IVFH 10Q after hours net revenue of $562,604!
WOW!!! RESULTS OF OPERATIONS
The following is a discussion of our financial condition and results of operations for the three and six months ended June 30, 2011 and 2010.
This discussion may contain forward looking-statements that involve risks and uncertainties. Our actual results could differ materially from the forward looking-statements discussed in this report. This discussion should be read in conjunction with our unaudited condensed consolidated financial statements, the notes thereto and other financial information included elsewhere in the report.
Three Months Ended June 30, 2011 Compared to Three Months Ended June 30, 2010
Revenue
Revenue increased by $487,330, or approximately 21%, to $2,776,276 for the three months ended June 30, 2011 from $2,288,946 during the three months ended June 30, 2010.
We recorded sales decreases in Produce and Poultry of 10%, 5% respectively. These decreases were offset by increases in Seafood, Meat/Game, Cheese, and Specialty which increased 4%, 8%, 21%, 36%, respectively. Specialty sales has increased to 64% of total sales by line in 2011 versus 58% in 2010. This is due to our addition of new revenue sources from the manufacture and sale of proprietary food products and additional sales channel opportunities such as gluten-free and organic Products.
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Any changes in the food distribution operating landscape that materially hinders our current ability and/or cost to deliver our fresh produce to our customers could potentially cause a material impact on our net revenue and gross margin and, therefore, our profitability and cash flows could be adversely affected.
Currently, a small portion of our revenues comes from imported products or international sales. Our current sales from such segments may be hampered and negatively impacted by any economic tariffs that may be imposed in the United States or in foreign countries.
See "Transactions with Major Customers" and the Securities and Exchange Commission's ("SEC") mandated FR-60 disclosures following the "Liquidity and Capital Resources" section for a further discussion of the significant customer concentrations, loss of significant customer, critical accounting policies and estimates, and other factors that could affect future results.
Cost of goods sold
Our cost of goods sold for the three months ended June 30, 2011 was $2,038,708 an increase of $223,646 or approximately 12% compared to cost of goods sold of $1,815,062 for the three months ended June 30, 2010. Cost of goods sold increased primarily due to increased revenues and is primarily comprised of the following expenses for the three months ended June 30, 2011: cost of goods sold of specialty meat, game, cheese, poultry and other sales categories in the amount of $1,482,176 and shipping expenses in the amount of $512,955. Shipping costs increased by $10,786 in 2011 versus 2010, while cost of specialty meat, game, cheese poultry and other sales categories increased by $2,449,578. For the three months ended June 30, 2011 and 2010 the gross margin was approximately 27% and 21%, respectively. Our cost of goods sold percentage increase is in line with our revenue percentage increase.
Selling, general and administrative expenses
Selling, general and administrative expenses were $473,157 for the three months ended June 30, 2011, a decrease of $79,116, or approximately 14%, compared to $552,273 for the three months ended June 30, 2010. The primary components of selling, general, and administrative expenses for the three months ended June 30, 2011 were, payroll and related costs of $309,770; consulting and professional fees of $94,203; insurance costs of $25,340; facilities costs of $23,803; and office expense of $14,660. We expect our legal and accounting fees to increase in 2011. We also, expect to increase our spending on advertising and marketing, which are expensed when incurred, and web development fees in 2011.
Interest expense
Interest expense increased by $115,509, or approximately 122%, from $94,487 during the three months ended June 30, 2010 to $209,996 for the three months ended June 30, 2011. Interest expense increased during the three months ended June 30, 2011 as compared to the three months ended June 30, 2010 as the result of the amortization of the discount on the notes payable.
Gain from the extinguishment of debt
During the three months ended June 30, 2011, the Company entered into agreements (the "Notes Settlement Agreements") with several convertible note holders regarding thirteen convertible notes in the aggregate amount of $333,000 principal and $236,924 accrued interest. Pursuant to the Note Settlement Agreements, the Company made cash payments in the aggregate amount of $181,604 and agreed to pay an additional $12,500 by February 15, 2012. The Company also committed to issue a total of 33,986,996 shares of its common stock to the note holders. The Notes Settlement Agreements resulted in an aggregate gain on extinguishment of debt in the amount of $165,325.
Gain from change in fair value of warrant liability
At June 30, 2011, the Company had outstanding warrants to purchase an aggregate of 273,200,000 shares of the Company's common stock. The Company revalued this warrant liability at June 30, 2011, at $883,707. This revaluation resulted in a gain of $154,789 which the Company charged to operations during the three months ended June 30, 2011. This is a decrease of $297,953 or approximately 208% compared to a loss of $143,164 from the revaluation of the warrant liability which the Company recorded during the three months ended June 30, 2010.
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Gain and loss from change in fair value of conversion option liability
At June 30, 2011 the Company had outstanding a liability to issue an aggregate of 250,658,200 shares of the Company's common stock pursuant to convertible notes payable. The Company revalued this liability at June 30, 2011 at $1,780,874. This revaluation resulted in a gain of $188,075, which the Company included in operations for the three months ended June 30, 2011. This is an decrease of $694,224 or approximately 137% compared to a loss of $506,149 from the revaluation of the conversion option liability which the Company recorded during the three months ended June 30, 2010.
Net Income (loss)
For the reasons stated above, net income for the three months ended June 30, 2011 was $562,604, an increase of $2,198,617 compared to a net loss of $1,636,013, during the three months ended June 30, 2010. It is important to note that a substantial portion of these gains is the result of non-cash items, such as the revaluation of warrant liability, option liability, and conversion option liability, as well as the gain and loss on the extinguishment of debt. These non-cash items of income and expense had no direct impact on our cash flows during the periods ended June 30, 2011 or 2010.
