UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D. C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 ~~or 15(d)~~or15(d) of the Securities and Exchange Act of 1934

For the quarterly period ended ~~September 30, 2017~~March 31, 2022

☐ 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~~

(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 ~~and posted on its corporate web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ 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 ☐ ~~(Do not check if a smaller reporting company)~~	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: ~~35,086,659 shares of common stock issued and 32,595,547~~46,649,123 shares of common stock outstanding as of ~~November 9, 2017.~~May 13, 2022.

INNOVATIVE FOOD HOLDINGS, INC.

TABLE OF CONTENTS TO FORM 10-Q

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Cash Flows	5
	Condensed Consolidated Statement of Stockholders’ Equity	6
	Notes to the Condensed Consolidated Financial Statements	6 7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (including cautionary statement)	23 24
Item 4.	Controls and Procedures	29 31

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	30 32
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	30 32
Item 3.	Defaults Upon Senior Securities	30 32
Item 4.	Mine Safety Disclosures	30 32
Item 5.	Other Information	31 32
Item 6.	Exhibits	31 33
	Signatures	32 34

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Innovative Food Holdings, Inc.

Condensed Consolidated Balance ~~Sheet~~Sheets

							March 31,			December 31,
	September 30,			December 31,			2022			2021
	2017			2016			(unaudited)
ASSETS	(unaudited)

Current assets
Cash and cash equivalents	$	4,337,662		$	3,764,053		$	3,111,168		$	6,122,671
Accounts receivable, net		2,417,104			1,538,395			3,422,003			3,256,764
Inventory		983,733			815,033			3,209,945			3,109,984
Other current assets		64,367			55,393			389,513			314,107
Due from related parties		-			-
Total current assets		7,802,866			6,172,874			10,132,629			12,803,526

Property and equipment, net		1,988,055			2,068,110			8,094,038			8,186,227
Investment		201,525			208,983
Intangible assets, net		1,419,233			707,684
Investments								286,725			286,725
Right to use assets, operating leases, net								199,474			232,381
Right to use assets, finance leases, net								680,358			669,039
Other amortizable intangible assets, net								61,987			72,218
Goodwill and other unamortizable intangible assets								1,532,822			1,532,822
Total assets	$	11,411,679		$	9,157,651		$	20,988,033		$	23,782,938

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	2,088,148		$	3,119,533		$	4,473,440		$	5,702,905
Accrued liabilities - related parties		-			65,000
Accrued interest		15,674			626,873			42,794			29,349
Notes payable - related party, current portion		-			164,650
Deferred revenue								1,250,944			1,631,406
Line of Credit								2,000,000			2,000,000
Notes payable - current portion, net of discount		547,183			1,424,432			412,491			412,961
Lease liability - operating leases, current								63,361			74,088
Lease liability - finance leases, current								182,664			159,823
Contingent liability - current portion		200,000			-			187,000			187,000
Total current liabilities		2,851,005			5,400,488			8,612,694			10,197,532

Contingent liability - long term		200,000			-
Other long-term liabilities		200,000			-
Note payable - long term portion, net of discount		918,646			1,137,811
Lease liability - operating leases, non-current								136,113			158,293
Lease liability - finance leases, non-current								478,262			499,240
Contingent liability - long-term								108,600			108,600
Note payable - long term portion, net								5,319,914			5,409,172
Total liabilities		4,169,651			6,538,299			14,655,583			16,372,837

Stockholders’ equity
Common stock: $0.0001 par value; 500,000,000 shares authorized; 35,086,659 and 25,301,816 shares issued, and 32,595,547 and 24,568,157 shares outstanding at September 30, 2017 and December 31, 2016, respectively		3,506			2,528
Commitments & Contingencies (see note 16)

Stockholders' equity
Common stock: $0.0001 par value; 500,000,000 shares authorized; 49,343,846 and 48,879,331 shares issued, and 46,506,266 and 46,041,751 shares outstanding at March 31, 2022 and December 31, 2021, respectively								4,931			4,885
Additional paid-in capital		35,931,641			33,974,470			41,815,390			41,662,710
Treasury stock: 2,276,703 and 519,254 shares outstanding at September 30, 2017 and December 31, 2016, respectively		(992,313	)		(174,949	)
Treasury stock: 2,623,171 and 2,623,171 shares outstanding at March 31, 2022 and December 31, 2021, respectively.								(1,141,370	)		(1,141,370	)
Accumulated deficit		(27,700,806	)		(31,182,697	)		(34,346,501	)		(33,116,124	)
Total stockholders’ equity		7,242,028			2,619,352
Total stockholders' equity								6,332,450			7,410,101

Total liabilities and stockholders’ equity	$	11,411,679		$	9,157,651
Total liabilities and stockholders' equity							$	20,988,033		$	23,782,938

See notes to these unaudited condensed consolidated financial statements.

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Innovative Food Holdings, Inc.

Condensed Consolidated Statements of Operations

(unaudited)

~~(unaudited)~~

	For the Three			For the Three
	Months Ended			Months Ended
	March 31			March 31
	2022			2021


Revenue	$	15,643,111		$	12,180,899
Cost of goods sold		11,917,179			8,878,914
Gross margin		3,725,932			3,301,985

Selling, general and administrative expenses		5,172,426			4,850,828
Total operating expenses		5,172,426			4,850,828

Operating loss		(1,446,494	)		(1,548,843	)

Other income (expense:)
Impairment of investment		-			(209,850	)
Gain on interest rate swap		294,000			-
Other leasing income		5,090			5,140
Interest expense, net		(82,973	)		(90,318	)
Total other income (expense)		216,117			(295,028	)

Net loss before taxes		(1,230,377	)		(1,843,871	)

Provision for income taxes		-			-

Net loss	$	(1,230,377	)	$	(1,843,871	)

Net loss per share – basic and diluted	$	(0.03	)	$	(0.05	)

Weighted average shares outstanding – basic and diluted		46,256,160			35,872,143

For the Three For the Three For the Nine For the Nine
Months Ended Months Ended Months Ended Months Ended
September 30, September 30, September 30, September 30,
2017 2016 2017 2016

Revenue $ 10,495,637 $ 9,094,443 $ 30,494,462 $ 25,413,011
Cost of goods sold 7,052,018 6,404,185 20,585,273 17,979,553
Gross margin 3,443,619 2,690,258 9,909,189 7,433,458

Selling, general and administrative expenses 1,894,588 1,702,425 6,269,386 5,245,178
      Total operating expenses 1,894,588 1,702,425 6,269,386 5,245,178

Operating income 1,549,031 987,833 3,639,803 2,188,280

Other (income) expense:
  Interest expense, net 16,139 121,226 157,912 365,764
      Total other (income) expense 16,139 121,226 157,912 365,764

Net income before taxes 1,532,892 866,607 3,481,891 1,822,516

Income tax expense - - - -

Net income from continuing operations $ 1,532,892 $ 866,607 $ 3,481,891 $ 1,822,516

Net income from discontinued operations - - - 4,447,279

Consolidated net income $ 1,532,892 $ 866,607 $ 3,481,891 $ 6,269,795

Net income per share from continuing operations - basic $ 0.047 $ 0.035 $ 0.117 $ 0.073

Net income per share from discontinued operations - basic $ - $ $ - $ 0.178

Net income per share from continuing operations - diluted $ 0.046 $ 0.030 $ 0.113 $ 0.066

Net income per share from discontinued operations - diluted $ - $ - $ - $ 0.139

Weighted average shares outstanding - basic 32,333,108 25,047,134 29,779,904 24,980,317

Weighted average shares outstanding - diluted 33,476,756 31,619,778 30,842,167 32,044,762

See notes to these unaudited condensed consolidated financial statements.

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Innovative Food Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

~~(unaudited)~~

	For the Three			For the Three
	Months Ended			Months Ended
	March 31,			March 31,
	2022			2021

Cash flows from operating activities:
Net loss	$	(1,230,377	)	$	(1,843,871	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment of investment		-			209,850
Depreciation and amortization		138,361			135,854
Amortization of right-of-use asset		19,691			22,929
Amortization of prepaid loan fees		3,088			3,088
Stock based compensation		152,726			157,791
(Recovery) Provision for doubtful accounts		(1,115	)		2,721

Changes in assets and liabilities:
Accounts receivable, net		(164,124	)		533,252
Inventory and other current assets, net		(175,367	)		658,428
Accounts payable and accrued liabilities		(1,216,020	)		(1,561,858	)
Deferred revenue		(380,462	)		(1,784,265	)
Contingent liabilities		-			(8,000	)
Operating lease liability		(19,691	)		(22,929	)
Net cash used in operating activities		(2,873,290	)		(3,497,010	)

Cash flows from investing activities:
Acquisition of property and equipment		(4,760	)		(4,612	)
Net cash used in investing activities		(4,760	)		(4,612	)

Cash flows from financing activities:
Proceeds from Payroll Protection Plan Loan		-			1,669,929
Principal payments on debt		(92,816	)		(107,168	)
Principal payments financing leases		(40,637	)		(35,068	)
Net cash (used in) provided by financing activities		(133,453	)		1,527,693

Decrease in cash and cash equivalents		(3,011,503	)		(1,973,929	)

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

Cash and cash equivalents at end of period	$	3,111,168		$	3,086,086

Supplemental disclosure of cash flow information:

Cash paid during the period for:
Interest	$	84,961		$	83,275

Taxes	$	-		$	-

Non-cash investing and financing activities:
Increase in right to use assets & liabilities – operating leases	$	-		$	17,814
Decrease in right to use assets & liabilities – operating leases	$	13,216		$	-
Increase in right to use assets & liabilities – finance leases	$	42,500		$	-

For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
2017 2016
Cash flows from operating activities:
Net income $ 3,481,891 $ 6,269,795
Gain on sale of discontinued operations - (7,201,196 )
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 409,283 409,228
Stock based compensation 315,968 673,523
Stock based compensation for TFD employees - 1,028,908
Amortization of discount on notes payable 185,018 277,529
Allowance for doubtful accounts - 11,963

Changes in assets and liabilities:
Accounts receivable, net (878,709 ) (237,265 )
Deferred revenue - 289,254
Inventory and other current assets, net (177,674 ) 81,012
Accounts payable and accrued expenses - related party - (146,018 )
Accounts payable and accrued liabilities (1,199,680 ) 197,603
Accrued liabilities - related party (65,000 ) -
Due from related party - 110
Contingent liability - (91,000 )
Net cash provided by operating activities 2,071,097 1,563,446

Cash flows from investing activities:
Cash decrease due to sale of discontinued operations - (470,482 )
Acquisition of property and equipment (40,777 ) (10,512 )
Cash paid in the acquisition of Oasis (300,000 ) -
Net cash (used in) investing activities (340,777 ) (480,994 )

Cash flows from financing activities:
Common stock sold for exercise of warrants 196,741 -
Payments made on revolving credit facilities - (841,831 )
Purchase of stock options from officers, directors, and employees (163,925 ) -
Cash received from exercise of stock options 70,000 -
Purchase of treasury stock (505,660 ) (14,850 )
Borrowings on revolving credit facilities - 805,959
Principal payments on debt (746,941 ) (1,021,829 )
Principal payments capital leases (6,926 ) (8,094 )
Net cash (used in) financing activities (1,156,711 ) (1,080,645 )

Increase in cash and cash equivalents 573,609 1,807

Cash and cash equivalents at beginning of period 3,764,053 2,137,289

Cash and cash equivalents at end of period $ 4,337,662 $ 2,139,096

Supplemental disclosure of cash flow information:

Cash paid during the period for:
Interest $ 64,198 $ 96,318

Taxes $ - $ -

Common stock issued for conversion of note payable by related party $ 164,650 $ -
Equipment acquired under capital lease $ - $ 9,217
Fair value of 25,000 shares of common stock issued to a service provider, previously accrued $ - $ 34,000

See notes to these unaudited condensed consolidated financial statements.

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Innovative Food Holdings, Inc.

Condensed Consolidated Statements of Stockholders' Equity

(unaudited)

FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021

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

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		286,254		29		157,762		-		-			-			157,791
Net loss for the three months ended March 31, 2021		-		-		-		-		-			(1,843,871	)		(1,843,871	)
Balance - March 31, 2021 (unaudited)		38,495,314	$	3,846	$	37,572,917		2,623,171	$	(1,141,370	)	$	(34,243,664	)	$	2,191,729

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		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 (unaudited)		49,343,846	$	4,931	$	41,815,390		2,623,171	$	(1,141,370	)	$	(34,346,501	)	$	6,332,450

See notes to these unaudited condensed consolidated financial statements.

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INNOVATIVE FOOD HOLDINGS, INC.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2022

~~September 30, 2017~~

(Unaudited)

~~(Unaudited)~~

1. BASIS OF PRESENTATION

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements of Innovative Food Holdings, Inc., and its wholly owned subsidiaries, some of which are non-operating, Artisan Specialty Foods, Inc. (“Artisan”), Food Innovations, Inc. (“~~Food Innovations” or “FII”~~FII”), Food New Media Group, Inc. (“FNM”), ~~Oasis Sales Corp. (“Oasis”),~~ Organic Food Brokers, ~~Inc.~~LLC (“OFB”), Gourmet ~~Food Service~~Foodservice Group, Inc. (“GFG”), Gourmet Foodservice Group Warehouse, Inc. (“GFW”), Gourmeting, Inc. (“Gourmeting”), ~~The~~ 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 ~~the~~its other subsidiaries, the “Company” or “IVFH”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. All material intercompany transactions have been eliminated upon consolidation of these entities.

The accompanying unaudited interim condensed 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, ~~2016.~~2021. In the opinion of management, the interim unaudited condensed 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, 2017~~March 31, 2022 are not necessarily indicative of the results of operations to be expected for the full year.

~~Discontinued Operations~~

On February 23, 2016, the Company consummated the sale of 90% of our ownership in The Fresh Diet (“FD”). As a result of the sale, the results of operations for all periods have been included in “Net income from discontinued operations” in our condensed consolidated statements of operations for the nine months ended September 30, 2016.

2. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES

Business Activity

Our business is currently conducted by our ~~wholly-owned~~wholly owned subsidiaries, some of which are non-operating, Artisan Specialty Foods, Inc. (“Artisan”), Food Innovations, ~~FNM, OFB, GFG,~~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 ~~(collectively~~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~~Consumer-Packaged Goods (“CPG”) products through a variety of sales ~~channels. Since its incorporation, the Company primarily through FII’s relationship with US Foods, Inc.~~channels ranging from national partnership based and regionally based foodservice related sales channels to e-commerce sales channels offering products both direct to consumers (“~~U.S. Foods” or “USF”~~D2C”)~~, has been in the~~ and direct to business of providing premium restaurants and other foodservice establishments, within 24 – 72 hours, with the freshest origin-specific perishable, and healthcare products shipped directly from our network of vendors and from our warehouses. Our customers include restaurants, hotels, country clubs, national chain accounts, casinos, hospitals and catering houses. Gourmet has been in the business of providing specialty food e-commerce consumers, through its own website at www.forethegourmet.com and through www.amazon.com, with unique specialty gourmet food products shipped directly from our network of vendors and from our warehouses within 24 – 72 hours. GFG is focused on expanding the Company’s program offerings to additional customers.(“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.

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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 ~~niche gourmet~~unique specialty foodservice products to over 500 customers such as chefs, restaurants, etc. in the Greater Chicago ~~area.~~ 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.~~ 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 ~~are~~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 ~~provide~~provides emerging and unique CPG specialty food brands with distribution and shelf placement access in ~~key~~all of the major metro markets in the food retail ~~food~~ industry. FNM provides value-added, synergistic, seed and early stage capital to food related businesses including foodtech, foodservice products, and CPG companies. Through its temperature controlled warehouse, Gourmet Foodservice Warehouse fulfills

igourmet has been in the business of providing D2C specialty food ~~product orders~~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 ~~wholesale~~subscription-based e-commerce business activities and ~~direct~~ to ~~consumer customers.~~

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.

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Use of Estimates

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 doubtful accounts receivable, stock-based services, valuation of financial instruments, 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, operating and ~~equity based~~finance right to 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 ~~condensed~~ consolidated financial statements include the accounts of Innovative Food Holdings, Inc., and its wholly owned operating subsidiaries, Artisan, ~~Food Innovations,~~FII, FNM, OFB, GFG, GFW, Gourmeting, Haley, Oasis, ~~GFG,~~Innovative Gourmet, ~~Foodservice Warehouse, Inc., Gourmeting, Inc., Haley,~~Food Funding, IFP, L Innovations, M Innovations, P Innovations, MIF, M Foods, PlantBelly, Plant Innovations, IFI, IGP, and Gourmet. ~~All accounts of FD have been included under discontinued operations.~~ 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, 2017~~March 31, 2022 and ~~December 31, 2016,~~2021, trade receivables from the Company’s largest customer amounted to ~~49%~~33% and ~~44%~~46%, respectively, of total trade receivables.

During the three months ended March 31, 2022 and 2021, sales from the Company’s largest customer amounted to 49% and 42% of total sales, respectively.

The Company maintains cash balances in excess of Federal Deposit Insurance Corporation limits. At March 31, 2022 and December 31, 2021, the total cash in excess of these limits was $1,388,422 and $4,555,032, 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 to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. For lease agreements with terms less than 12 months, the Company has elected the short-term lease measurement and recognition exemption, and it recognizes such lease payments on a straight-line basis over the lease term.

Revenue Recognition

The Company recognizes revenue upon product delivery. All of our products are shipped either same day or overnight or through longer shipping terms to the customer and the customer takes title to product and assumes risk and ownership of the product when it is delivered. Shipping charges to customers and sales taxes collectible from customers, if any, are included in revenues.

For revenue from product sales, the Company recognizes revenue in accordance with Financial Accounting Standards Board ~~“FASB”~~(“FASB”) Accounting Standards Codification ~~“ASC” 605-15-05. ASC 605-15-05 requires that four basic criteria~~(“ASC”) Topic 606“Revenue from Contracts with Customers”. A five-step analysis must be met ~~before~~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 can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria (3) and (4)when (or as) performance obligations are ~~based on management’s judgments regarding the fixed nature of the selling prices of the products delivered and the collectability of those amounts.~~satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

Warehouse and logistic services revenue is primarily comprised of inventory management, order fulfilment and warehousing services. Warehouse & logistics services revenues are recognized at the point in time when the services are rendered to the customer.

Deferred Revenue

Certain customer arrangements in the Company's business such as gift cards and e-commerce subscription purchases result in deferred revenues when cash payments are received in advance of performance. Gift cards issued by the Company generally have an expiration of five years from date of purchase. The Company records a liability for unredeemed gift cards and advance payments for monthly club memberships, as cash is received, and the liability is reduced when the card is redeemed or product delivered.

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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

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

Disaggregation of Revenue

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

	Three Months Ended
	March 31,
	2022		2021
	(unaudited)		(unaudited)
Specialty foodservice	$	11,540,835	$	6,827,927
E-Commerce		3,612,344		4,979,938
National Brand Management		284,147		225,594
Logistics		205,785		147,440
Total	$	15,643,111	$	12,180,899

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 ~~income (loss)~~earnings per share is based on the weighted average number of shares outstanding during the period, while fully-diluted net ~~income (loss)~~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.

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Dilutive shares at ~~September 30, 2017:~~March 31, 2022:

~~Convertible notes and interest~~

~~At September 30, 2017, the Company had outstanding convertible notes payable in the aggregate principal amount of $20,000 convertible at the rate of $0.25 per share with accrued interest of $15,764.~~

~~Warrants~~

~~At September 30, 2017, the Company had outstanding warrants for holders to purchase the following additional shares: 700,000 shares at a price of $0.01 per share.~~

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:~~ Company at March 31, 2022:

				Weighted					Weighted
				Average					Average
				Remaining					Remaining
Exercise	Exercise	Number		Contractual		Exercise	Number		Contractual
Price	Price	of Options		Life (years)		Price	of Options		Life (years)
$	0.35		470,000		0.31	0.60		50,000		3.75
$	0.57		225,000		0.25	0.62		360,000		1.75
$	1.31		200,000		0.69	0.85		540,000		1.75
$	1.42		100,000		0.72	1.00		50,000		3.75
$	1.43		50,000		1.25	1.20		1,100,000		1.59
$	1.46		100,000		0.75
$	1.60		310,000		0.25
$	1.70		75,000		0.54
$	1.90		190,000		1.60
$	2.00		50,000		0.54
$	2.40		20,000		0.67
$	2.50		37,500		0.54
$	3.40		30,000		0.67
$	3.50		37,500		0.54
			1,895,000		0.57			2,100,000		1.76

~~RSUs~~

During the nine months ended September 30, 2017, the Company cancelled all outstanding restricted stock units (“RSUs”) and replaced them with common stock or restricted stock awards; see note 16. At September 30, 2017, there are no RSUs outstanding.

We recognized stock-based compensation expense for RSUs in a straight-line manner over the vesting period of the grant. This resulted in stock-based compensation expense of $0 and $658,709 related to recognition of RSUs during the nine months ended September 30, 2017 and 2016, respectively.

Restricted Stock Awards

During the nine months ended September 30, 2017, the Company cancelled unvested RSUs representing 1,370,000 shares of common stock and replaced them with restricted stock awards also representing 1,370,000 shares of common stock. The restricted stock awards will vest over the same vesting period and under the same terms as the RSUs they replaced. Restricted stock awards representing 1,070,000 shares have stock are vested at September 30, 2017;

At March 31, 2022, there are ~~a total of~~ 300,000 unvested restricted stock awards ~~remaining.~~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 ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, the Company ~~recognized expense~~incurred obligations to issue the following shares of ~~$240,208 for~~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 ~~vesting of restricted stock awards,~~Company’s employees are included in a 10b5-1 selling plan.

The Company charged the ~~same~~ amount of ~~expense that would have been recognized had the RSUs not been replaced by the restricted~~$152,726 to operations in connection with stock ~~awards. As the restricted stock awards were not in place~~grants during the ~~nine~~three months ended ~~September 30, 2016, there was no such cost during that period.~~

March 31, 2022.

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Dilutive shares at ~~September 30, 2016:~~March 31, 2021:

Stock Options

~~Convertible notes and interest~~

At September 30, 2016, the Company had outstanding convertible notes payable in the aggregate principal amount of $812,215 with accrued interest of $623,771 convertible at the rate of $0.25 per share into an aggregate of 5,743,994 shares of common stock.

~~Warrants~~

At September 30, 2016, the Company had outstanding warrants for holders to purchase the following additional shares: 2,294,491 shares at a price of $0.575 per share; 448,010 shares at a price of $0.55 per share; 94,783 shares at a price of $0.25 per share; and 700,000 shares at a price of $0.01 per share.

~~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:~~ Company at March 31, 2021:

				Weighted					Weighted
				Average					Average
				Remaining					Remaining
Exercise	Exercise	Number of		Contractual		Exercise	Number		Contractual
Prices		Options		Life (years)
$	0.350		1,170,000		1.17
$	0.380		92,500		0.50
$	0.400		275,000		0.51
$	0.450		92,500		0.50
$	0.474		92,500		0.50
$	0.480		92,500		0.50
$	0.570		225,000		1.51
$	1.310		75,000		2.17
Price						Price	of Options		Life (years)
$	1.440		15,000		0.34	0.60		50,000		4.75
$	1.460		100,000		2.00	0.62		360,000		2.75
$	1.600		310,000		1.51	0.85		540,000		2.75
$	1.900		15,000		1.34	1.00		50,000		4.75
$	2.000		500,000		0.67	1.10		75,000		0.12
$	2.400		20,000		1.92	1.20		1,050,000		2.60
$	3.400		30,000		1.92	1.50		125,000		0.75
			3,105,000		1.07			2,250,000		2.57

~~RSUs~~

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The Company charged the amount of $36,080 to operations in connection with stock options during the three months ended March 31, 2021.

Restricted Stock Awards

At ~~September 30, 2016, the Company had issued~~March 31, 2021 there are 300,000 unvested restricted stock ~~units (“RSUs”) for the potential issuance of shares of the Company’s common~~awards remaining from grants in a prior year. Those 300,000 restricted stock for the purpose of aligning executives and employees of the Company and for the purpose of compensation for serving as members of the Board of Directors of the Company and for the purposes of retaining qualified personnel at compensation levels that otherwise would not be available should the company have been required to pay certain salaries in cash only. Certain of the RSUs were issued to members of the board of directors of the Company (“Board RSUs”); certain RSUs were issued to the executive officers of the Company (“Executive RSUs”); certain RSUs were issued to employees of the Company (“Employee RSUs”); and certain RSUs were issued to employees of The Fresh Diet (“FD RSUs”).

~~In August 2016, 95,000 Board RSUs were exercised. At September 30, 2016, the following Board RSUs were outstanding: a total of 545,000 RSUs were vested, and 270,000 RSUs~~awards will vest ~~on July 1, 2017.~~

At September 30, 2016, the following Executive RSUs were outstanding: a total of 1,137,072 RSUs were vested; 600,000 RSUs will vest on December 31, 2016; and 800,000 RSUs will vest on July 1, 2017. An additionalas follows: 125,000 ~~RSUs~~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 ~~RSUs~~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, 2021, the Company incurred obligations to issue the following shares of common stock pursuant to compensation agreements: an aggregate total of 50,070 shares of common stock to board members and an aggregate total of 236,184 shares to Executive Officers. Some of these shares or other shares owned by the Company’s employees are included in a 10b5-1 plan. The Company ~~estimated that~~charged the ~~stock-price goals~~amount of ~~the Company’s~~$121,711 to operations in connection with stock price closing above $2.00 per share for 20 straight days have a 90% likelihood of achievement, and these RSUs were valued at 90% of their face value; the Company also estimated that the likelihood of the Company’s stock closing above $3.00 per share for 20 straight days is 70%, and these RSUs were valued at 70% of their face value.

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~~At September 30, 2016, the following FD RSUs were outstanding: A total of 300,000 RSUs were vested; 300,000 RSUs will vest on December 31, 2016; and 400,000 RSUs will vest on July 1, 2017.~~

~~At September 30, 2016, a total of 251,174 Employee RSUs were outstanding, all of which were vested.~~

We recognized stock-based compensation expense for RSUs in a straight-line manner over the vesting period of the grant. This resulted in stock-based compensation expense (continuing operations) of $190,692 related to recognition of RSUsgrants during the three months ended ~~September 30, 2016 and $658,709 related to recognition of RSUs during the nine months ended September 30, 2016.~~March 31, 2021.

Significant Recent Accounting Pronouncements

In ~~May 2017,~~December 2019, the FASB issued ASU No. ~~2017-09, Stock Compensation - Scope of Modification~~2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which ~~provides guidance on which changes~~is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the ~~terms or conditions of a share-based payment award require an entity~~general principles in Topic 740 and also clarifies and amends existing guidance to apply modification accounting. The ASU requires that an entity should account for the effects of a modification unless the fair value (or calculated value or intrinsic value, if used), vesting conditions and classification (as equity or liability) of the modified award are all the same as for the original award immediately before the modification. The ASU becomesimprove consistent application. This guidance is effective for ~~the Company on January 1, 2018,~~fiscal years, and ~~should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in any~~ interim ~~period. The Company is currently assessing the impact that this standard will have on any awards that are modified once this standard is adopted.~~

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, current U.S. GAAP requires the performance of procedures to determine the fair value at the impairment testing date of assets and liabilities (including unrecognized assets and liabilities) following the procedure that would be required in determining the fair value of assets acquired and liabilities assumed in a business combination. Instead, the amendments under this ASU require the goodwill impairment test to be performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The ASU becomes effective for the Company on January 1, 2020. The amendments in this ASU should be applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. Under ASU 2014-09, revenue is recognized when a customer obtains control of promised goods or services and is recognized at an amount that reflects the consideration expected to be received in exchange for such goods or services. In addition, ASU 2014-09 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is effective forperiods within those fiscal years, beginning after December 15, 2017. The new revenue standard is principle based and interpretation of those principles may vary from company to company based on their unique circumstances. It is possible that interpretation, industry practice, and guidance may evolve as companies and the accounting profession work to implement this new standard.2020, with early adoption permitted. The Company ~~is still in the process~~adopted this standard effective January 1, 2021; adoption of ~~evaluating the~~this standard did not have a material effect ~~of the new standard~~ on ~~the Company’s historical~~our consolidated financial statements and related disclosures. ~~While~~

In August 2020, the ~~Company has~~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, 2022; adoption of this standard did not ~~completed its evaluation, the Company currently believes that the impact to revenue~~have a material effect on our consolidated financial statements and ~~expense recognized will not be material to any of the years presented.~~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 ~~condensed~~ consolidated financial statements.

