0001493152-19-012221.txt : 20190813 0001493152-19-012221.hdr.sgml : 20190813 20190813163350 ACCESSION NUMBER: 0001493152-19-012221 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 57 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190813 DATE AS OF CHANGE: 20190813 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: 191021150 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: June 30, 2019

[ ] 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)

Securities registered pursuant to Section 12(b) of the Act: None

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 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, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth 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 August 13, 2019, there were 16,081,294 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

BLUE STAR FOODS CORP.

FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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	15

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

Item 4.	Controls and Procedures	19

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	20

Item 1A.	Risk Factors	20

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

Item 3.	Defaults Upon Senior Securities	21

Item 4.	Mine Safety Disclosures	21

Item 5.	Other Information	21

Item 6.	Exhibits	21

SIGNATURES		22

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, 2018 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.

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

June 30, 2019 and December 31, 2018

	JUNE 30 2019			DECEMBER 31 2018
	(unaudited)
ASSETS
CURRENT ASSETS
Cash (including VIE $6,774 and $5,561, respectively)	$	63,071		$	13,143
Restricted Cash		77,350			334,083
Accounts receivable, net (including VIE $87,189 and $49,624, respectively)		2,933,208			3,449,487
Inventory, net (including VIE $46,193 and $117,816, respectively)		5,295,784			8,126,634
Advances to related party		1,109,015			1,139,619
Other current assets (including VIE $3,821 and $4,351 respectively)		100,428			90,929
Total current assets		9,578,856			13,153,895
FIXED ASSETS, net		83,945			109,169
RIGHT OF USE ASSET		1,182,816			-
OTHER ASSETS		155,929			218,254
TOTAL ASSETS	$	11,001,546		$	13,481,318
LIABILITIES AND STOCKHOLDER’S DEFICIT
CURRENT LIABILITIES
Accounts payable and accruals (including VIE $85,996 and $95,720, respectively)	$	1,907,517		$	3,155,741
Working capital line of credit		5,636,481			8,203,725
Related Party Notes Payable		1,100,000			-
Current maturities of long-term debt		15,600			31,230
Stockholder notes payable - Subordinated		2,910,136			2,910,136
Total current liabilities		11,569,734			14,300,832
LONG -TERM LIABILITY		1,066,310			-
TOTAL LIABILITIES		12,636,044			14,300,832
STOCKHOLDER’S DEFICIT
Blue Star Foods Corp. Stockholder Equity
Series A 8% cumulative convertible preferred stock, $0.0001 par value; 10,000 shares authorized, 1,413 shares issued and outstanding as of June 30, 2019 and December 31, 2018		-			-
Common stock, $0.0001 par value, 100,000,000 shares authorized; 16,095,424 shares issued and outstanding (including 14,130 shares declared (not yet issued) as stock dividend on June 30, 2019) as of June 30, 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		1,612			1,603
Additional paid-in capital		4,885,279			3,404,774
Accumulated deficit		(6,124,983	)		(3,895,139	)
Total Blue Star Foods Corp. stockholder’s deficit		(1,238,092	)		(446,762	)
Non-controlling interest		(417,602	)		(440,833	)
Accumulated other comprehensive income (VIE)		21,196			(68,081	)
Total VIE’s deficit		(396,406	)		(372,752	)
TOTAL STOCKHOLDER’S DEFICIT		(1,634,498	)		(819,514	)
TOTAL LIABILITIES AND STOCKHOLDER’S DEFICIT	$	11,001,546		$	13,481,318

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

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

THREE AND SIX MONTHS ENDED JUNE 30, 2019 and 2018

	Three months ended (unaudited)						Six months ended (unaudited)
	2019			2018			2019			2018
REVENUE, NET	$	7,532,474		$	8,805,238		$	14,043,248		$	16,995,655
COST OF REVENUE		6,421,144			7,182,171			12,022,058			14,689,239
GROSS PROFIT		1,111,330			1,623,067			2,021,190			2,306,416

COMMISSIONS		19,851			37,400			38,661			66,215
SALARIES & WAGES		1,121,792			460,093			2,238,540			932,970
OTHER OPERATING EXPENSES		665,206			555,255			1,440,612			1,238,734
INCOME (LOSS) FROM OPERATIONS		(695,519	)		570,319			(1,696,623	)		68,497

