Innovative Food Holdings, Inc.

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innovfood20230930_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D. C. 20549

FORM 10-Q

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

For the quarterly period ended September 30, 2023

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

For the transition period from to .

Commission File Number: 0-9376

https://cdn.kscope.io/0833092d01ded1c52d56b4a629a94e05-ivfh_logo1.jpg

INNOVATIVE FOOD HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

Florida

(State or Other Jurisdiction of Incorporation or Organization)

20-1167761

(IRS Employer I.D. No.)

28411 Race Track Rd.

Bonita Springs, Florida 34135

(Address of Principal Executive Offices)

(239) 596-0204

(Registrant’s Telephone Number, Including Area Code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act: None.

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

(Check One):

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Regulation 12b-2 of the Exchange Act): Yes ☐ No ☒

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 48,979,067 shares of common stock outstanding as of November 6, 2023.

INNOVATIVE FOOD HOLDINGS, INC.

TABLE OF CONTENTS TO FORM 10-Q

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited)	4
	Consolidated Balance Sheets	4
	Consolidated Statements of Operations	5
	Consolidated Statement of Stockholders’ Equity	6
	Consolidated Statements of Cash Flows	7
	Condensed Notes to the Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (including cautionary statement)	29
Item 4.	Controls and Procedures	37

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
	Signatures	40

PART I. FINANCIAL INFORMATION

ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS

Innovative Food Holdings, Inc.

Consolidated Balance Sheets

	September 30,			December 31,
	2023			2022
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	3,711,887		$	4,899,398
Accounts receivable, net		4,969,374			4,969,395
Inventory		2,986,258			3,053,852
Other current assets		339,410			289,432
Total current assets		12,006,929			13,212,077

Property and equipment, net		7,682,896			7,921,561
Right of use assets, operating leases, net		104,775			152,425
Right of use assets, finance leases, net		469,883			570,323
Other amortizable intangible assets, net		-			30,994
Tradenames and other unamortizable intangible assets		1,532,822			1,532,822
Total assets	$	21,797,305		$	23,420,202

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities	$	5,228,965		$	6,853,253
Accrued separation costs, related parties, current portion		343,144			-
Accrued interest		91,660			18,104
Deferred revenue		1,094,322			1,558,155
Line of Credit		-			2,014,333
Stock appreciation rights liability		274,755			-
Notes payable - current portion		120,330			5,711,800
Lease liability - operating leases, current		66,860			64,987
Lease liability - finance leases, current		185,226			191,977
Total current liabilities		7,405,262			16,412,609

Note payable, net of discount		8,880,014			-
Accrued separation costs, related parties, non-current		874,359			-
Lease liability - operating leases, non-current		37,915			87,438
Lease liability - finance leases, non-current		197,077			333,092
Total liabilities		17,394,627			16,833,139

Commitments & Contingencies (see note 16)
Stockholders' equity
Common stock: $0.0001 par value; 500,000,000 shares authorized; 51,622,238 and 49,427,297 shares issued, and 48,799,067 and 46,589,717 shares outstanding at September 30, 2023 and December 31, 2022, respectively		5,159			4,938
Additional paid-in capital		42,685,559			42,189,471
Common stock to be issued, 180,000 and 1,499,940 shares at September 30, 2023 and December 31, 2022, respectively		18			150
Treasury stock: 2,623,171 and 2,623,171 shares outstanding at September 30, 2023 and December 31, 2022 , respectively.		(1,141,370	)		(1,141,370	)
Accumulated deficit		(37,146,688	)		(34,466,126	)
Total stockholders' equity		4,402,678			6,587,063

Total liabilities and stockholders' equity	$	21,797,305		$	23,420,202

See condensed notes to these unaudited consolidated financial statements.

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Innovative Food Holdings, Inc.

Consolidated Statements of Operations

(unaudited)

	For the Three			For the Three			For the Nine			For the Nine
	Months Ended			Months Ended			Months Ended			Months Ended
	September 30,			September 30,			September 30,			September 30,
	2023			2022			2023			2022

Revenue	$	17,300,291		$	20,059,982		$	53,128,812		$	56,226,249
Cost of goods sold		12,424,105		$	15,546,132			39,373,204			43,537,570
Gross margin		4,876,186			4,513,850			13,755,608			12,688,679

Selling, general and administrative expenses		4,483,134			4,320,981			13,838,369			15,015,456
Separation costs - executive officers		-			-			1,945,650			-
Total operating expenses		4,483,134			4,320,981			15,784,019			15,015,456

Operating income (loss)		393,052			192,869			(2,028,411	)		(2,326,777	)

Other income (expense:)
Other income - interest rate swap		-			-			-			294,000
Loss on extinguishment of debt		-			-			-			(40,556	)
Other leasing income		2,389			785			6,189			8,169
Interest expense, net		(260,708	)		(183,908	)		(642,506	)		(379,253	)
Total other income (expense)		(258,319	)		(183,123	)		(636,317	)		(117,640	)

Net income (loss) before taxes		134,733			9,746			(2,664,728	)		(2,444,417	)

Income tax expense		-			-			15,834			-

Net income (loss)	$	134,733		$	9,746		$	(2,680,562	)	$	(2,444,417	)

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

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

Weighted average shares outstanding - basic		49,193,476			47,390,976			48,909,277			46,838,377

Weighted average shares outstanding - diluted		49,235,998			47,390,976			48,909,277			46,838,377

See condensed notes to these unaudited consolidated financial statements.

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Innovative Food Holdings, Inc.

