What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-31 compared with 2021-04-15 · 68 added, 65 removed, 203 unchanged (40% of the section changed)

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Prior thereto, our common stock traded under the symbol “FBSN”.

35,371,480 shares of our common stock were outstanding as of April 15, 2021.

46,041,751 shares of our common stock were outstanding as of March 1, 2022.

Security Holders

On April 15, 2021, there were approximately 56 record holders of our common stock.

On March 1, 2022, there were approximately 55 record holders of our common stock.

In addition, we believe there are at least several hundred additional beneficial owners of our common stock whose shares are held in “street name.”

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During the year ended December 31, 2021, the Company had the following equity related, nonregistered transactions:

On January 29, 2020, the Company issued 38,943 shares of common stock with a fair value of $17,135 to an employee as a bonus.

On January 10, 2020, the Company issued 2,381 shares of common stock with a fair value of $1,119 to a service provider as payment for services.

On February 3, 2021, the Company issued an additional 2,381 shares of common stock with a fair value of $1,167 to a service provider as payment for services.

On August 26, 2021 the Company issued 9,375,000 shares of common stock to investors with a fair value of $3,580,372 for cash.

During the year ended December 31, 2021, the Company accrued the amount of $385,000 representing 961,897 shares of common stock issuable at an average price of $0.4177 per share to its Chief Executive Officer pursuant to his compensation agreement.

During the year ended December 31, 2021, the Company accrued the amount of $17,116 representing 59,016 shares of common stock issuable at an average price of $0.29 per share to its Chief Strategy Officer pursuant to his compensation agreement.

During the year ended December 31, 2020, the Company accrued the amount of $35,000 to each of two directors (a total of $70,000) representing 69,928 shares of common stock issuance to each director (a total of 139,856 shares) pursuant to their service agreements.

During the year ended December 31, 2021, the Company accrued the amount of $90,000 representing 200,282 shares of common stock issuable to two Directors.

During the year ended December 31, 2021, the Company issued 74,076 shares with a fair value of $31,861 as a bonus.

All of the issuances described above were exempt from registration pursuant to Section 4(2) of the Securities Act of 1933 for the following reasons:

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December 31, 2021

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 as of December 31, 2020:

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 December 31, 2021:

December 31, 2020

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Equity compensation plans not approved by shareholders

Selected Financial Data

Not Applicable.

Management ’ s Discussion and Analysis of Financial Condition and Results of Operations

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The general volatility of the capital markets and the establishment of a market for our shares, and

Disruption in the economic and financial conditions primarily from the impact of past terrorist attacks in the United States, threats of future attacks, police and military activities overseas and other disruptive worldwide pandemic, political and economic events and environmental weather conditions.

We are also subject to other risks detailed from time to time in our other filings with Securities and Exchange Commission and elsewhere in this report.

Disruption in the economic and financial conditions primarily from the impact of past terrorist attacks in the United States, threats of future attacks, police and military activities overseas and other disruptive worldwide political and economic events, health pandemics, rising inflation and environmental weather conditions.

We are also subject to other risks detailed from time to time in our other filings with the SEC and elsewhere in this report.

Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate.

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The preparation of these 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.

These estimates include certain assumptions related to doubtful accounts receivable, stock-based services, valuation of financial instruments, and income taxes.

These estimates include certain assumptions related to doubtful accounts receivable, stock-based services, valuation of financial instruments, operating right to use assets and liabilities, and income taxes.

On an on-going basis, we evaluate these estimates, including those related to revenue recognition and concentration of credit risk.

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Doubtful Accounts Receivable

The Company maintained an allowance in the amount of $343,832 for doubtful accounts receivable at December 31, 2020, and $95,284 at December 31, 2019.

The Company maintained an allowance in the amount of $375,931 and $343,832 for doubtful accounts receivable at December 31, 2021 and 2020.

The Company has an operational relationship of several years with our major customers, and we believe this experience provides us with a solid foundation from which to estimate our expected losses on accounts receivable.