OTHER EXPENSE		-			(25,679	)		-			(25,679	)
INTEREST EXPENSE		(257,277	)		(289,927	)		(495,470	)		(556,224	)
NET INCOME (LOSS)		(952,796	)		254,713			(2,192,093	)		(513,406	)
LESS: NET INCOME ( LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST		42,499			10,263			23,231			(34,627	)
NET INCOME (LOSS) LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.	$	(995,295	)	$	244,450		$	(2,215,324	)	$	(478,779	)
DIVIDEND ON PREFERRED STOCK		28,260			-			56,520			-
NET INCOME(LOSS) ATTRIBUABLE TO BLUE STAR FOODS CORP COMMON SHAREHOLDERS	$	(1,023,555	)		244,450		$	(2,271,844	)	$	(478,779	)
COMPREHENSIVE INCOME (LOSS):
TRANSLATION ADJUSTMENT ATTRIBUTABLE TO NON-CONTROLLING INTEREST		6,965			(4,175	)		(46,885	)		921
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST	$	49,464		$	6,088		$	(23,654	)	$	(33,706	)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BLUE STAR FOODS CORP.	$	(995,295	)	$	244,450		$	(2,215,324	)	$	(478,779	)
PRO FORMA DATA:
PRO FORMA INCOME TAX EXPENSE					-			-			-
PRO FORMA NET (LOSS) INCOME ATTRIBUTABLE TO BLUE STAR FOODS CORP	$	(995,295	)	$	244,450		$	(2,215,324	)	$	(478,779	)
PRO FORMA COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO BLUE STAR FOODS CORP	$	(995,295	)	$	244,450		$	(2,215,324	)	$	(478,779	)
Loss per basic and diluted common share:					-
Basic net income (loss) per common share	$	(0.06	)	$	0.02		$	(0.14	)	$	(0.03	)
Basic weighted average common shares outstanding		16,045,616			15,000,000			16,045,616			15,000,000
Fully diluted net income (loss) per common share	$	(0.06	)	$	0.02		$	(0.14	)	$	(0.03	)
Fully diluted weighted average common shares outstanding		16,045,616			15,000,000			16,045,616			15,000,000

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

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S DEFICIT

Three and Six Months Ending June 30, 2019 and 2018

(unaudited)

	Series A Preferred 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	)
Common stock issued for Services						22,500		3		44,997					45,000						45,000
Common stock issued for Cash						11,000		1		21,999					22,000						22,000
Common Stock Incentive Issued to Employees						5,500		1		10,999					11,000						11,000
Stock Based Compensation										670,966					670,966						670,966
Dividends to preferred stockholders						14,130		1		28,259		(28,260	)		-						-
Net Loss								-				(995,295	)		(995,295	)		42,499			(952,796	)
Comprehensive Income						-		-		-		-			-			6,965			6,965
June 30, 2019		1,413	$	-		16,095,424	$	1,612	$	4,885,279	$	(6,124,983	)	$	(1,238,092	)	$	(396,406	)	$	(1,634,498	)

		Series A Preferred 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, 2017		-	$	-		15,000,000	$	1,500	$	558,257	$	(1,494,927	)	$	(935,170	)	$	(317,378	)	$	(1,252,548	)
ASC 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 Income		-		-		-		-		-		-			-			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	)
Net Income		-		-		-		-		-		244,449			244,449			10,263			254,712
Comprehensive loss		-		-		-		-		-		-			-			(4,175	)		(4,175	)
June 30, 2018		-	$	-		15,000,000	$	1,500	$	558,257	$	(2,055,226	)	$	(1,495,469	)	$	(351,084	)	$	(1,846,553	)

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

Blue Star Foods Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30,

(unaudited)

	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:

Net Loss	$	(2,192,093	)	$	(513,406	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock Based Compensation		1,346,994			-
Common stock issued for Services		45,000
Depreciation of fixed assets		34,010			31,103
Amortization of Right to use asset		74,935			-
Amortization of loan costs		72,325			66,827
Changes in operating assets and liabilities:
Receivables		516,279			489,612
Inventories		2,830,850			5,144,395
Advances to affiliated supplier		30,604			(1,082,925	)
Other current assets		(9,499	)		(7,852	)
Change in Right of use Liability		(65,231	)
Accounts payable and accruals		(1,374,434	)		(992,931	)
Net cash provided by operating activities		1,309,740			3,134,823
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets		(8,786	)		(6,371	)
Net cash used in investing activities		(8,786	)		(6,371	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Common Stock Offering		32,000			-
Proceeds from working capital lines of credit		11,571,080			13,601,796
Repayments of working capital lines of credit		(14,138,324	)		(16,738,935	)
Proceeds from Related Party Notes Payable		1,100,000
Principal payments of long-term debt		(15,630	)		(17,245	)
Payments of Loan costs		(10,000	)
Net cash used in financing activities		(1,460,874	)		(3,154,384	)
Effect of exchange rate changes on cash		(46,885	)		921
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH		(206,805	)		(25,011	)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD		347,226			58,875
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD	$	140,421		$	33,864
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Series A 8% Dividend issued in Common Stock		56,520			-
Valuation of Right to Use asset/liability		1,257,751
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$	494,596		$	555,824

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

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 shares of Series A Preferred stock and 181,250 warrants issued to private placement investors for total capital contribution of $725,000, 688 shares of Series A Preferred stock 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 an option to purchase 3,120,000 shares of common stock of 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 Company, and 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 Form 10-K for the year ending December 31, 2018 for a broader discussion of our business and the risks inherent in such business.

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated statement of cash flows:

	June 30, 2019		December 31, 2018

Cash and cash equivalents	$	63,071.00	$	13,143.00
Restricted cash		77,350.00		334,083.00
Total cash, cash equivalents, and restricted cash shown in the cash flow statement	$	140,421.00	$	347,226.00

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 June 30, 2019 and December 31, 2018, the balance due from the related party for future shipments was approximately $1,109,015 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 June 30, 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.

	June 30, 2019
Assets
Operating lease assets	$	1,182,816

Liabilities
Current	$	126,577
Operating lease liabilities
Noncurrent
Operating lease liabilities	$	1,066,310

Supplemental cash flow information related to leases were as follows:

	Six Months Ended June 30, 2019

Cash used in operating activities:
Operating leases	$	9,704
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.

