---

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

---

 

FORM 8-K/A

Amendment No. 1 

 

---

 

CURRENT REPORT

Pursuant to Section 13 OR 15(d) of

The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  January 24, 2018

 

 

 

Registrant’s telephone number, including area code:  (239) 596-0204

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

On January 30, 2018, Innovative Food Holdings, Inc. filed a Current Report on form 8-K under Items 1.01, 2.01, and 9.01 to report the acquisition of substantially all of the assets and certain liabilities of iGourmet LLC and iGourmet NY LLC, privately-held New York limited liability companies, by our wholly-owned subsidiary, Innovative Gourmet, LLC.  This filing is being made solely to provide the required financial statements in a timely manner.

 

Item 9.01.      Financial Statements and Exhibits.

 

(a)           Financial Statements of Businesses Acquired. The audited financial statements of iGourmet LLC as of and for the years ended December 31, 2017 and 2016 are attached hereto as Exhibit 99.1 to this Form 8-K/A and are incorporated in their entirety by reference.  The unaudited condensed consolidated interim financial statements and pro forma information was reviewed by Liggett & Webb, P.A., our independent registered public accountants.

 

(b)           Pro Forma Financial Information. Unaudited Pro Forma Condensed Combined financial information is attached hereto as Exhibit 99.2 to this Form 8-K/A and is incorporated in its entirety by reference.

(d)           Exhibits

 

 

 

 

 

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 hereunto duly authorized.

Exhibit 99.1

	PAGES
Report of Independent Registered Public Accounting Firm	3
Financial Statements
Balance Sheets	4
Statements of Operations	5
Statements of Cash Flows	6
Statements of Changes in Members’ Deficit	7
Notes to the Financial Statements	8

		December 31,				December 31,
		2017				2016
ASSETS
Current assets
Cash and cash equivalents		$	4,716			$	326,167
Accounts receivable			550,967				402,678
Inventory			273,556				364,748
Due from related parties			713,083				555,043
Other current assets			102,223				-
Total current assets			1,644,545				1,648,636
Property and equipment, net			16,325				18,784
Other assets			11,100				9,292
Total assets		$	1,671,970			$	1,676,712
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Bank overdraft		$	93,448			$	-
Accounts payable and accrued liabilities			3,049,720				2,122,175
Loans payable, current portion – net of discount of $9,318 and    $4,636, respectively			657,680				210,415
Loans payable, related parties, current portion			228,812				-
Other current liabilities, related parties			1,324,349				1,327,059
Deferred revenue			344,869				342,189
Other current liabilities			15,500				500
Total current liabilities			5,714,378				4,002,338
Loans payable			1,094,777				1,178,776
Loans payable, related parties			671,545				1,123,955
Total liabilities			7,480,700				6,305,069
Commitments and contingencies (note 14)			-				-
Members’ deficit			(5,808,730	)			(4,628,3575	)
Total liabilities and members’ deficit		$	1,671,970			$	1,676,712

		For the Twelve				For the Twelve
		Months Ended				Months Ended
		December 31,				December 31,
		2017				2016
Revenue		$	8,729,199			$	8,528,314
Cost of goods sold			6,582,183				6,228,555
Gross margin			2,147,016				2,299,759
Selling, general and administrative expenses			2,871,283				2,906,390
Total operating expenses			2,871,283				2,906,390
Operating (loss)			(724,267	)			(606,631	)
Other (income) expense:
Interest expense, net			465,106				295,982
Other (income)			(9,000	)			(74,750	)
Total other (income) expense			456,106				221,232
Net loss		$	(1,180,373	)		$	(827,863	)

		For the Twelve				For the Twelve
		Months Ended				Months Ended
		December 31,				December 31,
		2017				2016
Cash flows from operating activities:
Net (loss)		$	(1,180,373	)		$	(827,863	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			26,003				14,199
Amortization of original issue discount on notes payable			140,475				60,177
Changes in assets and liabilities:
Accounts receivable, net			(148,289	)			(100,974	)
Inventory			91,192				18,148
Other current assets			(102,223	)			-
Other assets			(1,808	)			-
Due from related parties			(158,040	)			(112,197	)
Due to related parties			(2,710	)			130,202
Accounts payable and accrued liabilities			942,545				311,853
Deferred revenue			2,680				54,701
Net cash (used in) operating activities			(390,548	)			(451,754	)
Cash flows from investing activities:
Acquisition of property and equipment			(23,544	)			(3,030	)
Net cash (used in) investing activities			(23,544	)			(3,030	)
Cash flows from financing activities:
Bank overdraft			93,448				-
Cash received from line of credit			4,137,040				4,039,400
Cash paid on line of credit			(4,014,038	)			(4,039,400	)
Cash received from loans			1,437,214				969,667
Principal payments on loans			(1,214,423	)			(1,159,438	)
Cash received from related party notes			8,400				651,145
Principal payments related party notes			(355,000	)			(209,065	)
Net cash provided by  financing activities			92,641				252,309
(Decrease) in cash and cash equivalents			(321,451	)			(202,475	)
Cash and cash equivalents at beginning of year			326,167				528,642
Cash and cash equivalents at end of year		$	4,716			$	326,167
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest		$	257,428			$	169,031
Taxes		$	-			$	-

