chef customers rave about their experience, with Net Promoter Scores (NPS) on par with some of the leading consumer brands in the world.

We service these two customer bases from a unified network of three warehouses: a 200K square foot facility in Mountain Top, Pennsylvania (an important industry distribution hub for the Northeast), a 30K square foot facility in the greater Chicago area, and a 5K square foot facility in Bonita Springs, FL. We have 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 food handling supply chains in the world, and the quality and food safety that our premium customers expect from us. All three sites 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.

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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 Chef Advisors, as ex-chefs themselves, go beyond customer service to offer our Professional Chefs customer support, menu ideas, and preparation guidance. Our photography and marketing teams have developed a look and feel all our own.

Lastly, we also have small but profitable 3PL, partnerships, and brand services teams that package all of our activities into services that we can sell back to the small, nascent, or international brands we do business with.

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.

Three Months Ended ~~September 30, 2022~~March 31, 2023 Compared to Three Months Ended ~~September 30, 2021~~March 31, 2022

Revenue

Revenue increased by ~~$4,852,629~~$1,352,089 or approximately ~~32%~~9% to ~~$20,059,982~~$16,995,200 for the three months ended ~~September 30, 2022~~March 31, 2023 from ~~$15,207,353~~$15,643,111 in the prior year. The increase in revenues is primarily attributable to an increase in specialty foodservice revenues which was driven by the continued nationwide opening of restaurants and other foodservice establishments previously affected by COVID-19 as well as increases in travel related foodservice, and restaurant dining. This foodservice revenue growth is softening sequentially, as the impact of restaurant re-openings runs its course. The increase in specialty foodservice revenue was partially offset with decreases in e-commerce revenues. The decrease in e-commerce revenue during the current period was related to decreases in COVID-19 driven demand in ~~2022~~2023 compared to ~~2021~~2022 partially driven by the continued re-opening of bricks and mortar ~~stores, and~~stores. It was also driven by decreases in digital marketing related in part to a more challenging digital marketing environment ~~as compared to 2021 which has been driven partially by industrywide marketing challenges related to~~and industry-wide expanded privacy rules that significantly reduce data sharing.

~~Table~~ In addition, we have proactively reduced our marketing spending on e-commerce as we work to improve the end-to-end customer experience to improve the retention levels of ~~Contents~~

the new customers we spend money to acquire.

We continue to assess the potential of new revenue sources from the manufacture and sale of proprietary food products, private label products and additional sales channel opportunities in both the foodservice and consumer space and will implement a strategy which based on our analysis provides the most beneficial opportunity for growth.

Any changes in the food distribution and specialty foods operating landscape that materially hinders our current ability and/or cost to deliver our products to our customers could potentially cause a material impact on our net revenue and gross margin and, therefore, our profitability and cash flows could be adversely affected.

Currently, a small portion of our revenues comes from imported products or international sales. Our current sales from such markets may be hampered and negatively impacted by any economic tariffs that may be imposed in the United States or in foreign countries.

See “Transactions with Major Customers” and the Securities and Exchange Commission’s (“SEC”) mandated FR-60 disclosures following the “Liquidity and Capital Resources” section for a further discussion of the significant customer concentrations, loss of significant customer, critical accounting policies and estimates, and other factors that could affect future results.

Cost of goods sold

Our cost of goods sold for the three months ended ~~September 30, 2022~~March 31, 2023 was ~~$15,546,132,~~$12,908,689, an increase of ~~$4,118,789~~$991,510 or approximately ~~36%~~8% compared to cost of goods sold of ~~$11,427,343~~$11,917,179 for the three months ended ~~September 30, 2021. The increase in cost of goods sold is attributed mainly to increases in revenues.~~March 31, 2022. Cost of goods sold was made up of the following expenses for the three months ended ~~September 30, 2022:~~March 31, 2023: cost of goods of specialty, meat, game, cheese, seafood, poultry and other sales categories in the amount of ~~$10,668,051;~~$9,300,431; shipping, delivery, handling, and purchase allowance expenses in the amount of ~~$4,753,816;~~$3,465,414; and cost of goods associated with logistics of ~~$124,265.~~$142,844. Gross margins as a percentage of sales ~~declined~~increased during the current period to ~~22.5%~~24.0% compared to ~~24.9%~~23.8% during the comparable period, ~~primarily due~~as we began to ~~variation in product and revenue mix across our various selling channels,~~compare current period results to lower inflation-driven margins last year, as well as lapping increases in fuel ~~costs and fuel~~ surcharges ~~associated with the higher cost of fuel in the United States~~ and higher shipping ~~costs contributed to the decline in gross margins as a percentage of sales.~~costs.