	June 30, 2019
Weighted-average remaining lease term
Operating leases		6.97 years
Weighted-average discount rate
Operating leases		5.5	%

Maturities of lease liabilities as of June 30, 2019, were as follows:

	Operating Leases

2019 (excluding the six months ended June 30, 2019)	$	99,819
2020		190,574
2021		201,675
2022		213,600
2023		216,847
Thereafter		557,074
Total lease payments		1,479,589
Less: amount of lease payments representing interest		(287,069	)
Present value of future minimum lease payments	$	1,192,520
Less: current obligations under leases	$	(126,577	)
Non current long-term obligations	$	1,065,943

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 six months ended June 30, 2019, the Company incurred a net loss of $2,192,093, has an accumulated deficit of $6,124,983 and working capital deficit of $1,990,878, with the current liabilities inclusive of $2,910,136 in stockholder loans that are subordinated to the provider of the working capital facility, and $126,577 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.

The information below represents the assets, liabilities and non-controlling interest related to Strike as of June 30, 2019 and December 31, 2018.

	June 30, 2019
Assets	$	143,977
Liabilities		85,996
Non-controlling interest		(417,602	)

	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 ACF Finco I, LP (“ACF”) 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, September 19, 2018, November 8, 2018 and July 29, 2019. In the fourth amendment the term of this facility was extended to a term of 5 years 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% and 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 ACF to call the note upon a material adverse change.

During the year ended December 31, 2018, the Company failed to meet certain financial covenants under the line of credit and as of June 30, 2019 was in violation of its fixed charge coverage ratio. The loan and security agreement dated September 19, 2018 was amended on July 29, 2019 (the “Fourth Amendment”). The Fourth Amendment waived the Company’s defaults of the financial covenants, revised certain financial covenants, confirmed the secured lender’s rights and resulted in a default interest rate of an additional 3%, effective August 1, 2019 until the default is cured.

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 remaining unchanged

As of June 30, 2019, the line of credit bears interest rate of 8.77%.

As of June 30, 2019 and December 31, 2018, the line of credit had an outstanding balance of approximately $5,636,500 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 and Chief Executive Officer. As of June 30, 2019, $2,910,000 of principal remains outstanding and approximately $87,300 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 June 30, 2019 and December 31, 2018, the 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 balance as of June 30, 2019 was $15,964 and 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 and Chief Executive Officer pledged 5,000,000 shares of common stock to secure the Company’s obligations under the note.

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 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 and Chief Executive Officer pledged 1,000,000 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 on March 31, 2019.

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.

On May 17, 2019 the Company issued 20,000 shares at $2.00 per share to various individuals for professional services.

On May 17, 2019 the Company issued 5,500 shares at $2.00 per share to 11 non officer employees as a bonus incentive.

A dividend of common stock was authorized to the shareholders per the preferred shares designation on June 30, 2019. The dividend of 14,130 shares of stock with a value of $28,260 was declared but not yet issued.

Note 7. Stock-Based Compensation

For the six months ended June 30, 2019

During the six months ended June 30, 2019, approximately $1,336,000 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 six months ending June 30, 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 six months ending June 30, 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 six months ending June 30, 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 six months ended June 30, 2019 is estimated at $613,586 on the date of grant. The unrecognized portion of the expense remaining outstanding is $1,395,338.

The following Table represents option activity for the six months ending June 30, 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 – June 30, 2019		6,945,000	$	1.25		9.39
Exercisable - June 30, 2019		3,120,000	$	0.33		9.37	$	5,210,400

Note 8. Warrants

The following Table represents warrant activity for the six months ending June 30, 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 -June 30, 2019		353,250	$	2.40		2.36
Exercisable - June 30, 2019		353,250	$	2.40		2.36	$	-

There was no warrant activity for the six months ending June 30, 2019.

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 $1,292,250 at June 30, 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 $117,800 and $106,300 for the six months ended June 30, 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 six months ended June 30, 2019. The Company has a scheduled mediation date in September 2019.

Note 10. Subsequent Events

The Kenar Note matured on July 26, 2019 and has been extended on a month-to-month basis on the same terms and conditions.

The Lobo Note matured on August 2, 2019 and has been extended on a month-to-month basis on the same terms and conditions.

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.

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

Three months ended June 30, 2019 and 2018

Net Revenue. Revenue for the three months ended June 30, 2019 decreased 14.5% to $7,532,474 as compared to $8,805,238 for the three months ended June 30, 2018 as a result of a decrease in poundage due to market softness, and a 82,000 pound reduction in private label business with US Foods, as the Company is transitioning out of packaging the private label for this customer.

Cost of Goods Sold. Cost of goods sold for the three months ended June 30, 2019 decreased to $6,421,144 as compared to $7,182,171 for the three months ended June 30, 2018. The decrease is attributable to the revenue decline.

Gross Profit. Gross profit margin for the three months ended June 30, 2019 decreased by $511,737 to $1,111,330 as compared to $1,623,067 for the three months ended June 30, 2018. This decrease is directly attributable to a reduction in average selling price in the market. Pricing pressures have caused the market to adjust lower.

Commissions Expenses. Commissions expenses decreased from $37,400 for the three months ending June 30, 2018 to $19,851 for the three months ending June 30, 2019, 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 $661,699 to $1,121,792, or 136.2% for the three months ended June 30, 2019 as compared to $460,093 for the three months ended June 30, 2018. This increase is solely due to the noncash expenses related to stock-based compensation which totaled $670,967 for the three months ending June 30, 2019 as compared to $0 for the three months ending June 30, 2018. The actual cash utilized for payroll (excluding stock-based compensation) decreased by $9,268 for the three months ending June 30, 2019 as compared to the same period in 2018.