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Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Revenue decreased by $6,226,938 or approximately 10.8% to $51,676,028 for the year ended December 31, 2020 from $57,902,966 prior year.

The decrease in revenue is primarily attributable to a decrease in specialty foodservice revenues which was driven by the nationwide closures of restaurants and other foodservice establishments related to COVID-19.

The decline in specialty foodservice was partially offset with revenues increases mainly associated with e-commerce.

The increases in e-commerce revenues were driven by the Company’s ability to increase sales at its e-commerce properties and convert significant shifts in e-commerce specialty food, supermarket trends, and e-commerce grocery trends, driven initially by the COVID-19 pandemic, into e-commerce revenues.

Revenue increased by $10,536,120 or approximately 20% to $62,212,148 for the year ended December 31, 2021 from $51,676,028 prior year.

The increase in revenues is primarily attributable to an increase in specialty foodservice revenues which was driven by the nationwide opening of restaurants and other foodservice establishments previously affected by COVID-19.

As more foodservice establishments and restaurants have re-opened we have experienced improving foodservice revenues, although revenues still remain slightly below historical levels.

The increase in specialty foodservice revenue was partially offset with decreases mainly associated with e-commerce revenues.

Though e-commerce revenue remains significantly above historical levels, the decreases during the current period were the result of decreases in COVID-19 driven demand in 2021 compared to 2020.

We continue to assess the potential of new revenue sources from the manufacture and sale of proprietary food products, private label products and additional sales channel opportunities in both the foodservice and consumer space and will implement a strategy which based on our analysis provides the most beneficial opportunity for growth.

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Cost of goods sold

Our cost of goods sold for the year ended December 31, 2020 was $37,859,500, a decrease of $3,395,576 or approximately 8.2% compared to cost of goods sold of $41,255,076 for the year ended December 31, 2019.

Our cost of goods sold for the year ended December 31, 2021 was $45,261,401, an increase of $7,401,901 or approximately 20% compared to cost of goods sold of $37,859,500 for the year ended December 31, 2020.

The increase in cost of goods sold is attributed mainly to increases in revenues.

Cost of goods sold was made up of the following expenses for the year ended December 31, 2021:

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Total gross margin was approximately 27.2% of sales in 2021 compared to approximately 26.7% of sales in 2020.

The decrease in gross margins from 2019 is primarily attributable to variation in product and revenue mix across our various selling channels including a decrease in higher gross margin revenues associated with National Brand Management and lower gross margins associated with foodservice revenues including revenue and margin variations driven by the COVID-19 pandemic.

In 2020, we continued to price our products in order to gain market share and increase the number of our end users and ecommerce customers.

We currently expect, if market conditions and our product revenue mix remain constant, that our cost of goods sold may increase and our gross margin decrease.

Gross margins as a percentage of sales improved slightly during the current period to 27.2% compared to 26.7% during the comparable period, primarily due to variation in product and revenue mix across our various selling channels.

In 2022, we continue to price our products in order to increase sales, gain market share and increase the number of our end users and customers.

We currently expect, if market conditions, overall economic conditions, and our product revenue mix remain constant, that our cost of goods sold may increase and may result in a decrease in profit margin.

Selling, general, and administrative expenses

Selling, general, and administrative expenses increased by $1,008,411 or approximately 5% to $20,540,229 during the year ended December 31, 2021 compared to $19,531,818 for the year ended December 31, 2020.

The increase in selling, general, and administrative expenses was primarily due to an increase in advertising and marketing costs of $1,370,345, increases in payroll and related costs of approximately $1,386,169 (net of an increase in non-cash compensation in the amount of $111,258), an increase in IT and computer costs of $210,456, an increase in insurance costs of $176,485 an increase in banking and credit card fees of $272,364, an increase in bad debt expense of $218,862, , an increase in office, facilities, and vehicles costs $133,842, and an increase in taxes of $98,290.