In ~~2022,~~Q1 of 2023, we ~~continue~~continued to price our products in order to increase sales, gain market share and increase the number of our end users and customers. We are currently ~~expect, if market conditions, overall economic conditions,~~focused, however, on returning to pre-inflation margin levels through improved management of product mix, reduced shipping expenses, and ~~our product revenue mix remain constant, that our~~improved cost management processes.

Table of ~~goods sold may increase and may result in a decrease in profit margin.~~

Contents

Selling, general, and administrative expenses

Selling, general, and administrative expenses decreased by ~~$677,692~~$373,340 or approximately ~~14%~~7% to ~~$4,320,981~~$4,799,086 during the three months ended ~~September 30, 2022~~March 31, 2023 compared to ~~$4,998,673~~$5,172,426 for the three months ended ~~September 30, 2021.~~March 31, 2022. The decrease in selling, general, and administrative expenses was primarily due to a decrease in ~~payroll~~advertising and ~~related~~digital marketing costs in the amount of ~~$301,946 and~~$491,624, a decrease in ~~advertising and digital marketing~~office & facilities costs of ~~$355,378. Other components of the decrease in sales, general, and administrative expenses include~~$114,961, a decrease in computer and IT ~~costs~~expense of ~~$22,113; a decrease in professional and legal fees of $20,587,~~$45,725, and a decrease in banking and credit card fees of ~~$15,736; and a~~$43,099. These decrease were partially offset by an increase in professional fees of $157,566, including $91,125 related to the executive personnel changes, an increase in taxes in the amount of $21,845, an increase in insurance costs of ~~$7,092. These decreases were partially offset by~~$14,694, an increase in travel and entertainment costs of ~~$17,903,~~$11,245, an increase in ~~office & facilities costs~~amortization and depreciation of ~~$16,432,~~$6,923, and an increase in ~~taxes~~bad debt expense in the amount of ~~$11,124. The decrease in sales,~~$5,781 Selling, general, and administrative expenses ~~represent~~as a percentage of sales decreased from 33% of sales during the ~~results~~three months ended March 31, 2022 to 28% of sales during the current quarter. This decrease is the result of our overall cost-cutting efforts as well as the restructuring of our marketing and advertising programs.

~~Gain on forgiveness of debt~~Separation costs – executive officers

During the three months ended ~~September 30, 2021,~~March 31, 2023, the Company ~~recorded~~entered into a ~~gain on forgiveness~~separation agreement with its Prior CEO and current board member with a total cost of ~~debt in connection with the IVFH PPP Loan in the amount of $1,665,818,~~$1,819,199 consisting of ~~$1,650,221~~$1,251,199 in cash payments, $1,199 of ~~principal~~Cobra health insurance payments, and ~~$15,597~~stock grants with a value of ~~accrued interest. There was no comparable transaction in the current period.~~

~~Other leasing income~~

During the three months ended September 30, 2022, the Company recognized income in the amount of $785 in connection with the lease of space in our Mountaintop warehouse facility, a decrease of $1,115 or approximately 59% compared to $1,900$568,000. Also during the three months ended ~~September 30, 2021.~~

March 31,

~~Table~~ 2023, the Company entered into a separation agreement with its prior Director of ~~Contents~~

~~Interest expense, net~~

~~Interest expense, net~~Strategic Acquisitions and board member consisting of interest income, increased by $101,879 or approximately 124% to $183,908 during the three months ended September 30, 2022, compared to $82,029 during the three months ended September 30, 2021. Interest accrued or paid on the Company’s commercial loanscash payments of $100,000 and ~~notes payable increased by $54,646 to $135,562 during the current period primarily as a result~~$26,451 of ~~increases in interest rates. Interest income was $1,999~~Cobra health insurance payments. The aggregate separation costs for the three months ended ~~September 30, 2022, an increase of $141 compared to interest income of $2,140~~March 31, 2023 was $1,945,650; there were no such costs during the prior period due to lower cash balances. Interest on the Company’s note payable was $96 for the three months ended September 30, 2022 and 2021. Interest expense associated with the amortization of loan fees was $50,036 during the three months ended September 30, 2022, an increase of $46,879 compared to $3,157 during the prior period; the increase was due to loan fees associated with the MapleMark debt.