Consolidated Statements of Stockholders' Equity

Three and Nine Months Ended September 30, 2023 and 2022

(unaudited)

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

Balance -June 30, 2022		48,290,859	$	4,827		1,723,288			170		$	41,980,090			2,623,171	$	(1,141,370	)	$	(35,570,287	)	$	5,273,430
Fair value of vested stock and options		-		-		602,443			60			152,666			-		-			-			152,726
Shares issued to management and employees, previously accrued		1,136,438		114		(1,136,438	)		(114	)		-			-		-			-			-
Net income for the three months ended September 30, 2022		-		-		-			-			-			-		-			9,746			9,746
Balance -September 30, 2022		49,427,297	$	4,941		1,189,293			116		$	42,132,756			2,623,171	$	(1,141,370	)	$	(35,560,541	)	$	5,435,902


Balance -June 30, 2023		50,969,327	$	5,092		847,320			85		$	42,608,233			2,623,171	$	(1,141,370	)	$	(37,281,421	)	$	4,190,619
Fair value of shares issuable under equity incentive plan		-		-		-			-			77,326			-		-			-			77,326
Common stock issued from common stock subscribed		652,911		67		(667,320	)		(67	)		-			-		-			-			-
Net income for the three months ended September 30, 2023		-		-		-			-			-			-		-			134,733			134,733
Balance -September 30, 2023		51,622,238	$	5,159		180,000			18		$	42,685,559			2,623,171	$	(1,141,370	)	$	(37,146,688	)	$	4,402,678



Balance - December 31, 2021		48,114,557	$	4,809		764,774		$	76		$	41,662,710			2,623,171	$	(1,141,370	)	$	(33,116,124	)	$	7,410,101
Fair value of vested stock and stock options		-		-		1,560,957			154			460,115			-		-			-			460,269
Common stock issued for services		176,302		18		-			-			59,931			-		-			-			59,949
Offering expenses for stock previously sold for cash		-		-		-			-			(50,000	)		-		-			-			(50,000	)
Shares issued to management and employees, previously accrued		1,136,438		114		(1,136,438	)		(114	)		-			-		-			-			-
Net loss for the nine months ended September 30, 2022		-		-		-			-			-			-		-			(2,444,417	)		(2,444,417	)
Balance - September 30, 2022		49,427,297	$	4,941		1,189,293		$	116		$	42,132,756			2,623,171	$	(1,141,370	)	$	(35,560,541	)	$	5,435,902


Balance - December 31, 2022		49,427,297	$	4,938		1,499,940		$	150		$	42,189,471			2,623,171	$	(1,141,370	)	$	(34,466,126	)	$	6,587,063
Shares issued for compensation		-		-		222,380			22			50,658			-		-			-			50,680
Shares issued to management and employees, previously accrued		875,000		87		(875,000	)		(87	)		-			-		-			-			-
Fair value of shares under compensation plan		-		-		-			-			165,328			-		-			-			165,328
Shares issued under severance agreement		400,000		40		-			-			167,960			-		-			-			168,000
Common stock issued for services		267,030		27		-			-			112,142			-		-			-			112,169
Common stock issued from common stock subscribed		652,911		67		(667,320	)		(67	)		-			-		-			-			-
Net loss for the nine months ended September 30, 2023		-		-		-			-			-			-		-			(2,680,562	)		(2,680,562	)
Balance - September 30, 2023		51,622,238	$	5,159		180,000		$	18		$	42,685,559			2,623,171	$	(1,141,370	)	$	(37,146,688	)	$	4,402,678

See condensed notes to these unaudited consolidated financial statements.

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Innovative Food Holdings, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	For the Nine			For the Nine
	Months Ended			Months Ended
	September 30,			September 30,
	2023			2022

Cash flows from operating activities:
Net loss	$	(2,680,562	)	$	(2,444,417	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		429,048			423,844
Amortization of right of use asset		47,650			50,821
Amortization of prepaid loan fees		-			70,618
Amortization of discount on notes payable		2,013			-
Stock based compensation		328,177			520,218
Value of stock appreciation rights		274,755			-
Loss on extinguishment of debt		-			40,556
Provision for doubtful accounts		108,694			11,493

Changes in assets and liabilities:
Accounts receivable, net		(108,673	)		(1,425,374	)
Inventory and other current assets, net		17,616			150,643
Accounts payable and accrued liabilities		(1,489,017	)		386,414
Accrued separation costs - related parties		1,385,503			-
Deferred revenue		(463,833	)		(536,757	)
Operating lease liability		(47,650	)		(50,821	)
Net cash used in operating activities		(2,196,279	)		(2,802,762	)

Cash flows from investing activities:
Acquisition of property and equipment		(58,949	)		(107,045	)
Net cash used in investing activities		(58,949	)		(107,045	)

Cash flows from financing activities:
Payment of offering costs for stock previously issued		-			(50,000	)
Cash received from notes payable, net of costs		3,285,588			-
Principal payments on debt		(52,405	)		(169,696	)
Principal payments financing leases		(151,133	)		(130,459	)
Principal payments on line of credit		(2,014,333	)		-
Cost of debt financing		-			(110,305	)
Net cash provided by (used in) financing activities		1,067,717			(460,460	)

Decrease in cash and cash equivalents		(1,187,511	)		(3,370,267	)

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

Cash and cash equivalents at end of period	$	3,711,887		$	2,752,404

Supplemental disclosure of cash flow information:

Cash paid during the period for:
Interest	$	572,879		$	187,090

Taxes	$	-		$	-

Non-cash investing and financing activities:
(Decrease) Increase in right of use assets & liabilities	$	-		$	(13,216	)
Finance lease for fixed assets	$	-		$	42,500
Debt to Fifth Third Bank paid directly by Maple Mark Bank	$	-		$	7,695,866
Par value of shares issued, previously accrued	$	66		$	-
Issuance of common stock for severance agreement previously accrued	$	168,000		$	-

See condensed notes to these unaudited consolidated financial statements.

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INNOVATIVE FOOD HOLDINGS, INC.

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

1. NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited interim consolidated financial statements include those of Innovative Food Holdings, Inc. and all of its wholly-owned subsidiaries (collectively, the “Company”) and have been prepared in accordance with generally accepted accounting principles pursuant to Regulation S-X of the Securities and Exchange Commission and with the instructions to Form 10-Q. Certain information and footnote disclosures normally included in audited consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. Accordingly, these interim financial statements should be read in conjunction with the Company’s audited financial statements and related notes as contained in Form 10-K for the year ended December 31, 2022. In the opinion of management, the interim unaudited consolidated financial statements reflect all adjustments, including normal recurring adjustments, necessary for fair presentation of the interim periods presented. The results of the operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results of operations to be expected for the full year.

Business Activity

We provide difficult-to-find specialty foods primarily to both Professional Chefs and Home Gourmets through our relationships with producers, growers, makers and distributors of these products worldwide. The distribution of these products primarily originates from our three unified warehouses and those of our drop ship partners, and is driven by our proprietary technology platform. In addition, we provide value-added services through our team of food specialists and Chef Advisors who offer customer support, menu ideas, and preparation guidance.