These increases were partially offset by a decrease in amortization and depreciation of $530,157 and a decrease in professional fees of $25,048.

The increase in selling, general, and administrative expenses was primarily due to an increase in payroll and related costs of approximately $915,262 (net of an increase in non-cash compensation in the amount of $142,815), an increase in advertising and marketing costs of $550,770, an increase in insurance costs of $118,119, an increase in office, facilities, and vehicles costs $47,374, and an increase in taxes of $26,868.

These increases were partially offset by a decrease in bad debt expense of $223,143, a decrease in amortization and depreciation of $177,087, a decrease in banking and credit card fees of $125,877, a decrease in professional fees of $48,434, a decrease in IT and computer costs of $44,021.

The increases were driven mainly by additional costs including increases in costs including warehouse fulfillment costs associated with COVID-19, increased costs associated with additional personnel mainly related to warehouse operations, overall employee costs and insurance costs, increased legal, accounting, facility and IT costs including costs associated with the planned launch of new websites, and increased advertising associated with increased spending in digital marketing related to certain of the Company’s e-commerce websites.

Gain on forgiveness of debt

During the year ended December 31, 2021, the Company recorded a gain on forgiveness of debt in connection with the PPP Loans in the amount of $3,425,015, consisting of $3,398,635 of principal and $26,380 of accrued interest.

Impairment of goodwill and intangible assets

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As a result of impairment tests, the Company was required by applicable accounting rules to record an impairment of goodwill and intangible assets in the aggregate amount of $1,698,952.

At December 31, 2020, the net carrying value of goodwill and other intangible assets on the Company’s balance sheet is $1,633,202.

There was no such comparable charge during the prior period.

There was no such comparable charge during the current period.

At December 31, 2021, the net carrying value of other amortizable and unamortizable assets on the Company’s balance sheet is $1,605,040.

Impairment of Investment

During the year ended December 31, 2021, the founder of one of the food related companies passed away in an untimely tragic accident, and as a result the food related company ceased operations and the Company recognized an impairment in the amount of $209,850 in connection with that investment.

Other leasing income

On November 8, 2019 the Company purchased a logistics and warehouse facility located in Mountain Top, Pennsylvania.

During the year ended December 31, 2020, the Company recognized revenue in the amount of $43,810 in connection with the lease of space in this facility compared to $3,125 during the year ended December 31, 2019.

The increase was due to the Company recognizing a full year of activity during 2020 compared to the period from November 8, 2019 to December 31, 2019 during the prior year.

Gain on settlement of contingent liabilities

During the year ended December 31, 2019, the Company recorded a gain on settlement of contingent liabilities in the amount of $132,300 in connection with potential additional consideration under the igourmet Asset Purchase Agreement.

There was no comparable transaction during the current year.

On November 8, 2019 the Company purchased a logistics and warehouse facility located in Mountain Top, Pennsylvania and leased portions of this facility to a third party for a cell tower installation.

During the year ended December 31, 2021, the Company recognized revenue in the amount of $10,840 in connection with the lease of space in this facility compared to $43,810 during the year ended December 31, 2020 The decrease was due to (i) the Company recognized income in the amount of $22,380 in the current period as revenues in connection with customers for whom the Company provides other logistical services;

this category of income was classified as other leasing income during the prior year;

(ii) On January 18, 2021, the Company entered into a 50 year easement agreement for total proceeds of $380,000.

The 2021 revenue represents the recognition of the proceeds of the easement over the term of the agreement;

the Company recognized additional revenues in the amount of $10,879 from the previous short-term cell tower leasing agreement in the prior year.

Gain on disposal of fixed assets

During the year ended December 31, 2020, the Company recorded a gain on the sale of warehouse equipment in the amount of $7,984, compared to a gain on sale of equipment of $12,495 during the prior period.