Other Operating Expense. Other operating expense increased by 19.8% from $555,255 for the three months ended June 30, 2018 to $665,206 for the three months ended June 30, 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 $289,927 for the three months ended June 30, 2018 to $257,277 for the three months ended June 30, 2019. This decrease is due to the decrease in average funds borrowed from $10,017,743 as of June 30, 2018 to $7,174,713 as of June 30, 2019.

Net Loss: The Company had a net loss of $952,796 for the three months ended June 30, 2019 as compared to a net profit of $254,713 for the three months ended June 30, 2018. The increase in net loss is attributable to decreased revenues combined with non-cash operating expenses related to stock compensation of $670,967 during the first three months of 2019.

Six months ended June 30, 2019 and 2018

Net Revenue. Revenue for the six months ended June 30, 2019 decreased 17.4% to $14,043,248 as compared to $16,995,655 for the six months ended June 30, 2018 as a result of a decrease in poundage due to market softness, and a 153,000 pound reduction in private label business with US Foods, as the Company is transitioning out of packaging the private label for this customer.

Cost of Goods Sold. Cost of goods sold for the six months ended June 30, 2019 decreased to $12,022,058 as compared to $14,689,239 for the six months ended June 30, 2018. The decrease is attributable to the revenue decline.

Gross Profit. Gross profit margin for the six months ended June 30, 2019 decreased by $285,226 to $2,021,190 as compared to gross profit margin of $2,306,416 for the six months ended June 30, 2018. This decrease is directly attributable to lower revenue and lower market prices in the industry as compared to replacement cost. We believe pricing pressures industry wide have caused this decrease in product margin.

Commissions Expenses. Commissions expenses decreased from $66,215 for the six months ending June 30, 2018 to $38,661 for the six months ending June 30, 2019, 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 $1,305,570 to $2,238,540, or 140% for the six months ended June 30, 2019 as compared to $932,970 for the six months ended June 30, 2018. This increase is solely due to the noncash expenses related to stock-based compensation which totaled $1,346,994 for the six months ending June 30, 2019 as compared to $0 for the six months ending June 30, 2018. The actual cash utilized for payroll (excluding stock-based compensation) decreased by $41,424 for the six months ending June 30, 2019 as compared to the same period in 2018.

Other Operating Expense. Other operating expense increased by 16.3% from $1,238,734 for the six months ended June 30, 2018 to $1,440,612 for the six months ended June 30, 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 $556,224 for the six months ended June 30, 2018 to $495,470 for the six months ended June 30, 2019. This decrease is due to the decrease in average funds borrowed from $10,540,581 as of June 30, 2018 to $6,920,103 as of June 30, 2019.

Net Loss. The Company had a net loss of $2,192,093 for the six months ended June 30, 2019 as compared to a net loss of $513,406 for the six months ended June 30, 2018. The increase in net loss is attributable to decreased revenues combined with non-cash operating expenses related to stock compensation of $1,346,994 during the first six months of 2019.

Liquidity and Capital Resources

At June 30, 2019, the Company had a working capital deficit of approximately $1,990,900, 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 $126,577 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 $1,100,000 notes payable that were executed in the first six months of 2019 The Company’s primary sources of liquidity consist of inventory of $5,295,784 and accounts receivable of $2,933,208.

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

The Company entered into a $14,000,000 revolving line of credit with ACF Finco I, LP 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, September 19, 2018, November 8, 2018 and July 29, 2019. 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 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 and Chief Executive Officer. 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.

John Keeler Promissory Notes

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 and Chief Executive Officer pledged 5,000,000 shares of common stock to secure the Company’s obligations under the note. The Kenar Note matured on July 26, 2019 and was extended on a month-to-month basis on the same terms and conditions.

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 and Chief Executive Officer pledged 1,000,000 shares of common stock to secure the Company’s obligations under the Lobo Note. The Lobo Note matured on August 2, 2019 and was extended on a month-to-month basis on the same terms and conditions.

Cash Provided by Operating Activities. Cash provided by operating activities during the six months ended June 30, 2019 was $1,309,740 as compared to cash provided by operating activities of $3,134,823 for the six months ended June 30, 2018. The decrease is primarily attributable to an increase in the net loss after non-cash items along with a reduction in cash generated from the reduction of receivables and inventory. Also, additional cash was used to reduce the Accounts Payable and accruals balance by $381,503 during the six months ended June 30, 2019.

Cash Used for Investing Activities. Cash used for investing activities for the six months ended June 30, 2019 was $8,786 as compared to $6,371 used for investing activities for the six months ended June 30, 2018.

Cash utilized in Financing Activities. Cash utilized in financing activities for the six months ended June 30, 2019 was $1,460,874 as compared to cash from financing activities of $3,154,384 for the six months ended June 30, 2018. The Company’s revolving working capital line of credit utilized cash of approximately $2,567,000 and related party notes provided $1,100,000 in cash for the six months ending June 30, 2019 as compared to a pay down of the revolving working capital line of credit for the six months ending June 30, 2018 of approximately $3,137,000.