~~Net income~~

For the reasons above, the Company had net income for the three months ended September 30, 2022 of $9,746 which is a decrease of $357,280 or 97% compared to a net income of $367,026 during the three months ended September 30, 2021. The net income for the three months ended September 30, 2022 includes a total of $350,310 in non-cash charges, including non-cash compensation in the amount of $152,726, depreciation and amortization expense of $144,109, amortization of prepaid loan fees in the amount of $50,036, and provision for doubtful accounts of $3,437.

The net income for the three months ended September 30, 2021 includes a one-time gain of $1,665,818 consisting of $1,650,221 of principal and $15,597 of accrued interest related to forgiveness of the IVFH PPP Loan and a total of $304,098 in non-cash charges, including depreciation and amortization expense of $135,731, non-cash compensation in the amount of $160,752, amortization of the discount on notes payable of $3,157, and provision for doubtful accounts of $4,456.

~~Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30, 2021~~

~~Revenue~~

Revenue increased by $14,863,433 or approximately 36% to $56,226,249 for the nine months ended September 30, 2022 from $41,362,816 prior year. The increase in revenues is primarily attributable to an increase in specialty foodservice revenues which was driven by the nationwide opening of restaurants and other foodservice establishments previously affected by COVID-19 as well as increases in travel related foodservice, and restaurant dining. The increase in specialty foodservice revenue was partially offset with decreases in e-commerce revenues. The decreases in e-commerce revenues during the current period were related to decreases in COVID-19 driven demand in 2022 compared to 2021 and also by lower recognized revenue in the first quarter of 2022, due to a decline in the value of recognized deferred revenue associated with items ordered in the 4th quarter of the prior year but delivered in the first quarter of the following year. E-commerce revenues were also driven lower by the continued re-opening of bricks and mortar stores, and in part to a more challenging digital marketing environment as compared to 2021 due to industrywide marketing challenges related to expanded privacy rules that significantly reduce data sharing.

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~~Cost of goods sold~~

Our cost of goods sold for the nine months ended September 30, 2022 was $43,537,570, an increase of $13,066,169 or approximately 43% compared to cost of goods sold of $30,471,401 for the nine months ended September 30, 2021. The increase in cost of goods sold which also included inventory adjustment expenses of $316,666, is attributed mainly to increases in revenues. Cost of goods sold was made up of the following expenses for the nine months ended September 30, 2022: cost of goods of specialty, meat, game, cheese, seafood, poultry and other sales categories in the amount of $29,868,964; shipping, delivery, handling, and purchase allowance expenses in the amount of $13,270,633; and cost of goods associated with logistics of $397,973. Gross margins as a percentage of sales declined during the current period to 22.6% compared to 26.3% during the comparable period, primarily due to variation in product and revenue mix across our various selling channels, increases in fuel costs and fuel surcharges associated with the higher cost of fuel in the United States and higher shipping costs contributed to the decline in gross margins as a percentage of sales.

In 2022, we continue to price our products in order to increase sales, gain market share and increase the number of our end users and customers. We currently expect, if market conditions, overall economic conditions, and our product revenue mix remain constant, that our cost of goods sold may increase and may result in a decrease in profit margin.

~~Selling, general, and administrative expenses~~

Selling, general, and administrative expenses increased by $502,653 or approximately 3% to $15,015,456 during the nine months ended September 30, 2022 compared to $14,512,803 for the nine months ended September 30, 2021. The increase in selling, general, and administrative expenses was primarily due to an increase in advertising and digital marketing costs of $329,945 which includes an expense of $86,866 in digital marketing fees associated with a settlement of digital marketing fees to a service provider, an increase in professional fees of $213,286 (including $188,986 in expenses associated with the MapleMark loan transaction); an increase in office and facilities expenses of $88,478; an increase in travel expenses of $75,334; an increase in computer and IT costs of $46,540;an increase in insurance costs of $33,543; and an increase in depreciation and amortization of $17,294; and an increase in taxes of $9,674. These increases were partially offset by a decrease in payroll and related costs of $111,876 (including an increase in non-cash compensation of $44,086); a decrease in banking and credit card costs of $179,215; and a decrease in provision for doubtful accounts of $20,950. The decreases were driven primarily by our overall cost cutting efforts.

~~Impairment of Investment~~

Gain on Interest Rate Swap

During the ~~nine~~three months ended ~~September 30,~~March 31, 2022, the Company recognized a gain on the interest rate swap in the amount of $294,000 in connection with the termination of the interest rate swap. There is no comparable transaction in the ~~prior period.~~

~~Loss on extinguishment of debt~~

During the nine months ended September 30, 2022, we entered into a revolving line of credit agreement and two term loan agreements with MapleMark Bank, replacing our revolving line of credit and term loans with Fifth Third Bank. We wrote off the existing discounts to the Fifth Third Bank loans in the amount of $40,556 resulting in a loss on extinguishment of debt. There was no comparable transaction during the nine months ended September 30, 2021.