During the year ended December 31, 2020, the Company recorded a gain on the sale of warehouse equipment in the amount of $7,984, compared to a gain on sale of equipment of $0 during the current period.

This type of transaction occurs infrequently.

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Interest expense, net of interest income, increased by $51,160 or approximately 17% to $353,854 during the year ended December 31, 2021, compared to $302,576 during the year ended December 31, 2020.

The increase was due primarily to an increase in interest accrued or paid on the Company’s commercial loans and notes payable in the amount of $182,640 from $114,257 during the year ended December 31, 2019 to $296,897 during the year ended December 31, 2020.

The Company also recorded interest expense in connection with the amortization of prepaid loan fees in the amount of $12,560 during the year ended December 31, 2020 compared to $1,819 during the prior period, an increase of $10,741.

Interest income was $6,831 during the year ended December 31, 2020, a decrease of $330 compared to interest income of $7,161 during the prior year.

Net (loss) income

For the reasons above, the Company had a net loss for the year ended December 31, 2020 of $7,665,024 compared to a net income of $222,767 during the year ended December 31, 2019.

The increase was due primarily to an increase in interest accrued or paid on the Company’s commercial loans and notes payable in the amount of $296,897 during the year ended December 31, 2020 to $348,864 during the year ended December 31, 2021.

The Company also recorded interest expense in connection with the amortization of prepaid loan fees in the amount of $12,525 during the year ended December 31, 2021 compared to $12,560 during the prior period.

For the reasons above, the Company had a net loss for the year ended December 31, 2021 of $716,331 compared to a net loss of $7,665,024 during the year ended December 31, 2020.

The loss for the year ended December 31, 2021 includes a total of $1,449,236 in non-cash charges, including amortization of intangible assets in the amount of $8,912;

depreciation expense of $517,942;

charges for non-cash compensation in the amount of $668,251;

impairment of investment of $209,850;

amortization of prepaid loan fees of $12,525;

and provision for doubtful accounts of $31,756.

These non-cash losses were offset by a gain on forgiveness of debt in the amount of $3,425,015.

The loss for the year ended December 31, 2020 includes a total of $3,159,751 in non-cash charges, including impairment of intangible assets in amount of $1,698,952;

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charges for non-cash compensation in the amount of $525,436;

and amortization of prepaid loan fees of $12,560.

The income for the year ended December 31, 2019 includes a total of $1,650,096 in non-cash charges, including amortization of intangible assets in the amount of $899,757, depreciation expense of $334,342, charges for non-cash compensation in the amount of $414,178, and amortization of prepaid loan fees of $1,819.

and amortization of prepaid loan fees of $12,560, and allowance for doubtful accounts of $218,862.

Liquidity and Capital Resources at December 31, 2021

As of December 31, 2021, the Company had current assets of $12,803,526, consisting of cash and cash equivalents of $6,122,671;

trade accounts receivable of $2,380,305;

inventory of $3,719,786;

trade accounts receivable of $3,256,764 inventory of $3,109,984;

and other current assets of $314,107.

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During the year ended December 31, 2021, the Company had cash used in operating activities of $3,661,569.

Cash flow used in operations consisted of the Company’s consolidated net loss of $7,665,024 subtracted by impairment of intangible assets of $1,698,952, depreciation and amortization of $703,941, non-cash compensation in the amount of $525,436, amortization of right-of-use assets of $161,926, provision for doubtful accounts of $254,899, and amortization of prepaid loan fees in the amount of $12,560.

These amounts were partially offset by a gain on the disposition of fixed assets in the amount of $7,984.

Cash flow used in operations consisted of the Company’s consolidated net loss of $716,331 subtracted by the depreciation and amortization of $526,854, non-cash compensation in the amount of $668,251, amortization of right-of-use assets of $102,715, provision for doubtful accounts of $31,756, and amortization of prepaid loan fees in the amount of $12,525.

These amounts were partially offset by a gain on the forgiveness of debt of $3,425,015, and proceeds from the sale of common stock.