		Units				Total Members’ Deficit
Balance at December 31, 2015			4,384,808			$	(3,800,494	)
Loss for the year ended December 31, 2016			-				(827,863	)
Balance at December 31, 2016			4,384,808				(4,628,357	)
Loss for the year ended December 31, 2017			-				(1,180,373	)
Balance at December 31, 2017			4,384,808			$	(5,808,730	)

Computer Equipment	3 years
Office Furniture and Fixtures	5 years
Warehouse Equipment	5 years
Vehicles	5 years
Leasehold Improvements	10 years

		2017				2016
Due for payments on personal credit cards		$	667,445			$	529,872
Due for rent and utilities			45,638				25,171
Due from related parties		$	713,083			$	555,043

		2017				2016
Office Furniture & Equipment		$	48,623			$	25,079
Warehouse Equipment			556,707				556,707
Computer Equipment			105,151				105,151
Leasehold Improvements			22,957				22,957
Vehicles			41,889				41,889
			775,327				751,782
Less accumulated depreciation and amortization			(759,002	)			(732,998	)
Total		$	16,325			$	18,784

		2017				2016
Trade accounts payable		$	3,044,257			$	2,122,175
Accrued interest			5,463				-
Total		$	3,049,720			$	2,122,175

		December 31, 2017				December 31, 2016
At December 31, 2017, the Company owed the principal amount of $37,152 to American Express Bank, FSB pursuant to a Business Loan and Security Agreement dated January 25, 2017 in the original principal amount of $539,000 (the “American Express 2017 Loan”.  The fee charged on the American Express 2017 Loan was 6% of the original principal amount, or $32,340. This fee was charged to interest expense during the twelve months ended December 31, 2017.   At December 31, 2016, the Company owed the principal amount of $29,818 to American Express Bank, FSB pursuant to a Business Loan and Security Agreement dated February 19, 2016 in the original principal amount of $621,000 (the “American Express 2016 Loan”.  The fee charged on the American Express 2016 Loan was 6% of the original principal amount, or $37,260. This fee was charged to interest expense during the twelve months ended December 31, 2016.		$	37,152			$	29,818
At December 31, 2017, the Company owed the principal amount of $80,085 to Celtic Bank under three loan agreements in the original aggregate principle amount of $139,715 (the “Celtic Bank 2017 Loans”). The Celtic Bank 2017 Loans were issued with original issue discounts in the aggregate amount of $15,615; $11,902 of these discounts were amortized to interest expense during the twelve months ended December 31, 2017.   At December 31, 2016, the Company owed the principal amount of $64,111 to Celtic Bank under six loan agreements in the original aggregate principal amount of $172,545 (the “Celtic Bank 2016 Loans”). The Celtic Bank 2016 Loans were issued with original issue discounts in the aggregate amount of $21,845; $16,240 of these discounts were amortized to interest expense during the twelve months ended December 31, 2016.			80,085				64,111
At December 31, 2017, the Company owed the principal amount of $262 to PayPal Working Capital under a loan agreement in the original principal amount of $91,972 (the “PayPal 2017 Loan”). The PayPal 2017 Loan was issued with an original issue discount in the amount of $6,972; this amount was amortized to interest expense during the twelve months ended December 31, 2017.   At December 31, 2016, the Company owed the principal amount of $28,728 to PayPal Working Capital under a loan agreement in the original principal amount of $107,385 (the “PayPal 2016 Loan”). The PayPal 2016 Loan was issued with an original issue discount in the amount of $10,385; this amount was amortized to interest expense during the twelve months ended December 31, 2016.			262				28,728

At December 31, 2017, the Company owed the principal amount of $1,178,776 on a secured loan payable to UPS Capital Business Credit in the original amount of $1,675,000 (the “UPS Loan”). The UPS Loan bears interest at the rate of prime plus 1.75%, and is payable at the rate of $7,000 per month including principal and interest. The UPS Loan is guaranteed by the U.S. Small Business Administration. During the twelve months ended December 31, 2017, the Company paid principal and interest in the amounts of $92,393 and $68,607, respectively, on the UPS Loan.  On January 24, 2018, this note was purchased by a third party pursuant to an asset purchase agreement; see note 15.   At December 31, 2016, the Company owed the principal amount of $1,271,170 on the UPS Loan.  During the twelve months ended December 31, 2016, the Company paid principal and interest in the amounts of $91,122 and $67,878, respectively, on the UPS Loan.			1,178,776				1,271,170
At December 31, 2017, the Company owed the principal amount of $140,000 on a note payable to Alimentias dated August 24, 2017 (the “Alimentias Note”), bearing interest at the rate of 15% per annum and due December 31, 2017. During the twelve months ended December 31, 2017, the company accrued and paid interest in the amounts of $14,627 and $16,667, respectively, on the Alimentias note.			140,000				-
At December 31, 2017, the Company owned the principal amount of $325,500 on a note payable to Food Funding, LLC (the “Food Funding Note 1”) bearing interest at the rate of    9% per annum and due on April 1, 2018.  During the twelve months ended December 31, 2017, the Company accrued interest in the amount of $5,238 on the Food Funding Note 1.			325,500				-
Total			1,761,775				1,393,827
Less: discount			(9,318	)			(4,636	)
Notes payable, net of discount		$	1,752,457			$	1,389,191