~~Gain on forgiveness of debt~~

During the nine months ended September 30, 2021, the Company recorded a gain on forgiveness of debt in connection with the IVFH PPP Loan in the amount of $1,665,818, consisting of $1,650,221 of principal and $15,597 of accrued interest. There was no comparable transaction in the current period.

~~Table of Contents~~

Other leasing income

During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company recognized income in the amount of ~~$8,169~~$1,900 in connection with the lease of space in our Mountaintop warehouse facility, a decrease of ~~$771~~$3,190 or approximately 9%63% compared to ~~$8,940~~$5,090 during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022.

Interest expense, net

Interest expense, net of interest income, increased by ~~$121,364~~$89,468 or approximately ~~47%~~108% to ~~$379,253~~$172,441 during the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to ~~$257,889~~$82,973 during the ~~nine~~three months ended ~~September 30, 2021. Interest~~March 31, 2022. The increase was due primarily to an increase in interest accrued or paid on the Company’s commercial loans and notes payable ~~increased by $84,925~~in the amount of $174,509 due to ~~$308,489 during the current period primarily as a result of increases in~~higher interest rates. ~~Interest on~~These increases were partially offset by interest income in the ~~PPP loans decreased by $10,540 to $0 during~~amount of $2,068 for the ~~current period compared to $10,540 during the nine~~three months ended ~~September 30, 3021. The Company’s PPP loans have all been forgiven as of September 30, 2022. Interest income was $5,984 for the period ended September 30, 2022, an increase of $423~~March 31, 2023, compared to interest income of ~~$5,561 during~~$1,989 for the prior period due to higher cash balances. Interest on the Company’s note payable was $282 for the nine months ended September 30, 2022 and 2021. Interest expense associated with the amortization of loan fees was $70,618 during the nine months ended September 30, 2022, an increase of $61,250 compared to $9,368 during the prior period due to loan fees associated with the MapleMark loans.year.

Net loss

For the reasons above, the Company had a net loss for the ~~nine~~three months ended ~~September 30, 2022~~March 31, 2023 of ~~$2,444,417 which is an increase of $30,048 or 1%~~$2,828,766 compared to a net loss of ~~$2,414,369~~$1,230,377 during the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The loss for the three months ended March 31, 2023 includes $1,952,060 in one-time expenses related to executive management separation and hiring costs, in addition to a net total of $323,432 in non-cash charges: non-cash compensation in the amount of $178,048 and depreciation and amortization expense of $145,384. The net loss for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 includes a total of ~~$1,066,729~~$298,060 in non-cash charges, including non-cash compensation in the amount of ~~$520,218,~~$152,726, depreciation and amortization expense of ~~$423,844,~~$138,361, and amortization of prepaid loan fees in the amount of ~~$70,618, loss on extinguishment of debt of $40,556, and provision for doubtful accounts of $11,493.~~

The net loss for the nine months ended September 30, 2021 includes a gain of $1,665 in connection with the forgiveness of the IVFH PPP Loan and a total of $1,135,469 in non-cash charges, including impairment of investment of $209,850, depreciation and amortization expense of $407,676, non-cash compensation in the amount of $476,132, amortization of the discount on notes payable of $9,368, and provision for doubtful accounts of $32,443.$3,088.

Liquidity and Capital Resources at ~~September 30, 2022~~March 31, 2023

As of ~~September 30, 2022~~March 31, 2023, the Company had current assets of ~~$10,696,497~~$9,874,158, consisting of cash and cash equivalents of ~~$2,752,404,~~$1,650,127; trade accounts, net receivable of ~~$4,670,645,~~$4,829,709; inventory of ~~$2,937,098,~~$3,021,465; and other current assets of ~~$336,350.~~$372,857. Also at ~~September 30, 2022,~~March 31, 2023, the Company had current liabilities of ~~$15,304,111,~~$14,593,537, consisting of trade ~~payable~~payables and accrued liabilities of ~~$6,070,249,~~$4,796,700, current portion of accrued separation costs – related parties of $559,370, accrued interest of ~~$18,008,~~$18,198, deferred revenue of ~~$1,094,649,~~$1,238,790, line of credit of $2,014,333, ~~notes payable –~~ current portion of ~~$5,667,485, lease liabilities – operating leases,~~notes payable of $5,709,043, current portion of ~~$63,569,~~operating lease ~~liabilities – financing leases, current portion~~liability of ~~$188,818,~~$63,877, and current portion of ~~contingent liabilities~~financing lease liability of ~~$187,000.~~$193,226.