Recently Adopted Accounting Pronouncements

ASC 842 Leases.

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

	June 30, 2019
Assets
Operating lease assets	$	1,182,816

Liabilities
Current	$	126,577
Operating lease liabilities
Noncurrent
Operating lease liabilities	$	1,066,310

Supplemental cash flow information related to leases were as follows:

	Six Months Ended June 30, 2019
Cash used in operating activities:
Operating leases	$	9,704
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.

	June 30, 2019
Weighted-average remaining lease term
Operating leases		6.97 years
Weighted-average discount rate
Operating leases		5.5	%

Maturities of lease liabilities as of June 30, 2019, were as follows:

	Operating Leases

2019 (excluding the six months ended June 30, 2019)	$	99,819
2020		190,574
2021		201,675
2022		213,600
2023		216,847
Thereafter		557,074
Total lease payments		1,479,589
Less: amount of lease payments representing interest		(287,069	)
Present value of future minimum lease payments	$	1,192,520
Less: current obligations under leases	$	(126,577	)
Non current long-term obligations	$	1,065,943

Stock-Based Compensation

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 June 30, 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.

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.

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.

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

On May 20, 2019, we issued an aggregate of 5,500 shares of common stock to eleven employees of the Company as bonus compensation.

On May 20, 2019, we issued an aggregate of 20,000 shares of common stock to Newbridge Securities Corporation and two of its employees for investment banking services provided to the Company.

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

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: August 13, 2019	By:	/s/ John Keeler
	Name:	John Keeler
	Title:	Executive Chairman and Chief Executive Officer (Principal Executive Officer)

Dated: August 13, 2019	By:	/s/ Christopher Constable
	Name:	Christopher Constable
	Title:	Chief Financial Officer, Secretary and Treasurer
		(Principal Financial and Accounting Officer)

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, John Keeler, 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: August 13, 2019

/s/ John Keeler

John Keeler

Executive Chairman 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: August 13, 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 June 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John Keeler, Executive Chairman 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: August 13, 2019	By:	/s/ John Keeler
	Name:	John Keeler
	Title:	Executive Chairman 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 June 30, 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.

Date: August 13, 2019	By:	/s/ Christopher Constable
	Name:	Christopher Constable
	Title:	Chief Financial Officer, Secretary and Treasurer
		(Principal Financial and Accounting Officer)

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During the year ended December 31, 2018, the Company failed to meet certain financial covenants under the line of credit and as of June 30, 2019 was in violation of its fixed charge coverage ratio. The loan and security agreement dated September 19, 2018 was amended on July 29, 2019 (the "Fourth Amendment"). The Fourth Amendment waived the Company's defaults of the financial covenants, revised certain financial covenants, confirmed the secured lender's rights and resulted in a default interest rate of an additional 3%, effective August 1, 2019 until the default is cured.

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.

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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 Form 10-K for the year ending December 31, 2018 for a broader discussion of our business and the risks inherent in such business.   Restricted Cash   The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated statement of cash flows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">December 31, 2018</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 60%; text-align: left">Cash and cash equivalents</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">63,071.00</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">13,143.00</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Restricted cash</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">77,350.00</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">334,083.00</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Total cash, cash equivalents, and restricted cash shown in the cash flow statement</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">140,421.00</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">347,226.00</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   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 June 30, 2019 and December 31, 2018, the balance due from the related party for future shipments was approximately $1,109,015 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 June 30, 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.   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold">Assets</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 74%; text-align: left">Operating lease assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 22%; text-align: right">1,182,816</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold">Liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Current</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">126,577</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Operating lease liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Noncurrent</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Operating lease liabilities</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1,066,310</td><td style="text-align: left"> </td></tr> </table>   Supplemental cash flow information related to leases were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Six Months Ended June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Cash used in operating activities:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 80%; text-align: left; padding-left: 10pt">Operating leases</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">9,704</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">ROU assets recognized in exchange for lease obligations:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Operating leases</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1,257,751</td><td style="text-align: left"> </td></tr> </table>   The table below presents the remaining lease term and discount rates for operating leases.   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left">Weighted-average remaining lease term</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Operating leases</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">6.97 years</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left">Weighted-average discount rate</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 80%; text-align: left; padding-left: 10pt">Operating leases</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 16%; text-align: right">5.5</td><td style="width: 1%; text-align: left">%</td></tr> </table>   Maturities of lease liabilities as of June 30, 2019, were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Operating Leases</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 80%">2019 (excluding the six months ended June 30, 2019)</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">99,819</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">190,574</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">201,675</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">213,600</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">216,847</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">557,074</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Total lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1,479,589</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Less: amount of lease payments representing interest</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(287,069</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Present value of future minimum lease payments</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,192,520</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Less: current obligations under leases</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(126,577</td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Non current long-term obligations</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,065,943</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   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 six months ended June 30, 2019, the Company incurred a net loss of $2,192,093, has an accumulated deficit of $6,124,983 and working capital deficit of $1,990,878, with the current liabilities inclusive of $2,910,136 in stockholder loans that are subordinated to the provider of the working capital facility, and $126,577 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.   The information below represents the assets, liabilities and non-controlling interest related to Strike as of June 30, 2019 and December 31, 2018.   <table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%">Assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">143,977</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">85,996</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Non-controlling interest</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(417,602</td><td style="text-align: left">)</td></tr> </table>   <table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">December 31, 2018</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%">Assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">177,352</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">95,720</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Non-controlling interest</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(440,883</td><td style="text-align: left">)</td></tr></table>