3. ACCOUNTS RECEIVABLE

At March 31, 2022 and December 31, 2021, accounts receivable consists of:

~~3. ACQUISITION~~

	March 31, 2022			December 31, 2021
	(unaudited)
Accounts receivable from customers	$	3,795,831		$	3,632,695
Allowance for doubtful accounts		(373,828	)		(375,931	)
Accounts receivable, net	$	3,422,003		$	3,256,764

~~Pursuant to~~

During the ~~Oasis Asset Purchase Agreement, effective January 1, 2017,~~three months ended March 31, 2022 the Company through its wholly-owned subsidiary Oasis Sales Corp., purchased certain assets of Oasis Sales and Marketing, L.L.C., a California limited liability company. The purchase price consisted of $300,000 cash; a two-year promissory note incredited the amount of ~~$100,000, and~~$1,115 to bad debt expense due to a ~~structured equity instrument (the “SEI”) in~~bad debt recovery; during the previous period the Company charged the amount of ~~$200,000. In addition, the Company is contingently liable for certain performance-based payments over the twenty-four months following the acquisition date up~~$2,721, to a maximum of $400,000 (“Earnout Payments”). The SEI is recorded as Other Long Term Liabilities on the Company’s balance sheet at September 30, 2017. The SEI can be paid in cash or shares of the Company’s stock at the Company’s option, at any time, or is automatically payable via the issuance of 200,000 shares of the Company’s stock if the Company’s shares close above $1.00 for ten consecutive days. The Company believes it is likely that the Earnout Payments will be made, and accordingly has recorded the entire amount of $400,000 as a contingent liability on its balance sheet at September 30, 2017. The amount of $800,000 was allocated to customer lists, an intangible asset with a useful life of 60 months; and the amount of $200,000 was allocated to a non-compete agreement, an intangible asset with a useful life of 48 months. A total of $52,500 and $157,500 was amortized to operations during the three and nine months ended September 30, 2017, respectively. The Company has presented preliminary estimates of the fair value of the intangible assets acquired. The Company is in the process of finalizing its review and evaluation of the related valuation assumptions supporting its fair value estimates of acquired intangible assets; therefore, the estimates used herein are subject to change. This may result in adjustments to the values presented.bad debt expense.

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4. ~~DISCONTINUED OPERATIONS~~

Effective February 23, 2016, the Company closed a transaction to sell 90% of our ownership in The Fresh Diet, Inc. (“FD”) to New Fresh Co., LLC, a Florida limited liability company controlled by the former founder of FD. The consideration to Innovative Food Holdings consisted primarily of a restructuring of our loans, which includes the ability to convert to additional amounts of FD under certain circumstances. Aside from any payments related to liabilities previously accrued by the Company, there were no other cash outflows related to the discontinued operations. During the twelve months ended December 31, 2016, the Company accrued the amount of $850,000 representing the amount due based on an agreement signed in 2017. The agreement involved the purchase of rights to 1,450,000 RSUs and the purchase of 642,688 shares of the Company’s common stock. During the three and nine months ended September 30, 2017, the Company paid cash for liabilities related to discontinued operations in the amount of $96,231 and $1,460,122, respectively. The Company also retired 642,688 shares of the Company stock to treasury.

ASC 360-10-45-9 requires that a long-lived asset (disposal group) to be sold shall be classified as held for sale in the period in which a set of criteria have been met, including criteria that the sale of the asset (disposal group) is probable and actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. This criteria was achieved on February 9, 2016. Additionally, the discontinued operations are comprised of the entirety of FD, excluding corporate services expenses. Lastly, for comparability purposes certain prior period line items relating to the assets held for sale have been reclassified and presented as discontinued operations for all periods presented in the accompanying condensed consolidated statements of operations. The following information presents the major classes of line items constituting the after-tax income from discontinued operations in the condensed consolidated statements of operations:

For the Nine Months Ended
September 30,
2016
Revenue $ 2,389,950
Cost of goods sold 1,764,834
Gross margin 625,116

Selling, general and administrative expenses 3,368,213
Total operating expenses 3,368,213

Operating loss (2,743,097 )

Other (income) expense:
Gain on sale of discontinued operations (7,201,196 )
Interest expense, net 10,820
Total other (income) expense (7,190,376 )

Income from discontinued operations, net of tax $ 4,447,279

The following information presents the major classes of line items constituting significant operating and investing cash flow activities in the consolidated statements of cash flows relating to discontinued operations:

	~~For the Nine Months Ended~~ ~~September 30,~~
	~~2016~~
~~Cash Flow: Major line items~~

~~Depreciation and Amortization~~		~~107,009~~
~~Non-cash compensation~~		~~1,028,908~~
~~Purchase of equipment~~		~~(6,296~~	)
~~Cash from revolving credit facilities~~		~~685,959~~
~~Payments made on revolving credit facilities~~		~~(641,831~~	)
~~Principal payments made on notes payable~~		~~(7,074~~	)
~~Principal payments made on capital leases~~		~~(8,094~~	)

INVENTORY

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~~The components of the gain on sale and income from discontinued operations are as follows:~~

February 22, 2016

Receivable due from buyer, net of reserve of $8,700,000 $ -
Net proceeds from sale of assets and liabilities -

Assets sold (6,225,073 )
Liabilities sold 13,426,269
Net liabilities sold 7,201,196

Gain on sale 7,201,196

Loss from discontinued operations before income tax (2,753,917 )
Income tax expense -

Income from discontinued operations $ 4,447,279

~~5. ACCOUNTS RECEIVABLE~~

~~At September 30, 2017 and December 31, 2016, accounts receivable consists of:~~

September 30,
2017

December 31,
2016

Accounts receivable from customers $ 2,422,540 $ 1,546,518
Allowance for doubtful accounts (5,436 ) (8,123 )
Accounts receivable, net $ 2,417,104 $ 1,538,395

~~6. INVENTORY~~

Inventory consists primarily of specialty food products. At ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, inventory consisted of the following:

March 31,

2022

December 31,

2021

(unaudited)

Finished Goods Inventory

3,209,945

3,109,984

September 30,
2017

December 31,
2016

Finished Goods Inventory $ 983,733 $ 815,033

5. PROPERTY AND EQUIPMENT

Acquisition of Building

The Company owns a building and property located at 28411 Race Track Road, Bonita Springs, Florida 34135. The property consists of approximately 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.~~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. ~~During~~We have also recently completed an additional property improvement and upgrade buildout at the ~~twelve months ended December 31, 2015,~~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 ~~paid~~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 ~~total~~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 ~~$474,301 for various building~~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 ~~furniture, fixtures, and equipment related to this property.~~ were financed by a loan from Fifth Third Bank.

Depreciation on the building and the related improvements, furniture, fixtures, and equipment began when ~~Artisan~~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 (See Note 13).

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~~A summary of~~

The following table summarizes property and equipment at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016, was as follows:~~2021:

	March 31, 2022			December 31, 2021
	(unaudited)
Land	$	1,256,895		$	1,256,895
Building		7,191,451			7,191,451
Computer and Office Equipment		598,326			593,566
Warehouse Equipment		376,667			376,667
Furniture and Fixtures		944,233			944,233
Vehicles		109,441			109,441
Total before accumulated depreciation		10,477,013			10,472,253
Less: accumulated depreciation		(2,382,975	)		(2,286,026	)
Total	$	8,094,038		$	8,186,227

September 30,
2017

December 31,
2016

Land $ 385,523 $ 385,523
Building 1,326,165 1,326,165
Computer and Office Equipment 497,191 466,177
Warehouse Equipment 226,953 226,953
Furniture, Fixtures 464,502 454,743
Vehicles 40,064 40,064
Total before accumulated depreciation 2,940,398 2,899,625
Less: accumulated depreciation (952,343 ) (831,515 )
Total $ 1,988,055 $ 2,068,110

Depreciation and amortization expense for property and equipment amounted to ~~$41,700~~$96,949 and ~~$37,807~~$100,164 for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively. ~~Depreciation~~

6. RIGHT TO USE ASSETS AND LEASE LIABILITIES – OPERATING LEASES

The Company has operating leases for offices, warehouses, vehicles, and ~~amortization~~office equipment. The Company’s leases have remaining lease terms of 1 year to 3 years, some of which include options to extend.

The Company’s lease expense for ~~property~~the three months ended March 31, 2022 and ~~equipment~~2021 was entirely comprised of operating leases and amounted to ~~$120,832~~$23,244 and ~~$120,017~~$26,855, respectively.

The Company’s ROU asset amortization for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021 was $19,691 and $22,929, respectively.

Right to use assets – operating leases are summarized below:

	March 31, 2022		December 31, 2021
	(unaudited)
Office	$	138,496	$	148,529
Warehouse equipment		49,131		55,047
Office equipment		11,847		12,677
Vehicles		-		16,128
Right of use assets - operating leases, net	$	199,474	$	232,381

Operating lease liabilities are summarized below:

	March 31, 2022			December 31, 2021
	(unaudited)
Office	$	138,496		$	148,529
Warehouse equipment		49,131			55,047
Office equipment		11,847			12,677
Vehicles		-			16,128
Lease liability	$	199,474		$	232,381
Less: current portion		(63,361	)		(74,088	)
Lease liability, non-current	$	136,113		$	158,293

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Maturity analysis under these lease agreements are as follows:

For the period ended March 31, 2023	$	74,849
For the period ended March 31, 2024		71,116
For the period ended March 31, 2025		68,055
For the period ended March 31, 2026		7,057
For the period ended March 31, 2027		-
Total	$	221,077
Less: Present value discount		(21,603	)
Lease liability	$	199,474

7. RIGHT TO USE ASSETS – FINANCING LEASES

The Company has financing leases for vehicles and warehouse equipment. See note 14. Right to use asset – financing leases are summarized below:

	March 31, 2022			December 31, 2021
	(unaudited)
Vehicles		404,858			362,358
Warehouse Equipment		555,416			555,416
Total before accumulated depreciation		960,274			917,774
Less: accumulated depreciation		(279,916	)		(248,735	)
Total right to use assets - financing leases, net	$	680,358		$	669,039

Depreciation expense for right to use assets for the three months ended March 31, 2022 and 2021 was $31,181 and $32,820, respectively.

8. INVESTMENTS

The Company has made investments in certain early stage food related companies which it expects can benefit from synergies with the Company’s various operating businesses. At ~~September 30, 2017,~~March 31, 2022 and 2021 the Company has investments in ~~three~~seven food related companies in the aggregate amount of ~~$201,525.~~$286,725. The Company does not have significant influence over the operations of these companies.

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

During the three months ended March 31, 2021, the founder of one of the food related companies ~~it invests in.~~ 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.

9. INTANGIBLE ASSETS

The Company acquired certain intangible assets pursuant to the ~~acquisition of~~acquisitions through Artisan, Oasis, ~~(see note 3),~~Innovative Gourmet, OFB, Haley, and ~~OFB, and the acquisition of certain~~M Innovations. These assets ~~of The Haley Group, LLC. The following is the net book value of these assets:~~

September 30, 2017
Accumulated
Gross Amortization Net
Trade Name $ 217,000 $ - $ 217,000
Non-Compete Agreement 444,000 (281,500 ) 162,500
Customer Relationships 1,930,994 (1,042,261 ) 888,733
Goodwill 151,000 - 151,000
Total $ 2,742,994 $ (1,323,761 ) $ 1,419,233

December 31, 2016
Accumulated
Gross Amortization Net
Trade Name $ 217,000 $ - $ 217,000
Non-Compete Agreement 244,000 (244,000 ) -
Customer Relationships 1,130,994 (791,310 ) 339,684
Goodwill 151,000 - 151,000
Total $ 1,742,994 $ (1,035,310 ) $ 707,684

Total amortization expense charged to continuing operations for the three months ended September 30, 2017 and 2016 was $82,317 and $50,567, respectively. Total amortization expense charged to continuing operations for the nine months ended September 30, 2017 and 2016 was $288,451 and $182,201, respectively.

~~The~~include non-compete agreements, customer relationships, trade names, ~~are not considered finite-lived assets,~~internally developed technology, and ~~are not being amortized.~~goodwill. The ~~non-compete agreements are being amortized over a period~~Company has also capitalized the development of ~~48 months. The customer relationships acquired in the Artisan, Haley, Oasis, and OFB transactions are being amortized over periods of 60, 36, 60, and 60 months, respectively.~~

its website.

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As detailed in ASC 350 “Intangibles - Goodwill and Other”, the Company tests for goodwill impairment in the fourth quarter of each year and whenever events or changes in circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. As detailed in ASC 350-20-35-3A, in performing its testing for goodwill impairment, management has completed a qualitative analysis to determine whether it was more likely than not that the fair value of athe 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.

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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 ~~analysis completed in 2016 determined~~adverse impact to the Company’s foodservice customer base was a triggering event and accordingly, as required by ASC 350, the Company performed interim goodwill and long-lived asset quantitative impairment tests during the first quarter of 2020. While the triggering event was a result of the negative impact related to foodservice customers, the applicable accounting rules then required an impairment test targeted specifically to any available carrying value of goodwill or intangible assets. During the first quarter of 2020, the Company performed the impairment tests on certain intangible assets and goodwill pursuant to the acquisitions through Artisan, Oasis, Innovative Gourmet and M Innovations; the intangible assets acquired pursuant to the acquisitions of OFB and Haley were fully amortized at the time of the impairment test.

Long-lived Impairment Test

Long-lived assets, including other intangible assets, were tested for recoverability at the asset group level. The Company estimated the net undiscounted cash flows expected to be generated from the asset group over the expected useful life of the asset group’s primary asset. Key assumptions include future revenues, growth rates, estimates of future levels of gross profit and operating profit and projected capital expenditures necessary to maintain the operating capacity of each asset group. As a result of the impairment test, it was calculated that ~~there~~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 norequired by the applicable accounting rules to record an impairment charge to ~~goodwill assets.~~operations during the year ended December 31, 2020. At March 31, 2022 and December 31, 2021, the net carrying value of other intangible assets on the Company’s balance sheet was $1,594,809 and $1,605,040, respectively.

