Market Overview

Innovative Food Holdings, Inc. Reports Financial Results for First Quarter 2020

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First Quarter Revenue Increased 3.5% to $13.3 Million
e-commerce Revenue Up 31.6% to $2.9 Million 
Recorded a Non-Cash Impairment of $1.7 million
Active and Unique e-commerce Users Increased Over 70% Compared to the Prior Year Period
Unique Multi-Channel Infrastructure Benefitting from Rapidly Evolving Market Opportunities

BONITA SPRINGS, Fla., July 07, 2020 (GLOBE NEWSWIRE) -- Innovative Food Holdings, Inc. (OTCQB:IVFH), ("IVFH" or "the Company") an interconnected data driven platform of specialty food companies that provides chefs and consumers direct access to the highest quality unique specialty food products as well as gift boxes and other curated products across the U.S., today reported its financial results for the first quarter ended March 31, 2020. 

"We experienced strong e-commerce growth in the 2020 first quarter, which accelerated during the second quarter, as our e-commerce assets have been uniquely positioned to benefit from disruptive trends underway in our markets.  Our in-house chefs and curation teams are working with our procurement, logistics, and marketing departments to create new products including high-quality specialty grocery products, themed specialty food kits, curated gifts, and monthly subscriptions.  We are also investing in our platform to further increase customer engagement and conversion rates.  During the third quarter, we expect to move into our new Pennsylvania distribution center, launch the new igourmet website featuring a modern user interface supported by Shopify, and further expand our digital marketing efforts," stated Sam Klepfish, CEO of Innovative Food Holdings.

"As restaurants start re-opening, foodservice revenue has experienced sequential monthly improvements in May and June; however, foodservice revenues have experienced unprecedented declines starting in the second half of March 2020 and the impacts of the COVID-19 pandemic continue to affect foodservice customers.  Related to these declines, we recorded a non-cash $1.7 million impairment charge during the first quarter.  In addition, we experienced reduced profitability in the first quarter, which included higher expenses related to the COVID-19 crisis and a less profitable mix of foodservice business due to the COVID-19 crisis, as well as continued investments in our rapidly growing e-commerce platform.  Despite these near-term impacts to profitability, we saw a $0.6 million year-over-year improvement in operating cash flow during the first quarter." 

"We believe our unique multi-channel infrastructure provides us with significant resources to successfully operate in the current market environment.  As a result, we have seen growing interest from companies looking to leverage our e-commerce and foodservice assets.  We have recently formed new relationships with large national retailers that are seeking to leverage our unique product lines and fulfillment capabilities in order to expand their specialty food offerings, which in turn has the potential to further expand our distribution channels and customer access.  The COVID-19 crisis has significantly accelerated changes in consumer behavior already underway and, IVFH, like other e-commerce retailers, is seeing a paradigm shift towards digital channels. As a result, we are highly encouraged by our growing digital and direct-to-consumer presence, including our e-commerce monthly subscription offerings, our new omnichannel sales channels, and our new online products including recently developed meal kits, as well as the planned launch of igourmet's new website and the move to our new state-of-the-art Pennsylvania distribution center," concluded Mr. Klepfish. 

IVFH's revenue increased to $13.3 million during the three months ended March 31, 2020, compared to $12.9 million for the three months ended March 31, 2019.  The primary drivers of the 3.5% increase in first quarter revenue was due to over 30% year-over-year growth in the Company's e-commerce business as well as the contribution from new logistics revenue. 

Deferred revenue associated with the Company's e-commerce subscription services, which includes both Mouth and igourmet, was $0.4 million at March 31, 2020, compared to $0.3 million at March 31, 2019.  The nearly 30% year-over-year increase in deferred revenue was driven by increased demand for the Company's monthly food subscription offerings as well as an increase in gift cards sales. 

For the 2020 first quarter, igourmet and Mouth had over 40,000 active unique customers, an increase of over 70% from the same period last year.

The following table sets forth IVFH's revenue by business category for the three months ended March 31, 2020 and March 31, 2019 (unaudited).

  Three Months Ended
  March 31,
2020
  % of Net
Sales

  March 31,
2019
  % of Net
Sales
  %
Change
Specialty Foodservice $   9,913,000   74.5 %   $ 10,206,000   79.4 %   -2.9 %
E-commerce     2,878,000   21.6 %       2,187,000   17.0 %   31.6 %
National Brand Management   251,000   1.9 %     466,000   3.6 %   -46.2 %
Logistics $   264,000   2.0 %   $   -     -       -  
Total IVFH $   13,306,000   100 %   $ 12,859,000   100 %   3.5 %

For the 2020 first quarter, selling and administrative ("SG&A") expenses were $4.6 million, compared to $3.8 million for the same period last year.  The $0.8 million, or approximately 21.7% increase, which included costs associated with COVID-19, was primarily due to a one-time increase in uncollectible debt allowance of $0.2 million, a $0.1 million increase in digital marketing expenses, $0.2 million of higher payroll and related costs, increases in professional and legal fees of $0.1 million, and increases in computer and information technology costs of $0.1 million. 

For the 2020 first quarter, the Company reported a net loss of $(3.3 million), or $(0.09) per share, compared to net income of $0.2 million, or $0.01 per diluted share in the prior year's first quarter. Adjusted net income for the 2020 first quarter was a loss of $(1.1 million), or $(0.031) per share, compared to net income of $0.5 million, or $0.015 per diluted share for the same period last year. 

Cash EBITDA for the 2020 first quarter was a loss of $(0.9 million), compared to positive EBITDA of $0.6 million in the prior year quarter. 

About Innovative Food Holdings, Inc.
Innovative Food Holdings, Inc. is an interconnected data driven platform of small, specialty food companies serving business and consumer customers.  The platform offers efficient, cost effective, and transparent sourcing of over 7,000 specialty food products including proprietary branded products. Sales channels on the platform include specialty foodservice channels and data driven DTC e-commerce channels including leading specialty food direct-to-consumer e-commerce websites www.igourmet.com  and www.mouth.com as well as a strong specialty food omnichannel offering via www.amazon.com, www.ebay.com and  www.walmart.com.

Forward-Looking Statements

This release contains certain forward-looking statements and information relating to Innovative Food Holdings, Inc. (the "Company") that are based on the current beliefs of the Company's management, as well as assumptions made by, and information currently available to, the Company. Such statements reflect the current views of the Company with respect to future events and are subject to certain assumptions, including those described in this release. Should one or more of these underlying assumptions prove incorrect, actual results may vary materially from those described herein as "should," "could," "will," "anticipate," "believe," "intend," "plan," "might," "potentially" or "expect." Additional factors that could also cause actual results to differ materially relate to the global COVID-19 crisis. The Company does not intend to update these forward-looking statements. The content of the websites referenced above are not incorporated herein.


Innovative Food Holdings, Inc.
Condensed Consolidated Balance Sheets
(unaudited)

    March 31,     December 31,   
    2020     2019  
    (unaudited)          
ASSETS                
Current assets                
Cash and cash equivalents   $ 5,071,543     $ 3,966,050  
Accounts receivable, net     1,860,038       3,309,830  
Inventory     2,941,435       2,350,622  
Other current assets     318,617       273,689  
Total current assets     10,191,633       9,900,191  
                 
Property and equipment, net      6,830,425       6,645,389  
Investments     450,225       435,225  
Right to use assets, operating leases, net     358,714       193,733  
Right to use assets, finance leases, net     313,209       174,631  
Other amortizable intangible assets, net     84,000       1,342,741  
Goodwill and other unamortizable intangible assets     1,532,822       2,183,065  
Total assets   $ 19,761,028     $ 20,874,975  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities                
Accounts payable and accrued liabilities   $ 3,828,998     $ 4,009,956  
Accrued interest     20,552       16,973  
Deferred revenue     358,456       499,776  
Line of Credit     2,000,000       -  
Notes payable - current portion, net     751,505       727,766  
Lease liability - operating leases, current      134,459       133,296  
Lease liability - finance leases, current      47,261       29,832  
Contingent liability - current portion     187,000       187,000  
Total current liabilities     7,328,231       5,604,599  
                 
Lease liability - operating leases, non-current     224,255       60,437  
Lease liability - finance leases, non-current     281,270       154,905  
Contingent liability - long-term     144,600       156,600  
Note payable - long term portion, net     3,953,432       3,881,037  
Total liabilities     11,931,788       9,857,578  
                 
Commitments & Contingencies (see note 16)     -       -  
                 
Stockholders' equity                
                 
Common stock: $0.0001 par value; 500,000,000 shares authorized;  37,279,320 and 37,210,859 shares issued, and 34,441,740 and 34,373,279 shares outstanding at March 31, 2020 and December 31, 2019, respectively     3,724       3,718  
Additional paid-in capital     36,955,853       36,889,818  
Treasury stock: 2,623,171 shares outstanding at March 31, 2020 and December 31, 2019     (1,141,370 )     (1,141,370 )
Accumulated deficit      (27,988,967 )     (24,734,769 )
Total stockholders' equity     7,829,240       11,017,397  
                 
Total liabilities and stockholders' equity   $ 19,761,028     $ 20,874,975  



Innovative Food Holdings, Inc.
Condensed Consolidated Statements of Operations
(unaudited)

    For the Three     For the Three  
    Months Ended     Months Ended  
     March 31,       March 31,   
    2020     2019  
                 
                 
Revenue   $ 13,305,920     $ 12,859,215  
Cost of goods sold     10,192,864       8,881,380  
Gross margin     3,113,056       3,977,835  
                 
Selling, general and administrative expenses      4,612,761       3,788,997  
Impairment of goodwill and intangible assets     1,698,952       -  
Total operating expenses     6,311,713       3,788,997  
                 
Operating (loss) income     (3,198,657 )     188,838  
                 
Other income (expense):                
Other leasing income     10,879       -  
Interest expense, net     (66,420 )     (25,478 )
Total other income (expense)     (55,541 )     (25,478 )
                 
Net (loss) income before taxes     (3,254,198 )     163,360  
                 
Income tax expense     -       -  
                 
Net (loss) income   $ (3,254,198 )   $ 163,360  
                 
Net (loss) income per share - basic   $ (0.09 )   $ 0.005  
                 
Net (loss) income per share - diluted   $ (0.09 )   $ 0.005  
                 
Weighted average shares outstanding - basic     34,626,275       33,947,817  
                 
Weighted average shares outstanding - diluted     34,626,275       33,947,817  



Innovative Food Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited) 

    For the Three     For the Three  
    Months Ended     Months Ended  
     March 31,       March 31,   
    2020     2019  
                 
Cash flows from operating activities:                
Net (loss) income   $ (3,254,198 )   $ 163,360  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
Impairment of goodwill and intangible assets     1,698,952       -  
Depreciation and amortization     324,565       305,205  
Amortization of right-of-use asset     49,949       42,619  
Amortization of prepaid loan fees     3,123       -  
Stock based compensation     66,041       100,144  
Provision for doubtful accounts     223,335       (830 )
                 
Changes in assets and liabilities:                
Accounts receivable, net     1,226,457       (223,433 )
Inventory and other current assets, net     (650,741 )     156,123  
Accounts payable and accrued liabilities     (177,379 )     (1,508,855 )
Deferred revenue     (141,320 )     (281,920 )
Contingent liabilities     (12,000 )     (25,307 )
Operating lease liability     (49,949 )     (42,619 )
Net cash used in operating activities     (693,165 )     (1,315,513 )
                 
Cash flows from investing activities:                
Acquisition of property and equipment      (285,599 )     (2,705 )
Net cash used in investing activities     (285,599 )     (2,705 )
                 
Cash flows from financing activities:                
Proceeds from note payable     150,786       -  
Proceeds from line of credit     2,000,000       -  
Principal payments on debt      (57,775 )     (294,734 )
Principal payments financing leases     (8,754 )     (6,066 )
Net cash provided by (used in) financing activities     2,084,257       (300,800 )
                 
Increase (Decrease) in cash and cash equivalents     1,105,493       (1,619,018 )
                 
Cash and cash equivalents at beginning of period     3,966,050       4,759,817  
                 
Cash and cash equivalents at end of period   $ 5,071,543     $ 3,140,799  
                 
Supplemental disclosure of cash flow information:                
                 
Cash paid during the period for:                
Interest   $ 59,373     $ 27,693  
                 
Taxes   $ -     $ -  
                 
Non-cash investing and financing activities:                
Issuance of 131,136 shares of common stock previously accrued   $ -     $ 93,666  
Right to use assets and liabilities - operating, upon adoption of ASU 2016-02   $ -     $ 388,581  
Increase in right of use assets & liabilities   $ 214,930     $ -  
Investment in food related company    $ 15,000     $ 15,500  
Capital lease for purchase of fixed assets   $ 152,548     $ -  


  Three Months Ended
(unaudited)
  March 31,
2020
  March 31,
2019
Adjusted Net Income and EPS (4)      
Revenue $   13,305,920     $   12,859,215  
Net Income     (3,254,198 )       163,360  
Amortization of intangible assets (1)     210,032         229,130  
One-time charges   1,917,891       -  
Stock related expenses (2)     66,041         100,144  
Adjusted Net Income
$   (1,060,234 )   $   492,634  
               
Weighted Avg. Shares Outstanding Diluted (3)    34,626,275       33,947,817  
               
Adjusted Fully Diluted EPS $   (0.031 )   $   0.015  
       
  Three Months Ended
(unaudited)
  March 31,
2020
  March 31,
2019
Cash EBITDA (4)      
Net Income $   (3,254,198 )   $   163,360  
Interest expense, taxes & Other Income   55,541       25,478  
Depreciation & amortization   324,565       305,205  
One-time charges   1,917,891       -  
Stock related expenses (2)     66,041         100,144  
Cash EBITDA $   (890,160 )   $   594,187  
  1. Includes non-cash amortization charges related to assets acquired
  2. Includes stock and options-based compensation and expenses
  3. Full Year GAAP weighted fully diluted share count
  4. Adjusted Net Income and Cash EBITDA are each a non-GAAP metric. Management believes that the presentation of these non-GAAP financial measures provides useful information to investors because the information may allow investors to better evaluate ongoing business performance and certain components of the Company's results. In addition, the Company believes that the presentation of these financial measures enhances an investor's ability to make period-to-period comparisons of the Company's operating results. This information should be considered in addition to the results presented in accordance with GAAP, and should not be considered a substitute for the GAAP results.


Company Contact: Investor and Media Contact:
Ronit Wallerstein Andrew M. Berger
Investor Relations Managing Director
Innovative Foods Holdings, Inc. SM Berger & Company, Inc.
(718) 645-1755 (216) 464-6400
rwallerstein@IVFH.com andrew@smberger.com

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