Note 5. Debt   Working Capital Line of Credit   The Company entered into a $14,000,000 revolving line of credit with ACF Finco I, LP (“ACF”) 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, September 19, 2018, November 8, 2018 and July 29, 2019. In the fourth amendment the term of this facility was extended to a term of 5 years 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% and is subject to the following terms:   <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="width: 96px; text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="width: 24px; text-align: justify; font: 10pt Times New Roman, Times, Serif">●</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">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. </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">●</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">The line is collateralized by substantially all the assets and property of the Company and is personally guaranteed by the stockholder of the Company. </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">●</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">The Company is restricted to specified distribution payments, use of funds, and is required to comply with certain other covenants including certain financial ratios. </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">● </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">All cash received by the Company is applied against the outstanding loan balance. </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">● </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">A subjective acceleration clause allows ACF to call the note upon a material adverse change. </td></tr> </table>   During the year ended December 31, 2018, the Company failed to meet certain financial covenants under the line of credit and as of June 30, 2019 was in violation of its fixed charge coverage ratio. The loan and security agreement dated September 19, 2018 was amended on July 29, 2019 (the “Fourth Amendment”). The Fourth Amendment waived the Company’s defaults of the financial covenants, revised certain financial covenants, confirmed the secured lender’s rights and resulted in a default interest rate of an additional 3%, effective August 1, 2019 until the default is cured.   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 remaining unchanged   As of June 30, 2019, the line of credit bears interest rate of 8.77%.   As of June 30, 2019 and December 31, 2018, the line of credit had an outstanding balance of approximately $5,636,500 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 and Chief Executive Officer. As of June 30, 2019, $2,910,000 of principal remains outstanding and approximately $87,300 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 June 30, 2019 and December 31, 2018, the 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 balance as of June 30, 2019 was $15,964 and 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 and Chief Executive Officer pledged 5,000,000 shares of common stock to secure the Company’s obligations under the note.   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 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 and Chief Executive Officer pledged 1,000,000 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 on March 31, 2019.   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.   On May 17, 2019 the Company issued 20,000 shares at $2.00 per share to various individuals for professional services.   On May 17, 2019 the Company issued 5,500 shares at $2.00 per share to 11 non officer employees as a bonus incentive.   A dividend of common stock was authorized to the shareholders per the preferred shares designation on June 30, 2019. The dividend of 14,130 shares of stock with a value of $28,260 was declared but not yet issued.

Note 7. Stock-Based Compensation   For the six months ended June 30, 2019   During the six months ended June 30, 2019, approximately $1,336,000 in compensation expense was recognized on the following:   <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="width: 96px; text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="width: 24px; text-align: justify; font: 10pt Times New Roman, Times, Serif">1.</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">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. </td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">2.</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">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 six months ending June 30, 2019.</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">3.</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">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 six months ending June 30, 2019.</td></tr> <tr style="vertical-align: top; font: 10pt Times New Roman, Times, Serif"> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif"> </td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">4.</td> <td style="text-align: justify; font: 10pt Times New Roman, Times, Serif">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 six months ending June 30, 2019.</td></tr> </table>   The following table summarizes the assumptions used to estimate the fair value of the stock options granted during 2019:   <table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: center">2019</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left">Expected Volatility</td> <td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 20%; text-align: right">39%-48</td><td style="width: 1%; text-align: left">%</td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Risk Free Interest Rate</td> <td> </td> <td style="text-align: left"> </td><td style="text-align: right">2.62%-2.71 </td><td style="text-align: left">%</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Expected life of warrants</td> <td> </td> <td style="text-align: left"> </td><td style="text-align: right">6.25 – 10.0 </td><td style="text-align: left"> </td></tr> </table>   Under the Black-Scholes option pricing model, the fair value of the 705,000 options granted during the six months ended June 30, 2019 is estimated at $613,586 on the date of grant. The unrecognized portion of the expense remaining outstanding is $1,395,338.   The following Table represents option activity for the six months ending June 30, 2019:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Number of Options</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Exercise Price</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Remaining Contractual Life in Years</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Aggregate Intrinsic Value</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 44%; padding-bottom: 2.5pt">Outstanding - December 31, 2018</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">6,240,000</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">1.17</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">9.86</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right"> </td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable - December 31, 2018</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">3,120,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.33</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">9.86</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,210,400</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Granted</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">705,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.00</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Vested</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Outstanding – June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">6,945,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1.25</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">9.39</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">3,120,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.33</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">9.37</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,210,400</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

Note 8. Warrants   The following Table represents warrant activity for the six months ending June 30, 2019:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Number of Warrants</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Exercise Price</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Remaining Contractual Life in Years</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Aggregate Intrinsic Value</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 44%; padding-bottom: 2.5pt">Outstanding - December 31, 2018</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">353,250</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">2.40</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">2.85</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">                </td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable - December 31, 2018</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">353,250</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.40</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2.85</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Granted</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Forfeited or Expired</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Outstanding -June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">353,250</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.40</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2.36</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">353,250</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.40</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2.36</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> </table>   There was no warrant activity for the six months ending June 30, 2019.