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:

	March 31, 2022 (unaudited)
			Accumulated
	Gross		Amortization and Impairment			Net
Non-Compete Agreement - amortizable	$	505,900	$	(505,900	)	$	-
Customer Relationships - amortizable		3,068,034		(3,068,034	)		-
Trade Name		1,532,822		-			1,532,822
Internally Developed Technology - amortizable		875,643		(875,643	)		-
Goodwill		650,243		(650,243	)		-
Website - amortizable		84,000		(22,013	)		61,987
Total	$	6,716,642	$	(5,121,833	)	$	1,594,809

	December 31, 2021
			Accumulated
	Cost		Amortization			Net
Non-Compete Agreement - amortizable	$	505,900	$	(505,900	)	$	-
Customer Relationships - amortizable		3,068,034		(3,068,034	)		-
Trade Name		1,532,822		-			1,532,822
Internally Developed Technology		875,643		(875,643	)		-
Goodwill		650,243		(650,243	)		-
Website		84,000		(11,782	)		72,218
Total	$	6,716,642	$	(5,111,602	)	$	1,605,040

Total amortization expense for the three months ended March 31, 2022 and 2021 was $10,231 and $2,870, respectively.

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10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities at ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016~~2021 are as follows:

	September 30, 2017		December 31, 2016		March 31, 2022		December 31, 2021
Trade payables	$	1,921,920	$	1,547,603
Accrued costs of discontinued operations		18,765		1,478,887
					(unaudited)
Trade payables and accrued liabilities					$	4,213,969	$	5,414,731
Accrued payroll and commissions		147,463		93,043		259,471		288,174
Total	$	2,088,148	$	3,119,533	$	4,473,440	$	5,702,905

~~At September 30, 2017 and December 31, 2016, accrued liabilities to related parties of $0 and $65,000, respectively, consisted of accrued bonus.~~

11. ACCRUED INTEREST

At ~~September 30, 2017,~~March 31, 2022, accrued interest on ~~a note~~notes outstanding was ~~$15,674.~~$42,794. During the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2022 and 2021, the Company paid cash for interest in the aggregate amount of ~~$17,480~~$84,961 and ~~$59,432,~~$83,275, respectively.

At December 31, 2016, accrued interest was $626,873, convertible at the option of the note holders into the Company’s common stock a price of $0.25 per share, or a total of 2,507,492 shares. During the twelve months ended December 31, 2016, the Company paid cash for interest in the aggregate amount of $96,318.

12. REVOLVING CREDIT FACILITIES

	March 31, 2022		December 31, 2021
	(unaudited)

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 months ended March 31, 2022 and 2021, the Company paid interest in the amount of $22,222 and $17,083 respectively, on the Fifth Third Bank Line of Credit.	$	2,000,000	$	2,000,000

Total	$	2,000,000	$	2,000,000

~~September 30,~~

~~2017~~

~~December 31,~~

~~2016~~

Line of credit facility with Fifth Third Bank in the original amount of $1,000,000 with an interest rate of LIBOR plus 3.25%. In August 2015, the amount of the credit facility was increased to $1,500,000 and the due date was extended to August 1, 2016. In August 2016, this credit facility was extended to August 1, 2017. On August 1, 2017 this credit facility was increased to $2,000,000 and the due date was extended to August 1, 2018. During the twelve months ended December 31, 2016, the Company made net borrowings in the amount of $120,000 from this facility, and transferred principal in the amount of $1,200,000 from this credit facility to a new term loan established with Fifth Third Bank. There was no activity on this credit facility during the nine months ended September 30, 2017.

~~Total~~

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13. NOTES PAYABLE ~~AND NOTES PAYABLE TO RELATED PARTIES~~

September 30,
2017

December 31,
2016

Term loan dated as of August 5, 2016 in the original amount of $1,200,000 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 LIBOR plus 4.5%. Principal payments in the amount of $66,667 are due monthly along with accrued interest beginning September 5, 2016. The entire principal balance and all accrued interest is due on the maturity date of February 5, 2018. During the twelve months ended December 31, 2016, the Company transferred principal in the amount of $1,200,000 from the line of credit facility with Fifth Third Bank into this term loan. During the three months ended September 30, 2017, the Company made principal and interest payments on this loan in the amounts of $200,000 and $5,594, respectively. During the nine months ended September 30, 2017, the Company made principal and interest payments on this loan in the amounts of $600,000 and $24,187, respectively. $ 314,033 $ 914,033

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 and interest at the rate of Libor plus 3% are due monthly. The balance of the principal amount will be due February 28, 2018. During the three months ended September 30, 2017, the Company made payments of principal and interest on this note in the amounts of $13,650 and $3,288, respectively. During the nine months ended September 30, 2017, the Company made payments of principal and interest on this note in the amounts of $40,950 and $9,663, respectively. 295,750 336,700

Secured mortgage note payable for the acquisition of land and building in Broadview, Illinois in the amount of $980,000. Payments of $8,167 including principal and 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 will be due May 29, 2020. During the three months ended September 30, 2017, the Company made payments of principal and interest on this note in the amounts of $24,500 and $7,845, respectively. During the nine months ended September 30, 2017, the Company made payments of principal and interest on this note in the amounts of $73,500 and $22,919, respectively. 751,333 824,833

A total of 16 convertible notes payable in the aggregate amount of $627,565 (the “Convertible Notes Payable”). Certain of the Convertible Notes Payable contain cross default provisions, and are secured by subordinated interest in a majority of the Company’s assets. The Convertible Notes Payable bear interest at the rate of 1.9% per annum; principal and accrued interest are convertible into common stock of the Company at a conversion price of $0.25 per share; however, the interest may be paid in cash by the Company and certain limited amounts of principle may also be prepaid in cash. Effective May 13, 2014, the due date of these notes was extended from May 15, 2014 to December 31, 2015, and a discount to the notes in the aggregate amount of $712,565 was recorded to recognize the value of the beneficial conversion feature embedded in the extension of the term of the notes. In March 2015 the notes were further extended to January 1, 2016. On September 30, 2015, the notes in the amount of $627,565 were further extended to July 1, 2017, and a discount in the amount of $627,565 was recorded to recognize the value of the beneficial conversion featured embedded in the extension of the term of the notes. During the three and nine months ended September 30, 2017, $0 and $185,018, respectively, of this discount was charged to operations. During the three and nine months ended September 30, 2017, the Company accrued interest in the amount of $0 and $179,304, respectively, on these notes.

During the three months ended June 30, 2017, holders of the Convertible Notes Payable converted principal in the amount of $627,565 and accrued interest in the amount of $528,242 into an aggregate of 1,155,807 shares of common stock, and accrued interest in the amount of $86,089 was forgiven. The amount of $86,809 is recorded as a decrease in interest expense during the three and six months ended June 30, 2017.
- 627,565

A convertible 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%. The principal is convertible into common stock of the Company at a conversion price of $0.25 per share. During the three and nine months ended September 30, 2017, the Company accrued interest in the amount of $93 and $279, respectively, on this note. 20,000 20,000

	March 31, 2022		December 31, 2021
	(unaudited)

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 March 31, 2022, the Company made payments of principal and interest on this note in the amounts of $13,650 and $504, respectively; and during the three months ended March 31, 2021, the Company made payments of principal and interest on this note in the amounts of $13,650 and $927, respectively.	$	54,600	$	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 March 31, 2022, the Company made payments of principal and interest on this note in the amounts of $24,500 and $2,476, respectively; and during the three months ended March 31, 2021, the Company made payments of principal and interest on this note in the amounts of $24,500 and $3,212, respectively.		326,665		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 March 31, 2022, the Company made payments of principal and interest on this loan in the amounts of $18,235 and $2,159, respectively; and during the three months ended March 31, 2021, the Company made payments of principal and interest on this loan in the amounts of $17,313 and $3,081, respectively.		153,911		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 months ended March 31, 2022 and 2021, the Company accrued interest in the amount of $94 and $93, respectively, on this note; at March 31, 2022 and 2021, accrued interest on this note was $17,817 and $17,438 respectively.		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, 2022, the Company made principal and interest payments in the amount of $2,663 and $232, respectively, on this loan; and during the three months ended March 31, 2021, the Company made principal and interest payments in the amount of $2,505 and $360, respectively.		18,351		20,984

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September 30,
2017

December 31,
2016

Unsecured note to Sam Klepfish for $164,650 which may not be prepaid without Mr. Klepfish’s consent, originally carrying an interest rate of 8% per annum and no due date. As of July 1, 2014, the interest rate was reduced to 1.9% and as of November 17, 2014 the interest rate was further reduced to 0%. During the three months ended December 31, 2015, interest in the amount of $54,150 was capitalized, and the aggregate principal amount of $164,650 was extended to July 1, 2017. This note and accrued interest are convertible into common stock of the Company at a conversion price of $0.25 per share. During the three months ended March 31, 2017, the entire principal balance of this note in the amount of $164,650 was converted into 658,600 shares of the Company’s common stock. - 164,650

Unsecured promissory note in the amount of $100,000 dated January 1, 2017 bearing interest at the rate of 2.91% per annum issued in connection with the Oasis acquisition. Payments in the amount of $4,297 consisting of principal and interest are to be made monthly beginning February 15, 2017 for twenty-four months until paid in full. During the three and nine months ended September 30, 2017, the Company made principal payments on this note in the amount of $12,361 and $530, respectively; during the three and nine months ended September 30, 2017, the Company made interest payments on this note in the amount of rest payments on this note in the amounts of $32,496, and $1,880, respectively. 67,504 -

Capital lease obligations under a lease agreement for a forklift payable in thirty-six monthly installments of $274 including interest at the rate of 4.46%. During the three and nine months ended September 30, 2017, the Company made principal payments in the amount of $778 and $2,307, respectively. During the three and nine months ended September 30, 2017, the Company made interest payments on this lease obligation in the amounts of $45 and $159, respectively. 3,471 5,778

Capital lease obligations under a lease agreement for a forklift payable in thirty-six monthly installments of $579 including interest at the rate of 4.83%. During the three and nine months ended September 30, 2017, the Company made principal payments in the amounts of $1,558 and $4,617, respectively. During the three and nine months end September 30, 2017, the Company made interest payments on this lease obligation in the amounts of $178 and $591, respectively. 13,738 18,354

Total $ 1,465,829 $ 2,911,913

Less: Discount - (185,020 )

Net $ 1,465,829 $ 2,726,893
Current maturities, net of discount $ 547,183 $ 1,589,082
Long-term portion, net of discount 918,646 1,137,811
Total $ 1,465,829 $ 2,726,893

For the Three Months Ended
September 30,

2017 2016
Discount on Notes Payable amortized to interest expense: $ - $ 92,509

For the Nine Months Ended
September 30,

2017 2016
Discount on Notes Payable amortized to interest expense: $ 185,018 $ 277,527

~~At September 30, 2017 and December 31, 2016, the Company had unamortized discounts to notes payable in the aggregate amount of $0 and $185,020, respectively.~~

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; $3,088 of this discount was amortized to interest expense during each of the three months ended March 31, 2022 and 2021. During the three months ended March 31, 2022 the Company made principal and interest payments in the amount of $33,800 and $37,800, respectively, on this loan. During the three months ended March 31, 2021, the Company paid principal and interest in the amount of $49,200 and $38,980, respectively, on this loan. The Company also has 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 pays 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. During the three months ended March 31, 2022 and 2021, the Company paid additional interest in the amount of $5,632 and $6,094, respectively, pursuant to the Fifth Third Interest Rate Swap. 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 three months ended March 31, 2022.		5,201,800			5,235,600


Total		5,775,328			5,868,145
Discount		(42,923	)		(46,012	)
Net of discount	$	5,732,405		$	5,822,133

Current portion	$	455,414		$	458,973
Long-term maturities		5,319,914			5,409,172
Total	$	5,775,328		$	5,868,145

Aggregate maturities of long-term notes payable as of ~~September 30, 2017~~March 31, 2022 are as follows:

For the period ended March 31,

2023	$	455,415
2024		388,838
2025		309,908
2026		4,621,167
2027		-
Total	$	5,775,328

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14. LEASE LIABILITIES - FINANCING LEASES

	March 31, 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 March 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $1,269 and $198, respectively.	$	12,319	$	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 March 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $459 and $72, respectively.		4,459		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 March 31, 2022, the Company made principal and interest payments on this lease obligation in the amount of $23,944 and $5,882, respectively. During the three months ended March 31, 2021, the Company made principal and interest payments on this lease obligation in the amount of $22,552 and $7,274, respectively.		375,744		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 March 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $4,980 and $1,584, respectively. During the three months ended March 31, 2021, the Company made principal and interest payments on this lease obligation in the amounts of $4,716 and $1,847, respectively.		113,040		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 March 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $5,630 and $1,346, respectively. During the three months ended March 31, 2021, the Company made principal and interest payments on this lease obligation in the amounts of $5,182 and $1,795, respectively.		60,896		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 March 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $2,751 and $692, respectively. During the three months ended March 31, 2021, the Company made principal and interest payments on this lease obligation in the amounts of $2,618 and $826, respectively.		53,572		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 March 31, 2022, the Company made principal and interest payments on this lease obligation in the amounts of $1,604 and $359, respectively.		40,896		-

Total	$	660,926	$	659,063

Current portion	$	182,664	$	159,823
Long-term maturities		478,262		499,240
Total	$	660,926	$	659,063

~~For the period ended September 30,~~ 20

2018 $ 547,183
2019 177,038
2020 609,933
2021 54,600
2022 54,600
Thereafter 22,475
Total $ 1,465,829

~~Beneficial Conversion Features~~

The Company calculates the fair value of any beneficial conversion features embedded in its convertible notes via the Black-Scholes valuation method. The Company also calculates the fair value of any detachable warrants offered with its convertible notes via the Black-Scholes valuation method. The instruments were considered discounts to the notes, to the extent the aggregate value of the warrants and conversion features did not exceed the face value of the notes. These discounts were amortized to interest expense via the effective interest method over the term of the notes.

~~14. RELATED PARTY TRANSACTIONS~~

~~For the nine months ended September 30, 2017:~~

The Company cancelled RSUs held by its Chief Executive Officer representing 1,382,540 shares of common stock, of which 700,000 were unvested and 682,540 were vested. In place of the 682,540 vested cancelled RSUs, the Company issued a net amount of 586,586 shares of common stock. The remaining 95,954 shares of the 682,540 cancelled vested RSUs were not issued and instead the cash value of those shares was held back by the Company to pay certain taxes related to the issuance. In addition, the 700,000 unvested RSUs were replaced with restricted stock awards under the same terms and conditions as the 700,000 RSUs. See note 16.

The Company cancelled RSUs held by its President representing 1,724,532 shares of common stock, of which 490,000 were unvested and 1,234,532 were vested. In place of the 1,234,532 vested cancelled RSUs, the Company issued a net amount of 928,027 shares of common stock. The remaining 306,505 shares of the 1,234,532 cancelled vested RSUs were not issued and instead the cash value of those shares was held back by the Company to pay certain taxes related to the issuance. In addition, the 490,000 unvested RSUs were replaced with restricted stock awards under the same terms and conditions as the 490,000 RSUs. See note 16.