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During the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, the Company had cash used in operating activities of ~~$2,802,762.~~$3,191,712. Cash flow used in operations consisted of the Company’s consolidated net loss of ~~$2,444,417 partially offset by stock based~~$2,828,766 less depreciation and amortization of $145,384, stock-based compensation in the amount of ~~$520,218, depreciation~~$178,048, bad debt expense of $4,666, and amortization of ~~$423,844, amortization~~right-of-use assets of ~~prepaid loan fees of $70,618; amortization of right-to-use asset of $50,821, loss on extinguishment of debt of $40,556, and provision for doubtful accounts of $11,493.~~$16,314. The Company’s cash position also decreased ~~due to~~by $707,361 as a ~~change~~result of changes in the components of current assets and ~~liabilities~~current liabilities. Excluding expenses associated with the separation and hiring of key officers referenced earlier, the Company would have recorded cash used in ~~the amount~~operating activities of ~~$1,475,895.~~$2,755,732, an improvement of $117,558 vs. 2022.

The Company had cash used in investing activities of ~~$107,045~~$7,995 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, which consisted of cash paid for the acquisition of property and equipment.

The Company had cash used in financing activities of ~~$460,460~~$49,564 for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, which consisted of principal payments made on notes payable of ~~$169,696,~~$2,757, and principal payments on financing leases of ~~$130,459, cost debt financing of $110,305; and payment of offering costs for stock previously accrued of $50,000.~~$46,807.

~~Table of Contents~~

The Company had a net working capital deficit of ~~$4,607,614~~$4,719,379 as of September 30, 2022. The Company used cash in operations during the nine months ended September 30, 2022 in the amount of $2,802,762. This compares to cash used in operations of $5,947,141 during the nine months ended September 30, 2021. On June 6, 2022, the Company completed a financing arrangement with MapleMark Bank, whereby MapleMark provided the company with a revolving credit facility and two term loans in the aggregate amount of $7,695,866. Pursuant to the terms of these loan agreements, the Company has applied for loan guarantees from United States Department of Agriculture. Upon receipt of these guarantees, the revolving loan in the amount of $2,014,333 will be due in 18 months and the term loans in the aggregate amount of $5,681,533 will be due in 30 years, substantially improving the Company’s liquidity. The Company has applied for these guarantees, though there can be no assurance that they will be received.

March 31, 2023. The Company intends to continue to focus on increasing market share and cash flow from operations by focusing its sales activities on specific market segments and new product ~~lines. As of September 30, 2022,~~lines and improving operating efficiencies. Currently, we do not have any material long-term obligations other than those described in Notes 6, 7, 12 ~~13,~~ and 1413 to the financial statements included in this report. As we seek to increase our sales of new items and enter new markets, acquire new businesses as well as identify new ~~and other consumer and~~ food ~~service~~ oriented products and services, we may use existing cash reserves, long-term financing, or other means to finance such ~~diversification.~~diversification, although no assurance can be given that such growth will occur.

If the Company’s cash flow from operations is insufficient to fully implement its business plan, the Company may require additional financing in order to execute its operating plan. The Company cannot predict whether this additional financing will be in the form of equity or debt, or be in another form. The Company may not be able to obtain the necessary additional capital on a timely basis, on acceptable terms, or at all.

In any of these events, the Company may be unable to implement its current plans for expansion, repay its debt obligations as they become due or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations.

~~2022~~2023 Plans

2022 was a year of continued volatility. The ~~world has been in~~food service industry moved past the ~~grip of a pandemic since March 2020 which has wreaked havoc on economies world-wide, including in the U.S., which is our primary market. As a result~~depressed restaurant market of the ~~pandemic, restaurants, hotels, country clubs, casinos, catering houses and other segments~~Pandemic, posting significant gains. For e-commerce, it was a year of our primary customer base have either closed completely or have only recently begun to open with significantly reduced operations. Accordingly, foodservice revenues, which historically have been a significant portion of our overall revenues had been significantly reducedindustry declines as most foodservice establishments cross the United States closed or had limited operations. As a result, foodservice revenue commencing in the second half of March 2020 and through the end of 2021 experienced unprecedented declines. In 2022, as the pandemic began to recede and foodservice establishments reopened and travel resumed, we have experienced strong foodservice revenue growth. Concurrently, while ecommerce revenues remained above pre-pandemic historical levels, lower deferred revenues recognized in the nine months of 2022 and decreases in COVID-19 driven demand in 2022 compared to 2021 (partially driven by the continued re-opening ofconsumers shifted their purchases back into bricks and mortar ~~stores),~~stores. In the first quarter of 2023, we saw our revenue trends begin to stabilize for the first year since the Pandemic began in 2020. We will now begin lapping a more normalized market for food at home and ~~an increasingly challenging digital marketing environment fueled by industry-wide marketing challenges, including expanded privacy rules that significantly reduce data sharing.~~away from home.