		December 31,
		2017
2018		$	666,998
2019			84,000
2020			84,000
2021			84,000
2022			84,000
Thereafter			758,777
Total		$	1,761,775

Line of Credit with Luzerne Bank (the “Luzerne Line of Credit”) in the amount of $1,500,000 dated February 28, 2014. The Luzerne Line of Credit is in the name of the Company’s majority owners Spencer and Jessica Chessman, and is in effect until such time as the parties may agree in writing to terminate the agreement. The interest rate on the Luzerne Line of Credit is the prime rate plus 0.75%.  The Company paid interest in the amount of $26,609 on the Luzerne Line of Credit during the twelve months ended December 31, 2017.		$	123,002			$	-
At December 31, 2017, the Company owed the principal amount of $20,400 to JoAnn Jones, an equity holder in the Company, pursuant to a Notes Payable in the original amount of $24,200 (the “JJ Notes”). The JJ Notes bears interest at the rate of 10% per annum, and is due on December 31, 2019.  During the twelve months ended December 31, 2017, the Company accrued interest in the amount of $1,564 on the JJ Notes.   At December 31, 2016, the Company owed the principal amount of $12,000 on the JJ Notes. During the twelve months ended December 31, 2016, the Company accrued interest in the amount of $317 on the JJ Notes.			20,400				12,000

At December 31, 2017, the Company owed the principal amount of $493,969 to Tracy Chesman, an equity holder in the Company, pursuant to Note Payable agreements in the original amount of $1,875,001 (the “TC Notes”). The TC Notes bear interest at the rate of 10% per annum; principal in the amount of $105,810 was due on December 31, 2018, and principal in the amount of $388,159 was due on December 31, 2019. During the twelve months ended December 31, 2017, the Company made principal payments in the amount of $355,000 and accrued interest in the amount of $58,753 on the TC Notes.   At December 31, 2016, the Company owed the principal amount of $848,969 on the TC Notes; principal in the amount of $460,810 was due on December 31, 2018, and principal in the amount of $388,159 was due on December 31, 2019. During the twelve months ended December 31, 2016, the Company accrued interest in the amount of $58,753 on the TC Notes.			493,969				848,969
At December 31, 2017, the Company owed the principal amount of $262,986 to Spencer Chesman, an equity holder in the Company, pursuant to Note Payable agreements in the original amount of $468,051 (the “SC Notes”). The SC Notes bear interest at the rate of 10% per annum, and are due December 31, 2020. During the twelve months ended December 31, 2017, the Company accrued interest in the amount of $17,234 on the SC Notes.   At December 31, 2016, the Company owed the principal amount of $262,986 on the SC Notes. Principal in the amount of $262,986 is due on December 31, 2020. During the twelve months ended December 31, 2016, the Company accrued interest in the amount of $26,300 on the SC Notes.			262,986				262,986
Total		$	900,357			$	1,123,955

		December 31,
		2017
2018		$	228,812
2019			408,559
2020			262,986
2021			-
2022			-
Thereafter			-
Total		$	900,357

		December 31, 2017				December 31, 2016
Credit card liabilities		$	1,025,736			$	1,084,778
Other receivables – due from equity holders			(713,083	)			(555,043	)
Net amount due on credit card liabilities		$	312,653			$	529,735

Exhibit 99.2

 

 

Unaudited Pro Forma Condensed Combined Balance Sheet

As of December 31, 2017

 

 

See accompanying notes to the unaudited pro forma condensed combined financial statements.

Innovative Food Holdings, Inc.

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Year Ended December 31, 2017

 

See accompanying notes to the unaudited pro forma condensed combined financial statements.

 

 

 

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 $3,800,000 million 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 shares of Innovative Food Holdings’ common stock valued at the time of the closing of this transaction and 37.5%, at Innovative Gourmet’s  option, in Innovative Food Holdings shares valued  at the time of the payment of the earnout or in cash.

 

 

In connection with the acquisition, our wholly-owned subsidiary, Food Funding LLC, 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.

 

The pro forma condensed combined balance sheet as of December 31, 2017 reflects the following allocation of the total purchase price to iGourmet LLC’s net tangible assets, with the residual allocated to intangible assets:

  

Initial purchase price		$	1,500,000
Cash payable in connection with the transaction			1,957,400
Contingent liabilities			809,500
Total purchase price		$	4,266,900
Tangible assets acquired		$	954,214
Intangible assets acquired			3,160,700
Goodwill acquired			151,986
Total purchase price		$	4,266,900

 

Intangible Asset		Life in Years
Retail Customer List		2
Other Customer Relationships		3
Trade Names		N/A
Internally Developed Technology		5
Non- compete agreements		3