The Company’s cash position increased by $1,072,174 as a result of changes in the components of current assets and current liabilities.

The Company had cash used in investing activities of $450,387 for the year ended December 31, 2020, which consisted of cash paid for the acquisition of property and equipment in the amount of $431,137, and cash paid for the acquisition of intangible assets in the amount of $19,250.

The Company had cash provided by financing activities of $3,304,235 for the year ended December 31, 2020, which consisted of proceeds for a line of credit in the amount of $2,000,000 and proceeds from a PPP loan in the amount of $1,650,221;

The Company had cash used in investing activities of $24,511 for the year ended December 31, 2021, which consisted of cash paid for the acquisition of property and equipment in the amount of $24,511.

The Company had cash provided by financing activities of $4,748,736 for the year ended December 31, 2021, which consisted of proceeds from a PPP loan in the amount of $1,748,414 and proceeds from the sale of common stock, net of issuances costs of $3,580,372;

these amounts were partially offset by principal payments on loans and notes payable in the amount of $433,087 and principal payments on financing leases in the amount of $146,963.

The Company currently anticipates that up to 100% of this PPP loan will be eligible for government forgiveness under the PPP program, although there is no assurance of such eligibility.

The Company had net working capital deficit of $760,101 as of December 31, 2020.

The Company had cash used in operations during the year ended December 31, 2020 in the amount of $1,759,883.

This compares to cash generated from operating activities of $1,594,647 during the year ended December 31, 2019.

The Company intends to continue to focus on increasing market share and cash flow from operations by focusing its sales activities on specific market segments and new product lines.

The Company had net working capital of $2,605,994 as of December 31, 2021.

The Company had cash used in operations during the year ended December 31, 2021 in the amount of $3,661,569, compared to cash used in operating activities of $1,759,883 during the year ended December 31, 2020.

The Company intends to continue to focus on increasing market share and cash flow from operations by focusing its sales activities on specific market segments and new product lines and improving operating efficiencies.

Currently, we do not have any material long-term obligations other than those described in Notes 11, 12 and 13 to the financial statements included in this report.

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In any of these events, the Company may be unable to implement its current plans for expansion, repay its debt obligations as they become due or respond to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial condition and results of operations.

As 2020 began we put together a plan which we expected to try to implement in 2020.

Those plans are described in the paragraphs below.

However, in the interim period since those plans were prepared, as described above in “Business – Growth Strategy”, “Risk Factors” and elsewhere in this Report, in 2020 the world has been in the grip of a pandemic which has wreaked havoc on economies world-wide, including in the U.S., which is our primary market.

Since 2020 the world has been in the grip of a pandemic which has wreaked havoc on economies world-wide, including in the U.S., which is our primary market.

As a result of the pandemic, restaurants, hotels, country clubs, casinos, catering houses and other of our primary customers have either been closed completely or are only partially open with significantly reduced operations.

Accordingly, foodservice revenues, which historically have been a significant overall portion of our revenues have been significantly reduced as most foodservice establishments cross the United States closed or had limited operations.

As a result, Foodservice revenue commencing in the second half of March 2020 and continuing throughout the year experienced unprecedented declines.

Conversely, we have experienced significant growth in our on-line e-commerce revenues as overall e-commerce grew and as demand for food products continued across the United States.

Accordingly, we have focused our resources on meeting the growth of e-commerce revenues.

While the percentage increase in e-commerce revenues was strong, the additional e-commerce revenues did not exceed the decrease in foodservice revenues commencing in the second half of March 2020 and continuing throughout the year and overall revenues and profits declined for that time frame.

In April 2020 we applied for and received a loan of approximately $1.6 million under a program established under a recent congressionally approved program which is administered by the U.S.

As a result, foodservice revenue commencing in the second half of March 2020 and continuing throughout the year and into 2021, experienced unprecedented declines.