Use of Estimates

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

Principles of Consolidation

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

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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, 2023 and 2022, trade receivables from the Company’s largest customer amounted to 26% and 27%, respectively, of total trade receivables. During the three months ended September 30, 2023 and 2022, sales from the Company’s largest customer amounted to 47% and 50% of total sales, respectively. During the nine months ended September 30, 2023 and 2022, sales from the Company’s largest customer amounted to 47% and 51% of total sales, respectively.

The Company maintains cash balances in excess of Federal Deposit Insurance Corporation limits. At September 30, 2023 and December 31, 2022, the total cash in excess of these limits was $2,018,993 and $3,205,568, respectively.

Leases

The Company accounts for leases in accordance with Financial Accounting Standards Board (“FASB”) ASC 842, “Leases”. The Company determines if an arrangement is a lease at inception. Operating lease right-of-use assets (“ROU assets”) and short-term and long-term lease liabilities are included on the face of the consolidated balance sheet. Finance lease ROU assets are presented within other assets, and finance lease liabilities are presented within current and long-term liabilities.

ROU assets represent the right of use to an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The operating lease ROU asset also excludes lease incentives. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. The Company has lease agreements with lease and non-lease components, which are accounted for as a single lease component. For lease agreements with terms less than 12 months, the Company has elected the short-term lease measurement and recognition exemption, and it recognizes such lease payments on a straight-line basis over the lease term.

Revenue Recognition

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

For revenue from product sales (i.e., specialty foodservice and e-commerce), the Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 “Revenue from Contracts with Customers”. A five-step analysis must be met as outlined in Topic 606: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations, and (v) recognize revenue when (or as) performance obligations are satisfied. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required.

Revenue from brand management services are comprised of fees and/or commissions associated with client sales. Revenue from brand management services are recognized at the point in time when services are rendered to the client.

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

Deferred Revenue

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

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

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

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

Cash payments received		385,633
Net sales recognized		(513,231	)
Balance as of September 30, 2022 (unaudited)	$	1,094,649

Balance as of December 31, 2022	$	1,558,155
Cash payments received		215,346
Net sales recognized		(534,711	)
Balance as of March 31, 2023 (unaudited)	$	1,238,790

Cash payments received		361,151
Net sales recognized		(515,819	)
Balance as of June 30, 2023 (unaudited)	$	1,084,122

Cash payments received		997,195
Net sales recognized		(986,995	)
Balance as of September 30, 2023 (unaudited)	$	1,094,322

Disaggregation of Revenue

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

	Three Months Ended
	September 30,
	2023		2022
	(unaudited)		(unaudited)
Specialty Foodservice	$	14,775,073	$	17,630,515
E-Commerce		1,825,924		1,839,541
National Brand Management		340,577		336,766
Logistics		358,717		253,160
Total	$	17,300,291	$	20,059,982

	Nine Months Ended
	September 30,
	2023		2022
	(unaudited)		(unaudited)
Specialty Foodservice	$	44,625,285	$	46,072,258
E-Commerce		6,660,138		8,637,210
National Brand Management		965,660		872,732
Logistics		877,729		644,049
Total	$	53,128,812	$	56,226,249

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Cost of goods sold

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

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

Basic and Diluted Earnings Per Share

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

The Company uses the treasury stock method to calculate the impact of outstanding stock options and warrants. Stock options and warrants for which the exercise price exceeds the average market price over the period have an anti-dilutive effect on earnings per common share and, accordingly, are excluded from the calculation.

Dilutive shares at September 30, 2023:

Stock Options

The following table summarizes the options outstanding and the related prices for the options to purchase shares of the Company’s common stock issued by the Company at September 30, 2023:

				Weighted
				average
				Remaining
Exercise		Number of		contractual
Price		Options		life (years)
$	0.41		125,000		0.57
$	0.50		125,000		0.57
$	0.60		50,000		2.25
$	0.62		360,000		0.25
$	0.85		540,000		0.25
$	1.00		50,000		2.25
$	1.20		900,000		0.25
			2,150,000		0.37

Restricted Stock Awards

At September 30, 2023, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those 300,000 restricted stock awards will vest as follows: 125,000 restricted stock awards will vest contingent upon the attainment of a stock price of $2.00 per share for 20 straight trading days, and an additional 175,000 restricted stock awards will vest contingent upon the attainment of a stock price of $3.00 per share for 20 straight trading days. The fair value of these RSUs at the date of the grants will be charged to operations upon vesting. At September 30, 2023, none of these RSU were vested. There was no charge to operations for these RSUs during the three and nine months ended September 30, 2023.

Stock-based Compensation

At September 30, 2023, there were a total of 3,538,243 shares of common stock potentially issuable to the Company’s CEO pursuant to his compensation plan and contingent upon the achievement of certain performance goals; see notes 14 and 17.

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Dilutive shares at September 30, 2022:

Stock Options

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

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

Restricted Stock Awards

At September 30, 2022, there are 300,000 unvested restricted stock awards remaining from grants in a prior year. Those 300,000 restricted stock awards will vest as follows: 125,000 restricted stock awards will vest contingent upon the attainment of a stock price of $2.00 per share for 20 straight trading days, and an additional 175,000 restricted stock awards will vest contingent upon the attainment of a stock price of $3.00 per share for 20 straight trading days. At September 30, 2022, none of these RSU were vested. There was no charge to operations for these RSUs during the three and nine months ended September 30, 2022.

Stock-based Compensation

At September 30, 2023, there were a total of 1,000,307 shares of common stock issuable to officers and directors pursuant to their compensation plans.

New Accounting Pronouncements

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

2. LIQUIDITY

The accompanying unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of the Company as a going concern. The Company had an accumulated deficit of $37,146,688 at September 30, 2023 and negative cash flow from operations in the amount of $2,196,279 for the nine months ended September 30, 2023. The Company’s current assets exceeded its current liabilities by $4,601,667 as of September 30, 2023. The Company has reported net income of $134,733 for the three months ended September 30, 2023 and a net loss of $2,680,562 for the nine months ended September 30, 2023.

The Company continues to work to manage its current liabilities while making changes to operations in order to further improve its cash flow and liquidity position. Management believes the Company achieved significant progress in improving the Company’s liquidity during the three months ended September 30, 2023, as discussed below.

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The Company reported a profit in the amount of $134,733 for the three months ended September 30, 2023 compared to a profit in the amount of $9,746 during the comparable period of the prior year. Also during the three months ended September 30, 2023, the Company paid the entire balance due on its letter of credit with MapleMark Bank in the amount of $2,014,333. Due to the Company’s improved operations performance along with its restructured balance sheet, the Company believes that any issues regarding its near-term liquidity have been resolved.