During ~~2022,~~2023, as Mr. Bennett has now recently taken the role of CEO, we will be doing a holistic review of the Company’s portfolio of businesses and go to market strategies. In the meantime, we plan to ~~expand our business by expanding our~~ focus on the fundamentals of running a healthy business serving both Professional and Home Chefs, including a focus on improving margins. On the Professional Chefs business, we expect to continue to expand by entering additional specialty foods markets, serving new customers, and ~~by leveraging our e-commerce platform to launch and grow~~launching new ~~D2C brands and e-commerce sites within targeted consumer areas either organically and/or through acquisition of new D2C brands and e-commerce sites within targeted consumer areas. In addition,~~products. While the Home Chef customer remains an important focus for us, we ~~will continue exploring potential acquisition and partnership opportunities with influencers and other celebrities~~plan to continue to ~~extend~~be cautious with our focus in the specialty food market through the growth of the Company’s existing sales channels and through a variety of additional potential sales channel relationships. Additionally, to further optimize the Company’s return on marketing spend. the company has meaningfully reduced its digital marketing spend ~~in traditional digital marketing channels and~~on this business, while we focus on ~~increasing our strategic loyalty and retention focused~~improving the customer ~~experience improvements across our branded online retailers.~~journey. Additional focus includes ~~further~~ improving the customer experience on our existing food subscription offerings, expanding our ~~traditional monthly subscription offerings~~assortment, and launching a ~~“subscribe~~loyalty rewards program. These efforts are expected to increase our customer retention and ~~save” subscription offering.~~

~~In addition, we~~frequency, enabling us to achieve higher returns on our advertising spend when we’re ready to accelerate again. We are currently ~~exploring~~targeting 2024 for this re-acceleration of marketing spending, pending the ~~introduction~~achievement of ~~or have introduced into~~ the ~~market,~~frequency and retention thresholds required to enable a ~~variety of new product categories and new product lines, including private label products and proprietary branded products to leverage our existing foodservice and consumer customer base.~~sustainably profitable business.

Furthermore, the Company intends to continue to expand its activities in the direct-to-consumer space and the overall consumer packaged goods (CPG) space by leveraging its overall capabilities in the consumer space, including leveraging its direct to consumer e-commerce platform to reach both additional customers in multiple channels, and to expand availability of its e-commerce capabilities to additional products and markets. In addition, the company plans to expand its business to business (B2B) offerings within the ecommerce industry.

~~Table of Contents~~

The ~~Company also plans on expanding its B2B offerings, including~~company has significant efforts underway to improve gross margins across all operating entities. We believe we can achieve this objective through improving our product mix, building a more strategic pricing and promotional plan with supplier support, and implementing a more robust process for managing the impact of its managed services which provide a complete customer backend experience solution for small to large brands by leveraging the platform's procurement, logistics and fulfillment capabilities. The Company also manages monthly subscription offerings on behalf of third party B2B clients and the Company plans on expanding this offering in 2022. In addition, the Company is focused on formally launching its B2B managed marketplace offerings, currently in beta testing, in which the Company offers its B2B customers a complete managed solution including warehousing fulfillment and listing management, for third party marketplace for marketplaces such as Amazon, Walmart and other third party marketplaces.inflation.

No assurances can be given that any of these plans will come to fruition or that if implemented ~~that~~ they will necessarily yield positive results.

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.

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Inflation

In the opinion of management, ~~during the nine months ended September 30, 2022,~~ inflation has ~~not~~ had a material effect on the Company’s financial condition orand 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 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 2023.

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, ~~2021~~2022 and other of its Current Reports on Form 8-K, all of which reports are available at no cost at www.sec.gov.