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 $1,292,250 at June 30, 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 $117,800 and $106,300 for the six months ended June 30, 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 six months ended June 30, 2019. The Company has a scheduled mediation date in September 2019.

Note 10. Subsequent Events   The Kenar Note matured on July 26, 2019 and has been extended on a month-to-month basis on the same terms and conditions.   The Lobo Note matured on August 2, 2019 and has been extended on a month-to-month basis on the same terms and conditions.

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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 shares of Series A Preferred stock and 181,250 warrants issued to private placement investors for total capital contribution of $725,000, 688 shares of Series A Preferred stock 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 an option to purchase 3,120,000 shares of common stock of 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 Company, and 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.

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 Form 10-K for the year ending December 31, 2018 for a broader discussion of our business and the risks inherent in such business.

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 June 30, 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.   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold">Assets</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 74%; text-align: left">Operating lease assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 22%; text-align: right">1,182,816</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold">Liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Current</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">126,577</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Operating lease liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Noncurrent</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Operating lease liabilities</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1,066,310</td><td style="text-align: left"> </td></tr> </table>   Supplemental cash flow information related to leases were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Six Months Ended June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Cash used in operating activities:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 80%; text-align: left; padding-left: 10pt">Operating leases</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">9,704</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">ROU assets recognized in exchange for lease obligations:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Operating leases</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1,257,751</td><td style="text-align: left"> </td></tr> </table>   The table below presents the remaining lease term and discount rates for operating leases.   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left">Weighted-average remaining lease term</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Operating leases</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">6.97 years</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left">Weighted-average discount rate</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 80%; text-align: left; padding-left: 10pt">Operating leases</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 16%; text-align: right">5.5</td><td style="width: 1%; text-align: left">%</td></tr> </table>   Maturities of lease liabilities as of June 30, 2019, were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Operating Leases</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 80%">2019 (excluding the six months ended June 30, 2019)</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">99,819</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">190,574</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">201,675</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">213,600</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">216,847</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">557,074</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Total lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1,479,589</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Less: amount of lease payments representing interest</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(287,069</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Present value of future minimum lease payments</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,192,520</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Less: current obligations under leases</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(126,577</td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Non current long-term obligations</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,065,943</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

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.

he table below presents the lease-related assets and liabilities recorded on the balance sheets.   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold">Assets</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 74%; text-align: left">Operating lease assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 22%; text-align: right">1,182,816</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td> </td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="font-weight: bold">Liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Current</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">126,577</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Operating lease liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td>Noncurrent</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Operating lease liabilities</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1,066,310</td><td style="text-align: left"> </td></tr></table>

Supplemental cash flow information related to leases were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Six Months Ended June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Cash used in operating activities:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 80%; text-align: left; padding-left: 10pt">Operating leases</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">9,704</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">ROU assets recognized in exchange for lease obligations:</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Operating leases</td><td> </td> <td style="text-align: left">$</td><td style="text-align: right">1,257,751</td><td style="text-align: left"> </td></tr></table> The table below presents the remaining lease term and discount rates for operating leases.   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left">Weighted-average remaining lease term</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-left: 10pt">Operating leases</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">6.97 years</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="font-weight: bold; text-align: left">Weighted-average discount rate</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="width: 80%; text-align: left; padding-left: 10pt">Operating leases</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 16%; text-align: right">5.5</td><td style="width: 1%; text-align: left">%</td></tr></table>

Maturities of lease liabilities as of June 30, 2019, were as follows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Operating Leases</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 80%">2019 (excluding the six months ended June 30, 2019)</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">99,819</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2020</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">190,574</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2021</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">201,675</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">2022</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">213,600</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">2023</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">216,847</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 1.5pt">Thereafter</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">557,074</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-left: 10pt">Total lease payments</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">1,479,589</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Less: amount of lease payments representing interest</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(287,069</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Present value of future minimum lease payments</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,192,520</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Less: current obligations under leases</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">(126,577</td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Non current long-term obligations</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1,065,943</td></tr></table>

The information below represents the assets, liabilities and non-controlling interest related to Strike as of June 30, 2019 and December 31, 2018.   <table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%">Assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">143,977</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">85,996</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Non-controlling interest</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(417,602</td><td style="text-align: left">)</td></tr> </table>   <table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 80%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">December 31, 2018</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 78%">Assets</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 18%; text-align: right">177,352</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td>Liabilities</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">95,720</td><td style="text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Non-controlling interest</td><td> </td> <td style="text-align: left"> </td><td style="text-align: right">(440,883</td><td style="text-align: left">)</td></tr></table>

The following table summarizes the assumptions used to estimate the fair value of the stock options granted during 2019:   <table cellpadding="0" cellspacing="0" align="center" style="border-collapse: collapse; width: 60%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: center">2019</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 76%; text-align: left">Expected Volatility</td> <td style="width: 2%"> </td> <td style="width: 1%; text-align: left"> </td><td style="width: 20%; text-align: right">39%-48</td><td style="width: 1%; text-align: left">%</td> </tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Risk Free Interest Rate</td> <td> </td> <td style="text-align: left"> </td><td style="text-align: right">2.62%-2.71 </td><td style="text-align: left">%</td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Expected life of warrants</td> <td> </td> <td style="text-align: left"> </td><td style="text-align: right">6.25 – 10.0 </td><td style="text-align: left"> </td></tr></table>