3. ACCOUNTS RECEIVABLE

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

	September 30, 2023			December 31, 2022
	(unaudited)
Accounts receivable from customers	$	5,051,214		$	5,309,620
Allowance for doubtful accounts		(81,840	)		(340,225	)
Accounts receivable, net	$	4,969,374		$	4,969,395

During the nine months ended September 30, 2023, the Company wrote-off accounts receivable in the amount of $335,693 against our allowance for doubtful accounts. As these accounts had all been 100% recorded in the allowance for doubtful accounts, there was no charge to operations.

During the three and nine months ended September 30, 2023, the Company charged the amount of $57,789 and $108,694 to provision for doubtful accounts, respectively. During the three and nine months ended September 30, 2022, the Company charged the amount of $0 and $11,493 to provision for doubtful accounts, respectively.

4. INVENTORY

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

	September 30, 2023		December 31, 2022
	(unaudited)
Finished goods inventory	$	2,986,258	$	3,053,852
Allowance for slow moving & obsolete inventory		-		-
Finished goods inventory, net	$	2,986,258	$	3,053,852

5. PROPERTY AND EQUIPMENT

A summary of property and equipment at September 30, 2023 and December 31, 2022 is as follows:

	September 30, 2023			December 31, 2022
	(unaudited)
Land	$	1,256,895		$	1,256,895
Building		7,191,451			7,191,451
Computer and Office Equipment		626,349			609,018
Warehouse Equipment		420,573			378,957
Furniture and Fixtures		1,021,481			1,021,481
Vehicles		109,441			109,441
Total before accumulated depreciation		10,626,190			10,567,243
Less: accumulated depreciation		(2,943,294	)		(2,645,682	)
Total	$	7,682,896		$	7,921,561

Depreciation expense for property and equipment amounted to $98,367 and $96,650 for the three months ended September 30, 2023 and 2022, respectively, and $297,614 and $285,215 for the nine months ended September 30, 2023 and 2022, respectively. Depreciation expense for property and equipment is recorded in selling, general & administrating expenses on the Company’s statement of operations.

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6. RIGHT OF USE (“ROU”) ASSETS AND LEASE LIABILITIES – OPERATING LEASES

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

The Company’s lease expense for the three months ended September 30, 2023 and 2022 was entirely comprised of operating leases and amounted to $17,746 and $18,213, respectively. The Company’s lease expense for the nine months ended September 30, 2023 and 2022 was entirely comprised of operating leases and amounted to $54,282 and $60,186, respectively.

The Company’s ROU asset amortization for the three months ended September 30, 2023 and 2022 was $15,536 and $15,659, respectively. The Company’s ROU asset amortization for the nine months ended September 30, 2023 and 2022 was $47,650 and $50,821, respectively. The difference between the lease expense and the associated ROU asset amortization consists of interest.

Right of use assets – operating leases are summarized below:

	September 30, 2023		December 31, 2022
	(unaudited)
Warehouse equipment	$	25,205	$	36,170
Office		72,150		106,601
Office equipment		7,420		9,654
Right of use assets, net	$	104,775	$	152,425

Operating lease liabilities are summarized below:

	September 30, 2023			December 31, 2022
	(unaudited)
Warehouse equipment	$	25,205		$	36,170
Office		72,150			106,601
Office equipment		7,420			9,654
Lease liability	$	104,775		$	152,425
Less: current portion		(66,860	)		(64,987	)
Lease liability, non-current	$	37,915		$	87,438

Maturity analysis under these lease agreements are as follows:

For the period ended September 30, 2024	$	71,902
For the period ended September 30, 2025		37,936
For the period ended September 30, 2026		890
Total	$	110,728
Less: Present value discount		(5,953	)
Lease liability	$	104,775

During the year ended December 31, 2022, the Company recorded the removal of a right of use asset and lease liability in the amount of $13,216 due to damage to the asset.

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7. RIGHT OF USE ASSETS – FINANCING LEASES

The Company has financing leases for vehicles and warehouse equipment. Right of use asset – financing leases are summarized below:

	September 30, 2023			December 31, 2022
	(unaudited)
Vehicles	$	404,858		$	404,858
Warehouse Equipment		555,416			555,416
Total before accumulated depreciation		960,274			960,274
Less: accumulated depreciation		(490,391	)		(389,951	)
Total	$	469,883		$	570,323

Depreciation expense related to right of use assets for the three months ended September 30, 2023 and 2022 was $33,480 and $37,128, respectively. Depreciation expense related to right of use assets for the nine months ended September 30, 2023 and 2022 was $100,440 and $107,736, respectively.

During the nine months ended September 30, 2023 and 2022, the Company recorded right of use assets and lease liabilities in the amount of $0 and $42,500, respectively, due to the execution of new financing lease agreements.

Financing lease liabilities are summarized below:

	September 30, 2023		December 31, 2022
	(unaudited)
Financing lease obligation under a lease agreement for a forklift dated July 12, 2021 in the original amount of $16,070 payable in thirty-six monthly installments of $489 including interest at the rate of 6.01%. During the three months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $1,371 and $99, respectively. During the nine months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $2,718 and $218, respectively.	$	4,293	$	8,396

Financing lease obligation under a lease agreement for a pallet truck dated July 15, 2021 in the original amount of $5,816 payable in thirty-six monthly installments of $177 including interest at the rate of 6.01%. During the three months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $493 and $36, respectively. During the nine months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $983 and $79, respectively.	$	1,554	$	3,040

Financing lease obligation under a lease agreement for warehouse furniture and equipment truck dated October 14, 2020 in the original amount of $514,173 payable in sixty monthly installments of $9,942 including interest at the rate of 6.01%. During the three months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amount of $25,804 and $4,020, respectively. During the nine months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amount of $51,227 and $8,424, respectively.	$	224,301	$	301,726

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	September 30, 2023		December 31, 2022
	(unaudited)
Financing lease obligation under a lease agreement for a truck dated March 31, 2020 in the original amount of $152,548 payable in eighty-four monthly installments of $2,188 including interest at the rate of 5.44%. During the three months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $5,329 and $1,234, respectively. During the nine months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $10,587 and $2,540, respectively.	$	81,695	$	97,685

Financing lease obligation under a lease agreement for a truck dated November 5, 2018 in the original amount of $128,587 payable in seventy monthly installments of $2,326 including interest at the rate of 8.33%. During the three months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $6,246 and $859, respectively. During the nine months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $12,364 and $1,718, respectively.	$	24,546	$	-

Financing lease obligation under a lease agreement for a truck dated August 23, 2019 in the original amount of $80,413 payable in eighty-four monthly installments of $1,148 including interest at the rate of 5.0%. During the three months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $2,928 and $552, respectively. During the nine months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $5,820 and $1,104, respectively.	$	36,324	$	43,287

Financing lease obligation under a lease agreement for a truck dated February 4, 2022 in the original amount of $42,500 payable in twenty-four monthly installments of $1,963 including interest at the rate of 10.1%. During the three months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $5,416 and $474, respectively. During the nine months ended September 30, 2023, the Company made principal and interest payments on this lease obligation in the amounts of $10,697 and $1,083, respectively.	$	9,590	$	25,826

Total	$	382,303	$	525,069

Current portion	$	185,226	$	191,977
Long-term maturities		197,077		333,092
Total	$	382,303	$	525,069

There was a total of $18,104 and $0 accrued interest on financing leases at September 30, 2023 and December 31, 2022, respectively.

Aggregate maturities of lease liabilities:

For the twelve months ended September 30,

2024	$	183,376
2025		151,982
2026		36,150
2027		10,795
Total	$	382,303

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8. INTANGIBLE ASSETS

The Company acquired certain intangible assets pursuant to the acquisitions of Artisan, Oasis, igourmet, OFB, Haley, and Mouth. These assets include non-compete agreements, customer relationships, trade names, internally developed technology, and goodwill. The Company has also capitalized the development of its website.

Other Amortizable Intangible Assets

Other amortizable intangible assets consist of $1,055,400 of trade names held by igourmet, $260,422 of trade names held by Mouth, and $217,000 of trade names held by Artisan. The Company followed the guidance of ASC 360 “Property, Plant, and Equipment” (“ASC 360”) in assessing these assets for impairment. ASC 360 states that impairment testing should be completed whenever events or changes in circumstances indicate the asset’s carrying value may not be recoverable. In management’s judgment there are no indications that the carrying value of these trade names may not be recoverable, and it determined that impairment testing was not required.

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

	September 30, 2023 (unaudited)
			Accumulated
	Gross		Amortization			Net
Non-Compete Agreement - amortizable	$	505,900	$	(505,900	)	$	-
Customer Relationships - amortizable		3,068,034		(3,068,034	)		-
Trade Names and other		1,532,822		-			1,532,822
Internally Developed Technology - amortizable		875,643		(875,643	)		-
Website - amortizable		84,000		(84,000	)		-
Total	$	6,066,399	$	(4,533,567	)	$	1,532,822

	December 31, 2022
			Accumulated
	Cost		Amortization			Net
Trade Name		1,532,822		-			1,532,822
Internally Developed Technology		875,643		(875,643	)		-
Website		84,000		(53,006	)		30,994
Total	$	2,492,465	$	(928,649	)	$	1,563,816

Total amortization expense for the three months ended September 30, 2023 and 2022 was $10,332 and $10,231, respectively. Total amortization expense for the nine months ended September 30, 2023 and 2022 was $30,994 and $30,993, respectively.

9. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

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

	September 30, 2023		December 31, 2022
	(unaudited)
Trade payables and accrued liabilities	$	5,021,343	$	6,599,903
Accrued payroll and commissions		207,622		253,350
Total	$	5,228,965	$	6,853,253

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10. ACCRUED SEPARATION COSTS – RELATED PARTIES

On February 3, 2023, the Company entered into a Severance Note, an Agreement and General Release, and a Side Letter thereto with Sam Klepfish (the “SK Agreements”), its prior CEO and a current board member. The SK Agreements provide, among other things, for Mr. Kelpfish’s resignation from all positions with the Company and its subsidiaries on February 28, 2023, except that Mr. Klepfish will remain a director and member of the board of the Company, confidentiality and non-disparagement conditions, nomination of Mr. Klepfish for future election to the board of directors at least through the 2024 general meeting of shareholders based on certain minimum stock ownership and Board Observer rights when Mr. Klepfish is no longer a director but maintains certain minimum agreed upon stock ownership. The payment terms are $250,000 upon effectiveness and an additional $1,000,000 payable in weekly payments of $6,410.26 from March 8, 2023 through March 6, 2026. The $250,000 was paid into an escrow account with the requirement that they are released to Mr. Klepfish on his separation date. The $1,000,000 portion is in the form of an unsecured, non-interest bearing note payable to Mr. Klepfish. The SK Agreements also call for the delivery of 400,000 shares of the Company’s common stock valued at $168,000 based upon the closing price of the Company’s common stock on Mr. Klepfish’s separation date of February 28, 2023 (see note 14); in addition, for delivery on June 1, 2027 of additional shares of the Company’s common stock equal to the greater of (i) the number of shares with an aggregate fair market value of $400,000 on such date, or (ii) 266,666 shares. The Company also agreed to pay a total of $1,199 of Cobra insurance costs on behalf of Mr. Klepfish over eighteen months. The total amount accrued in connection with the SK Agreements was $1,819,199.

On February 28, 2023, the Company entered into a separation agreement (the “Wiernasz Separation Agreement”) with Justin Wiernasz, a director and previous Director of Strategic Acquisitions. Pursuant to the Wiernasz Separation Agreement, the Company agreed to a payment of $100,000 in cash as follows: $33,333 upon execution of the agreement, $33,333 on March 15, 2023, and $33,334 on April 15, 2023. The Company also agreed to make the Cobra insurance payments on behalf of Mr. Wiernasz in the amount of $2,548 per month for twelve months with a maximum of $26,451. The total amount accrued in connection with the Wiernasz Separation Agreement was $126,451.

During the three months ended September 30, 2023, the Company made the following payments in connection with the SK Agreements: The Company paid cash in the amount of $83,333 to Mr. Klepfish, and made Cobra payments on behalf of Mr. Klepfish in the amount of $200. The Company also issued 400,000 shares of common stock with a fair value of $168,000.

During the three months ended September 30, 2023, the Company made the following payments in connection with separation agreements with Justin Weirnasz, its prior Director of Strategic Acquisitions and board member: The Company paid cash in the amount of $33,334 to Mr. Weirnasz and made Cobra payments on behalf of Mr. Weirnasz in the amount of $7,645.