As the pandemic has begun to decline in the United States and foodservice establishments have begun to reopen, we have experienced improving foodservice revenues although our revenues have not yet reached its previous historical levels for the full year.

While the decline in the pandemic and the re-opening of bricks and mortar stores resulted in a decline of e-commerce revenues compared to the comparable quarter in 2020, ecommerce revenues remained significantly above pre-pandemic historical levels.

In April 2020 we applied for and received a loan of approximately $1,650,221 under a program established under a congressionally approved program which is administered by the U.S.

Small Business Administration.

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Small Business Administration.

In addition, between the government loans, the potential forgiveness of the government loans, cash on hand and our current expectations of incoming revenues, we believe we have sufficient resources to continue operating for at least the next 12 months.

However, as we cannot predict at this time when quarantines, curfews, stay in place orders, and closures of non-essential businesses will end and general economic activity will resume, we cannot predict when our business will return to its pre-pandemic norms and the amount of economic stress we would experience.

During the year ended December 31, 2021, the Company received notifications from Fifth Third Bank, N.A.

that principal and accrued interest in the aggregate amounts of $3,398,635 and $26,380, respectively, due under the PPP Loans had been forgiven;

at December 31, 2021, the balance due under the PPP loans was $0.

Between cash on hand, access to outside capital, and our current expectations of incoming revenues, we believe we have sufficient resources to continue operating for at least the next 12 months.

However, inasmuch as we cannot predict the timing and the effect of the pandemic on general economic activities, we cannot predict the trajectory of the pandemic and the amount of economic stress we could experience if the pandemic were to worsen in the United States and worldwide.

While we intend to continue to focus on executing on our strategic growth plans, given the current economic conditions, we are not able to determine the exact timeframe in 2022, if at all, that we can then again consider fully implementing portions of the plans described below.

During 2021, we plan to attempt to expand our business by expanding our focus to additional specialty foods markets.

In addition, we will continue exploring potential acquisition and partnership opportunities and continue to extend our focus in the specialty food market through the growth of the Company’s existing sales channels and through a variety of additional potential sales channel relationships.

During 2022, we plan to expand our business by expanding our focus to additional specialty foods markets and by leveraging our e-commerce platform to launch and grow, either organically and/or through acquisition, new D2C brands and e-commerce sites within targeted consumer areas, on the Company’s e-commerce platform.

In addition, we will continue exploring potential acquisition and partnership opportunities with influencers and other celebrities to continue to extend our focus in the specialty food market through the growth of the Company’s existing sales channels and through a variety of additional potential sales channel relationships.

In addition, we are currently exploring the introduction of, or have introduced into the market, a variety of new product categories and new product lines, including private label products and proprietary branded products to leverage our existing foodservice and consumer customer base.

Furthermore, the Company intends to continue to expand its activities in the direct to consumer space and the overall consumer packaged goods (CPG) space through leveraging the assets acquired from igourmet LLC and Mouth Foods, Inc.

and through leveraging its overall capabilities in the consumer space, including leveraging its direct to consumer e-commerce capabilities to reach both additional customers in multiple channels, and to expand availability of its e-commerce capabilities to additional products and markets.

Furthermore, the Company intends to continue to expand its activities in the direct to consumer space and the overall consumer packaged goods (CPG) space through leveraging its overall capabilities in the consumer space, including leveraging its direct to consumer e-commerce platform to reach both additional customers in multiple channels, and to expand availability of its e-commerce capabilities to additional products and markets.

No assurances can be given that any of these plans will come to fruition or that if implemented that they will necessarily yield positive results.

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The Company's largest customer, U.S.

and its affiliates, accounted for approximately 40% and 57% of total sales in each of the years ended December 31, 2020 and 2019;

and its affiliates, accounted for approximately 46% and 40% of total sales in each of the years ended December 31, 2021 and 2020, respectively;

and approximately 40% of total sales in the fourth quarter of 2021 compared to 32% of total sales in the fourth quarter of 2020.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity