0001493152-19-007651.txt : 20190516 0001493152-19-007651.hdr.sgml : 20190516 20190516163634 ACCESSION NUMBER: 0001493152-19-007651 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 57 CONFORMED PERIOD OF REPORT: 20190331 FILED AS OF DATE: 20190516 DATE AS OF CHANGE: 20190516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Blue Star Foods Corp. CENTRAL INDEX KEY: 0001730773 STANDARD INDUSTRIAL CLASSIFICATION: PREPARED FRESH OR FROZEN FISH & SEAFOODS [2092] IRS NUMBER: 824270040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-55903 FILM NUMBER: 19832810 BUSINESS ADDRESS: STREET 1: 3330 CLEMATIS STREET STREET 2: SUITE 217 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 BUSINESS PHONE: 800-341-2684 MAIL ADDRESS: STREET 1: 3330 CLEMATIS STREET STREET 2: SUITE 217 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 FORMER COMPANY: FORMER CONFORMED NAME: AG ACQUISITION GROUP II, INC. DATE OF NAME CHANGE: 20180207 10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: March 31, 2019

 

or

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________________ to ________________

 

Commission file number: 000-55903

 

BLUE STAR FOODS CORP.
(Exact name of registrant as specified in its charter)

 

Delaware   82-4270040
(State or other jurisdiction of
incorporation or organization)
 

(IRS Employer

Identification No.)

 

3000 NW 109th Avenue

Miami, Florida 33172

(Address of principal executive offices)
 
(860) 633-5565
(Registrant’s telephone number, including area code)
 
N/A
(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically on its corporate Web site, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

  Large accelerated filer [  ] Accelerated filer [  ]
  Non-accelerated filer [  ] Smaller reporting company [X]
    Emerging Growth Company [X]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

 

As of May 14, 2019, there were 16,055,794 shares of the registrant’s common stock, par value $0.0001 per share (“Common Stock”) outstanding.

 

 

 

 
 

 

BLUE STAR FOODS CORP.

 

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

 

TABLE OF CONTENTS

 

    PAGE
     
PART I - FINANCIAL INFORMATION  
     
Item 1. Financial Statements (Unaudited) 4
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 22
     
Item 4. Controls and Procedures 22
     
PART II - OTHER INFORMATION  
     
Item 1. Legal Proceedings 23
     
Item 1A. Risk Factors 23
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
     
Item 3. Defaults Upon Senior Securities 24
     
Item 4. Mine Safety Disclosures 24
     
Item 5. Other Information 24
     
Item 6. Exhibits 24
     
SIGNATURES 25

 

2
 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include, among others, those statements including the words “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans” and words of similar import. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

 

Forward-looking statements are based on our current expectations and assumptions regarding our business, potential target businesses, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include changes in local, regional, national or global political, economic, business, competitive, market (supply and demand) and regulatory conditions and the following:

 

  Our ability to raise capital when needed and on acceptable terms and conditions;
     
  Our ability to make acquisitions and integrate acquired businesses into our company;
     
  Our ability to attract and retain management with experience in the business of importing, packaging and selling of seafood;
     
  Our ability to negotiate, finalize and maintain economically feasible agreements with suppliers and customers;
     
  The availability of crab meat and other premium seafood products we sell;
     
  The intensity of competition; and
     
  Changes in the political and regulatory environment and in business and fiscal conditions in the United States and overseas.

 

A description of these and other risks and uncertainties that could affect our business appears in the section captioned “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 20178 which we filed with the Securities and Exchange Commission (“SEC”) on April 1, 2019 (“Annual Report”). The risks and uncertainties described under “Risk Factors” are not exhaustive.

 

Given these uncertainties, readers of this Quarterly Report on Form 10-Q (“Quarterly Report”) are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.

 

All references in this Quarterly Report to the “Company”, “Blue Star Foods”, “we”, “us”, or “our”, are to Blue Star Foods Corp. (formerly AG Acquisition Group II, Inc.), a Delaware corporation, and its consolidated subsidiary, John Keeler & Co., Inc., d/b/a Blue Star Foods, a Florida corporation.

 

3
 

 

PART I – FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the SEC, and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report, as updated in subsequent filings we have made with the SEC. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.

 

Blue Star Foods Corp.

CONSOLIDATED BALANCE SHEETS

 

   MARCH 31   DECEMBER 31 
   2019   2018 
   (unaudited)     
ASSETS          
           
CURRENT ASSETS          
Cash (including VIE $10,213 and $5,561, respectively)  $45,150   $13,143 
Restricted Cash   59,237    334,083 
Accounts receivable, net (including VIE $37,681 and $49,624, respectively)   3,275,317    3,449,487 
Inventory, net (including VIE $12,033 and $117,816, respectively)   8,618,182    8,126,634 
Advances to related party   1,261,468    1,139,619 
Other current assets (including VIE $3,759 and $4,351, respectively)   95,166    90,929 
Total current assets   13,354,520    13,153,895 
           
FIXED ASSETS, net   95,834    109,169 
           
RIGHT OF USE ASSET   1,220,283    - 
OTHER ASSETS   192,256    218,254 
           
TOTAL ASSETS  $14,862,893   $13,481,318 
           
LIABILITIES AND STOCKHOLDER’S DEFICIT          
           
CURRENT LIABILITIES          
Accounts payable and accruals (including VIE $55,171 and $95,720, respectively)  $2,556,061   $3,155,741 
Working capital line of credit   8,712,945    8,203,725 
Related Party Notes Payable   1,000,000    - 
Current maturities of long-term debt   25,158    31,230 
Stockholder notes payable - Subordinated   2,910,136    2,910,136 
Total current liabilities   15,204,300    14,300,832 
           
RIGHT OF USE LONG -TERM LIABILITY   1,096,226    - 
           
TOTAL LIABILITIES   16,300,526    14,300,832 
           
COMMITMENTS AND CONTINGENCIES          
           
STOCKHOLDER’S DEFICIT          
Blue Star Foods Corp. Stockholder’s Deficit          
Series A 8% cumulative convertible preferred stock, $0.0001 par value; 10,000 shares authorized, 1,413 shares issued and outstanding as of March 31, 2019 and December 31, 2018   -    - 
Common stock, $0.0001 par value, 100,000,000 shares authorized; 16,042,294 shares issued and outstanding (including 14,130 shares declared as stock dividend on March 31, 2019) as of March 31, 2019 and 16,023,164 shares issued and outstanding (including 8,164 shares declared as stock dividend on December 31, 2018) as of December 31, 2018   1,606    1,603 
Additional paid-in capital   4,108,059    3,404,774 
Accumulated deficit   (5,101,428)   (3,853,139)
Total Blue Star Foods Corp. stockholder’s deficit   (991,763)   (446,762)
           
Non-controlling interest   (460,101)   (440,833)
Accumulated other comprehensive income (VIE)   14,231    68,081 
Total VIE’s deficit   (445,870)   (372,752)
           
TOTAL STOCKHOLDER’S DEFICIT   (1,437,633)   (819,514)
           
TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT  $14,862,893   $13,481,318 

 

The accompanying notes are an integral part of these unaudited financial statements

 

4
 

 

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (UNAUDITED)

THREE MONTHS ENDED MARCH 31,

 

   2019   2018 
         
REVENUE, NET  $6,510,774   $8,190,417 
           
COST OF REVENUE (including approximately $2,114,500 and $4,234,600, respectively, purchased from related party)   5,600,914    7,507,068 
           
GROSS PROFIT   909,860    683,479 
           
COMMISSIONS   18,810    28,815 
SALARIES & WAGES   1,116,748    472,877 
SETTLEMENT & WARRANT EXPENSE   -    - 
OTHER OPERATING EXPENSES   775,406    683,479 
           
LOSS FROM OPERATIONS   (1,001,104)   (501,822)
           
OTHER INCOME   -    - 
OTHER EXPENSE   -    - 
INTEREST EXPENSE   (238,193)   (266,297)
           
NET LOSS   (1,239,297)   (768,119)
           
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST   (19,268)   (44,890)
           
NET LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.  $(1,220,029)  $(723,229)
           
DIVIDEND ON PREFERRED STOCK   28,260    - 
           
NET LOSS ATTRIBUABLE TO BLUE STAR FOODS CORP. COMMON SHAREHOLDERS  $(1,248,289)  $(715,458)
           
COMPREHENSIVE INCOME (LOSS):          
           
TRANSLATION ADJUSTMENT ATTRIBUTABLE TO NON-CONTROLLING INTEREST   (53,850)   5,096 
           
COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST  $(73,118)  $(39,793)
           
COMPREHENSIVE LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.  $(1,220,029)  $(723,229)
           
PRO FORMA DATA:          
PRO FORMA INCOME TAX EXPENSE   -    - 
           
PRO FORMA NET LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.  $(1,220,029)  $(723,229)
           
PRO FORMA COMPREHENSIVE LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.  $(1,222,029)  $(723,229)
           
Loss per basic and diluted common share:          
Basic net loss per common share  $(0.08)  $(0.05)
Basic weighted average common shares outstanding   16,026,386    15,000,000 
Fully diluted net loss per common share  $(0.08)  $(0.05)
Fully diluted weighted average common shares outstanding   16,026,386    15,000,000 

 

The accompanying notes are an integral part of these unaudited financial statements

 

5
 

 

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S DEFICIT (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2019

 

   Series A Pref Stock $.0001 par value   Common Stock $.0001 par value   Additional Paid-in   Retained Earnings (Accumulated   Total Blue Star Foods Corp. Stockholder’s   Non-Controlling   Total Stockholder’s Equity 
   Shares   Amount   Shares   Amount   Capital   Deficit)   Deficit   Interest   (Deficit) 
December 31, 2018   1,413    -    16,023,164    1,603    3,404,774    (3,853,139)   (446,762)   (372,752)   (819,514)
                                              
Common stock issued for Cash             5,000    1    9,999         10,000         10,000 
                                              
Stock Based Compensation                       665,028         665,028         665,028 
                                              
Dividends to preferred stockholders             14,130    2    28,258    (28,260)   -         - 
                                              
Net Loss                  -         (1,220,029)   (1,220,029)   (19,268)   (1,239,297)
                                              
Comprehensive loss             -    -    -    -    -    (53,850)   (53,850)
                                              
March 31, 2019   1,413    -    16,042,294    1,606    4,108,059    (5,101,428)   (991,763)   (445,870)   (1,437,633 

 

The accompanying notes are an integral part of these unaudited financial statements

 

6
 

 

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S DEFICIT (UNAUDITED)

THREE MONTHS ENDED MARCH 31, 2018

 

   Common Stock $1.00 par value   Additional Paid-in   Retained Earnings (Accumulated   Total Blue Star Foods Corp. Stockholder’s   Non-Controlling   Total Stockholder’s Equity 
   Shares   Amount   Capital   Deficit)   Deficit   Interest   (Deficit) 
                             
December 31, 2017   15,000,000   $1,500   $558,257    (1,494,927)   (935,170)   (317,378)  $(1,252,548)
                                    
606 Adjustment to January 1, 2018                  (81,520)   (81,520)        (81,520)
                                    
Adjusted January 1, 2018   15,000,000    1,500    558,257    (1,576,447)   (1,016,690)   (317,378)   (1,334,068)
                                    
Net Loss   -    -    -    (723,228)   (723,228)   (44,890)   (768,118)
                                    
Comprehensive loss   -    -    -    -    -    5,096    5,096 
                                    
March 31, 2018   15,000,000   $1,500   $558,257    (2,299,675)   (1,739,918)   (357,172)  $(2,097,090)

 

The accompanying notes are an integral part of these unaudited financial statements

 

7
 

 

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31,

 

   2019   2018 
CASH FLOWS FROM OPERATING ACTIVITIES:          
           
Net Loss  $(1,239,297)  $(768,118)
Adjustments to reconcile net loss to net cash used in operating activities:          
Stock Based Compensation   665,028    - 
Depreciation of fixed assets   17,005    15,551 
Amortization of Right of use asset   37,468    - 
Amortization of loan costs   35,998    33,262 
Changes in operating assets and liabilities:          
Receivables   174,170    255,434 
Inventories   (491,548)   2,496,991 
Advances to affiliated supplier   (121,849)   (327,044)
Other current assets   (4,237)   (2,983)
Change in Right of use Liability   (32,615)   - 
Accounts payable and accruals   (728,590)   (622,157)
Net cash provided by (used) in operating activities   (1,688,467)   1,080,936 
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of fixed assets   (3,670)   (2,991)
Net cash used in investing activities   (3,670)   (2,991)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from Common Stock Offering   10,000    - 
Proceeds from working capital lines of credit   7,215,843    6,888,740 
Repayments of working capital lines of credit   (6,706,623)   (7,934,415)
Proceeds from Related Party Notes Payable   1,000,000    - 
Principal payments of long-term debt   (6,072)   (8,556)
Payments of Loan costs   (10,000)   - 
Net cash provided by (used) in financing activities   1,503,148    (1,054,231)
           
Effect of exchange rate changes on cash   (53,850)   5,096 
           
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH   (242,839)   28,810 
           
CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD   347,226    58,875 
           
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD  $104,387   $87,685 
           
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY          
Series A 8% Dividend issued in Common Stock   28,260    - 
Valuation of Right of Use asset/liability   1,257,751    - 
           
Supplemental Disclosure of Cash Flow Information          
Cash paid for interest  $238,367   $266,286 

 

The accompanying notes are an integral part of these unaudited financial statements

 

8
 

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

Note 1. Company Overview

 

Located in Miami, Florida, Blue Star Foods Corp. (the “Company”) is a sustainable seafood company. The company’s main operating business, John Keeler & Co., Inc. has been in business for approximately twenty-one years. The Company was formed under the laws of the State of Delaware. The current source of revenue is importing blue and red swimming crab meat primarily from Indonesia, Philippines and China and distributing it in the United States of America, Canada and Europe under several brand names such as Blue Star, Oceanica, Pacifika and Harbor Banks.