The following table represents the amounts accrued, paid, and outstanding on these agreements as of September 30, 2023:

	Total		Paid / Issued			Balance		Current		Non-current
Mr. Klepfish:
Cash - through March 6, 2026	$	1,000,000	$	(192,308	)	$	807,692	$	333,332	$	474,359
Cash - upon agreement execution		250,000		(250,000	)		-		-		-
Stock - June 1, 2027		400,000		-			400,000		-		400,000
Stock - Issued in April 2023		168,000		(168,000	)		-		-		-
Cobra - over eighteen months		1,199		-			1,199		1,199		-
Total – Mr. Klepfish	$	1,819,199	$	(610,308	)	$	1,208,891	$	334,531	$	874,359

Mr. Wiernasz:
Cash - three equal payments	$	100,000	$	(100,000	)	$	-	$	-	$	-
Cobra - over eighteen months		26,451		(17,838	)		8,613		8,613		-
Total - Mr. Wiernasz	$	126,451	$	(117,838	)	$	8,613	$	8,613	$	-

Total Company	$	1,945,650	$	(728,546	)	$	1,217,104	$	343,144	$	874,359

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11. STOCK APPRECIATION RIGHTS LIABILITY

Effective May 15, 2023, the Company issued 1,500,000 stock appreciation rights (the “Smallwood SARs”) to Brady Smallwood, its Chief Operating Officer. See note 14. The Smallwood SARs were valued utilizing the Black-Scholes valuation model, and had an aggregate fair value of $9,794 upon issuance; this amount was charged to operations and credited to stock appreciation rights liability. The Smallwood SARs are revalued each quarter, and any gain or loss in the fair value is charged to non-cash compensation expense. At September 30, 2023, the Smallwood SARs had a fair value of $274,755; the increase in fair value in the amount $264,961 was charged to non-cash compensation during the nine months ended September 30, 2023.

12. REVOLVING CREDIT FACILITIES

	September 30, 2023		December 31, 2022
	(unaudited)
On June 6, 2022, the Company entered into a revolving credit facility (the “MapleMark Revolver”) with MapleMark Bank ("MapleMark”) in the initial amount of $2,014,333. The borrowing base amount is based upon 80% of eligible accounts receivables and 60% of eligible inventory. This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction of the Fifth Third Bank Line of Credit. Any amounts borrowed under the MapleMark Revolver will bear interest at the greater of (a) the Base Rate (the rate of interest per annum quoted in the “Money Rates” section of The Wall Street Journal from time to time and designated as the “Prime Rate”) plus 0.25% per annum and (b) 3.50% per annum. At September 30, 2023, the interest rate was 8.50%. The MapleMark Revolver originally was due to mature on May 27, 2023. The Company applied for a USDA Guarantee and on June 9, 2023, this guarantee was approved. At this time, the Revolver was expanded to $3,000,000 and its term extended to May 27, 2024. The MapleMark Revolver contains certain negative covenants. During the three and nine months ended September 30, 2023, the Company paid interest in the amount of $29,991 and $115,429, respectively, on the MapleMark Revolver. During the three months ended September 30, 2023, the Company made a principal payment in the amount of $2,014,333 on the MapleMark Revolver. At September 30, 2023, this loan has been fully satisfied. The amount of $2,014,333 is available to the Company under the MapleMark Revolver at September30, 2023.	$	-	$	2,014,333

Total	$	-	$	2,014,333

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13. NOTES PAYABLE

	September 30, 2023		December 31, 2022
	(unaudited)

On June 6, 2022, the Company entered into a term loan agreement with MapleMark (the “MapleMark Term Loan 1”) for the original amount of $5,324,733. This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction of the outstanding principal and interest due under existing loans with Fifth Third Bank. Amounts outstanding under the Term Loans accrued interest at the rate equal to the lesser of (a) the Maximum Lawful Rate, or (b) the greater of (i) WSJP (the “Prime Rate” as published by The Wall Street Journal) plus 1.25% per annum or (ii) 4.50% per annum. At December 31, 2022, the interest rate was 8.75%. The MapleMark loan was originally due to mature on May 27, 2023. and in the event United States Department of Agriculture issues a guarantee of repayment of the MapleMark loan in favor of the Company pursuant to its Business and Industry Loan Guarantee Program (the “USDA Guarantee”), at the Company’s option, the amount of the MapleMark loan can be expanded to $7,420,000. Upon approval of the USDA Loan Guarantee on June 9, 2023, the Company refinanced its term loans with MapleMark Bank. On June 14, 2023, the Company paid the principal and interest due on the MapleMark Term Loan 1 in the amount of $5,324,733 and $61,715, respectively, with proceeds of the MapleMark Term Loan 3 (see below). The Maple Mark Term Loan 1 contains negative covenants that, subject to certain exceptions, limits the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. The Term Loan Agreements also provides that the Company and its subsidiaries on a consolidated basis, meet a Fixed Charge Coverage Ratio as described in detail in the Loan Agreements. The Term Loan Agreements contain events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, and certain judgment defaults as specified in the Term Loan Agreements. If an event of default occurs, the maturity of the amounts owed under the Term Loan Agreements may be accelerated. The obligations under the Term Loan Agreements are guaranteed by the Company and IFP and are secured by mortgages on their real estate located in Florida, Illinois, and Pennsylvania and substantially all of their assets, in each case, subject to certain exceptions and permitted liens. The Company recorded a discount to this loan in the amount of $57,106 in connection with financing costs which was amortized to interest expense during the year ended December 31, 2022. During the three months and nine months ended September 30, 2023, the Company accrued interest in the amount of $0 and $221,176, respectively, on the MapleMark Term Loan 1. At September 30, 2023, this loan has been fully satisfied.	$	-	$	5,324,733

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September 30,

2023

December 31,

2022

(unaudited)

On June 13, 2023, the Company entered into a term loan with MapleMark Bank (the “MapleMark Term Loan 3”) in the amount of $9,057,840. Principal and interest due on the MapleMark Term Loan 1 in the amounts of $5,324,733 and $61,715, respectively, were paid with proceeds of the MapleMark Term Loan 3. The MapleMark Term Loan 3 is payable in monthly installments of $80,025 commencing July 1, 2023 and continuing through June 13, 2048.