The Company cancelled RSUs held by its two of its Directors representing 545,000 shares of common stock, of which 180,000 were unvested and 365,000 were vested. In place of the 365,000 vested cancelled RSUs, the Company issued 365,000 shares of common stock. In addition, the 180,000 unvested RSUs were replaced with restricted stock awards under the same terms and conditions as the 180,000 RSUs. See note 16.

~~The Company’s Chief Executive Officer converted a note payable in the amount of $164,650 into 658,600 shares of common stock.~~

The Company acquired options to purchase 100,000 shares of the Company’s common stock from its President for $9,000 cash, which was the difference between the exercise price of the options and the market price of the stock on the date of purchase.

The Company acquired options to purchase 140,000 shares of the Company’s common stock from its President for $13,400 cash, which was the difference between the exercise price of the options and the market price of the stock on the date of purchase.

The Company acquired options to purchase 87,500 shares of the Company’s common stock from its Principal Accounting Officer for $8,125 cash, which was the difference between the exercise price of the options and the market price of the stock on the date of purchase.

The Company acquired options to purchase 100,000 shares of the Company’s common stock from its Chief Executive Officer for $24,000 cash, which was the difference between the exercise price of the options and the market price of the stock on the date of purchase.

The Company acquired options to purchase 100,000 shares of the Company’s common stock from its President for $24,000 cash, which was the difference between the exercise price of the options and the market price of the stock on the date of purchase.

The Company acquired options to purchase 200,000 shares of the Company’s common stock from two of its directors (100,000 from each director) for $48,000 ($24,000 to each director), which was the difference between the exercise price of the options and the market price of the stock on the date of purchase.

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Aggregate maturities of lease liabilities – financing leases as of March 31, 2022 are as follows:

For the period ended March 31,

2023	$	182,665
2024		193,226
2025		160,994
2026		96,069
2027		27,972
Thereafter		-
Total	$	660,926

15. RELATED PARTY TRANSACTIONS

For the three months ended March 31, 2022:

Vesting of shares to officers

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 $10,000 for the vesting of a total of 25,812 shares of common stock issuable to two of its independent board members, and $140,400 for the vesting of a total of 438,703 shares of common stock issuable to its Chief Executive Officer and its Director of Strategic Acquisitions pursuant to their employment agreements. The Company acquired options to purchase 100,000 shares of the Company’s common stock from a director for $33,000, which was the difference between the exercise price of the options and the market price of the stock on the date of purchase.

~~For the nine months ended September 30, 2016:~~

~~At December 31, 2015, the Company had an accrued liability~~also recognized non-cash compensation in the amount of ~~$160,150 representing an aggregate of 210,520 shares of common stock to be issued to officers, directors, and employees for services performed during 2013;~~$2,326 during the three months ended March 31, ~~2016,~~2022 in connection with stock options issuable to management and board members.

For the three months ended March 31, 2021:

Vesting of shares to officers

During the three months ended March 31, 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 ~~issued 210,520 RSUs in satisfaction~~charged to operations the amount of ~~this liability. Also at December 31, 2015,~~$22,500 for the vesting of a total of 50,070 shares of common stock issuable to two of its independent board members, and $99,211 for the vesting of a total of 236,184 shares of common stock issuable to its Chief Executive Officer and its Director of Strategic Acquisitions pursuant to their employment agreements. The Company ~~had an accrued liability~~also recognized non-cash compensation in the amount of ~~$157,780 representing 244,620 RSUs to be issued to officers and employees as a bonus for services performed in 2015;~~$36,080 during the three months ended March 31, ~~2016, the Company issued an aggregate of 244,620 RSUs~~2021 in ~~satisfaction of this liability.~~

~~During the three months ended September 30, 2016, the Company issued 95,000 shares of its common~~connection with stock options issuable to ~~an ex-Director of the Company pursuant to the exercise of RSUs.~~management and board members.

~~15.~~

16. COMMITMENTS AND CONTINGENT LIABILITIES

Contingent Liability

Pursuant to the ~~Oasis acquisition,~~igourmet Asset Purchase Agreement, the Company ~~is contingently liable for~~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. The~~date as well as to certain additional liabilities that the Company ~~believes it is likely that these payments will be made,~~has evaluated and ~~accordingly~~has recorded on a contingent basis. During the ~~entire~~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 ~~$400,000~~$39,000 in connection with the additional liabilities. During the three months ended March 31, 2022 and 2021, the Company paid the amount of $0 and $8,000, respectively, in connection with the additional liabilities. At March 31, 2022 and December 31, 2021, the amount of $67,000 remains on the Company’s consolidated balance sheet as a current contingent liability, and $108,600 and $108,600, respectively, as a long term contingent liability.

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 ~~its balance sheet at acquisition. $200,000~~a contingent basis. During the year ended December 31, 2019, the Company paid the amount of ~~this amount~~$120,576 in connection with these liabilities. At March 31, 2022 and December 31, 2021, $120,000 is classified as a current ~~liability~~contingent liability.

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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 ~~$200,000~~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. As of March 31, 2022, the Company has made the required minimum royalty payments.

Litigation

On September 16, 2019, an action (the “PA Action”) was filed in the Court of Common Pleas of Philadelphia County, Trial Division, against, among others, the Company and its wholly-owned subsidiaries, Innovative Gourmet LLC and Food Innovations, Inc. Since that time, other parties involved in the incident have joined as plaintiffs in the PA Action. The complaint in the PA Action alleges, inter alia, wrongful death and negligence by a ~~long term liability at September 30, 2017.~~driver employed by Innovative Gourmet and indicates a demand and offer to settle for 50 million dollars. 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. On July 16, 2020, the court granted the Company's motion to stay the case through the final adjudication of an additional pending legal proceeding against the driver in connection with the events related to the case. 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.

~~Litigation~~

From time to time, the Company has become and may become involved in ~~various~~certain lawsuits and legal proceedings which arise in the ordinary course of ~~business.~~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 ~~business.~~

~~On July 7, 2017, Scher Zalman Duchman~~financial position or our business and Deborah L. Duchman (collectively, “Duchmans”) filed an amended complaint in the United States District Court for the Southern District of Florida seeking approximately $1 million in damages against Innovative Food Holdings, Inc., FD Acquisition Corp., and Sam Klepfish, IVFH’s CEO. The Duchmans, amongst other things, allege that defendants owed a fiduciary duty to the Duchmans to protect them, and their own personal guarantees and obligations, in connection with loans and other duties incurred by a former subsidiary of the Company. The Duchmans further allege that the defendants did not fulfill that alleged fiduciary obligation. In response to the lawsuit, IVFH has filed a motion, which is currently being considered by the court, seeking dismissal of claims on a number of bases. IVFH has also notified the court of a release and covenant not to sue executed by S. Duchman in April of 2016 in favor of IVFH and its officers which encompasses the claims the Duchmans have asserted. IVFH believes that this lawsuit is without merit and is an attempt by the Duchmans to drag IVFH into the Duchmans’ personal financial matters which are unrelated to IVFH. While IVFH intends to vigorously defend against this lawsuit, the outcome of ~~this lawsuit~~these matters cannot be ultimately be predicted.

17. EQUITY

~~16. EQUITY~~

Common Stock

At ~~September 30, 2017~~March 31, 2022 and December 31, ~~2016,~~2021, a total of ~~2,491,112 and 733,659~~2,837,580 shares ~~respectively,~~ are deemed issued but not outstanding by the Company. These include ~~2,276,703~~2,623,171 shares of treasury ~~stock as of September 30, 2017 and 519,254 shares of treasury stock as of December 31, 2016.~~stock.

~~Nine~~

Three months ended ~~September 30, 2017:~~March 31, 2022:

~~The~~

~~The Company purchased options to purchase~~ a total of ~~367,500~~438,703 shares of common stock ~~from two executive officers,~~issuable to its Chief Executive Officer and ~~employee, and a board member for an aggregate $34,925 in cash, which was the difference between the exercise price~~its Director of ~~the options and the market price of the stock on the date of purchase.~~Strategic Acquisitions pursuant to their employment agreement. The Company ~~charged~~also recognized non-cash compensation in the amount of ~~$34,925~~$2,326 during the three months ended March 31, 2022 in connection with stock options issuable to ~~additional paid-in capital.~~management and board members.

Three months ended March 31, 2021:

~~The~~

During the three months ended March 31, 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 ~~$240,208 to additional paid-in capital representing~~$22,500 for the vesting of ~~restricted~~a total of 50,070 shares of common stock ~~awards issued~~issuable to ~~officers.~~two of its independent board members, and $99,211 for the vesting of a total of 236,184 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 $36,080 during the three months ended March 31, 2021 in connection with stock options issuable to management and board members.

1822

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~~The Company issued 658,600 shares of common stock to its Chief Executive Officer for conversion of a note payable in the amount of $164,650.~~

The Company issued a net amount of 2,410,392 shares of common stock (net of 623,813 shares held back by the Company to pay certain taxes owed related to the issuance) to employees, officers, and directors in satisfaction of the following obligations: vested RSUs representing 2,533,246 shares of common stock, and bonus shares and shares previously accrued representing 500,959 shares of common stock. The Company charged the amount of $33,453 to additional paid-in capital representing the value of these shares that had not been previously charged to operations.

The Company retired to treasury 642,688 shares of common stock pursuant to an agreement signed to acquire those shares. The Company also retired to treasury an aggregate of 37,000 shares of common stock purchased on the open market for cash of $18,592.

~~The Company issued 4,626,427 shares of common stock for the conversion of notes payable and accrued interest in the aggregate amount of $1,155,807.~~

~~The Company issued 70,000 shares of common stock with a fair value of $33,600 to an employee as a bonus.~~

Options

~~The Company issued 200,000 shares of common stock for cash of $70,000 pursuant to the exercise of stock options.~~

~~The Company issued 224,638 shares of common stock for subscriptions receivable in the amount of $128,022 in connection with the exercise of warrants.~~

The Company issued 250,000 shares of common stock in exchange for the cashless conversion of warrants. The aggregate par value of $25 was charged to additional paid-in capital on the Company’s balance sheet at June 30, 2017.

The Company acquired 639,383 shares of common stock for cash of $235,000 and returned these shares to treasury. The Company also acquired an additional 438,379 shares of common stock for $252,068 of which $50,000 was paid and $202,068 was paid on October 2, 2017, and returned these shares to treasury.

The Company purchased options to purchase a total of 100,000 shares of common stock for $33,000 in cash, which was the difference between the exercise price of the options and the market price of the stock on the date of purchase. The Company charged the amount of $33,000 to additional paid-in capital.

The Company issued a total of 1,070,000 shares of common stock to officers and directors pursuant to the vesting of restricted stock awards: 400,000 shares to its Chief Executive Officer; 400,000 shares to its President; and 90,000 shares to each of three directors.

~~Nine months ended September 30, 2016:~~

~~The Company issued 25,000 shares of common stock with a fair value of $34,000 to a service provider. The value of these shares was accrued during the twelve months ended December 31, 2015.~~

The Company issued an aggregate of 600,000 shares of common stock to an employee of The Fresh Diet pursuant to a separation agreement. These shares were issued as follows: 300,000 of these shares were issued for the exercise of RSUs held by the employee, and an additional 300,000 shares were charged to discontinued operations at the fair value of $147,000.

The Company issued 133,333 shares of common stock to an employee of The Fresh Diet pursuant to an employee agreement. The fair value of these shares in the amount of $67,987 was charged to discontinued operations during the period.

The Company issued 200,000 shares of common stock to an employee of The Fresh Diet pursuant to a separation agreement. These shares were issued via the exercise of RSUs; the par value of $20 was charged to additional paid-in capital during the period.

~~The Company repurchased 33,000 shares of common stock at a share price of $0.45 per share. The value of these shares in the amount of $14,850 has been recorded in treasury stock.~~

~~The Company issued 95,000 shares of common stock pursuant to the exercises of RSUs by an ex-director.~~

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~~Warrants~~

The following table summarizes the significant terms of warrants outstanding at September 30, 2017. These warrants may be settled in cash and, unless the underlying shares are registered, via cashless exercise, into shares of the Company’s common stock at the request of the warrant holder. These warrants were granted in 2012 as part of a financing and loan agreement related to the acquisition of Artisan Specialty Foods in 2012:

Range of
exercise
Prices

Number of
warrants
Outstanding

Weighted
average
remaining
contractual
life (years)

Weighted
average
exercise
price of
outstanding
Warrants

Number of
warrants
Exercisable

Weighted
average
exercise
price of
exercisable
Warrants

$ 0.010 700,000 2.63 $ 0.01 700,000 $ 0.01

700,000 2.63 $ 0.01 700,000 $ 0.01

~~Transactions involving warrants are summarized as follows:~~

Number of Weighted Average
Warrants Exercise Price
Warrants outstanding at December 31, 2016 3,537,284 $ 0.45

Granted - -
Exercised (2,837,284 ) $ 0.56
Cancelled / Expired - -

Warrants outstanding at September 30, 2017 700,000 $ 0.01

~~Options~~

The following table summarizes the options outstanding at March 31, 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
$ 0.35 470,000 0.31 $ 0.35 470,000 $ 0.35

$ 0.57 225,000 0.25 $ 0.57 225,000 $ 0.57

$ 1.31 200,000 0.69 $ 1.31 200,000 $ 1.31

$ 1.42 100,000 0.72 $ 1.42 100,000 $ 1.42

$ 1.43 50,000 1.25 $ 1.43 50,000 $ 1.50

$ 1.46 100,000 0.75 $ 1.46 100,000 $ 1.46

$ 1.60 310,000 0.25 $ 1.60 310,000 $ 1.60

$ 1.70 75,000 0.54 $ 1.70 75,000 $ 1.70

$ 1.90 190,000 1.60 $ 1.90 190,000 $ 1.90

$ 2.00 50,000 0.54 $ 2.00 50,000 $ 2.00

$ 2.40 20,000 0.67 $ 2.40 20,000 $ 2.40

$ 2.50 37,500 0.54 $ 2.50 37,500 $ 0.79

$ 3.40 30,000 0.67 $ 3.40 30,000 $ 3.40

$ 3.50 37,500 0.54 $ 3.50 37,500 $ 3.50
1,895,000 0.57 $ 1.25 1,895,000 $ 1.25

						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
$	0.60		50,000		3.75	$	0.60		31,250	$	0.60
$	0.62		360,000		1.75	$	0.62		360,000	$	0.62
$	0.85		540,000		1.75	$	0.85		540,000	$	0.85
$	1.00		50,000		3.75	$	1.00		31,250	$	1.00
$	1.20		1,100,000		1.59	$	1.20		1,075,000	$	1.20
			2,100,000		1.76	$	0.99		2,037,500	$	0.99

~~Table of Contents~~

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		-	$	-
Exercised		-	$	-
Cancelled / Expired		-	$	-

Options outstanding at March 31, 2022 (unaudited)		2,100,000	$	0.99
Options exercisable at March 31, 2022 (unaudited)		2,037,500	$	0.99

Number of Shares
Weighted Average
Exercise Price

Options outstanding at December 31, 2016 2,445,000 $ 1.01

Granted 650,000 $ 1.73
Exercised (200,000 ) $ 0.35
Cancelled / Expired (1,000,000 ) $ 1.18

Options outstanding at September 30, 2017 1,895,000 $ 1.25

Aggregate intrinsic value of options outstanding and exercisable at ~~September 30, 2017~~March 31, 2022 and ~~2016~~2021 was ~~$339,700 and $737,905, respectively.~~$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 ~~$0.91~~$0.30 and ~~$0.48~~$0.43 as of ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, respectively, and the exercise price multiplied by the number of options outstanding.