 

On November 8, 2018 the sole shareholder of John Keeler & Co., Inc. executed an Agreement and Plan of Merger and Reorganization with Blue Star Foods Corp. (Formerly A.G. Acquisition Group II, Inc.) and Blue Star Acquisition Corp. John R. Keeler exchanged his 500 shares with a par value of $1.00 in John Keeler & Co., Inc. for the 15,000,000 shares with a par value of $.0001 of the then outstanding 16,015,000 outstanding shares. As part of the merger, the net liabilities existing in the company as of the date of the merger totaling approximately $2,400 were converted to equity as part of this transaction. The prior owners of Blue Star Foods Corp. received 750,000 shares of common stock as part of this transaction, and various service providers received 265,000 shares as compensation for their work on the transaction resulting in and expense and additional paid in capital of $530,001. Additionally, there were 725 Series A Preferred shares and 181,250 warrants issued to private placement investors for total capital contribution of $725,000, 688 Series A Preferred shares and 172,000 warrants issued for settlement with prior investors which had a fair value of $688,000 and $81,353 respectively. Lastly, upon the close of the merger there were 3,120,000 options to purchase common stock issued to Christopher Constable. Additionally, Carlos Faria held options to purchase 104 shares of John Keeler & Co., Inc. prior to the merger. These options were immediately converted at closing to 3,120,000 options to purchase common stock in Blue Star Foods Corp.

 

The Merger was accounted for as a “reverse merger” and recapitalization since, immediately following the completion of the transaction, the holders of John Keeler & Co., Inc.’s stock will have effective control of Blue Star Foods Corp. In addition, John Keeler & Co., Inc. will have control of the combined entity through control of the Board by designating all four of the board seats. Additionally, all of John Keeler & Co., Inc.’s officers and senior executive positions will continue on as management of the combined entity after consummation of the Merger. For accounting purposes, John Keeler & Co., Inc. will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction has been treated as a recapitalization of Blue Star Foods Corp. Accordingly, John Keeler & Co., Inc.’s assets, liabilities and results of operations are the historical financial statements of the registrant, and the John Keeler & Co., Inc.’s assets, liabilities and results of operations have been consolidated with Blue Star Foods Corp. effective as of the date of the closing of the Merger. No step-up in basis or intangible assets or goodwill was recorded in this transaction.

 

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

The following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The balance sheet as of December 31, 2018 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on from 10-K for the year ending December 31, 2018 for a broader discussion of our business and the risks inherent in such business.

 

9
 

 

Advances to Suppliers and Related Party

 

In the normal course of business, the Company may advance payments to its suppliers, inclusive of Bacolod, a related party. These advances are in the form of prepayments for products that will ship within a short window of time. In the event that it becomes necessary for the Company to return products or adjust for quality issues, the Company is issued a credit by the vendor in the normal course of business and these credits are also reflected against future shipments.

 

As of March 31, 2019 and December 31, 2018, the balance due from the related party for future shipments was approximately $1,261,468 and $1,139,619, respectively. The 2019 balances represent approximately four months of purchases from the supplier.

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers”, and has subsequently issued several supplemental and/or clarifying ASUs (collectively, “ASC 606”). ASC 606 prescribes a single common revenue standard that replaces most existing U.S. GAAP revenue recognition guidance. ASC 606 is intended to provide a more consistent interpretation and application of the principles outlined in the standard across filers in multiple industries and within the same industries compared to current practices, which should improve comparability. Adoption of ASC 606 is required for annual and interim periods beginning after December 15, 2017. Upon adoption, we must elect to adopt either retrospectively to each prior reporting period presented or use the modified retrospective transition method with the cumulative effect of initial adoption recognized at the date of initial application. We adopted the new standard using the modified retrospective method on January 1, 2018.

 

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

 

ASC 842 Leases.

 

On January 1, 2019, we adopted Accounting Standards Codification 842 and all the related amendments using the modified retrospective method. We recognized the cumulative effect of initially applying the new lease standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those periods.

 

The new lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts entered into prior to adoption are leases or contain leases.

 

We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of March 31, 2019. Our leases generally have terms that range from three years for equipment and five to twenty years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

 

10
 

 

Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.

 

When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that we will exercise the option, we consider these options in determining the classification and measurement of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

 

The table below presents the lease-related assets and liabilities recorded on the balance sheets.

 

   March 31, 2019 
Assets     
Operating lease assets  $1,220,283 
      
Liabilities     
Current  $128,910 
Operating lease liabilities     
Noncurrent     
Operating lease liabilities  $1,096,226 

 

Supplemental cash flow information related to leases were as follows:

 

   Three Months Ended March 31, 2019 
     
Cash used in operating activities:     
Operating leases  $4,853 
ROU assets recognized in exchange for lease obligations:     
Operating leases  $1,257,751 

 

The table below presents the remaining lease term and discount rates for operating leases.

 

   March 31, 2019 
Weighted-average remaining lease term     
Operating leases   7.21 years 
Weighted-average discount rate     
Operating leases   5.5%

 

11
 

 

Maturities of lease liabilities as of March 31, 2019, were as follows:

 

   Operating Leases 
     
2019 (excluding the three months ended March 31, 2019)  $149,729 
2020   190,574 
2021   201,675 
2022   213,600 
2023   216,847 
Thereafter   557,074 
Total lease payments   1,529,499 
Less: amount of lease payments representing interest   (312,143)
Present value of future minimum lease payments  $1,217,356 
Less: current obligations under leases  $(121,130)
Non current long-term obligations  $1,096,226 

 

Stock-Based Compensation

 

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-7”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.

 

Income Taxes

 

Prior to November 8, 2018, the Company was taxed under the provisions of subchapter S of the Internal Revenue Code. Under these provisions, the Company did not pay corporate federal income taxes on its taxable income but was liable for Florida corporate income taxes and Texas Franchise Tax. The shareholder was liable for individual income taxes on the Company’s taxable income. Post-merger, the Company file consolidated federal and state income tax returns.

 

Note 3. Going Concern

 

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the three months ended March 31, 2019, the Company incurred a net loss of $1,239,297, has an accumulated deficit of $5,101,428 and working capital deficit of $1,849,780, with the current liabilities inclusive of $2,910,136 in stockholder loans that are subordinated to the provider of the working capital facility, and $128,910 in the current portion of the lease liability recognition. These circumstances raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to increase revenues, execute on its business plan to acquire complimentary companies, raise capital, and to continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Note 4. Consolidation of Variable Interest Entities

 

Effective April 1, 2014, the Company’s stockholder was transferred the controlling interest of Strike the Gold Foods Ltd. (“Strike”), a related party entity based in the United Kingdom. The Company concluded that Strike is a VIE and the Company is the primary beneficiary of Strike, in accordance with ASC 810, Consolidation. Therefore, the Company consolidated Strike in its financial statements. Strike’s activities are reflected in the Company’s financial statements starting on April 1, 2014, the effective date of the controlling interest transfer. Strike was not a VIE of the Company and the Company was not the primary beneficiary of Strike prior to the effective date of the controlling interest transfer of April 1, 2014. Strike’s equity is classified as non-controlling interest in the Company’s financial statements since the Company is not a shareholder of Strike.

 

12
 

 

The information below represents the assets, liabilities and non-controlling interest related to Strike as of March 31, 2019 and December 31, 2018.

 

   March 31, 2019 
Assets  $63,686 
Liabilities   55,171 
Non-controlling interest   (460,101)

 

   December 31, 2018 
Assets  $177,352 
Liabilities   95,720 
Non-controlling interest   (440,883)

 

Note 5. Debt

 

Working Capital Line of Credit

 

The Company entered into a $14,000,000 revolving line of credit with Ares on August 31, 2016, the proceeds of which were used to pay off the prior line of credit, pay new loan costs of approximately $309,000, and provide additional working capital to the company. This facility was amended on November 18, 2016, June 19, 2017, October 16, 2017 and September 19, 2018. In the fourth amendment the term of this facility was extended to a term of 5 years from the effective date and is subject to early termination by the lender upon defined events of default. The Company continues to be obligated to meet certain financial covenants.

 

The line of credit bears an interest rate equal to the greater of 3 Month LIBOR rate plus 6.25%, the Prime rate plus 3.0% or a fixed rate of 6.5%.

 

The Ares line of credit agreement is subject to the following terms:

 

  Borrowing is based on up to 85% of eligible accounts receivable plus the net orderly liquidation value of eligible inventory at the same rate, subject to certain defined limitations.
  The line is collateralized by substantially all the assets and property of the Company and is personally guaranteed by the stockholder of the Company.
  The Company is restricted to specified distribution payments, use of funds, and is required to comply with certain other covenants including certain financial ratios.
  ●  All cash received by the Company is applied against the outstanding loan balance.
  ●  A subjective acceleration clause allows Ares to call the note upon a material adverse change.

 

During the year ended December 31, 2018, the Company failed to meet certain financial covenants. The bank issued the fourth amendment to the loan and security agreement dated September 19, 2018 waiving the defaults of the financial covenants, and resetting certain financial covenants. The Company is in violation of its covenant regarding advances to affiliates as of March 31, 2019.

 

On November 8, 2018, Inc. the company entered into the fifth amendment to the loan and security agreement with Ares Financial. This amendment memorialized the change in ownership of John Keeler & Co., Inc as a wholly owned subsidiary of Blue Star Foods Corp. as well as the change of John Keeler from CEO to Executive Chairman, and the appointment of Carlos Faria as the CEO of John Keeler & Co., Inc.

 

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The Company analyzed the Line of Credit modification under ASC 470-50-40-21 and determined that the modification did not trigger any additional accounting due to the revolving line of credit remain unchanged

 

As of March 31, 2019, the line of credit bears interest rate of 9.376%.

 

As of March 31, 2019 and December 31, 2018, the line of credit had an outstanding balance of approximately $8,713,000 and $8,204,000, respectively.

 

John Keeler Promissory Notes

 

From January 2006 through May 2017, Keeler & Co issued an aggregate of $2,910,000 6% demand promissory notes to John Keeler, our Executive Chairman. As of March 31, 2019, $2,910,000 of principal remains outstanding and approximately $43,700 of interest was paid under the notes. These notes have been subordinated to the provider of the working capital line of credit and payment of these loans are restricted under this subordination agreement. After satisfaction of the terms of the subordination, the Company can prepay the notes at any time first against interest due thereunder. If an event of default occurs under the notes, interest will accrue at 18% per annum and if not paid within 10 days of payment becoming due, the holder of the note is entitled to a late fee of 5% of the amount of payment not timely made.

 

Current Portion of Long-Term Debt

 

As of March 31, 2019 and December 31, 2018, current portion of long-term debt consisted of a note payable outstanding with Mercedes-Benz Financial Services (“MB Financial”). The Company entered into a loan agreement with MB Financial on November 30, 2014 to finance the purchase of an automobile. The loan bears interest at 5.56% per annum and requires monthly installments of approximately $3,000, inclusive of interest. The loan matures on November 30, 2019.