Amounts outstanding under the Maple Mark Term Loan 3 will bear interest at the rate equal to the lesser of (a) the Maximum Lawful Rate, or (b) the greater of (i) WSJP (the “Prime Rate” as published by The Wall Street Journal) plus 1.25% per annum or (ii) 4.50% per annum. At September 30, 2023, the interest rate was 9.50%. The MapleMark Term Loan 3 matures on June 13, 2048.

The MapleMark Term Loan 3 contains negative covenants that, subject to certain exceptions, limits the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. The Term Loan Agreements also provides that the Company and its subsidiaries on a consolidated basis, meet a Fixed Charge Coverage Ratio as described in detail in the Loan Agreements. The Term Loan Agreements contain events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, and certain judgment defaults as specified in the Term Loan Agreements. If an event of default occurs, the maturity of the amounts owed under the Term Loan Agreements may be accelerated. The obligations under the Term Loan Agreements are guaranteed by the Company and IFP and are secured by mortgages on their real estate located in Florida, Illinois, and Pennsylvania and substantially all of their assets, in each case, subject to certain exceptions and permitted liens.

The Company created a discount on the MapleMark Term Loan 3 for costs in the amount of $385,803 which will be amortized over the life of the loan. During the three months and nine months ended September 30, 2023, the Company amortized $1,284 and $2,013, respectively, of these costs to interest expense. During the three months and nine months ended September 30, 2023, the Company made principal payments in the amount of $49,510 on this loan. During the three and nine months ended September 30, 2023, the Company accrued interest in the amount of $190,564 and $261,880, respectively, on the MapleMark term Loan 3.

9,008,330

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	September 30, 2023		December 31, 2022
	(unaudited)
On June 6, 2022, the Company entered into a term loan agreement with MapleMark (the “MapleMark Term Loan 2”) for the original amount of $356,800. This amount was paid by MapleMark directly to Fifth Third Bank in satisfaction of the outstanding principal and interest due under existing loans with Fifth Third Bank. The MapleMark Term Loan 2 originally matured on May 27, 2023. On June 9, 2023, the USDA approved the Guarantee of MapleMark Term Loan 1 which allowed the Company to extend the term of the MapleMark Term Loan 2 from May 27, 2023 to May 27, 2033 with monthly payments in the amount of approximately $2,311 commencing July 1, 2023 and continuing through June 1, 2033. On July 1, 2033, a final payment in the amount of approximately $303,536 will be due on the MapleMark Term Loan 2. The MapleMark Term Loan 2 contains negative covenants that, subject to certain exceptions, limits the ability of the Company and its subsidiaries to, among other things, incur additional indebtedness, make restricted payments, pledge their assets as security, make investments, loans, advances, guarantees and acquisitions, undergo fundamental changes and enter into transactions with affiliates. The Term Loan Agreements also provides that the Company and its subsidiaries on a consolidated basis, meet a Fixed Charge Coverage Ratio as described in detail in the Loan Agreements. The Term Loan Agreements contain events of default that are customary for a facility of this nature, including (subject in certain cases to grace periods and thresholds) nonpayment of principal, nonpayment of interest, fees or other amounts, material inaccuracy of representations and warranties, violation of covenants, cross-default to certain other existing indebtedness, bankruptcy or insolvency events, and certain judgment defaults as specified in the Term Loan Agreements. If an event of default occurs, the maturity of the amounts owed under the Term Loan Agreements may be accelerated. The obligations under the Term Loan Agreements are guaranteed by the Company and IFP and are secured by mortgages on their real estate located in Florida, Illinois, and Pennsylvania and substantially all of their assets, in each case, subject to certain exceptions and permitted liens. The Company recorded a discount to this loan in the amount of $23,367 in connection with financing costs which was amortized to interest expense during the year ended December 31, 2022. During the three and nine months ended September 30, 2023, the Company made principal payments in the amount of $2,895 on this loan. During the three and nine months ended September 30, 2023, the Company accrued interest in the amount of $6,010 and $21,140, respectively, on this loan.	$	353,905	$	356,800

A note payable in the amount of $20,000. The Note was due in January 2006 and the Company is currently accruing interest on this note at 1.9%. During the three and nine months ended September 30, 2023, the Company accrued interest in the amount of $94 and $282, respectively, on this note. At September 30, 2023, accrued interest on this note was $18,386.	$	20,000	$	20,000

Vehicle acquisition loan dated December 6, 2018 in the original amount of $51,088, payable in sixty monthly installments of $955 including interest at the rate of 4.61% maturing November 5, 2023. During the three months ended September 30, 2023, the Company made principal and interest payments in the amount of $1,899 and $44, respectively, on this loan. During the nine months ended September 30, 2023, the Company made principal and interest payments in the amount of $8,368 and $228, respectively, on this loan.	$	1,899	$	10,267

Total	$	9,384,134		$	5,711,800
Discount		(383,790	)		-
Net of discount	$	9,000,344		$	5,711,800

Current portion	$	139,131		$	5,711,800
Long-term maturities		8,861,213			-
Total	$	9,000,344		$	5,711,800

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There was a total of $61,316 and $18,104 accrued interest on notes payable at September 30, 2023 and December 31, 2022, respectively.

Aggregate maturities of notes payable as of September 30, 2023 are as follows:

For the period ended September 30,

2024	$	120,330
2025		109,597
2026		120,708
2027		132,951
2028		146,313
Thereafter		8,754,235
Total	$	9,384,134

14. EQUITY

Common Stock

At September 30, 2023 and December 31, 2022, a total of 2,823,171 shares are deemed issued but not outstanding by the Company.

For the nine months ended September 30, 2023:

Common Stock Issued from Common Stock To Be Issued

During the three months ended September 30, 2023, the Company issued a total of 667,320 shares of common stock previously classified as common stock to be issued as follows: 178,626 shares were issued to the Company’s previous CEO; 14,754 shares were issued the Company’s previous Director of Strategic Acquisitions; an aggregate of 473,620 shares were issued to two board members; and 320 shares were issued to a previous employee. The issuance of these shares did not increase the total number of shares outstanding.

Shares issued to employees

On February 28, 2023, the Company issued 267,030 shares with a value of $112,169 to three employees as compensation.

Shares issued to previous Chief Executive officer

The Company incurred obligations to issue the following shares of common stock pursuant to employment agreements: an aggregate total of 400,007 shares of common stock with a market value of $93,600 were accrued for issuance to its previous Chief Executive Officer; of this amount, 207,839 with a market value of $52,919 were withheld for the payment of income taxes, and the net number of shares issuable to the previous Chief Executive Officer was 192,168 with a market value of $45,680. The Company also issued 400,000 shares of common stock to the previous Chief Executive Officer pursuant to the SK Agreements. See note 10.