During the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016,~~2021, the Company charged ~~a total of $0~~$2,326 and ~~$4,983,~~$36,080, respectively, to operations ~~related~~ to recognized stock-based compensation expense for employee and board member stock options. ~~During the nine months ended September 30, 2017 and 2017,~~

18. SUBSEQUENT EVENTS

On April 26, 2022, the Company ~~charged~~engaged a ~~total of $8,707 and $14,814, respectively, to operations related to recognized stock-based compensation expense~~consultant for ~~employee stock options.~~

~~Accounting for warrants and stock options~~

~~The Company valued warrants and options using the Black-Scholes valuation model utilizing the following variables:~~

	~~September 30,~~
	~~2017~~
~~Volatility~~		~~56.9~~	%
~~Dividends~~	$	-
~~Risk-free interest rates~~		~~0.87~~	%
~~Term (years)~~		~~0.78-2.44~~

~~Restricted Stock Units (“RSUs”)~~

~~During the nine months ended September 30, 2017, the Company cancelled all of its outstanding RSUs~~services and issued the ~~following: For vested RSUs representing 3,104,205~~following securities as compensation: 142,857 shares of common stock ~~the Company issued~~with a ~~net amount~~fair value of ~~2,480,392 shares of restricted common stock (net of 623,813 shares held back by the Company~~$48,543, options to ~~pay certain taxes owed related to the issuance); for unvested RSUs representing 1,370,000~~purchase 125,000 shares of common stock ~~the Company issued 1,370,000~~at a price of $0.41 per share with a fair value of $37,482; and options to purchase 125,000 shares of ~~restricted~~ common stock ~~under the same terms as the cancelled RSUs. 1,070,000~~at a price of the restricted stock awards vested on July 1, 2017, the same date at which the RSUs which they replaced would have vested. These 1,070,000 shares were issued during the three months ended September 30, 2017. The vesting for the remaining 300,000 restricted stock awards is contingent upon meeting certain price and volume conditions related to the Company’s stock; these conditions are the same conditions required for vesting$0.50 per share with a fair value of the cancelled RSUs. The Company charged the amount of $0 and $240,208, respectively, to operations during the three and nine months ended September 30, 2017 representing the amortization of the cost of these restricted stock awards. The amounts charged to operations is the same amount that the Company would have charged for the RSUs that were cancelled had they not been cancelled.$36,386.

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~~RSUs expense during the three and nine months ended September 30, 2017 and 2016 are summarized in the table below:~~

September 30,
2017 2016

RSUs expense – Continuing operations $ - $ 190,692
RSUs expense – Discontinued operations - -
Total $ - $ 190,692

September 30,
2017 2016

RSUs expense – Continuing operations $ - $ 658,709
RSUs expense – Discontinued operations - 813,908
Total $ - $ 1,472,617

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ITEM 2 - ~~MANAGEMENT’S~~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 environmental weather conditions.

We are also subject to other risks detailed from time to time in our other filings with ~~Securities and Exchange Commission~~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 doubtful accounts receivable, stock-based services, valuation of financial instruments, 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~~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 ~~$5,436~~$373,828 for doubtful accounts receivable at ~~September 30, 2017,~~March 31, 2022, and ~~$56,371~~$375,931 at ~~September 30, 2016.~~December 31, 2021. 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. ~~Generally, these~~

Income Taxes

The Company uses the liability method of accounting for income taxes. Deferred tax assets and liabilities ~~increased as~~are recognized for the ~~price~~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.

~~Income Taxes~~

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 ~~history of losses, and as such has recorded no liability for income taxes. Until such time as~~single lease component. For lease agreements with terms less than 12 months, the Company ~~begins to provide evidence that~~has elected the short-term lease measurement and recognition exemption, and it recognizes such lease payments on a ~~continued profit is a reasonable expectation, management will not determine that there is a~~straight-line basis ~~for accruing an income tax liability. These estimates have been accurate in~~over the ~~past.~~lease term.

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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)~~(“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 May 18, 2012, the Company executed a Stock Purchase Agreement to acquire all of the issued and outstanding shares of Artisan Specialty Foods, Inc., an Illinois corporation (“Artisan”), from its owner, Mr. David Vohaska. The purchase price was $1.2 million, with up to another $300,000 (with a fair value of $131,000) payable in the event certain financial milestones were met over the next one or two years. Those milestones have been met. The purchase price was primarily financed via a loan from Alpha Capital in the principal amount of $1,200,000. The loan was repaid in November 2013 via the issuance of a loan from Fifth Third Bank which has been paid in full. Prior to the acquisition, Artisan was a supplier and had sold products to the Company.

~~Pursuant to an asset purchase agreement, effective~~ November 2, 2012, the Company ~~purchased the outstanding~~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 ~~(“Haley”). Pursuant~~and its customers. The Haley Acquisition was valued at a total cost of $119,645.

On June 30, 2014, pursuant to a purchase agreement, ~~effective June 30, 2014,~~ 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.

~~Table~~

Pursuant to an Asset Purchase Agreement dated as of ~~Contents~~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 “Fresh Diet Merger Agreement”),~~ the Company acquired The Fresh Diet, Inc. (“~~The Fresh Diet” or “FD”~~FD”) through a reverse triangular merger as the registrant created a subsidiary corporation (FD Acquisition Corp) that merged with and into FD with FD being the surviving corporation and becoming a wholly-owned subsidiary of the Company. The purchase price consisted of 10,000,000 shares of the Company’s common stock valued at $14,000,000. The majority of FD’s current liabilities consisted of approximately $3.8 million of deferred revenues and approximately $2.1 million in short term commercial loans and there were additional ordinary course of business expenses such as trade payables, payroll and sales taxes which varied from month to month. In addition, it had some long term obligations the bulk of which consisted of interest free loans from FD’s former shareholders in the amount of approximately $2.2 million which were not due for three years. Prior to the merger FD had purchased an immaterial amount of product from the Company. FD operated as an independent subsidiary subject to oversight of its board of directors and the Company’s President and CEO.. Effective February 23, 2016, the Company closed a transaction to sell 90% of our ownership in FD ~~to New Fresh Co., LLC, a Florida limited liability company controlled by the former founder of FD who was appointed Interim CEO of FD on February 9, 2016. The~~for consideration ~~to Innovative Food Holdings consisted~~consisting primarily of a restructuring of our loans, which includes the ability to convert to additional amounts of FD under certain circumstances. ~~Aside from payments related to previously accrued liabilities there were~~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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~~On January 1, 2017,~~

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 ~~through its wholly-owned subsidiary Oasis Sales Corp., purchased~~acquired certain assets of ~~Oasis Sales~~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 ~~Marketing, L.L.C.,~~the acquired assets and assumed liabilities were recorded by the Company at their preliminary estimated fair values. Mouth, a ~~California limited~~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 ~~company.~~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~~with a Major Customer

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, ~~2016~~2021 (1) following our discussion of Liquidity and Capital Resources, and (2) ~~Concentrations of Credit Risk~~ in Note 1718 to the Consolidated Financial ~~Statements, and (3) as the fourth item under Risk Factors.~~Statements.

Relationship with U.S. Foods

We have historically sold the majority of our products through a distributor relationship between FII and Next Day Gourmet, L.P., a subsidiary of U.S. Foods, a leading broadline distributor. These sales amounted to ~~$7,604,308 (72%~~$7,659,459 (49% of total sales) and ~~$6,546,697 (72%~~$5,165,378 (42% of total sales) for the three months ended ~~September 30, 2017~~March 31, 2022 and ~~2016, respectively; and $22,004,270 (72% of total sales) and $18,352,407 (72% of total sales) for the nine months ended September 30, 2017 and 2016,~~2021, respectively. On January 26, 2015 we executed a contract between Food Innovations, Inc., our wholly-owned subsidiary, and U.S. ~~Foods.~~Foods, Inc. The term of the Agreement is from January 1, 2015 through December 31, 2016 and provides for ~~up to three (3)~~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 Agreement was extended through ~~2017.~~2018. Effective January 1, 2018 the 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.

RESULTS OF OPERATIONS

Prior year balances have been recast to reflect the sale of 90% of our interest in The Fresh Diet, Inc. in February 2016. Results of discontinued operations are excluded from the accompanying results of operations for all periods presented, unless otherwise noted. See Note 4 – discontinued operations in the accompanying notes to consolidated financial statements.

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, 2017~~March 31, 2022 Compared to Three Months Ended ~~September 30, 2016~~March 31, 2021

Revenue

~~Revenue~~

Revenue increased by ~~$1,401,194~~$3,462,212 or approximately ~~15%~~28% to ~~$10,495,637~~$15,643,111 for the three months ended ~~September 30, 2017~~March 31, 2022 from ~~$9,094,443~~$12,180,899 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, though e-commerce revenue remains significantly above pre-pandemic historical levels. The decreases in e-commerce revenues during the current period were related to decreases in COVID-19 driven demand in 2022 compared to 2021 partially driven by the continued re-opening of bricks and mortar stores, and also driven by lower recognized revenue in the first quarter of 2022, due to a decline in the value of recognized deferred revenue related revenues associated with items ordered in the 4th quarter of the prior year but delivered in the first quarter of the following year.

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 ~~that~~a strategy ~~if,~~which based on our analysis ~~we deem it~~provides the most beneficial ~~to us.~~opportunity for growth.

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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 ~~segments~~markets may be hampered and negatively impacted by any economic tariffs that may be imposed in the United States or in foreign countries.

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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, 2017~~March 31, 2022 was ~~$7,052,018,~~$11,917,179, an increase of ~~$647,833~~$3,038,265 or approximately ~~10%~~34% compared to cost of goods sold of ~~$6,404,185~~$8,878,914 for the three months ended ~~September 30, 2016.~~March 31, 2021. The increase in cost of goods sold is attributed mainly to increases in revenues. Cost of goods sold iswas made up of the following expenses for the three months ~~September 30, 2017:~~ended March 31, 2022: cost of goods of specialty, meat, game, cheese, seafood, poultry and other sales categories in the amount of ~~$4,982,334; and~~$7,761,702; shipping, delivery, handling, and purchase allowance expenses in the amount of ~~$2,069,684.~~$4,016,598; and cost of goods associated with logistics of $138,879. Total gross margin was approximately ~~32.8%~~23.8% of sales in ~~2017~~2021 compared to approximately ~~29.6%~~27.1% of sales in ~~2016. The increase in cost~~2021. Gross margins as a percentage of ~~goods sold is primary attributable~~sales declined during the current period to ~~an increase in sales. The increase in gross margins from 2016 is~~23.8% compared to 27.1% during the comparable period, primarily ~~attributable~~due to variation in product and revenue mix ~~as well as variations~~across our various selling channels. In addition, increases in fuel costs and fuel surcharges associated with the higher cost of ~~goods sold~~fuel in the United States contributed to the decline in gross margins as a percentage of ~~total expenses, across our various selling channels.~~sales.

In ~~2017,~~2022, we ~~continued~~continue to price our products in order to increase sales, gain market share and increase the number of our end ~~users. We were successful in both increasing sales~~users and ~~increasing market share.~~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.~~increase and may result in a decrease in profit margin.

Selling, general, and administrative expenses

Selling, general, and administrative expenses increased by ~~$192,163~~$321,598 or approximately ~~11%~~7% to ~~$1,894,588~~$5,172,426 during the three months ended ~~September 30, 2017~~March 31, 2022 compared to ~~$1,702,425~~$4,850,828 for the three months ended ~~September 30, 2016.~~March 31, 2021. The increase in selling, general, and administrative expenses was primarily due to an increase in ~~SGA expenses associated with Oasis,~~advertising and tomarketing costs of $250,282, an increase in professional fees of $150,679, an increase in office, facilities, and vehicles ~~costs. Increases~~costs $90,153, an increase in office, facilities, and vehicle costs of $90,153, an increase in travel expenses of $34,826, an increase in IT and computer costs of $30,281, an increase in insurance costs of $10,441, and an increase in amortization and depreciation of $2,507. These increases were partially offset by a decrease in payroll and related costs of approximately $214,143 (including a decrease in non-cash compensation in the amount of $5,065), a decrease in banking and credit card fees of $91,798, a decrease in bad debt expense of $3,872, and a decrease in taxes of $3,494. The increases were driven mainly by increases in costs related to legal, accounting, and ~~employee benefit costs also~~other advisor fees and increases in digital marketing fees. In addition an overall increase in cost of goods and labor and other items contributed to the ~~increase.~~increase in facility and IT costs.

Impairment of Investment

During the three months ended March 31, 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. There is no comparable transaction in the current period.

Gain on Interest Rate Swap

During the three months ended 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.

Other leasing income

During the three months ended March 31, 2022, the Company recognized revenue in the amount of $5,090 in connection with the lease of space in our Mountaintop warehouse facility, a decrease of $50 or approximately 1% compared to $5,140 during the three months ended March 31, 2021.