 

Kenar Note

 

On March 26, 2019, the Company issued a four-month promissory note in the principal amount of $1,000,000 (the “Kenar Note”) to Kenar Overseas Corp., a company registered in Panama (the “Lender”) and controlled by a related party. The term of the note may be extended for an additional two months at the Lender’s discretion. The note bears interest at the rate of 18% per annum during the initial four months which rate will increase to 24% during any extension thereof. The note may be prepaid in whole or in part without penalty. John Keeler, the Company’s Executive Chairman pledged 5,000,000 shares of common stock to secure the Company’s obligations under the note.

 

Note 6. Common Stock

 

On February 1, 2019, the Company sold 5,000 shares at $2.00 per share to one investor in a private offering.

 

A dividend of common stock was authorized to the shareholders per the preferred shares designation on March 31, 2019. The dividend resulted in an issuance of 14,130 shares of stock with a value of $28,260.

 

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Note 7. Stock-Based Compensation

 

For the three months ended March 31, 2019

 

During the three months ended March 31, 2019, $665,028 in compensation expense was recognized on the following:

 

  1. Options to purchase 3,120,000 shares of Common Stock at an exercise price of $2.00 with a 10 year life, which vest one-year from the date of grant, were issued to Christopher Constable under the 2018 Plan during the twelve months ending December 31, 2018.
  2. Options to purchase 430,000 shares of Common Stock at an exercise price of $2.00 with a 10 year life, which vest 25% each year from the date of grant, were issued to various long term employees under the 2018 Plan during the three months ending March 31, 2019.
  3. Options to purchase 250,000 shares of Common Stock at an exercise price of $2.00 with a 10 year life, which vest 20% each year from the date of grant, were issued to Zoty Ponce under the 2018 Plan during the three months ending March 31, 2019.
  4. Options to purchase 25,000 shares of Common Stock at an exercise price of $2.00 with a 10 year life, which vest 25% each year from the date of grant, were issued to various contractors during the three months ending March 31, 2019.

 

The following table summarizes the assumptions used to estimate the fair value of the stock options granted during 2019:

 

   2019 
Expected Volatility   39%-48%
Risk Free Interest Rate   2.62%-2.71 %
Expected life of warrants   6.25 – 10.0  

 

Under the Black-Scholes option pricing model, the fair value of the 705,000 options granted during the three months ended March 31, 2019 is estimated at $613,586.55 on the date of grant.

 

The following Table represents option activity for the three months ending March 31, 2019:

 

  

Number of

Options

  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Life in Years

  

Aggregate

Intrinsic

Value

 
Outstanding - December 31, 2018   6,240,000   $1.17    9.86      
Exercisable - December 31, 2018   3,120,000   $0.33    9.86   $5,210,400 
Granted   705,000   $2.00           
Vested   -                
Outstanding - March 31, 2019   6,945,000   $1.25    9.64      
Exercisable - March 31, 2019   3,120,000   $0.33    9.62   $5,210,400 

 

Note 8. Warrants

 

The following Table represents warrant activity for the three months ending March 31, 2019:

 

  

Number of

Warrants

  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Contractual

Life in Years

  

Aggregate

Intrinsic

Value

 
Outstanding - December 31, 2018   353,250   $2.40    2.85      
Exercisable - December 31, 2018   353,250   $2.40    2.85   $- 
Granted   -   $-           
Forfeited or Expired   -                
Outstanding - March 31, 2019   353,250   $2.40    2.61      
Exercisable - March 31, 2019   353,250   $2.40    2.61   $- 

 

There was no warrant activity for the three months ending March 31, 2019.

 

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Note 9. Commitment and Contingencies

 

Office lease

 

The Company leases its office and warehouse facility from JK Real Estate, a related party through common family beneficial ownership. The lease has a 20 year term, expiring in July 2021. It is currently likely that the Company will renew this lease for a five year term. The estimated lease payments associated with the renewal are included in the calculation of the future minimum lease payments. The Company is a guarantor of the mortgage on the facility which had a balance of approximately $1,298,100 at March 31, 2019; the Company’s maximum exposure. The Company deems that rental income on this lease is sufficient to cover the loan payments under this mortgage. Therefore, the Company did not record any liability related to the mortgage in the consolidated financial statements as the Company does not believe it will be called upon to perform under this guarantee, in accordance with ASC 460, Guarantees. See note 2 of these footnotes for the analysis of future minimum lease payments.Rental and equipment lease expenses amounted to approximately $58,500 and $53,000 for the three months ended March 31, 2019 and 2018, respectively.

 

Legal

 

Based on current negotiations in response to a letter received on November 27, 2018 in connection with a threatened lawsuit by a former employee, the Company believes that it has adequately reserved for any settlement resulting from such negotiations in its financial statements for the three months ended March 31, 2019. To date, the Company has received no further communications from the former employee.

 

Note 10. Subsequent Events

 

On April 2, 2019, the Company issued a four-month promissory note in the principal amount of $100,000 to Lobo Holdings, LLC., a stockholder in the Company. The note bears interest at the rate of 18% per annum. The note may be prepaid in whole or in part without penalty. John Keeler, the Company’s Executive Chairman pledged 1,000,000 shares of common stock to secure the Company’s obligations under the note.

 

On April 2, 2019, the Company sold 5,000 shares at $2.00 per share to one investor in a private offering.

 

On April 12, 2019, the Company sold 1,000 shares at $2.00 per share to one investor in a private offering.

 

On April 23, 2019, the Company issued 2,500 shares at $2.00 per share to MEC Consulting Inc. for professional services.

 

On May 2, 2019, the Company sold 500 shares at $2.00 per share to one investor in a private offering.

 

On May 6, 2019, the Company sold 500 shares at $2.00 per share to one investor in a private offering.

 

On May 7, 2019, the Company sold 3,000 shares at $2.00 per share to one investor in a private offering.

 

On May 9, 2019, the Company sold 1,000 shares at $2.00 per share to one investor in a private offering.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Forward-Looking Statements

 

The following management’s discussion and analysis should be read in conjunction with our historical financial statements and the related notes thereto. The management’s discussion and analysis contains forward-looking statements, such as statements of our plans, objectives, expectations and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions (“will,” “may,” “could,” “should,” etc.), or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties, including those under “Risk Factors” in our Annual Report, as updated in subsequent filings we have made with the SEC that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Our actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of several factors. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

 

Basis of Presentation

 

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described, and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited financial statements contained in this Quarterly Report, which we have prepared in accordance with United States generally accepted accounting principles. You should read the discussion and analysis together with such financial statements and the related notes thereto.

 

Overview

 

We were incorporated on October 17, 2017 in the State of Delaware as a blank check company to be used as a vehicle to pursue a business combination with an unidentified target. Since inception, and prior to the Merger (as defined below), we only engaged in organizational efforts. Following the Merger, we discontinued our prior activities of seeking a business for a merger or acquisition and acquired the business of John Keeler & Co., Inc., d/b/a Blue Star Foods, a Florida corporation formed on May 5, 1995 (“Keeler & Co”).

 

On November 8, 2018 (the “Closing Date”), we consummated a merger (the “Merger”) pursuant to the terms of an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”) by and among the Company, Blue Star Acquisition Corp., a newly formed, wholly-owned Florida subsidiary of the Company (“Acquisition Sub”), Keeler & Co, and John Keeler, Keeler & Co’s sole stockholder (the “Keeler & Co Stockholder”). As a result of the Merger, effective as of November 8, 2018, Acquisition Sub merged with and into Keeler & Co, and Keeler & Co became a wholly-owned subsidiary of the Company.

 

In connection with the Merger, the Company changed its name from “AG Acquisition Group II, Inc.” to “Blue Star Foods Corp.” and succeeded to the business of Keeler & Co, an international seafood company that imports, packages and sells refrigerated pasteurized crab meat, and other premium seafood products, including crab cakes, finfish and wakami salad, as its sole line of business.

 

As a result of the Merger and the related change in our business and operations, a discussion of our past financial results is not pertinent, and under applicable accounting principles the historical financial results of Keeler & Co, the accounting acquirer, prior to the Merger are considered the historical financial results of the Company.

 

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The audited financial statements for our fiscal years ended December 31, 2018 and the audited financial statements as amended filed with the Securities Exchange Commission with the Company’s Form 8-K/A on December 31, 2108, include a summary of our significant accounting policies and should be read in conjunction with the discussion below. In the opinion of management, all material adjustments necessary to present fairly the results of operations for such periods have been included in these audited financial statements. All such adjustments are of a normal recurring nature.

 

Results of Operations

 

The selected historical financial information presented below is derived from our unaudited consolidated financial statements for the three months ended March 31, 2019 and 2018.

 

The data set forth below should be read in conjunction with the financial statements and accompanying notes elsewhere in this Report.

 

Net Revenue. Revenue for the three months ended March 31, 2019 decreased 20.5% to $6,510,774 as compared to $8,190,417 for the three months ended March 31, 2018 as a result of a decrease in poundage due to market softness, and a 71,000 pound reduction in private label business with US Foods, as the Company is transitioning out of packaging the private label for this customer. Additionally, the Company sold approximately 59,000 pounds less Hanaii crab meat during the three months ended March 31, 2019 as compared to the three months ended March 31, 2018.

 

Cost of Goods Sold. Cost of goods sold for the three months ended March 31, 2019 decreased to $5,600,914 as compared to $7,507,068 for the three months ended March 31, 2018. The decrease is attributable to the revenue decline and as a reduction in product cost as it relates to selling price.

 

Gross Profit. Gross profit margin for the three months ended March 31, 2019 increased by $226,511 as compared to the three months ended March 31, 2018. This increase is directly attributable to lower product cost as it relates to selling price. This is a direct result of the Company’s analytics driving the purchasing decisions during a time of downward pressure on the commodity.

 

Commissions Expenses. Commissions expenses decreased from $28,815 for the three months ending March 31, 2019 to $18,810 for the three months ending March 31, 2018, primarily due to a re-alignment of the Company’s sales structure, reducing the number of accounts that earned brokerage commissions, and a decrease in revenue.

 

Salaries and Wages Expense. Salaries and wages expense increased $643,871, or 136.2% for the three months ended March 31, 2019 as compared to the three months ended March 31, 2018. This increase is solely due to the noncash expenses related to stock-based compensation which totaled $665,028 for the three months ending March 31, 2019 as compared to $0 for the three months ending March 31, 2018. The actual cash utilized for payroll (excluding stock-based compensation) reduced by $21,157 for the three months ending March 31, 2019 as compared to the same period in 2018.

 

Other Operating Expense. Other operating expense increased by 13.5% from $683,478 for the three months ended March 31, 2018 to $775,406 for the three months ended March 31, 2019. The increase is attributable to increases in both professional fees and filing fees related to the public company filing requirements.

 

Interest Expense. Interest expense decreased from $266,297 for the three months ended March 31, 2018 to $238,193 for the three months ended March 31, 2019. This decrease is due to the decrease in average funds borrowed from $11,586,313 as of March 31, 2018 to $8,458,335 as of March 31, 2019. The decrease in interest expense even though an interest rate increase of .69% in the underlying 30-day LIBOR rate for the three months ended March 31, 2019 as compared to a 30-day LIBOR rate in the three months ended March 31, 2018 occurred.

 

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Net Loss: The Company had a net loss of $1,239,297 for the three months ended March 31, 2019 as compared to a net loss of $768,118 for the three months ended March 31, 2018. The increase in net loss is attributable to decreased revenues combined with non-cash operating expenses related to stock compensation of $665,028 during the first three months of 2019.

 

Liquidity and Capital Resources

 

At March 31, 2019, the Company had a working capital deficit of $1,849,780, with current liabilities inclusive of $2,910,136 in stockholder loans that are subordinated to the provider of the Company’s working capital facility, and $128,910 in the current portion of the ASC 842 required lease liability recognition, as compared to a working capital deficit of $1,146,937 at December 31, 2018, also inclusive of $2,910,136 in stockholder debt. The decline in working capital is attributable to the $1,000,000 note payable that was borrowed in March 2019. The Company’s primary sources of liquidity consist of inventory of $8,618,182 and accounts receivable of $3,275,317.

 

The Company has historically financed its operations through the cash flow generated from operations, capital investment, notes payable and a working capital line of credit.

 

Loan and Security Agreement

 

On August 31, 2016, the Company entered into a Loan and Security Agreement and a revolving credit note for a $14,000,000 revolving line of credit with ACF, the proceeds of which were used to pay off the prior line of credit, pay new loan costs of approximately $309,000, and provide additional working capital. The credit facility was amended on November 18, 2016, September 19, 2017, October 16, 2017, September 19, 2018 and November 8, 2018. In the fourth amendment the term of this facility was extended to 2021 and is subject to early termination by the lender upon defined events of default. The Company continues to be obligated to meet certain financial covenants.