Six Months Ended June 30, 2011 Compared to Six Months Ended June 30, 2010
Revenue
Revenue increased by $650,899, or approximately 14%, to $5,247,806 for the six months ended June 30, 2011 from $4,596,907 during the six months ended June 30, 2010.
We recorded sales decreases in Seafood, Produce, Meat/Game, Poultry, Cheese which decreased 15%, 11%, 1%, 12%, 1%, respectively which was offset by a significant increase in Specialty sales of 31%. Specialty sales has increased to 62% of total sales by line in 2011 versus 55% in 2010. This is due to our addition of new revenue sources from the manufacture and sale of proprietary food products and additional sales channel opportunities such as gluten-free and organic Products.
Any changes in the food distribution operating landscape that materially hinders our current ability and/or cost to deliver our fresh produce to our customers could potentially cause a material impact on our net revenue and gross margin and, therefore, our profitability and cash flows could be adversely affected.
Currently, a small portion of our revenues comes from imported products or international sales. Our current sales from such segments may be hampered and negatively impacted by any economic tariffs that may be imposed in the United States or in foreign countries.
See "Transactions with Major Customers" and the Securities and Exchange Commission's ("SEC") mandated FR-60 disclosures following the "Liquidity and Capital Resources" section for a further discussion of the significant customer concentrations, loss of significant customer, critical accounting policies and estimates, and other factors that could affect future results.
Cost of goods sold
Our cost of goods sold for the six months ended June 30, 2011 was $3,930,850, an increase of $346,062 or approximately 8% compared to cost of goods sold of $3,584,788 for the six months ended June 30, 2010. Cost of goods sold increased primarily due to increased revenues and is primarily comprised of the following expenses for the six months ended June 30, 2011: cost of goods sold of specialty meat, game, cheese, poultry and other sales categories in the amount of $2,738,836 and shipping expenses in the amount of $1,052,036. Shipping costs increased by $51,507 in 2011 versus 2010, while cost of specialty meat, game, cheese, poultry, and other sales categories increased by $300,010. For the six months ended June 30, 2011 and 2010 the gross margin was approximately 25% and 22%, respectively. Our cost of goods sold percentage increase is in line with our revenue percentage increase.
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Selling, general and administrative expenses
Selling, general and administrative expenses were $928,719 for the six months ended June 30, 2011, a decrease of $164,919, or approximately 15%, compared to $1,093,638 for the six months ended June 30, 2010. The primary components of selling, general, and administrative expenses for the six months ended June 30, 2011 were, payroll and related costs of $608,899; consulting and professional fees of $126,062; insurance costs of $55,680; facilities costs of $46,153; and office expense of $33,283. We expect our legal and accounting fees to increase in 2011. We also, expect to increase our spending on advertising and marketing, which are expensed when incurred, and web development fees in 2011.
Interest expense
Interest expense increased by $214,202, or approximately 125%, from $171,897 during the six months ended June 30, 2010 to $386,099 for the six months ended June 30, 2011. Interest expense increased during the six months ended June 30, 2011 as compared to the six months ended June 30, 2010 as the result of the amortization of the discount on the notes payable.
Gain from the extinguishment of debt
During the three months ended June 30, 2011, the Company entered into agreements (the "Notes Settlement Agreements") with several convertible note holders regarding thirteen convertible notes in the aggregate amount of $333,000 principal and $236,924 accrued interest. Pursuant to the Note Settlement Agreements, the Company made cash payments in the aggregate amount of $181,604 and agreed to pay an additional $12,500 by February 15, 2012. The Company also committed to issue a total of 33,986,996 shares of its common stock to the note holders. The Notes Settlement Agreements resulted in an aggregate gain on extinguishment of debt in the amount of $165,325.
Fair value of warrants issued
During the six months ended June 30, 2010, the Company extended the expiration date of warrants to purchase an aggregate of 132,000,000 shares of common stock. The Company valued this extension at $134,216. During the six months ended June 30, 2010, the Company extended the expiration date of warrants to purchase an aggregate of 200,200,000 shares of common stock. The Company valued the extension of these warrants at $813,824, which the Company charged to operations during the six months ended June 30, 2010. These is no comparable activity during the six months ended June 30, 2011.
Gain from change in fair value of warrant liability
At June 30, 2011, the Company has outstanding warrants to purchase an aggregate of 273,200,000 shares of the Company's common stock. The Company revalued this warrant liability at June 30, 2011, at $883,707. This revaluation resulted in a gain of $299,468, which the Company credited to operations during the six months ended June 30, 2011. This is a decrease of $457,132 or approximately 290% compared to a loss of $157,664 from the revaluation of the warrant liability which the Company recorded during the six months ended June 30, 2010.
Gain and loss from change in fair value of conversion option liability
At June 30, 2011 the Company had outstanding a liability to issue an aggregate of 250,658,200 shares of the Company's common stock pursuant to convertible notes payable. The Company revalued this liability at June 30, 2011 at $1,780,874. This revaluation resulted in a gain of $265,801, which the Company included in operations for the six months ended June 30, 2011. This is a decrease of $1,593,137 or approximately 120% compared to a loss of $1,327,336 from the revaluation of the conversion option liability which the Company recorded during the six months ended June 30, 2010.
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Net Income (loss)
For the reasons stated above, net income for the six months ended June 30, 2011 was $732,732, an increase of $3,419,188 compared to a net loss of $2,686,456, during the six months ended June 30, 2010. It is important to note that a substantial portion of these gains is the result of non-cash items, such as the revaluation of warrant liability, option liability, and conversion option liability, as well as the gain and loss on the extinguishment of debt. These non-cash items of income and expense had no direct impact on our cash flows during the periods ended June 30, 2011 or 2010.
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