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 Securities Exchange Act of 1934 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 Quarterly Report, have ~~identified a control deficiency regarding the integration of two acquisitions in 2018~~determined that our controls and ~~as a result management has concluded our internal control over financial reporting was ineffective~~procedures are effective at ~~September 30, 2022~~March 31, 2023 at the reasonable assurance level. Management of the Company believes that this deficiency is primarily due to the smaller size of the company’s accounting staff in relation to certain continued system integrations related to the 2018 acquisitions of certain assets of igourmet LLC and Mouth Foods, Inc. To address this matter, we have expanded our accounting staff and we expect to retain additional qualified personnel to continue to remediate this control deficiency in the future. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) 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 Quarterly 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 16, 2019, an action (the “PA Action”) was filed in the Court of Common Pleas of Philadelphia County, Trial Division, against, among others, the Company and its ~~wholly owned~~wholly-owned subsidiaries, ~~Innovative Gourmet LLC~~igourmet and Food Innovations, Inc. Since that time, other parties involved in the incident have joined as plaintiffs in the PA Action. The complaint in the PA Action alleges, inter alia, wrongful death and negligence by a driver ~~formerly~~ employed by ~~Innovative Gourmet,~~igourmet and ~~plaintiffs filed~~indicates a demand and offer to settle for fifty million dollars. We expect that should a settlement occur the amount to resolve the Action would be substantially lower. The Company and its subsidiaries ~~and their employees~~ had auto and umbrella insurance policies, among others, that were in effect for the relevant ~~period.~~period The Company and its subsidiaries’ insurers have agreed to defend the Company and its subsidiaries ~~and the driver~~ in the PA Action (and the related ~~actions)~~action), subject to a reservation of rights. The Company believes that the likely outcome would result in the liabilities being covered by its insurance carriers. However, if the Company was found responsible for damages in excess of its available insurance coverage, such damages in excess of the coverage could have a material adverse effect on the Company’s operations. The case has been set for trial for April 1, 2024. Because the statute of limitations on the incident has now run, it is not anticipated that any new plaintiffs involved in the incident will come forward against the Company and its subsidiaries.

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.

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

None

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Item 6. Exhibits

3.1	Articles of Incorporation (incorporated by reference to exhibit 3.1 of the Company’s annual report on Form 10-KSB for the year ended December 31, 2004 filed with the Securities and Exchange Commission on September 28, 2005).

3.2	Amended Bylaws of the Company (incorporated by reference to exhibit 3.2 of the Company’s annual report Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission on March 16, 2011).

3.2.1	Amended Bylaws of the Company (incorporated by reference to exhibit 3.1 of the Company’s current report Form 8-K filed with the Securities and Exchange Commission on March 13, 2023).

10.1	Executive Employment Agreement dated February 3, 2023 between the Registrant and Robert William Bennett (incorporated by reference to exhibit 3.1 of the Company’s current report Form 8-K filed with the Securities and Exchange Commission on February 7, 2023)

10.2	Agreement and General Release dated February 3, 2023 between the Registrant and Samuel Klepfish (incorporated by reference to exhibit 3.1 of the Company’s current report Form 8-K filed with the Securities and Exchange Commission on February 7, 2023)

10.3	Side Letter dated February dated February 3, 2023 between the Registrant and Samuel Klepfish (incorporated by reference to exhibit 3.1 of the Company’s current report Form 8-K filed with the Securities and Exchange Commission on February 7, 2023)

31.1	Section 302 Certification

31.2	Section 302 Certification

32.1	Section 906 Certification

32.2	Section 906 Certification

101.INS	Inline XBRL Instance Document

101.SCH	Inline XBRL Taxonomy Extension Schema

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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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/ ~~Sam Klepfish~~Robert William Bennett	Chief Executive Officer and Director	~~November 14, 2022~~May 15, 2023
~~Sam Klepfish~~Robert William Bennett	(Principal Executive Officer)

/s/ Richard Tang	Chief Financial Officer	~~November 14, 2022~~May 15, 2023
Richard Tang

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0000312257 ivfh:FinanceLease2Member 2022-12-31 iso4217:USD xbrli:shares

Balance as of December 31, 2020	$	2,917,676
Cash payments received		591,886
Net sales recognized		(2,376,151	)
Balance as of March 31, 2021 (unaudited)	$	1,133,411

Cash payments received		375,115
Net sales recognized		(527,991	)
Balance as of June 30, 2021 (unaudited)	$	980,535

Cash payments received		401,097
Net sales recognized		(325,621	)
Balance as of September 30, 2021 (unaudited)	$	1,056,011

Cash payments received		99,989
Net sales recognized		(128,686	)
Balance as of June 30, 2022 (unaudited)	$	1,222,247

	Nine Months Ended
	September 30,
	2022		2021
	(unaudited)		(unaudited)
Specialty Foodservice	$	46,072,258	$	29,049,060
E-Commerce		8,637,210		10,917,318
National Brand Management		872,732		751,865
Logistics		644,049		644,573
Total	$	56,226,249	$	41,362,816

For the period ended September 30, 2023	$	72,948
For the period ended September 30, 2024		71,901
For the period ended September 30, 2025		37,938
For the period ended September 30, 2026		890
For the period ended September 30, 2027		-
Total	$	183,677
Less: Present value discount		(15,333	)
Lease liability	$	168,344

Secured mortgage note payable for the acquisition of land and building in Bonita Springs, Florida in the amount of $546,000. Principal payments of $4,550 plus interest at the rate of Libor plus 3% are due monthly. The balance of the principal amount was originally due February 28, 2018. On March 23, 2018 and effective February 26, 2018, this note was amended and renewed in the amount of $273,000, with monthly payments of principal and interest of $4,550 payable through the maturity date of February 28, 2023. During the three months ended September 30, 2022, the Company made payments of principal and interest on this note in the amounts of $9,100 and $151, respectively; and during the nine months ended September 30, 2022, the Company made payments of principal and interest on this note in the amounts of $22,750 and $655, respectively. On June 9, 2022, the principal and interest due on this note in the amount of $45,500 and $66, respectively, were paid directly to Fifth Third Bank by MapleMark in connection with MapleMark Term Loan 2.	$	-	$	68,250

Secured mortgage note payable for the acquisition of land and building in Broadview, Illinois in the amount of $980,000. Principal payments of $8,167 plus interest at the rate of LIBOR plus 2.75% are due monthly through April 2020, the remaining principal balance in the amount of $490,000 was originally due May 29, 2020. Effective May 29, 2020, the note was amended and renewed such that principal payments of $8,303 plus accrued interest were due beginning June 29, 2020 and continuing for sixty months; the entire principal balance and all accrued interest will be due on May 29, 2025. During the three months ended September 30, 2022, the Company made payments of principal and interest on this note in the amounts of $16,333 and $1,305, respectively; during the nine months ended September 30, 2022, the Company made payments of principal and interest on this note in the amounts of $40,833 and $3,781, respectively. On June 9, 2022, the principal and interest due on this note in the amount of $310,333 and $901, respectively, were paid directly to Fifth Third Bank by Maple Mark in connection with MapleMark Term Loan 2.	$	-	$	351,165

Promissory note dated March 22, 2019 in the original amount of $391,558 (the “Artisan Equipment Loan”) payable to Fifth Third Bank. This loan is secured by the Company’s tangible and intangible personal property and bears interest at the rate of 5.20%. The entire principal balance and all accrued interest is due on the maturity date of March 21, 2024. Monthly payments in the amount of $7,425 including principal and interest commenced in April, 2019. During the year ended December 31, 2019, equipment financed under the Artisan Equipment Loan in the amount of $33,075 was returned for credit. During the three months ended September 30, 2022, the Company made payments of principal and interest on this loan in the amounts of $12,288 and $1,308, respectively; during the nine months ended September 30, 2022, the Company made payments of principal and interest on this loan in the amounts of $30,523 and $3,467, respectively. On June 9, 2022, the principal and interest due on this note in the amount of $141,623 and $143, respectively, were paid directly to Fifth Third Bank by MapleMark in connection with MapleMark Term Loan 1.	$	-	$	172,146

A note payable in the amount of $20,000. The Note was due in January 2006 and the Company is currently accruing interest on this note at 1.9%. During the three and nine months ended September 30, 2022, the Company accrued interest in the amount of $96 and $285, respectively, on this note. At September 30, 2022, accrued interest on this note was $18,008.	$	20,000	$	20,000

Vehicle acquisition loan dated December 6, 2018 in the original amount of $51,088, payable in sixty monthly installments of $955 including interest at the rate of 4.61% maturing November 5, 2023. During the three months ended September 30, 2022, the Company made principal and interest payments in the amount of $2,694 and $168, respectively, on this loan; during the nine months ended September 30, 2022, the Company made principal and interest payments in the amount of $7,991 and $601, respectively.	$	12,992	$	20,984

	Number of Shares			Weighted Average Exercise Price
Options outstanding at December 31, 2021		2,100,000		$	0.99

Granted		250,000		$	0.46
Exercised		-		$	-
Cancelled / Expired		(50,000	)	$	1.20

Options outstanding at September 30, 2022 (unaudited)		2,300,000		$	0.93
Options exercisable at September 30, 2022 (unaudited)		2,287,500		$	0.93