 

The line of credit bears an interest at the greater of (i) the 3-month LIBOR rate plus 6.25%, (ii) the prime rate plus 3.0% and (iii) 6.5%. Borrowing is based on up to 85% of eligible accounts receivable plus the net orderly liquidation value of eligible inventory at the same rate, subject to certain specified limitations. The credit line is collateralized by substantially all the assets of the Company and is personally guaranteed by John Keeler, our Executive Chairman. The Company is restricted with respect to certain distribution payments, use of funds and is required to comply with certain other covenants including certain financial ratios.

 

During the twelve months ending December 31, 2018, the Company failed to meet certain financial covenants. Such default was waived in September 2018 pursuant to the fourth amendment to the Loan and Security Agreement and no default interest was incurred.

 

As of March 31, 2019, Company has advanced approximately $61,000 to its affiliates in excess of a loan covenant. The line of credit currently bears interest at the rate of 9.376%. At March 31, 2019, the outstanding balance of the line of credit was $8,712,945.

 

John Keeler Promissory Notes

 

From January 2006 through May 2017, Keeler & Co issued an aggregate of $2,910,000 6% demand promissory notes to John Keeler, our Executive Chairman. As of March 31, 2019, $2,910,000 of principal remains outstanding and approximately $43,700 of interest was paid under the notes. These notes have been subordinated to the provider of the working capital line of credit and payment of these loans are restricted under this subordination agreement. After satisfaction of the terms of the subordination, the Company can prepay the notes at any time first against interest due thereunder. If an event of default occurs under the notes, interest will accrue at 18% per annum and if not paid within 10 days of payment becoming due, the holder of the note is entitled to a late fee of 5% of the amount of payment not timely made.

 

Kenar Note

 

On March 26, 2019, the Company issued a four-month promissory note in the principal amount of $1,000,000 (the “Kenar Note”) to Kenar Overseas Corp., a company registered in Panama (the “Lender”). The term of the note may be extended for an additional two months at the Lender’s discretion. The note bears interest at the rate of 18% per annum during the initial four months which rate will increase to 24% during any extension thereof. The note may be prepaid in whole or in part without penalty. John Keeler, the Company’s Executive Chairman pledged 5,000,000 shares of common stock to secure the Company’s obligations under the note.

 

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Lobo Note

 

On April 2, 2019, the Company issued a four-month promissory note in the principal amount of $100,000 (the “Lobo Note”) to Lobo Holdings, LLC a Florida limited liability company (“Lobo”). The Lobo Note bears interest at the rate of 18% per annum. The Lobo Note may be prepaid in whole or in part without penalty. Unpaid principal and interest will become immediately due and payable upon certain defaults as described in the Lobo Note. John Keeler, the Company’s Executive Chairman pledged 1,000,000 shares of common stock to secure the Company’s obligations under the Lobo Note.

 

Cash Provided by Operating Activities. Cash used in operating activities during the three months ended March 31, 2019 was $1,688,470 as compared to cash provided by operating activities of $1,080,936 for the three months ended March 31, 2018. The decrease is primarily attributable to cash used for the purchase of inventory of $491,548 and a reduction in Accounts Payable and accruals of $728,590 during the three months ended March 31, 2019 as compared to cash provided as a result of the reduction of inventory and accounts receivable of $2,752,425 during the three months ended March 31, 2018.

 

Cash Used for Investing Activities. Cash used for investing activities for the three months ended March 31, 2019 was $3,670 as compared to $2,991 used for investing activities for the three months ended March 31, 2018.

 

Cash Provided from Financing Activities. Cash provided from financing activities for the three months ended March 31, 2019 was $1,503,148 as compared to cash used by financing activities of $1,054,231 for the three months ended March 31, 2018. The Company’s revolving working capital line of credit provided approximately $509,000 and the related party note provided $1,000,000 for the three months ending March 31, 2019 as compared to a pay down of the revolving working capital line of credit for the three months ending March 31, 2018 of approximately $1,046,000.

 

Recently Adopted Accounting Pronouncements

 

ASC 842 Leases.

 

On January 1, 2019, we adopted Accounting Standards Codification 842 and all the related amendments using the modified retrospective method. We recognized the cumulative effect of initially applying the new lease standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those periods.

 

The new lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts entered into prior to adoption are leases or contain leases.

 

We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of March 31, 2019. Our leases generally have terms that range from three years for equipment and five to twenty years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

 

Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.

 

20
 

 

When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that we will exercise the option, we consider these options in determining the classification and measurement of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

 

The table below presents the lease-related assets and liabilities recorded on the balance sheets.

 

   March 31, 2019 
Assets     
Operating lease assets  $1,220,283 
      
Liabilities     
Current  $128,910 
Operating lease liabilities     
Noncurrent     
Operating lease liabilities  $1,096,226 

 

Supplemental cash flow information related to leases were as follows:

 

   Three Months Ended March 31, 2019 
Cash used in operating activities:     
Operating leases  $4,853 
ROU assets recognized in exchange for lease obligations:     
Operating leases  $1,257,751 

 

The table below presents the remaining lease term and discount rates for operating leases.

 

   March 31, 2019 
Weighted-average remaining lease term     
Operating leases   7.21 years 
Weighted-average discount rate     
Operating leases   5.5%

 

21
 

 

Maturities of lease liabilities as of March 31, 2019, were as follows:

 

   Operating Leases 
     
2019 (excluding the three months ended March 31, 2019)  $149,729 
2020   190,574 
2021   201,675 
2022   213,600 
2023   216,847 
Thereafter   557,074 
Total lease payments   1,529,499 
Less: amount of lease payments representing interest   (312,143)
Present value of future minimum lease payments  $1,217,356 
Less: current obligations under leases  $(121,130)
Non current long-term obligations  $1,096,226 

 

Stock-Based Compensation

 

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-7”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.

 

We currently have no off-balance sheet arrangements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of March 31, 2019, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, based on the material weaknesses discussed below, our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

22
 

 

The matters involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:

 

●       The Company’s lack of an audit committee with a financial expert and thus the Company lacks the board oversight role within the financial reporting process; and

 

●       inadequate segregation of duties consistent with control objectives, including lack of personnel resources and technical accounting expertise within the accounting function of the Company.

 

Management believes that the material weaknesses that were identified did not have an effect on our financial results. However, management believes that these weaknesses, if not properly remediated, could result in a material misstatement in our financial statements in future periods.

 

Management’s Remediation Initiatives

 

At the time of the Merger, we appointed new members of senior management, including a new Chief Financial Officer. In an effort to remediate the identified material weaknesses and other deficiencies and enhance our internal controls, we plan to further initiate, the following measures, subject to the availability of required resources:

 

●       We plan to establish an audit committee, including an “audit committee financial expert” as defined by applicable SEC rules, that has the requisite financial sophistication as defined under the applicable Nasdaq rules and regulations; and

 

●       We plan to create a position to segregate duties consistent with control objectives and hire personnel resources with technical accounting expertise within the accounting function.

 

Changes in Internal Control over Financial Reporting

 

During the period covered by this Quarterly Report, there were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II – OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.

 

Based on current negotiations in response to a letter received on November 27, 2018 in connection with a threatened lawsuit by a former employee, the Company believes that it has adequately reserved for any settlement resulting from such negotiations in its financial statements for the three months ended March 31, 2019. To date, the Company has received no further communications from the former employee.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Except as set forth below, there were no sales of equity securities sold during the period covered by this Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.

 

On April 2, 2019, we issued 5,000 shares of common stock to an accredited investor in a private offering for $10,000.

 

On April 12, 2019, we issued 1,000 shares of common stock to an accredited investor in a private offering for $2,000.

 

On April 23, 2019, we issued 2,500 shares of common stock to MEC Consulting Inc., for legal services provided to the Company.

 

On May 2, 2019, we issued 500 shares of common stock to an accredited investor in a private offering for $1,000.

 

On May 6, 2019, we issued 500 shares of common stock to an accredited investor in a private offering for $1,000.

 

On May 7, 2019, we issued 3,000 shares of common stock to an accredited investor in a private offering for $6,000.

 

 23 

 

 

On May 9, 2019, we issued 1,000 shares of common stock to an accredited investor in a private offering for $2,000.

 

The above issuances did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe is exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof and/or Regulation D promulgated thereunder. The purchaser represented to us that he was an accredited investor and was acquiring the shares for investment purposes only and not with a view to, or for sale in connection with, any distribution thereof and that he could bear the risks of the investment.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None

 

ITEM 6. EXHIBITS

 

Exhibit No.  

SEC Report

Reference No.

  Description
         
31.1   *   Certification of Principal Executive Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2   *   Certification of Principal Financial Officer pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1   *   Certifications of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2   *   Certifications of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   *   XBRL Instance Document
101.SCH   *   XBRL Taxonomy Extension Schema Document
101.CAL   *   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   *   XBRL Taxonomy Extension Definition Linkbase Document
101.LAB   *   XBRL Taxonomy Extension Label Linkbase Document
101.PRE   *   XBRL Taxonomy Extension Presentation Linkbase Document

 

 

* Filed herewith

 

24
 

 

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 thereunto duly authorized.

 

  BLUE STAR FOODS CORP.
     
Dated: May 16, 2019 By: /s/ Carlos Faria
  Name: Carlos Faria
  Title:

President and Chief Executive Officer

(Principal Executive Officer)

      
Dated: May 16, 2019 By: /s/ Christopher Constable
  Name: Christopher Constable
  Title: Chief Financial Officer, Secretary and Treasurer
    (Principal Financial and Accounting Officer)

 

25
 

 

EX-31.1 2 ex31-1.htm

 

EXHIBIT 31.1

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT AND RULE 13A-14(A)

OR 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

I, Carlos Faria, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Blue Star Foods Corp.
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 16, 2019 /s/ Carlos Faria
  Carlos Faria
 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

EX-31.2 3 ex31-2.htm

 

EXHIBIT 31.2

 

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT AND RULE 13A-14(A)

OR 15D-14(A) UNDER THE SECURITIES EXCHANGE ACT OF 1934

 

I, Christopher Constable, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Blue Star Foods Corp.;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
   
4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

  (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
     
  (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
  (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
  (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

  (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
  (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: May 16, 2019 /s/ Christopher Constable
  Christopher Constable
 

Chief Financial Officer, Secretary and Treasurer

(Principal Financial Officer)

 

 

 

EX-32.1 4 ex32-1.htm

 

EXHIBIT 32.1

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Blue Star Foods Corp. (the “Company”), for the quarter ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Carlos Faria, President and, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

Date: May 16, 2019 By: /s/ Carlos Faria
  Name: Carlos Faria
  Title: President and Chief Executive Officer
    (Principal Executive Officer)

 

 

 

 

EX-32.2 5 ex32-2.htm

 

EXHIBIT 32.2

 

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report on Form 10-Q of Blue Star Foods Corp. (the “Company”), for the quarter ended March 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Christopher Constable, Chief Financial Officer, Secretary and Treasurer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

  (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

  (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

 

Date: May 16, 2019 By: /s/ Christopher Constable
  Name: Christopher Constable
  Title: Chief Financial Officer, Secretary and Treasurer
    (Principal Financial and Accounting Officer)

 

 

 