Shares accrued to be issued to board members

During the three and nine months ended September 30, 2023, a total of 0 and 30,212 shares of common stock, respectively, with a market value of $0 and $10,000, respectively, were accrued for issuance to two board members.

Share based executive compensation plans

During the three and nine months ended September 30, 2023, the amounts of $58,283 and $136,764 respectively were expensed for the share-based plan for the Chief Executive Officer, and the amounts of $19,043 and $28,564 were expensed, respectively, for the share based plan for the Chief Operating Officer. (see below). These restricted stock grants are being amortized over their term of from 31.5 to 34 months.

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Stock Appreciation Rights

Effective May 15, 2023, the Company issued 1,500,000 stock appreciation rights (the “Smallwood SARs”) to Brady Smallwood, its Chief Operating Officer. The Smallwood SARs vest upon issuance, and expire on December 31, 2026; 750,000 of the Smallwood SARs are priced at $1.50 per share, and 750,000 are priced at $2.00 per share. It is the Company’s intention to settle the Smallwood SARs in cash. The Smallwood SARs were valued utilizing the Black-Scholes valuation model, and had an aggregate fair value of $9,794 upon issuance; this amount was charged to operations and credited to stock appreciation rights liability. The Smallwood SARs are revalued each quarter, and any gain or loss in the fair value is charged to non-cash compensation expense. At September 30, 2023, the Smallwood SARs had a fair value of $274,755; the increase in fair value in the amount $264,961 was charged to non-cash compensation during the nine months ended September 30, 2023.

The following variables were utilized in valuing the Smallwood SARs:

Volatility		45.0-95.5	%
Dividends	$	0
Risk-free interest rates		3.67-5.03	%
Expected term (years)		1.63-1.82

As of September 30, 2023, total common stock issued and outstanding was 51,622,238 and 48,799,067, respectively. The Company also had 180,000 shares issuable to directors and consultants.

Chief Executive Officer share-based incentive plan

On February 3, 2023, the Company entered into an employment agreement with Bill Bennett to become the Company’s CEO. See note 15. Pursuant to this agreement, Mr. Bennett was provided with an incentive compensation plan (the “CEO Stock Plan”) whereby Mr. Bennett would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:

		Number of Shares Granted - Lower of:
Stock		Number of Shares Issued			Maximum
Price		and Outstanding on			Number of
Target		Grant Date Multiplied by:			Shares
$	0.60		2.00	%		943,531
$	0.80		1.50	%		707,649
$	1.00		1.00	%		471,766
$	1.20		0.75	%		353,824
$	1.40		0.75	%		353,824
$	1.60		0.50	%		235,883
$	1.80		0.50	%		235,883
$	2.00		0.50	%		235,883

The Company relied upon the guidance of Statement of Financial Account Standards No. 718 Compensation – Stock Compensation (“ASC 718”) in accounting for the CEO Stock Plan. A Monte Carlo market-based performance stock awards model was used in valuing the plan, with the following assumptions:

	●	The stock price for each trading day would fluctuate with an estimated projected volatility using a normal distribution. The stock price of the underlying instrument is modeled such that it follows a geometric Brownian motion with constant drift and volatility.

	●	The Company would award the stock upon triggering the thresholds.

	●	Annual attrition or forfeiture rates (i.e., pre–vesting forfeiture assumption) are assumed to be zero given the Holder’s position with the Company.

	●	No Projected capital events were included in the adjustments to the shares issued and outstanding in the projected simulations.

	●	Awards/Payouts were discounted at the risk–free rate.

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The plan was valued as of February 3, 2023. The following variables were utilized:

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

The value of the plan was determined to be $660,541. This amount will be recorded as a charge to additional paid-in capital on a straight-line basis over 34 months. During the three months and nine ended September 30, 2023, the amounts of $58,283 and $136,764, respectively, were charged to operations pursuant to the CEO Stock Plan.

Chief Operating Officer share-based incentive plan

On April 14, 2023, the Company entered into an employment agreement with Brady Smallwood to become the Company’s COO effective May 15, 2023. See note 15. Pursuant to this agreement, Mr. Smallwood was provided with an incentive compensation plan (the “COO Stock Plan”) whereby Mr. Smallwood would be granted shares of the Company’s common stock upon the common stock meeting certain price points at various 60-day volume weighted prices, as described below:

		Number of Shares Granted - Lower of:
Stock		Number of Shares Issued			Maximum
Price		and Outstanding on			Number of
Target		Grant Date Multiplied by:			Shares
$	0.87		0.40	%		196,627
$	1.16		0.30	%		147,470
$	1.45		0.20	%		98,313
$	1.74		0.15	%		73,735
$	2.03		0.15	%		73,735
$	2.32		0.10	%		49,157
$	2.61		0.10	%		49,157
$	2.90		0.10	%		49,157

	●	The stock price for each trading day would fluctuate with an estimated projected volatility using a normal distribution. The stock price of the underlying instrument is modeled such that it follows a geometric Brownian motion with constant drift and volatility.

	●	The Company would award the stock upon triggering the thresholds.

	●	Annual attrition or forfeiture rates (i.e., pre–vesting forfeiture assumption) are assumed to be zero given the Holder’s position with the Company.

	●	No Projected capital events were included in the adjustments to the shares issued and outstanding in the projected simulations.

	●	Awards/Payouts were discounted at the risk–free rate.

The plan was valued as of May 15, 2023. The following variables were utilized:

Volatility		103.9	%
Dividends	$	0
Risk-free interest rates		4.45	%
Expected term (years)		2.63

The value of the plan was determined to be $199,951. This amount will be recorded as a charge to additional paid-in capital on a straight-line basis over 31.5 months. During the three and nine months ended September 30, 2023, the amount of $19,043 and $28,564, respectively, were charged to operations pursuant to the COO Stock Plan.

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Nine months ended September 30, 2022:

During the nine months ended September 30, 2022 in connection with stock based compensation based upon the terms of employment agreements with its employees and compensation agreements with the Company’s independent board members, the Company charged to operations the amount of $20,000 for the vesting of a total of 51,624 shares of common stock issuable to two of its independent board members, and $300,800 for the vesting of a total of