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

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.
[phone]	[phone]
[e-mail]	[e-mail]