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Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
May 14, 2019
Document And Entity Information    
Entity Registrant Name Blue Star Foods Corp.  
Entity Central Index Key 0001730773  
Document Type 10-Q  
Document Period End Date Mar. 31, 2019  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Entity Small Business Flag true  
Entity Emerging Growth Company true  
Entity Ex Transition Period false  
Entity Common Stock, Shares Outstanding   16,055,794
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2019  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Balance Sheets - USD ($)
Mar. 31, 2019
Dec. 31, 2018
CURRENT ASSETS    
Cash (including VIE $10,213 and $5,561, respectively) $ 45,150 $ 13,143
Restricted Cash 59,237 334,083
Accounts receivable, net (including VIE $37,681 and $49,624, respectively) 3,275,317 3,449,487
Inventory, net (including VIE $12,033 and $117,816, respectively) 8,618,182 8,126,634
Advances to related party 1,261,468 1,139,619
Other current assets (including VIE $3,759 and $4,351, respectively) 95,166 90,929
Total current assets 13,354,520 13,153,895
FIXED ASSETS, net 95,834 109,169
RIGHT OF USE ASSET 1,220,283
OTHER ASSETS 192,256 218,254
TOTAL ASSETS 14,862,893 13,481,318
CURRENT LIABILITIES    
Accounts payable and accruals (including VIE $55,171 and $95,720, respectively) 2,556,061 3,155,741
Working capital line of credit 8,712,945 8,203,725
Related Party Notes Payable 1,000,000
Current maturities of long-term debt 25,158 31,230
Stockholder notes payable - Subordinated 2,910,136 2,910,136
Total current liabilities 15,204,300 14,300,832
RIGHT OF USE LONG -TERM LIABILITY 1,096,226
TOTAL LIABILITIES 16,300,526 14,300,832
COMMITMENTS AND CONTINGENCIES
Blue Star Foods Corp. Stockholder's Deficit    
Series A 8% cumulative convertible preferred stock, $0.0001 par value; 10,000 shares authorized, 1,413 shares issued and outstanding as of March 31, 2019 and December 31, 2018
Common stock, $0.0001 par value, 100,000,000 shares authorized; 16,042,294 shares issued and outstanding (including 14,130 shares declared as stock dividend on March 31, 2019) as of March 31, 2019 and 16,023,164 shares issued and outstanding (including 8,164 shares declared as stock dividend on December 31, 2018) as of December 31, 2018 1,606 1,603
Additional paid-in capital 4,108,059 3,404,774
Accumulated deficit (5,101,428) (3,853,139)
Total Blue Star Foods Corp. stockholder's deficit (991,763) (446,762)
Non-controlling interest (460,101) (440,833)
Accumulated other comprehensive income (VIE) 14,231 68,081
Total VIE's deficit (445,870) (372,752)
TOTAL STOCKHOLDER'S DEFICIT (1,437,633) (819,514)
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 14,862,893 $ 13,481,318
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2019
Dec. 31, 2018
Common stock, par value $ 0.0001 $ 0.0001
Common stock, shares authorized 100,000,000 100,000,000
Common stock, shares issued 16,042,294 16,023,164
Common stock, shares outstanding 16,042,294 16,023,164
Common stock dividend shares 14,130 8,164
Series A 8% Cumulative Convertible Preferred Stock [Member]    
Preferred stock, par value $ 0.0001 $ 0.0001
Preferred stock, shares authorized 10,000 10,000
Preferred stock, shares issued 1,413 1,413
Preferred stock, shares outstanding 1,413 1,413
Accounts Payable and Accruals [Member]    
Current liabilities of VIE $ 55,171 $ 95,720
Other Current Assets [Member]    
Current assets attributable to VIE 3,759 4,351
Inventories [Member]    
Current assets attributable to VIE 12,033 117,816
Accounts Receivable [Member]    
Current assets attributable to VIE 37,681 49,624
Cash [Member]    
Current assets attributable to VIE $ 10,213 $ 5,561
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Income Statement [Abstract]    
REVENUE, NET $ 6,510,774 $ 8,190,417
COST OF REVENUE (including approximately $2,114,500 and $4,234,600, respectively, 5,600,914 7,507,068
GROSS PROFIT 909,860 683,479
COMMISSIONS 18,810 28,815
SALARIES & WAGES 1,116,748 472,877
SETTLEMENT & WARRANT EXPENSE
OTHER OPERATING EXPENSES 775,406 683,479
LOSS FROM OPERATIONS (1,001,104) (501,822)
OTHER INCOME
OTHER EXPENSE
INTEREST EXPENSE (238,193) (266,297)
NET LOSS (1,239,297) (768,119)
LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST (19,268) (44,890)
NET LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. (1,220,029) (723,229)
DIVIDEND ON PREFERRED STOCK 28,260
NET LOSS ATTRIBUABLE TO BLUE STAR FOODS CORP. COMMON SHAREHOLDERS (1,248,289) (715,458)
COMPREHENSIVE INCOME (LOSS):    
TRANSLATION ADJUSTMENT ATTRIBUTABLE TO NON-CONTROLLING INTEREST (53,850) 5,096
COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST (73,118) (39,793)
COMPREHENSIVE LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. (1,220,029) (723,229)
PRO FORMA DATA:    
PRO FORMA INCOME TAX EXPENSE
PRO FORMA NET LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. (1,220,029) (723,229)
PRO FORMA COMPREHENSIVE LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. $ (1,222,029) $ (723,229)
Loss per basic and diluted common share:    
Basic net loss per common share $ (0.08) $ (0.05)
Basic weighted average common shares outstanding 16,026,386 15,000,000
Fully diluted net loss per common share $ (0.08) $ (0.05)
Fully diluted weighted average common shares outstanding 16,026,386 15,000,000
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parenthetical) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Income Statement [Abstract]    
Purchased from related party $ 2,114,500 $ 4,234,600
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Statements of Changes in Stockholder's Deficit (Unaudited) - USD ($)
Series A Preferred Stock [Member]
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings (Accumulated Deficit) [Member]
Total Blue Star Foods Corp. Stockholder's Deficit [Member]
Non-Controlling Interest [Member]
Total
Balance at Dec. 29, 2017 $ 1,500 $ 558,257 $ (1,494,927) $ (935,170) $ (317,378) $ (1,252,548)
Balance, shares at Dec. 29, 2017 15,000,000          
606 Adjustment to January 1, 2018       (81,520) (81,520)   (81,520)
Net Loss            
Balance at Jan. 02, 2018 $ 1,500 558,257 (1,576,447) (1,016,690) (317,378) (1,334,068)
Balance, shares at Jan. 02, 2018 15,000,000          
Net Loss   (723,228) (723,228) (44,890) (768,118)
Comprehensive loss   5,096 5,096
Balance at Mar. 31, 2018   $ 1,500 558,257 (2,299,675) (1,739,918) (357,172) (2,097,090)
Balance, shares at Mar. 31, 2018   15,000,000          
Balance at Dec. 31, 2018 $ 1,603 3,404,774 (3,853,139) (446,762) (372,752) (819,514)
Balance, shares at Dec. 31, 2018 1,413 16,023,164          
Common stock issued for Cash $ 1 10,000 10,000
Common stock issued for Cash, shares 5,000 9,999        
Stock Based Compensation $ 665,028 665,028 665,028
Dividends to preferred stockholders $ 2 28,258 (28,260) $ 28,260
Dividends to preferred stockholders, shares 14,130         14,130
Net Loss (1,220,029) (1,220,029) (19,268) $ (1,239,297)
Comprehensive loss (53,850) (53,850)
Balance at Mar. 31, 2019 $ 1,606 $ 4,108,059 $ (5,101,428) $ (991,763) $ (445,870) $ (1,437,633)
Balance, shares at Mar. 31, 2019 1,413 16,042,294          
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Statements of Changes in Stockholder's Deficit (Unaudited) (Parenthetical) - $ / shares
Mar. 31, 2019
Mar. 31, 2018
Common stock, par value $ 0.0001 $ 0.0001
Series A Preferred Stock [Member]    
Preferred stock, par value $ 0.0001 $ 0.0001
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Statements of Cash Flows (Unaudited) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Mar. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:      
Net Loss $ (1,239,297) $ (768,119) $ (768,118)
Adjustments to reconcile net loss to net cash used in operating activities:      
Stock Based Compensation 665,028  
Depreciation of fixed assets 17,005 15,551  
Amortization of Right of use asset 37,468  
Amortization of loan costs 35,998 33,262  
Changes in operating assets and liabilities:      
Receivables 174,170 255,434  
Inventories (491,548) 2,496,991  
Advances to affiliated supplier (121,849) (327,044)  
Other current assets (4,237) (2,983)  
Change in Right of use Liability (32,615)  
Accounts payable and accruals (728,590) (622,157)  
Net cash provided by (used) in operating activities (1,688,467) 1,080,936  
CASH FLOWS FROM INVESTING ACTIVITIES:      
Purchases of fixed assets (3,670) (2,991)  
Net cash used in investing activities (3,670) (2,991)  
CASH FLOWS FROM FINANCING ACTIVITIES:      
Proceeds from Common Stock Offering 10,000  
Proceeds from working capital lines of credit 7,215,843 6,888,740  
Repayments of working capital lines of credit (6,706,623) (7,934,415)  
Proceeds from Related Party Notes Payable 1,000,000  
Principal payments of long-term debt (6,072) (8,556)  
Payments of Loan costs (10,000)  
Net cash provided by (used) in financing activities 1,503,148 (1,054,231)  
Effect of exchange rate changes on cash (53,850) 5,096  
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (242,839) 28,810  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD 347,226 58,875  
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD 104,387 87,685 $ 87,685
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY      
Series A 8% Dividend issued in Common Stock 28,260  
Valuation of Right of Use asset/liability 1,257,751  
Supplemental Disclosure of Cash Flow Information      
Cash paid for interest $ 238,367 $ 266,286  
XML 20 R9.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidated Statements of Cash Flows (Unaudited) (Parenthetical)
3 Months Ended
Mar. 31, 2019
Statement of Cash Flows [Abstract]  
Preferred stock, dividend percentage 8.00%
XML 21 R10.htm IDEA: XBRL DOCUMENT v3.19.1
Company Overview
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Company Overview

Note 1. Company Overview

 

Located in Miami, Florida, Blue Star Foods Corp. (the “Company”) is a sustainable seafood company. The company’s main operating business, John Keeler & Co., Inc. has been in business for approximately twenty-one years. The Company was formed under the laws of the State of Delaware. The current source of revenue is importing blue and red swimming crab meat primarily from Indonesia, Philippines and China and distributing it in the United States of America, Canada and Europe under several brand names such as Blue Star, Oceanica, Pacifika and Harbor Banks.

 

On November 8, 2018 the sole shareholder of John Keeler & Co., Inc. executed an Agreement and Plan of Merger and Reorganization with Blue Star Foods Corp. (Formerly A.G. Acquisition Group II, Inc.) and Blue Star Acquisition Corp. John R. Keeler exchanged his 500 shares with a par value of $1.00 in John Keeler & Co., Inc. for the 15,000,000 shares with a par value of $.0001 of the then outstanding 16,015,000 outstanding shares. As part of the merger, the net liabilities existing in the company as of the date of the merger totaling approximately $2,400 were converted to equity as part of this transaction. The prior owners of Blue Star Foods Corp. received 750,000 shares of common stock as part of this transaction, and various service providers received 265,000 shares as compensation for their work on the transaction resulting in and expense and additional paid in capital of $530,001. Additionally, there were 725 Series A Preferred shares and 181,250 warrants issued to private placement investors for total capital contribution of $725,000, 688 Series A Preferred shares and 172,000 warrants issued for settlement with prior investors which had a fair value of $688,000 and $81,353 respectively. Lastly, upon the close of the merger there were 3,120,000 options to purchase common stock issued to Christopher Constable. Additionally, Carlos Faria held options to purchase 104 shares of John Keeler & Co., Inc. prior to the merger. These options were immediately converted at closing to 3,120,000 options to purchase common stock in Blue Star Foods Corp.

 

The Merger was accounted for as a “reverse merger” and recapitalization since, immediately following the completion of the transaction, the holders of John Keeler & Co., Inc.’s stock will have effective control of Blue Star Foods Corp. In addition, John Keeler & Co., Inc. will have control of the combined entity through control of the Board by designating all four of the board seats. Additionally, all of John Keeler & Co., Inc.’s officers and senior executive positions will continue on as management of the combined entity after consummation of the Merger. For accounting purposes, John Keeler & Co., Inc. will be deemed to be the accounting acquirer in the transaction and, consequently, the transaction has been treated as a recapitalization of Blue Star Foods Corp. Accordingly, John Keeler & Co., Inc.’s assets, liabilities and results of operations are the historical financial statements of the registrant, and the John Keeler & Co., Inc.’s assets, liabilities and results of operations have been consolidated with Blue Star Foods Corp. effective as of the date of the closing of the Merger. No step-up in basis or intangible assets or goodwill was recorded in this transaction.

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation and Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Basis of Presentation and Summary of Significant Accounting Policies

Note 2. Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

The following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The balance sheet as of December 31, 2018 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on from 10-K for the year ending December 31, 2018 for a broader discussion of our business and the risks inherent in such business.

 

Advances to Suppliers and Related Party

 

In the normal course of business, the Company may advance payments to its suppliers, inclusive of Bacolod, a related party. These advances are in the form of prepayments for products that will ship within a short window of time. In the event that it becomes necessary for the Company to return products or adjust for quality issues, the Company is issued a credit by the vendor in the normal course of business and these credits are also reflected against future shipments.