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Interest expense, net

Interest expense, net of interest income, decreased by ~~$105,087~~$7,345 or approximately ~~87%~~8% to ~~$16,139~~$82,973 during the three months ended ~~September 30, 2017,~~March 31, 2022, compared to ~~$121,226~~$90,318 during the three months ended ~~September 30, 2016. The decrease was due primarily to a reduction of the amortization of discounts~~March 31, 2021. Interest accrued or paid on the Company’s commercial loans and notes ~~payable. These discounts are fully amortized, and there was $0~~payable decreased by $1,032 to $76,148 during the current period primarily as a result of decreased principal balances. In addition, interest ~~expense~~ associated with ~~this amortization~~the interest rate swap was $5,632 during the three months ended ~~September 30, 2017,~~March 31, 2022 compared to ~~$92,509~~$6,094 in the prior period, a decrease of $462. The interest rate swap was terminated during the current period. Interest on the PPP loans decreased by $5,571, from $0 during the current period compared to $5,571 during the three months ended ~~September 30, 2016. There~~March 31, 3021. The Company’s PPP loans have all been forgiven as of March 31, 2022. Interest income was ~~a decrease~~$1,989 for the period ended March 31, 2022, an increase of ~~approximately $17,481 or 100%~~$280 compared to interest income of $1,709 during the ~~gross interest expense of $17,481 was accrued or paid interest~~prior period due to higher cash balances. Interest on the ~~company’s commercial loans and notes payable. The Company also had $1,342 of interest income during~~Company’s note payable was $94 for the three months ended ~~September 30, 2017.~~March 31, 2022 and 2021. We also amortized $3,088 of loan fees to interest expense during the period ended March 31, 2022 and 2021.

Net ~~income from continuing operations~~loss

For the reasons above, the Company had a net ~~income from continuing operations~~loss for the three months ended ~~September 30, 2017~~March 31, 2022 of ~~$1,532,892~~$1,230,377 which is ~~an increase~~a decrease of ~~approximately 77%~~$613,494 or 33% compared to a net ~~income~~loss of ~~$866,607~~$1,843,871 during the three months ended ~~September 30, 2016.~~March 31, 2021. The ~~income~~net loss for the three months ended ~~September 30, 2017~~March 31, 2022 includes a total of ~~$124,013~~$298,060 in non-cash charges, including amortization of intangible assets in the amount of $82,317 and depreciation expense of $41,696. The income for the three months ended September 30, 2016 includes a total of $376,513 in non-cash charges, including amortization of intangible assets in the amount of $50,567, depreciation expense of $37,807, charges for non-cash compensation in the amount of ~~$195,630,~~$152,726, depreciation and amortization expense of $138,361, and amortization of prepaid loan fees in the amount of $3,088.

The loss for the three months ended March 31, 2021 includes a total of $509,304 in non-cash charges, including impairment of investment of $209,850, depreciation and amortization expense of $135,854, non-cash compensation in the amount of $157,791, amortization of the discount on notes payable ~~in the amount~~ of ~~$92,509.~~

~~Nine Months Ended September 30, 2017 Compared to Nine Months Ended September 30, 2016~~

~~Revenue~~

~~Revenue increased by $5,081,451 or approximately 20% to $30,494,462~~$3,088, and provision for ~~the nine months ended September 30, 2017 from $25,413,011 in the prior year.~~

~~We continue to assess the potential~~doubtful accounts 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 that strategy if, based on our analysis, we deem it beneficial to us.

$2,721.

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

~~Cost of goods sold~~

Our cost of goods sold for the nine months ended September 30, 2017 was $20,585,273, an increase of $2,605,720 or approximately 15% compared to cost of goods sold of $17,979,553 for the nine months ended September 30, 2016. Cost of goods sold is made up of the following expenses for the nine months September 30, 2017: cost of goods of specialty, meat, game, cheese, seafood, poultry and other sales categories in the amount of $14,614,941; and shipping, delivery, handling, and purchase allowance expenses in the amount of $5,970,332. Total gross margin was approximately 32.5% of sales in 2017 compared to approximately 29.3% of sales in 2016. The increase in cost of goods sold is primary attributable to an increase in sales. The increase in gross margins from 2016 is primarily attributable to variation in product and revenue mix as well as variations in cost of goods sold as a percentage of total expenses, across our various selling channels.

In 2017, we continued to price our products in order to gain market share and increase the number of our end users. We were successful in both increasing sales and increasing market share. We currently expect, if market conditions and our product revenue mix remain constant, that our cost of goods sold may increase.

~~Selling, general, and administrative expenses~~

Selling, general, and administrative expenses increased by $1,024,208 or approximately 20% to $6,269,386 during the nine months ended September 30, 2017 compared to $5,245,178 for the nine months ended September 30, 2016. The increase in selling, general, and administrative expenses was primarily due to an increase in SGA expenses associated with Oasis, and to an increase in office, facilities, and vehicles costs. Increases in payroll taxes and employee benefit costs also contributed to the increase.

~~Interest expense, net~~

Interest expense, net of interest income, decreased by $207,852 or approximately 57% to $157,912 during the nine months ended September 30, 2017, compared to $365,764 during the nine months ended September 30, 2016. The decrease was due primarily to a reduction of interest as a result of negotiations with certain noteholders which resulted in a reduction of accrued interest in the amount of $86,089. Without this adjustment, and adding back interest income of $4,026, gross interest expense would have been $248,027 for the period. Approximately $63,009 or 25.4% of the gross interest expense was accrued or paid interest on the company’s commercial loans and notes payable; approximately $185,018 or 74.6% of the gross interest expense was a non-cash GAAP accounting charge associated with the amortization of the discounts on the Company’s notes payable.

~~Net income from continuing operations~~

For the reasons above, the Company had net income from continuing operations for the nine months ended September 30, 2017 of $3,481,891 which is an increase of approximately 91% compared to a net income of $1,822,516 during the nine months ended September 30, 2016. The income for the nine months ended September 30, 2017 includes a total of $910,269 in non-cash charges, including amortization of intangible assets in the amount of $288,451, depreciation expense of $120,832, charges for non-cash compensation in the amount of $315,968, and amortization of the discount on notes payable in the amount of $185,018. The income for the nine months ended September 30, 2016 includes a total of $1,253,239 in non-cash charges, including amortization of intangible assets in the amount of $182,201, depreciation expense of $120,018, charges for non-cash compensation in the amount of $673,523, and amortization of the discount on notes payable in the amount of $277,527.

Liquidity and Capital Resources at ~~September 30, 2017~~March 31, 2022

As of ~~September 30, 2017,~~March 31, 2022 the Company had current assets of ~~$7,802,866,~~$10,132,629 consisting of cash and cash equivalents of ~~$4,337,662;~~$3,111,168, trade accounts receivable ~~net~~ of ~~$2,417,104;~~$3,422,003, inventory of ~~$983,733;~~$3,209,945, and other current assets of ~~$64,367.~~$389,513. Also, at ~~September 30, 2017,~~March 31, 2022, the Company had current liabilities of ~~$2,851,005,~~$8,612,694, consisting of trade ~~payables~~payable and accrued liabilities of ~~$2,088,148;~~$4,473,440, accrued interest of ~~$15,674;~~$42,794, deferred revenue of $1,250,944, line of credit of $2,000,000, lease liabilities – operating leases, current portion of $63,361, lease liabilities – financing leases, current portion of $182,664, current portion of contingent liabilities of $187,000, and current portion of notes payable ~~and capital leases~~ of ~~$547,183; and current portion of contingent liability of $200,000.~~

$412,491.

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During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, the Company had cash ~~provided by~~used in operating activities of ~~$2,071,097.~~$2,873,290. Cash ~~flow from~~used in operations consisted ~~of:~~of the Company’s consolidated net ~~income~~loss of ~~$3,481,891 plus non-cash~~$1,230,377 increased by recovery of doubtful accounts of ($1,115); these items were reduced by stock based compensation in the amount of ~~$315,968; non-cash amortization of discount on notes payable of $185,018, and~~$152,726, depreciation and amortization of ~~$409,283.~~$138,361, amortization of right-to-use asset of $19,691, and amortization of prepaid loan fees of $3,088. The Company’s cash position also decreased ~~by $2,321,063 as~~due to a ~~result of changes~~change in the components of current assets and ~~current~~ liabilities ~~primarily a reduction in accrued liabilities related to related to discontinued operations~~ in the amount of ~~$1,460,122.~~$1,955,664.

The Company had cash used in investing activities of ~~$340,777~~$4,760 for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, which consisted of ~~cash paid in the acquisition of Oasis in the amount of $300,000, and~~ cash paid for the acquisition of property and ~~equipment in the amount of $40,777.~~ equipment.

The Company had cash ~~used in~~flow from financing activities of ~~$1,156,711~~$133,453 for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2022, which consisted of principal payments made on notes payable of ~~$746,941;~~$92,816 and principal payments on ~~capital~~financing leases of $6,926, payments made for the purchase of treasury stock of $505,660; and payments made for the purchase of options from officers, directors, and employees of $163,925. The Company also received cash of $196,741 from the exercise of warrants for common stock, and $70,000 for the exercise of common stock options.$40,637.

The Company had net working capital of ~~$4,951,861~~$1,519,935 as of ~~September 30, 2017.~~March 31, 2022. The Company ~~had~~used cash ~~provided by~~in operations during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2022 in the amount of $2,071,097; this amount is net of certain payments in the amount of $1,460,122 related to discontinued operations which relate mainly to a transaction to purchase the rights to 1,450,000 RSUs and 642,688 shares of the Company’s common stock from a former FD employee which resulted in $850,000 in non-recurring cash payments compared$2,873,290. This compares to cash ~~generated from operating activities~~used in operations of ~~$1,563,446~~$3,497,010 during the ~~nine~~three months ended ~~September 30, 2016. Without the cash flow items associated with discontinued operations, cash operating cash flow would have been $3,531,219 for the nine months ended September 30, 2017.~~March 31, 2021. 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. ~~Currently,~~As of March 31, 2022, we do not have any material long-term obligations other than those described in ~~Note~~Notes 6, 7, 12, 13, and 14 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.

In February 2016, we completed the sale of FD to New Fresh Co., LLC, a Florida limited liability company controlled by the former founder of FD. See Note 4 to the accompanying financial statements.

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.

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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~~

2022 Plans

Since 2020 the world has ~~not made any adjustments~~been in the grip of a pandemic which has wreaked havoc on economies world-wide, including in the U.S., which is our primary market. As a result of the pandemic, restaurants, hotels, country clubs, casinos, catering houses and other of our primary customers have either been closed completely or are only partially open with significantly reduced operations. Accordingly, foodservice revenues, which historically have been a significant overall portion of our revenues have been significantly reduced 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 continuing throughout the year and into 2021, experienced unprecedented declines. In 2022, as the pandemic has begun to decline in the ~~financial statements which would be necessary should~~United States and foodservice establishments have begun to reopen and travel has resumed, we have experienced strong foodservice revenue growth. Concurrently, while ecommerce revenues remained above pre-pandemic historical levels, lower deferred revenues recognized in the ~~Company not be able~~first quarter of 2022 and decreases in COVID-19 driven demand in 2022 compared to ~~continue as a going concern.~~ 2021 partially driven by the continued re-opening of bricks and mortar stores, impacted e-commerce revenues.

~~2017 Plans~~

During ~~2017, in addition to our efforts to increase sales in our existing foodservice operations~~2022, we plan ~~to attempt~~ to expand our business by expanding our focus to additional specialty foods markets ~~in both~~and by leveraging our e-commerce platform to launch and grow, either organically and/or through acquisition, new D2C brands and e-commerce sites within targeted consumer areas, on the ~~consumer and foodservice sector,~~Company’s e-commerce platform. In addition, we will continue exploring potential acquisition and partnership opportunities with influencers and ~~continuing~~other celebrities to continue to extend 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 which are currently being explored.~~relationships. In addition, we are currently exploring the introduction of, or have introduced into the market, 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.

Furthermore, the Company intends to continue to expand its activities in the direct-to-consumer space and the overall consumer packaged goods (CPG) space through 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.

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.

Inflation

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~~Inflation~~

In the opinion of management, during the three months ended March 31, 2022, inflation has not had a material effect on the Company’s financial condition or results of its operations.

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, ~~2016~~2021 and other of its Current Reports on Form 8-K, all of which isreports are available at no cost at www.sec.gov.

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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 ~~Securities and Exchange Commission’s~~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 Rules 13a-15(e) and 15d-15(e)~~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 and as a result management has concluded our internal control over financial reporting was ineffective at March 31, 2022 at the reasonable assurance level. Management of the Company believes that asthis deficiency is primarily due to the smaller size of ~~that date,~~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 ~~disclosure controls~~accounting staff and ~~procedures were adequate and effective~~we expect to ~~ensure that information required~~retain additional qualified personnel to ~~be disclosed by us~~continue to remediate this control deficiency in the ~~reports we file or submit with~~future. In making this assessment, our management used the ~~Securities and Exchange~~criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ~~is recorded, processed, summarized and reported within the time periods specified~~(“COSO”) in ~~the Securities and Exchange Commission’s rules and forms. The conclusions notwithstanding, you are advised that no system is foolproof.~~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 subsidiaries, Innovative Gourmet LLC and Food Innovations, Inc. Since that time, other parties involved in the incident have joined as plaintiffs in the PA Action. The complaint in the PA Action alleges, inter alia, wrongful death and negligence by a driver formerly employed by Innovative Gourmet, and plaintiffs filed 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, its subsidiaries, and their employees 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, its subsidiaries and the driver in the PA Action (and related actions), 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. On July 16, 2020, the court granted the Company's motion to stay the case through the final adjudication of an additional pending legal proceeding against the driver in connection with the events related to the case. It is not anticipated that the Company and its subsidiaries will be a party to any other legal proceedings in connection with this matter. 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.

~~On July 7, 2017, Scher Zalman Duchman~~financial position or our business, and Deborah L. Duchman (collectively, “Duchmans”) filed an amended complaint in the United States District Court for the Southern District of Florida seeking approximately $1 million in damages against Innovative Food Holdings, Inc., FD Acquisition Corp., and Sam Klepfish, IVFH’s CEO. The Duchmans, amongst other things, allege that defendants owed a fiduciary duty to the Duchmans to minimize the Duchmans’ own personal guarantees and personal obligations related to loans and other obligations incurred by a former subsidiary of the Company and that the Defendants did not fulfill that alleged fiduciary obligation. In response to the lawsuit, IVFH has filed a motion, which is currently being considered by the court, seeking dismissal of all claims on a number of basis including providing the court with a copy of a release and covenant not to sue executed by the Duchmans in April of 2017 in favor of IVFH and its officers which encompasses the claims the Duchmans have asserted. IVFH believes that this lawsuit is without merit and is an attempt by the Duchmans to drag IVFH into the Duchmans’ personal financial matters which are unrelated to IVFH. While IVFH intends to vigorously defend against this lawsuit, the outcome of ~~this lawsuit~~these matters cannot be ultimately be predicted.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

~~The Company issued the following shares of common stock during the nine months ended September 30, 2017:~~

~~The Company issued 274,783 shares of common stock for cash of $68,697 representing the exercise of warrants at a price of $0.25 per shares.~~

The Company issued 2,410,392 shares of common stock (net of 623,813 shares held back for withholding taxes) to employees, officers, and directors in satisfaction of the following obligations: vested RSUs representing 2,533,246 shares of common stock, and bonus shares and shares previously accrued representing 500,959 shares of common stock. The Company charged the amount of $59,584 to additional paid-in capital representing the value of these shares that had not been previously charged to operations.

~~The Company issued 658,600 shares of common stock to its Chief Executive Officer for the conversion of a note payable at $0.25 per share.~~

~~The Company issued 4,626,427 shares of common stock to investors for the conversion of principal and accrued interest on notes payable in the amounts of $627,565 and $528,242, respectively.~~

~~The Company issued 70,000 shares of common stock with a fair value of $33,600 to an employee as a bonus.~~

~~The Company issued 200,000 shares of common stock for the exercise of stock options for cash of $70,000.~~

~~The Company issued 224,638 shares of common stock for a subscription receivable in the amount of $128,044.~~

~~The Company issued 250,000 shares of common stock in exchange for the cashless conversion of warrants.~~

~~The Company made the following purchases of its common stock during the nine months ended September 30, 2017:~~

Period
(a)
Total number of shares purchased

(b)
Average price paid per share

(c)
Total number of shares purchased
as part of publicly announced plans or programs

(d)
Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs

January 2017 37,000 $ 0.502 N/A N/A
February 2017 642,688 $ 0.485 N/A N/A
May 2017 639,383 $ 0.368 N/A N/A
June 2017 438,379 $ 0.575 N/A N/A

Item 3. Defaults Upon Senior Securities

None.

~~None.~~

Item 4. Mine Safety Disclosures

Not ~~applicable~~applicable.

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Item 5. Other Information

None.

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~~None.~~

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).

~~4.1~~ 31.1	Form of Convertible Note (incorporated by reference to exhibit 4.1 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).

~~4.2~~	Form of Convertible Note (incorporated by reference to exhibit 4.2 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).

~~4.3~~	Form of Warrant - Class A (incorporated by reference to exhibit 4.3 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).

~~4.4~~	Form of Warrant - Class B (incorporated by reference to exhibit 4.4 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).

~~4.5~~	Form of Warrant - Class C (incorporated by reference to exhibit 4.5 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).

~~4.6~~	Secured Convertible Promissory Note dated December 31, 2008 in favor of Alpha Capital Anstalt (incorporated by reference to exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 7, 2009).

~~4.7~~	Class B Common Stock Purchase Warrant dated December 31, 2008 in favor of Alpha Capital Anstalt (incorporated by reference to exhibit 10.2 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 7, 2009).

~~4.8~~	Subscription Agreement between the Registrant and Alpha Capital Anstalt dated December 31, 2008 (incorporated by reference to exhibit 10.3 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 7, 2009).

~~4.9~~	Amendment, Waiver, and Consent Agreement effective January 1, 2009 between the Registrant and Alpha Capital Anstalt (incorporated by reference to exhibit 10.4 of the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on January 7, 2009).

~~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	Chief Executive Officer	~~November 14, 2017~~ May 16, 2022
Sam Klepfish

/s/ ~~John McDonald~~ Richard Tang	~~Principal~~ Chief Financial Officer	~~November 14, 2017~~ May 16, 2022
~~John McDonald~~ Richard Tang

32iso4217:USD xbrli:shares

	For the Three		For the Three		For the Nine		For the Nine
	Months Ended		Months Ended		Months Ended		Months Ended
	September 30,		September 30,		September 30,		September 30,
	2017		2016		2017		2016

Revenue	$	10,495,637	$	9,094,443	$	30,494,462	$	25,413,011
Cost of goods sold		7,052,018		6,404,185		20,585,273		17,979,553
Gross margin		3,443,619		2,690,258		9,909,189		7,433,458

Selling, general and administrative expenses		1,894,588		1,702,425		6,269,386		5,245,178
Total operating expenses		1,894,588		1,702,425		6,269,386		5,245,178

Operating income		1,549,031		987,833		3,639,803		2,188,280

Other (income) expense:
Interest expense, net		16,139		121,226		157,912		365,764
Total other (income) expense		16,139		121,226		157,912		365,764

Net income before taxes		1,532,892		866,607		3,481,891		1,822,516

Income tax expense		-		-		-		-

Net income from continuing operations	$	1,532,892	$	866,607	$	3,481,891	$	1,822,516

Net income from discontinued operations		-		-		-		4,447,279

Consolidated net income	$	1,532,892	$	866,607	$	3,481,891	$	6,269,795

Net income per share from continuing operations - basic	$	0.047	$	0.035	$	0.117	$	0.073

Net income per share from discontinued operations - basic	$	-	$		$	-	$	0.178

Net income per share from continuing operations - diluted	$	0.046	$	0.030	$	0.113	$	0.066

Net income per share from discontinued operations - diluted	$	-	$	-	$	-	$	0.139


Weighted average shares outstanding - basic		32,333,108		25,047,134		29,779,904		24,980,317

Weighted average shares outstanding - diluted		33,476,756		31,619,778		30,842,167		32,044,762

	For the Nine Months Ended
	September 30,
	2016
Revenue	$	2,389,950
Cost of goods sold		1,764,834
Gross margin		625,116

Selling, general and administrative expenses		3,368,213
Total operating expenses		3,368,213

Operating loss		(2,743,097	)

Other (income) expense:
Gain on sale of discontinued operations		(7,201,196	)
Interest expense, net		10,820
Total other (income) expense		(7,190,376	)

Income from discontinued operations, net of tax	$	4,447,279

	February 22, 2016

Receivable due from buyer, net of reserve of $8,700,000	$	-
Net proceeds from sale of assets and liabilities		-

Assets sold		(6,225,073	)
Liabilities sold		13,426,269
Net liabilities sold		7,201,196

Gain on sale		7,201,196

Loss from discontinued operations before income tax		(2,753,917	)
Income tax expense		-

Income from discontinued operations	$	4,447,279

	September 30, 2017
			Accumulated
	Gross		Amortization			Net
Trade Name	$	217,000	$	-		$	217,000
Non-Compete Agreement		444,000		(281,500	)		162,500
Customer Relationships		1,930,994		(1,042,261	)		888,733
Goodwill		151,000		-			151,000
Total	$	2,742,994	$	(1,323,761	)	$	1,419,233

	December 31, 2016
			Accumulated
	Gross		Amortization			Net
Trade Name	$	217,000	$	-		$	217,000
Non-Compete Agreement		244,000		(244,000	)		-
Customer Relationships		1,130,994		(791,310	)		339,684
Goodwill		151,000		-			151,000
Total	$	1,742,994	$	(1,035,310	)	$	707,684

	September 30, 2017		December 31, 2016

Term loan dated as of August 5, 2016 in the original amount of $1,200,000 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 LIBOR plus 4.5%. Principal payments in the amount of $66,667 are due monthly along with accrued interest beginning September 5, 2016. The entire principal balance and all accrued interest is due on the maturity date of February 5, 2018. During the twelve months ended December 31, 2016, the Company transferred principal in the amount of $1,200,000 from the line of credit facility with Fifth Third Bank into this term loan. During the three months ended September 30, 2017, the Company made principal and interest payments on this loan in the amounts of $200,000 and $5,594, respectively. During the nine months ended September 30, 2017, the Company made principal and interest payments on this loan in the amounts of $600,000 and $24,187, respectively.	$	314,033	$	914,033

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 and interest at the rate of Libor plus 3% are due monthly. The balance of the principal amount will be due February 28, 2018. During the three months ended September 30, 2017, the Company made payments of principal and interest on this note in the amounts of $13,650 and $3,288, respectively. During the nine months ended September 30, 2017, the Company made payments of principal and interest on this note in the amounts of $40,950 and $9,663, respectively.		295,750		336,700

Secured mortgage note payable for the acquisition of land and building in Broadview, Illinois in the amount of $980,000. Payments of $8,167 including principal and 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 will be due May 29, 2020. During the three months ended September 30, 2017, the Company made payments of principal and interest on this note in the amounts of $24,500 and $7,845, respectively. During the nine months ended September 30, 2017, the Company made payments of principal and interest on this note in the amounts of $73,500 and $22,919, respectively.		751,333		824,833

A total of 16 convertible notes payable in the aggregate amount of $627,565 (the “Convertible Notes Payable”). Certain of the Convertible Notes Payable contain cross default provisions, and are secured by subordinated interest in a majority of the Company’s assets. The Convertible Notes Payable bear interest at the rate of 1.9% per annum; principal and accrued interest are convertible into common stock of the Company at a conversion price of $0.25 per share; however, the interest may be paid in cash by the Company and certain limited amounts of principle may also be prepaid in cash. Effective May 13, 2014, the due date of these notes was extended from May 15, 2014 to December 31, 2015, and a discount to the notes in the aggregate amount of $712,565 was recorded to recognize the value of the beneficial conversion feature embedded in the extension of the term of the notes. In March 2015 the notes were further extended to January 1, 2016. On September 30, 2015, the notes in the amount of $627,565 were further extended to July 1, 2017, and a discount in the amount of $627,565 was recorded to recognize the value of the beneficial conversion featured embedded in the extension of the term of the notes. During the three and nine months ended September 30, 2017, $0 and $185,018, respectively, of this discount was charged to operations. During the three and nine months ended September 30, 2017, the Company accrued interest in the amount of $0 and $179,304, respectively, on these notes. During the three months ended June 30, 2017, holders of the Convertible Notes Payable converted principal in the amount of $627,565 and accrued interest in the amount of $528,242 into an aggregate of 1,155,807 shares of common stock, and accrued interest in the amount of $86,089 was forgiven. The amount of $86,809 is recorded as a decrease in interest expense during the three and six months ended June 30, 2017.		-		627,565

A convertible 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%. The principal is convertible into common stock of the Company at a conversion price of $0.25 per share. During the three and nine months ended September 30, 2017, the Company accrued interest in the amount of $93 and $279, respectively, on this note.		20,000		20,000

	September 30, 2017		December 31, 2016

Unsecured note to Sam Klepfish for $164,650 which may not be prepaid without Mr. Klepfish’s consent, originally carrying an interest rate of 8% per annum and no due date. As of July 1, 2014, the interest rate was reduced to 1.9% and as of November 17, 2014 the interest rate was further reduced to 0%. During the three months ended December 31, 2015, interest in the amount of $54,150 was capitalized, and the aggregate principal amount of $164,650 was extended to July 1, 2017. This note and accrued interest are convertible into common stock of the Company at a conversion price of $0.25 per share. During the three months ended March 31, 2017, the entire principal balance of this note in the amount of $164,650 was converted into 658,600 shares of the Company’s common stock.		-		164,650

Unsecured promissory note in the amount of $100,000 dated January 1, 2017 bearing interest at the rate of 2.91% per annum issued in connection with the Oasis acquisition. Payments in the amount of $4,297 consisting of principal and interest are to be made monthly beginning February 15, 2017 for twenty-four months until paid in full. During the three and nine months ended September 30, 2017, the Company made principal payments on this note in the amount of $12,361 and $530, respectively; during the three and nine months ended September 30, 2017, the Company made interest payments on this note in the amount of rest payments on this note in the amounts of $32,496, and $1,880, respectively.		67,504		-

Capital lease obligations under a lease agreement for a forklift payable in thirty-six monthly installments of $274 including interest at the rate of 4.46%. During the three and nine months ended September 30, 2017, the Company made principal payments in the amount of $778 and $2,307, respectively. During the three and nine months ended September 30, 2017, the Company made interest payments on this lease obligation in the amounts of $45 and $159, respectively.		3,471		5,778

Capital lease obligations under a lease agreement for a forklift payable in thirty-six monthly installments of $579 including interest at the rate of 4.83%. During the three and nine months ended September 30, 2017, the Company made principal payments in the amounts of $1,558 and $4,617, respectively. During the three and nine months end September 30, 2017, the Company made interest payments on this lease obligation in the amounts of $178 and $591, respectively.		13,738		18,354

Total	$	1,465,829	$	2,911,913

Less: Discount		-		(185,020	)

Net	$	1,465,829	$	2,726,893
Current maturities, net of discount	$	547,183	$	1,589,082
Long-term portion, net of discount		918,646		1,137,811
Total	$	1,465,829	$	2,726,893

	For the Nine Months Ended September 30,
	2017		2016
Discount on Notes Payable amortized to interest expense:	$	185,018	$	277,527

2018	$	547,183
2019		177,038
2020		609,933
2021		54,600
2022		54,600
Thereafter		22,475
Total	$	1,465,829

Range of exercise Prices		Number of warrants Outstanding		Weighted average remaining contractual life (years)		Weighted average exercise price of outstanding Warrants		Number of warrants Exercisable		Weighted average exercise price of exercisable Warrants
$	0.010		700,000		2.63	$	0.01		700,000	$	0.01

			700,000		2.63	$	0.01		700,000	$	0.01

	Number of			Weighted Average
	Warrants			Exercise Price
Warrants outstanding at December 31, 2016		3,537,284		$	0.45

Granted		-			-
Exercised		(2,837,284	)	$	0.56
Cancelled / Expired		-			-

Warrants outstanding at September 30, 2017		700,000		$	0.01

	Number of Shares			Weighted Average Exercise Price
Options outstanding at December 31, 2016		2,445,000		$	1.01

Granted		650,000		$	1.73
Exercised		(200,000	)	$	0.35
Cancelled / Expired		(1,000,000	)	$	1.18

Options outstanding at September 30, 2017		1,895,000		$	1.25

Period	(a) Total number of shares purchased		(b) Average price paid per share		(c) Total number of shares purchased as part of publicly announced plans or programs		(d) Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs

January 2017		37,000	$	0.502		N/A		N/A
February 2017		642,688	$	0.485		N/A		N/A
May 2017		639,383	$	0.368		N/A		N/A
June 2017		438,379	$	0.575		N/A		N/A