 

As of March 31, 2019 and December 31, 2018, the balance due from the related party for future shipments was approximately $1,261,468 and $1,139,619, respectively. The 2019 balances represent approximately four months of purchases from the supplier.

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers”, and has subsequently issued several supplemental and/or clarifying ASUs (collectively, “ASC 606”). ASC 606 prescribes a single common revenue standard that replaces most existing U.S. GAAP revenue recognition guidance. ASC 606 is intended to provide a more consistent interpretation and application of the principles outlined in the standard across filers in multiple industries and within the same industries compared to current practices, which should improve comparability. Adoption of ASC 606 is required for annual and interim periods beginning after December 15, 2017. Upon adoption, we must elect to adopt either retrospectively to each prior reporting period presented or use the modified retrospective transition method with the cumulative effect of initial adoption recognized at the date of initial application. We adopted the new standard using the modified retrospective method on January 1, 2018.

 

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

 

ASC 842 Leases.

 

On January 1, 2019, we adopted Accounting Standards Codification 842 and all the related amendments using the modified retrospective method. We recognized the cumulative effect of initially applying the new lease standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those periods.

 

The new lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts entered into prior to adoption are leases or contain leases.

 

We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of March 31, 2019. Our leases generally have terms that range from three years for equipment and five to twenty years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

 

Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.

 

When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that we will exercise the option, we consider these options in determining the classification and measurement of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

 

The table below presents the lease-related assets and liabilities recorded on the balance sheets.

 

    March 31, 2019  
Assets        
Operating lease assets   $ 1,220,283  
         
Liabilities        
Current   $ 128,910  
Operating lease liabilities        
Noncurrent        
Operating lease liabilities   $ 1,096,226  

 

Supplemental cash flow information related to leases were as follows:

 

    Three Months Ended March 31, 2019  
       
Cash used in operating activities:        
Operating leases   $ 4,853  
ROU assets recognized in exchange for lease obligations:        
Operating leases   $ 1,257,751  

 

The table below presents the remaining lease term and discount rates for operating leases.

 

    March 31, 2019  
Weighted-average remaining lease term        
Operating leases     7.21 years  
Weighted-average discount rate        
Operating leases     5.5 %

 

Maturities of lease liabilities as of March 31, 2019, were as follows:

 

    Operating Leases  
       
2019 (excluding the three months ended March 31, 2019)   $ 149,729  
2020     190,574  
2021     201,675  
2022     213,600  
2023     216,847  
Thereafter     557,074  
Total lease payments     1,529,499  
Less: amount of lease payments representing interest     (312,143 )
Present value of future minimum lease payments   $ 1,217,356  
Less: current obligations under leases   $ (121,130 )
Non current long-term obligations   $ 1,096,226  

 

Stock-Based Compensation

 

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-7”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.

 

Income Taxes

 

Prior to November 8, 2018, the Company was taxed under the provisions of subchapter S of the Internal Revenue Code. Under these provisions, the Company did not pay corporate federal income taxes on its taxable income but was liable for Florida corporate income taxes and Texas Franchise Tax. The shareholder was liable for individual income taxes on the Company’s taxable income. Post-merger, the Company file consolidated federal and state income tax returns.

XML 23 R12.htm IDEA: XBRL DOCUMENT v3.19.1
Going Concern
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going Concern

Note 3. Going Concern

 

The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the three months ended March 31, 2019, the Company incurred a net loss of $1,239,297, has an accumulated deficit of $5,101,428 and working capital deficit of $1,849,780, with the current liabilities inclusive of $2,910,136 in stockholder loans that are subordinated to the provider of the working capital facility, and $128,910 in the current portion of the lease liability recognition. These circumstances raise substantial doubt as to the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon the Company’s ability to increase revenues, execute on its business plan to acquire complimentary companies, raise capital, and to continue to sustain adequate working capital to finance its operations. The failure to achieve the necessary levels of profitability and cash flows would be detrimental to the Company. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidation of Variable Interest Entities
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Consolidation of Variable Interest Entities

Note 4. Consolidation of Variable Interest Entities

 

Effective April 1, 2014, the Company’s stockholder was transferred the controlling interest of Strike the Gold Foods Ltd. (“Strike”), a related party entity based in the United Kingdom. The Company concluded that Strike is a VIE and the Company is the primary beneficiary of Strike, in accordance with ASC 810, Consolidation. Therefore, the Company consolidated Strike in its financial statements. Strike’s activities are reflected in the Company’s financial statements starting on April 1, 2014, the effective date of the controlling interest transfer. Strike was not a VIE of the Company and the Company was not the primary beneficiary of Strike prior to the effective date of the controlling interest transfer of April 1, 2014. Strike’s equity is classified as non-controlling interest in the Company’s financial statements since the Company is not a shareholder of Strike.

  

The information below represents the assets, liabilities and non-controlling interest related to Strike as of March 31, 2019 and December 31, 2018.

 

    March 31, 2019  
Assets   $ 63,686  
Liabilities     55,171  
Non-controlling interest     (460,101 )

 

    December 31, 2018  
Assets   $ 177,352  
Liabilities     95,720  
Non-controlling interest     (440,883 )

 

XML 25 R14.htm IDEA: XBRL DOCUMENT v3.19.1
Debt
3 Months Ended
Mar. 31, 2019
Debt Disclosure [Abstract]  
Debt

Note 5. Debt

 

Working Capital Line of Credit

 

The Company entered into a $14,000,000 revolving line of credit with Ares on August 31, 2016, the proceeds of which were used to pay off the prior line of credit, pay new loan costs of approximately $309,000, and provide additional working capital to the company. This facility was amended on November 18, 2016, June 19, 2017, October 16, 2017 and September 19, 2018. In the fourth amendment the term of this facility was extended to a term of 5 years from the effective date and is subject to early termination by the lender upon defined events of default. The Company continues to be obligated to meet certain financial covenants.

 

The line of credit bears an interest rate equal to the greater of 3 Month LIBOR rate plus 6.25%, the Prime rate plus 3.0% or a fixed rate of 6.5%.

 

The Ares line of credit agreement is subject to the following terms:

 

  Borrowing is based on up to 85% of eligible accounts receivable plus the net orderly liquidation value of eligible inventory at the same rate, subject to certain defined limitations.
  The line is collateralized by substantially all the assets and property of the Company and is personally guaranteed by the stockholder of the Company.
  The Company is restricted to specified distribution payments, use of funds, and is required to comply with certain other covenants including certain financial ratios.
  ●  All cash received by the Company is applied against the outstanding loan balance.
  ●  A subjective acceleration clause allows Ares to call the note upon a material adverse change.

 

During the year ended December 31, 2018, the Company failed to meet certain financial covenants. The bank issued the fourth amendment to the loan and security agreement dated September 19, 2018 waiving the defaults of the financial covenants, and resetting certain financial covenants. The Company is in violation of its covenant regarding advances to affiliates as of March 31, 2019.

 

On November 8, 2018, Inc. the company entered into the fifth amendment to the loan and security agreement with Ares Financial. This amendment memorialized the change in ownership of John Keeler & Co., Inc as a wholly owned subsidiary of Blue Star Foods Corp. as well as the change of John Keeler from CEO to Executive Chairman, and the appointment of Carlos Faria as the CEO of John Keeler& Co., Inc.

 

The Company analyzed the Line of Credit modification under ASC 470-50-40-21 and determined that the modification did not trigger any additional accounting due to the revolving line of credit remain unchanged

 

As of March 31, 2019, the line of credit bears interest rate of 9.376%.

 

As of March 31, 2019 and December 31, 2018, the line of credit had an outstanding balance of approximately $8,713,000 and $8,204,000, respectively.

 

John Keeler Promissory Notes

 

From January 2006 through May 2017, Keeler & Co issued an aggregate of $2,910,000 6% demand promissory notes to John Keeler, our Executive Chairman. As of March 31, 2019, $2,910,000 of principal remains outstanding and approximately $43,700 of interest was paid under the notes. These notes have been subordinated to the provider of the working capital line of credit and payment of these loans are restricted under this subordination agreement. After satisfaction of the terms of the subordination, the Company can prepay the notes at any time first against interest due thereunder. If an event of default occurs under the notes, interest will accrue at 18% per annum and if not paid within 10 days of payment becoming due, the holder of the note is entitled to a late fee of 5% of the amount of payment not timely made.

 

Current Portion of Long-Term Debt

 

As of March 31, 2019 and December 31, 2018, current portion of long-term debt consisted of a note payable outstanding with Mercedes-Benz Financial Services (“MB Financial”). The Company entered into a loan agreement with MB Financial on November 30, 2014 to finance the purchase of an automobile. The loan bears interest at 5.56% per annum and requires monthly installments of approximately $3,000, inclusive of interest. The loan matures on November 30, 2019.

 

Kenar Note

 

On March 26, 2019, the Company issued a four-month promissory note in the principal amount of $1,000,000 (the “Kenar Note”) to Kenar Overseas Corp., a company registered in Panama (the “Lender”) and controlled by a related party. The term of the note may be extended for an additional two months at the Lender’s discretion. The note bears interest at the rate of 18% per annum during the initial four months which rate will increase to 24% during any extension thereof. The note may be prepaid in whole or in part without penalty. John Keeler, the Company’s Executive Chairman pledged 5,000,000 shares of common stock to secure the Company’s obligations under the note.

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.19.1
Common Stock
3 Months Ended
Mar. 31, 2019
Equity [Abstract]  
Common Stock

Note 6. Common Stock

 

On February 1, 2019, the Company sold 5,000 shares at $2.00 per share to one investor in a private offering.

 

A dividend of common stock was authorized to the shareholders per the preferred shares designation on March 31, 2019. The dividend resulted in an issuance of 14,130 shares of stock with a value of $28,260.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.19.1
Stock-Based Compensation
3 Months Ended
Mar. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation

Note 7. Stock-Based Compensation

 

For the three months ended March 31, 2019

 

During the three months ended March 31, 2019, $665,028 in compensation expense was recognized on the following:

 

  1. Options to purchase 3,120,000 shares of Common Stock at an exercise price of $2.00 with a 10 year life, which vest one-year from the date of grant, were issued to Christopher Constable under the 2018 Plan during the twelve months ending December 31, 2018.
  2. Options to purchase 430,000 shares of Common Stock at an exercise price of $2.00 with a 10 year life, which vest 25% each year from the date of grant, were issued to various long term employees under the 2018 Plan during the three months ending March 31, 2019.
  3. Options to purchase 250,000 shares of Common Stock at an exercise price of $2.00 with a 10 year life, which vest 20% each year from the date of grant, were issued to Zoty Ponce under the 2018 Plan during the three months ending March 31, 2019.
  4. Options to purchase 25,000 shares of Common Stock at an exercise price of $2.00 with a 10 year life, which vest 25% each year from the date of grant, were issued to various contractors during the three months ending March 31, 2019.

 

The following table summarizes the assumptions used to estimate the fair value of the stock options granted during 2019:

 

    2019  
Expected Volatility     39%-48 %
Risk Free Interest Rate     2.62%-2.71 %
Expected life of warrants     6.25 – 10.0   

 

Under the Black-Scholes option pricing model, the fair value of the 705,000 options granted during the three months ended March 31, 2019 is estimated at $613,586.55 on the date of grant.

 

The following Table represents option activity for the three months ending March 31, 2019:

 

   

Number of

Options

   

Weighted

Average

Exercise

Price

   

Weighted

Average

Remaining

Contractual

Life in Years

   

Aggregate

Intrinsic

Value

 
Outstanding - December 31, 2018     6,240,000     $ 1.17       9.86          
Exercisable - December 31, 2018     3,120,000     $ 0.33       9.86     $ 5,210,400  
Granted     705,000     $ 2.00                  
Vested     -                          
Outstanding - March 31, 2019     6,945,000     $ 1.25       9.64          
Exercisable - March 31, 2019     3,120,000     $ 0.33       9.62     $ 5,210,400  
XML 28 R17.htm IDEA: XBRL DOCUMENT v3.19.1
Warrants
3 Months Ended
Mar. 31, 2019
Warrants  
Warrants

Note 8. Warrants

 

The following Table represents warrant activity for the three months ending March 31, 2019:

 

   

Number of

Warrants

   

Weighted

Average

Exercise

Price

   

Weighted

Average

Remaining

Contractual

Life in Years

   

Aggregate

Intrinsic

Value

 
Outstanding - December 31, 2018     353,250     $ 2.40       2.85          
Exercisable - December 31, 2018     353,250     $ 2.40       2.85     $ -  
Granted     -     $ -                  
Forfeited or Expired     -                          
Outstanding - March 31, 2019     353,250     $ 2.40       2.61          
Exercisable - March 31, 2019     353,250     $ 2.40       2.61     $ -  

 

There was no warrant activity for the three months ending March 31, 2019.

XML 29 R18.htm IDEA: XBRL DOCUMENT v3.19.1
Commitment and Contingencies
3 Months Ended
Mar. 31, 2019
Commitments and Contingencies Disclosure [Abstract]  
Commitment and Contingencies

Note 9. Commitment and Contingencies

 

Office lease

 

The Company leases its office and warehouse facility from JK Real Estate, a related party through common family beneficial ownership. The lease has a 20 year term, expiring in July 2021. It is currently likely that the Company will renew this lease for a five year term. The estimated lease payments associated with the renewal are included in the calculation of the future minimum lease payments. The Company is a guarantor of the mortgage on the facility which had a balance of approximately $1,298,100 at March 31, 2019; the Company’s maximum exposure. The Company deems that rental income on this lease is sufficient to cover the loan payments under this mortgage. Therefore, the Company did not record any liability related to the mortgage in the consolidated financial statements as the Company does not believe it will be called upon to perform under this guarantee, in accordance with ASC 460, Guarantees. See note 2 of these footnotes for the analysis of future minimum lease payments.Rental and equipment lease expenses amounted to approximately $58,500 and $53,000 for the three months ended March 31, 2019 and 2018, respectively.

 

Legal

 

Based on current negotiations in response to a letter received on November 27, 2018 in connection with a threatened lawsuit by a former employee, the Company believes that it has adequately reserved for any settlement resulting from such negotiations in its financial statements for the three months ended March 31, 2019. To date, the Company has received no further communications from the former employee.

XML 30 R19.htm IDEA: XBRL DOCUMENT v3.19.1
Subsequent Events
3 Months Ended
Mar. 31, 2019
Subsequent Events [Abstract]  
Subsequent Events

Note 10 Subsequent Events

 

On April 2, 2019, the Company issued a four-month promissory note in the principal amount of $100,000 to Lobo Holdings, LLC., a stockholder in the Company. The note bears interest at the rate of 18% per annum. The note may be prepaid in whole or in part without penalty. John Keeler, the Company’s Executive Chairman pledged 1,000,000 shares of common stock to secure the Company’s obligations under the note.

 

On April 2, 2019, the Company sold 5,000 shares at $2.00 per share to one investor in a private offering.

 

On April 12, 2019, the Company sold 1,000 shares at $2.00 per share to one investor in a private offering.

 

On April 23, 2019, the Company issued 2,500 shares at $2.00 per share to MEC Consulting Inc. for professional services.

 

On May 2, 2019, the Company sold 500 shares at $2.00 per share to one investor in a private offering.

 

On May 6, 2019, the Company sold 500 shares at $2.00 per share to one investor in a private offering.

 

On May 7, 2019, the Company sold 3,000 shares at $2.00 per share to one investor in a private offering.

 

On May 9, 2019, the Company sold 1,000 shares at $2.00 per share to one investor in a private offering.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation and Summary of Significant Accounting Policies (Policies)
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Basis of Presentation

Basis of Presentation

 

The following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete annual financial statements. The information furnished reflects all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial statements not misleading. The balance sheet as of December 31, 2018 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto which are included in our Annual Report on from 10-K for the year ending December 31, 2018 for a broader discussion of our business and the risks inherent in such business.

Advances to Suppliers and Related Party

Advances to Suppliers and Related Party

 

In the normal course of business, the Company may advance payments to its suppliers, inclusive of Bacolod, a related party. These advances are in the form of prepayments for products that will ship within a short window of time. In the event that it becomes necessary for the Company to return products or adjust for quality issues, the Company is issued a credit by the vendor in the normal course of business and these credits are also reflected against future shipments.

 

As of March 31, 2019 and December 31, 2018, the balance due from the related party for future shipments was approximately $1,261,468 and $1,139,619, respectively. The 2019 balances represent approximately four months of purchases from the supplier.

Revenue Recognition

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers”, and has subsequently issued several supplemental and/or clarifying ASUs (collectively, “ASC 606”). ASC 606 prescribes a single common revenue standard that replaces most existing U.S. GAAP revenue recognition guidance. ASC 606 is intended to provide a more consistent interpretation and application of the principles outlined in the standard across filers in multiple industries and within the same industries compared to current practices, which should improve comparability. Adoption of ASC 606 is required for annual and interim periods beginning after December 15, 2017. Upon adoption, we must elect to adopt either retrospectively to each prior reporting period presented or use the modified retrospective transition method with the cumulative effect of initial adoption recognized at the date of initial application. We adopted the new standard using the modified retrospective method on January 1, 2018.

 

Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. ASC 606 also impacts certain other areas, such as the accounting for costs to obtain or fulfill a contract. The standard also requires disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.

ASC 842 Leases

ASC 842 Leases.

 

On January 1, 2019, we adopted Accounting Standards Codification 842 and all the related amendments using the modified retrospective method. We recognized the cumulative effect of initially applying the new lease standard as an adjustment to the opening balance of retained earnings. The comparative information has not been restated and continues to be reported under the lease accounting standard in effect for those periods.

 

The new lease standard requires all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We elected the practical expedients permitted under the transition guidance of the new standard that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. We did not reassess whether any contracts entered into prior to adoption are leases or contain leases.

 

We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. We did not have any finance leases as of March 31, 2019. Our leases generally have terms that range from three years for equipment and five to twenty years for property. We elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

 

Lease liabilities are recognized at the present value of the fixed lease payments using a discount rate based on similarly secured borrowings available to us. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Lease assets are tested for impairment in the same manner as long-lived assets used in operations. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.

 

When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that we will exercise the option, we consider these options in determining the classification and measurement of the lease. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.

 

The table below presents the lease-related assets and liabilities recorded on the balance sheets.

 

    March 31, 2019  
Assets        
Operating lease assets   $ 1,220,283  
         
Liabilities        
Current   $ 128,910  
Operating lease liabilities        
Noncurrent        
Operating lease liabilities   $ 1,096,226  

 

Supplemental cash flow information related to leases were as follows:

 

    Three Months Ended March 31, 2019  
       
Cash used in operating activities:        
Operating leases   $ 4,853  
ROU assets recognized in exchange for lease obligations:        
Operating leases   $ 1,257,751  

 

The table below presents the remaining lease term and discount rates for operating leases.

 

    March 31, 2019  
Weighted-average remaining lease term        
Operating leases     7.21 years  
Weighted-average discount rate        
Operating leases     5.5 %

 

Maturities of lease liabilities as of March 31, 2019, were as follows:

 

    Operating Leases  
       
2019 (excluding the three months ended March 31, 2019)   $ 149,729  
2020     190,574  
2021     201,675  
2022     213,600  
2023     216,847  
Thereafter     557,074  
Total lease payments     1,529,499  
Less: amount of lease payments representing interest     (312,143 )
Present value of future minimum lease payments   $ 1,217,356  
Less: current obligations under leases   $ (121,130 )
Non current long-term obligations   $ 1,096,226  
Stock-Based Compensation

Stock-Based Compensation

 

Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation – Stock Based Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-7”), which aligns accounting for share-based payments issued to nonemployees to that of employees under the existing guidance of Topic 718, with certain exceptions. This update supersedes previous guidance for equity-based payments to nonemployees under Subtopic 505-50, Equity – Equity-Based Payments to Non-Employees. The adoption of ASU 2018-07 did not have a material impact on the Company’s consolidated financial statements.

Income Taxes

Income Taxes

 

Prior to November 8, 2018, the Company was taxed under the provisions of subchapter S of the Internal Revenue Code. Under these provisions, the Company did not pay corporate federal income taxes on its taxable income but was liable for Florida corporate income taxes and Texas Franchise Tax. The shareholder was liable for individual income taxes on the Company’s taxable income. Post-merger, the Company file consolidated federal and state income tax returns.

XML 32 R21.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation and Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2019
Accounting Policies [Abstract]  
Schedule of Lease-related Assets and Liabilities

The table below presents the lease-related assets and liabilities recorded on the balance sheets.

 

    March 31, 2019  
Assets        
Operating lease assets   $ 1,220,283  
         
Liabilities        
Current   $ 128,910  
Operating lease liabilities        
Noncurrent        
Operating lease liabilities   $ 1,096,226  

Schedule of Supplemental Cash Flow Information Related to Leases

Supplemental cash flow information related to leases were as follows:

 

    Three Months Ended March 31, 2019  
       
Cash used in operating activities:        
Operating leases   $ 4,853  
ROU assets recognized in exchange for lease obligations:        
Operating leases   $ 1,257,751  

Schedule of Remaining Lease Term and Discount Rates for Operating Leases

The table below presents the remaining lease term and discount rates for operating leases.

 

    March 31, 2019  
Weighted-average remaining lease term        
Operating leases     7.21 years  
Weighted-average discount rate        
Operating leases     5.5 %

Schedule of Maturities of Lease Liabilities

Maturities of lease liabilities as of March 31, 2019, were as follows:

 

    Operating Leases  
       
2019 (excluding the three months ended March 31, 2019)   $ 149,729  
2020     190,574  
2021     201,675  
2022     213,600  
2023     216,847  
Thereafter     557,074  
Total lease payments     1,529,499  
Less: amount of lease payments representing interest     (312,143 )
Present value of future minimum lease payments   $ 1,217,356  
Less: current obligations under leases   $ (121,130 )
Non current long-term obligations   $ 1,096,226  

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidation of Variable Interest Entities (Tables)
3 Months Ended
Mar. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of Assets, Liabilities and Non-controlling Interest Related to Strike

The information below represents the assets, liabilities and non-controlling interest related to Strike as of March 31, 2019 and December 31, 2018.

 

    March 31, 2019  
Assets   $ 63,686  
Liabilities     55,171  
Non-controlling interest     (460,101 )

 

    December 31, 2018  
Assets   $ 177,352  
Liabilities     95,720  
Non-controlling interest     (440,883 )

XML 34 R23.htm IDEA: XBRL DOCUMENT v3.19.1
Stock-Based Compensation (Tables)
3 Months Ended
Mar. 31, 2019
Share-based Payment Arrangement [Abstract]  
Schedule of Fair Value of Stock Options

The following table summarizes the assumptions used to estimate the fair value of the stock options granted during 2019:

 

    2019  
Expected Volatility     39%-48 %
Risk Free Interest Rate     2.62%-2.71 %
Expected life of warrants     6.25 – 10.0   

Schedule of Stock Option Activity

The following Table represents option activity for the three months ending March 31, 2019:

 

   

Number of

Options

   

Weighted

Average

Exercise

Price

   

Weighted

Average

Remaining

Contractual

Life in Years

   

Aggregate

Intrinsic

Value

 
Outstanding - December 31, 2018     6,240,000     $ 1.17       9.86          
Exercisable - December 31, 2018     3,120,000     $ 0.33       9.86     $ 5,210,400  
Granted     705,000     $ 2.00                  
Vested     -                          
Outstanding - March 31, 2019     6,945,000     $ 1.25       9.64          
Exercisable - March 31, 2019     3,120,000     $ 0.33       9.62     $ 5,210,400  

XML 35 R24.htm IDEA: XBRL DOCUMENT v3.19.1
Warrants (Tables)
3 Months Ended
Mar. 31, 2019
Warrants  
Schedule of Warrant Activity

The following Table represents warrant activity for the three months ending March 31, 2019:

 

   

Number of

Warrants

   

Weighted

Average

Exercise

Price

   

Weighted

Average

Remaining

Contractual

Life in Years

   

Aggregate

Intrinsic

Value

 
Outstanding - December 31, 2018     353,250     $ 2.40       2.85          
Exercisable - December 31, 2018     353,250     $ 2.40       2.85     $ -  
Granted     -     $ -                  
Forfeited or Expired     -                          
Outstanding - March 31, 2019     353,250     $ 2.40       2.61          
Exercisable - March 31, 2019     353,250     $ 2.40       2.61     $ -  

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.19.1
Company Overview (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Nov. 08, 2018
Mar. 31, 2019
Mar. 31, 2018
Nov. 08, 2019
Dec. 31, 2018
Jan. 02, 2018
Dec. 29, 2017
Par value of exchanged shares   $ 0.0001 $ 0.0001   $ 0.0001    
Stock issued during period services, value   $ 530,001          
Total capital contribution   $ 10,000        
Series A Preferred Stock [Member]              
Shares outstanding   1,413     1,413
Common Stock [Member]              
Shares outstanding   16,042,294 15,000,000   16,023,164 15,000,000 15,000,000
Common stock recieved on transaction         750,000    
Stock issued during period services         265,000    
Prior Investors [Member] | Series A Preferred Stock [Member]              
Fair value   $ 688,000     $ 81,353    
Christopher Constable [Member]              
Number of stock options granted 3,120,000            
John Keeler & Co., Inc. [Member] | Shareholder [Member]              
Shares exchanged by the shareholder 500            
Par value of exchanged shares $ 1.00            
Shares issued to new shareholder 15,000,000            
Par value of shares issued to new shareholder $ 0.0001            
Shares outstanding 16,015,000            
Converted to equity transaction $ 2,400            
John Keeler & Co., Inc. [Member] | Private Placement Investors [Member]              
Warrants issued to investors 181,250            
Total capital contribution       $ 725,000      
John Keeler & Co., Inc. [Member] | Private Placement Investors [Member] | Series A Preferred Stock [Member]              
Shares issued to investors 725            
John Keeler & Co., Inc. [Member] | Prior Investors [Member]              
Warrants issued to investors 172,000            
John Keeler & Co., Inc. [Member] | Prior Investors [Member] | Series A Preferred Stock [Member]              
Shares issued to investors 688            
John Keeler & Co., Inc. [Member] | Christopher Constable [Member]              
Number of stock options granted 3,120,000            
John Keeler & Co., Inc. [Member] | Carlos Faria [Member]              
Options to purchase stock 104            
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Due from related party for future shipments $ 1,261,648 $ 1,139,619
finance leases  
Operating lease, term 7 years 2 months 16 days  
Equipment [Member]    
Operating lease, term 3 years  
Property [Member] | Minimum [Member]    
Operating lease, term 5 years  
Property [Member] | Maximum [Member]    
Operating lease, term 20 years  
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Lease-related Assets and Liabilities (Details) - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Accounting Policies [Abstract]    
Operating lease assets $ 1,220,283
Operating lease liabilities - Current 128,910  
Operating lease liabilities - Noncurrent $ 1,096,226
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Supplemental Cash Flow Information Related to Leases (Details)
3 Months Ended
Mar. 31, 2019
USD ($)
Accounting Policies [Abstract]  
Cash used in operating activities, Operating leases $ 4,853
ROU assets recognized in exchange for lease obligations, Operating leases $ 1,257,751
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Remaining Lease Term and Discount Rates for Operating Leases (Details)
Mar. 31, 2019
Accounting Policies [Abstract]  
Weighted-average remaining lease term, Operating leases 7 years 2 months 16 days
Weighted-average discount rate, Operating leases 5.50%
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.19.1
Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Maturities of Lease Liabilities (Details) - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Accounting Policies [Abstract]    
2019 (excluding the three months ended March 31, 2019) $ 149,729  
2020 190,574  
2021 201,675  
2022 213,600  
2023 216,847  
Thereafter 557,074  
Total lease payments 1,529,499  
Less: amount of lease payments representing interest (312,143)  
Present value of future minimum lease payments 1,217,356  
Less: current obligations under leases (121,130)  
Non current long-term obligations $ 1,096,226
XML 42 R31.htm IDEA: XBRL DOCUMENT v3.19.1
Going Concern (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Mar. 31, 2018
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]        
Net income (loss) $ (1,239,297) $ (768,119) $ (768,118)  
Accumulated deficit (5,101,428)     $ (3,853,139)
Working capital deficit 1,849,780      
Subordinated stockholder debt 2,910,136     $ 2,910,136
Current portion of lease liability recognition $ 128,910      
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.19.1
Consolidation of Variable Interest Entities - Schedule of Assets, Liabilities and Non-controlling Interest Related to Strike (Details) - USD ($)
Mar. 31, 2019
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]    
Assets $ 63,686 $ 177,352
Liabilities 55,171 95,720
Non-controlling interest $ (460,101) $ (440,883)
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.19.1
Debt (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Mar. 26, 2019
Mar. 31, 2019
Mar. 31, 2018
Dec. 31, 2018
Aug. 31, 2016
Revolving line of credit   $ 8,713,000   $ 8,204,000  
Repayment of new loan   $ 6,706,623 $ 7,934,415    
Line of credit, interest rate   9.376%      
Line of credit, description   Borrowing is based on up to 85% of eligible accounts receivable plus the net orderly liquidation value of eligible inventory at the same rate, subject to certain defined limitations.      
6% Demand Promissory Notes [Member] | John Keeler [Member]          
Debt instrument, principal amount   $ 2,910,000      
Debt instrument, interest rate   6.00%      
Debt instrument, interest paid   $ 43,700      
Debt instrument, payment terms   If an event of default occurs under the notes, interest will accrue at 18% per annum and if not paid within 10 days of payment becoming due, the holder of the note is entitled to a late fee of 5% of the amount of payment not timely made.      
Four Month Promissory Notes [Member] | Kenar Overseas Corp [Member]          
Debt instrument, principal amount $ 1,000,000        
Debt instrument, interest rate 18.00%        
Debt instrument, increase in interest rate 24.00%        
Four Month Promissory Notes [Member] | John Keeler [Member] | Kenar Overseas Corp [Member]          
Number of shares pledged to secure company's obligation 5,000,000        
ACF Finco I LP [Member]          
Revolving line of credit         $ 14,000,000
Repayment of new loan   $ 309,000      
Line of credit, term   5 years      
ACF Finco I LP [Member] | London Interbank Offered Rate (LIBOR) [Member]          
Line of credit, interest rate   6.25%      
ACF Finco I LP [Member] | Prime Rate [Member]          
Line of credit, interest rate   3.00%      
ACF Finco I LP [Member] | Fixed Rate [Member]          
Line of credit, interest rate   6.50%      
Mercedes-Benz Financial Services [Member]          
Debt instrument, interest rate   5.56%   5.56%  
Debt monthly instalment   $ 3,000   $ 3,000  
Debt maturity date   Nov. 30, 2019   Nov. 30, 2019  
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.19.1
Common Stock (Details Narrative) - USD ($)
3 Months Ended
Feb. 01, 2019
Mar. 31, 2019
Dividends to preferred stockholders, shares   14,130
Dividends to preferred stockholders   $ 28,260
Private Offering [Member] | One Investor [Member]    
Number of shares sold 5,000  
Shares sold, price per share $ 2.00  
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.19.1
Stock-Based Compensation (Details Narrative) - USD ($)
3 Months Ended 12 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Dec. 31, 2018
Compensation expense $ 665,028  
Option granted during period 705,000    
Estimated fair value of option granted during period $ 613,587    
Contractors [Member]      
Optiion to purchase of common stock 25,000    
Exercise price $ 2.00    
Option term 10 years    
Stock option vesting percentage 25.00%    
2018 Plan [Member] | Christopher Constable [Member]      
Optiion to purchase of common stock     3,120,000
Exercise price     $ 2.00
Option term     10 years
Stock option vesting term     1 year
2018 Plan [Member] | Long Term Employees [Member]      
Optiion to purchase of common stock 430,000    
Exercise price $ 2.00    
Option term 10 years    
Stock option vesting percentage 25.00%    
2018 Plan [Member] | Zoty Ponce [Member]      
Optiion to purchase of common stock 250,000    
Exercise price $ 2.00    
Option term 10 years    
Stock option vesting percentage 20.00%    
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.19.1
Stock-Based Compensation - Schedule of Fair Value of Stock Options (Details)
3 Months Ended
Mar. 31, 2019
Expected Volatility, Minimum 39.00%
Expected Volatility, Maximum 48.00%
Risk Free Interest Rate, Minimum 2.62%
Risk Free Interest Rate, Maximum 2.71%
Minimum [Member]  
Expected life of warrants 6 years 2 months 30 days
Maximum [Member]  
Expected life of warrants 10 years
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.19.1
Stock-Based Compensation - Schedule of Stock Option Activity (Details)
3 Months Ended
Mar. 31, 2019
USD ($)
$ / shares
shares
Share-based Payment Arrangement [Abstract]  
Number of Option, Outstanding beginning | shares 6,240,000
Number of Option, Exercisable beginning | shares 3,120,000
Number of Option, Granted | shares 705,000
Number of Option, Vested | shares
Number of Option, Outstanding ending | shares 6,945,000
Number of Option, Exercisable ending | shares 3,120,000
Weighted Average Exercise Price, Outstanding beginning | $ / shares $ 1.17
Weighted Average Exercise Price, Exercisable beginning | $ / shares 0.33
Weighted Average Exercise Price, Granted | $ / shares 2.00
Weighted Average Exercise Price, Vested | $ / shares
Weighted Average Exercise Price, Outstanding ending | $ / shares 1.25
Weighted Average Exercise Price, Exercisable ending | $ / shares $ 0.33
Weighted Average Remaining Contractual Life in Years, Outstanding beginning 9 years 10 months 10 days
Weighted Average Remaining Contractual Life in Years, Exercisable beginning 9 years 10 months 10 days
Weighted Average Remaining Contractual Life in Years, Outstanding ending 9 years 7 months 21 days
Weighted Average Remaining Contractual Life in Years, Exercisable ending 9 years 7 months 13 days
Aggregate Intrinsic value, Outstanding ending | $ $ 5,210,400
Aggregate Intrinsic value, Exercisable ending | $ $ 5,210,400
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.19.1
Warrants (Details Narrative)
3 Months Ended
Mar. 31, 2019
shares
Warrants  
Number of warrants granted
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.19.1
Warrants - Schedule of Warrant Activity (Details)
3 Months Ended
Mar. 31, 2019
USD ($)
$ / shares
shares
Warrants  
Number of Shares, Warrants Outstanding Beginning | shares 353,250
Number of Shares, Warrants Exercisable Beginning | shares 353,250
Number of Shares, Warrants granted | shares
Number of Shares, Warrants Forfeited or Expired | shares
Number of Shares, Warrants Outstanding Ending | shares 353,250
Number of Shares, Warrants Exercisable Ending | shares 353,250
Weighted Average Exercise Price Outstanding Beginning | $ / shares $ 2.40
Weighted Average Exercise Price Exercisable, Beginning | $ / shares 2.40
Weighted Average Exercise Price granted | $ / shares
Weighted Average Exercise Price Forfeited or Expired | $ / shares
Weighted Average Exercise Price Outstanding Ending | $ / shares 2.40
Weighted Average Exercise Price Exercisable Ending | $ / shares $ 2.40
Weighted Average Remaining Contractual Life Warrants Outstanding, Beginning 2 years 10 months 6 days
Weighted Average Remaining Contractual Life Warrants Exercisable, Beginning 2 years 10 months 6 days
Weighted Average Remaining Contractual Life Warrants Exercisable, Ending 2 years 7 months 10 days
Aggregate Intrinsic Value Exercisable | $
Aggregate Intrinsic Value Exercisable | $
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.19.1
Commitment and Contingencies (Details Narrative) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]    
Lease term 20 years  
Lease expiration Jul. 31, 2021  
Mortgage amount $ 1,298,100  
Rental and equipment lease expenses $ 58,500 $ 53,000
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.19.1
Subsequent Events (Details Narrative) - USD ($)
2 Months Ended
May 09, 2019
May 07, 2019
May 06, 2019
May 02, 2019
Apr. 23, 2019
Apr. 12, 2019
Apr. 02, 2019
Feb. 01, 2019
Apr. 02, 2019
One Investor [Member] | Private Offering [Member]                  
Number of shares sold               5,000  
Shares sold, price per share               $ 2.00  
Subsequent Event [Member] | One Investor [Member] | Private Offering [Member]                  
Number of shares sold   3,000 500 500   1,000 5,000    
Shares sold, price per share   $ 2.00 $ 2.00 $ 2.00   $ 2.00 $ 2.00   $ 2.00
Subsequent Event [Member] | Accredited Investor [Member] | Private Offering [Member]                  
Number of shares sold 1,000                
Shares sold, price per share $ 2.00                
Subsequent Event [Member] | MEC Consulting [Member]                  
Shares sold, price per share         $ 2.00        
Stock issued during period for services         2,500        
Subsequent Event [Member] | Four Month Promissory Notes [Member] | Lobo Holdings, LLC [Member]                  
Debt instrument, principal amount             $ 100,000   $ 100,000
Debt instrument, interest rate             18.00%   18.00%
Number of shares pledged to secure company's obligation                 1,000,000
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