The following Table represents option activity for the six months ending June 30, 2019:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Number of Options</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Exercise Price</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Remaining Contractual Life in Years</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Aggregate Intrinsic Value</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 44%; padding-bottom: 2.5pt">Outstanding - December 31, 2018</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">6,240,000</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">1.17</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">9.86</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right"> </td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable - December 31, 2018</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">3,120,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.33</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">9.86</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,210,400</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Granted</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">705,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.00</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Vested</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Outstanding – June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">6,945,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">1.25</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">9.39</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">3,120,000</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">0.33</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">9.37</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">5,210,400</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

The following Table represents warrant activity for the six months ending June 30, 2019:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Number of Warrants</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Exercise Price</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Weighted Average Remaining Contractual Life in Years</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Aggregate Intrinsic Value</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 44%; padding-bottom: 2.5pt">Outstanding - December 31, 2018</td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">353,250</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left">$</td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">2.40</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">2.85</td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td><td style="width: 2%; padding-bottom: 2.5pt"> </td> <td style="width: 1%; border-bottom: Black 2.5pt double; text-align: left"> </td><td style="width: 10%; border-bottom: Black 2.5pt double; text-align: right">                </td><td style="width: 1%; padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable - December 31, 2018</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">353,250</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.40</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2.85</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Granted</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 2.5pt">Forfeited or Expired</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="padding-bottom: 2.5pt">Outstanding -June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">353,250</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.40</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2.36</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="text-align: left"> </td><td style="text-align: right"> </td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="padding-bottom: 2.5pt">Exercisable - June 30, 2019</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">353,250</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">2.40</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left"> </td><td style="border-bottom: Black 2.5pt double; text-align: right">2.36</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">-</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

P2Y4M9D

Has been extended on a month-to-month basis on the same terms and conditions.

530001

688000

81353

87300

14130 28260

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated statement of cash flows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">December 31, 2018</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 60%; text-align: left">Cash and cash equivalents</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">63,071.00</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">13,143.00</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Restricted cash</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">77,350.00</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">334,083.00</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Total cash, cash equivalents, and restricted cash shown in the cash flow statement</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">140,421.00</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">347,226.00</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

1395338

Restricted Cash   The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts in the consolidated statement of cash flows:   <table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 90%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">June 30, 2019</td><td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">December 31, 2018</td><td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td><td> </td> <td colspan="2"> </td><td> </td><td> </td> <td colspan="2"> </td><td> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 60%; text-align: left">Cash and cash equivalents</td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">63,071.00</td><td style="width: 1%; text-align: left"> </td><td style="width: 2%"> </td> <td style="width: 1%; text-align: left">$</td><td style="width: 16%; text-align: right">13,143.00</td><td style="width: 1%; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left; padding-bottom: 1.5pt">Restricted cash</td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">77,350.00</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">334,083.00</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left; padding-bottom: 2.5pt">Total cash, cash equivalents, and restricted cash shown in the cash flow statement</td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">140,421.00</td><td style="padding-bottom: 2.5pt; text-align: left"> </td><td style="padding-bottom: 2.5pt"> </td> <td style="border-bottom: Black 2.5pt double; text-align: left">$</td><td style="border-bottom: Black 2.5pt double; text-align: right">347,226.00</td><td style="padding-bottom: 2.5pt; text-align: left"> </td></tr></table>

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Stockholder Equity Series A 8% cumulative convertible preferred stock, $0.0001 par value; 10,000 shares authorized, 1,413 shares issued and outstanding as of June 30, 2019 and December 31, 2018 Common stock, $0.0001 par value, 100,000,000 shares authorized; 16,095,424 shares issued and outstanding (including 14,130 shares declared (not yet issued) as stock dividend on June 30, 2019) as of June 30, 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 Additional paid-in capital Accumulated deficit Total Blue Star Foods Corp. stockholder's deficit Non-controlling interest Accumulated other comprehensive income (VIE) Total VIE's deficit TOTAL STOCKHOLDER'S DEFICIT TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT Statement [Table] Statement [Line Items] Current assets attributable to VIE Current liabilities of VIE Preferred stock, par value Preferred stock, shares authorized Preferred stock, shares issued Preferred stock, shares outstanding Common stock, par value Common stock, shares authorized Common stock, shares issued Common stock, shares outstanding Dividend declared but not yet issued, shares Common stock dividend shares Income Statement [Abstract] REVENUE, NET COST OF REVENUE GROSS PROFIT COMMISSIONS SALARIES & WAGES OTHER OPERATING EXPENSES INCOME (LOSS) FROM OPERATIONS OTHER EXPENSE INTEREST EXPENSE NET INCOME (LOSS) LESS: NET INCOME ( LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST NET INCOME (LOSS) LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP. 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Document and Entity Information - shares	6 Months Ended
Document and Entity Information - shares	Jun. 30, 2019	Aug. 13, 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	Jun. 30, 2019
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		16,081,294
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2019

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Consolidated Balance Sheets - USD ($)	Jun. 30, 2019	Dec. 31, 2018
CURRENT ASSETS
Cash (including VIE $6,774 and $5,561, respectively)	$ 63,071	$ 13,143
Restricted Cash	77,350	334,083
Accounts receivable, net (including VIE $87,189 and $49,624, respectively)	2,933,208	3,449,487
Inventory, net (including VIE $46,193 and $117,816, respectively)	5,295,784	8,126,634
Advances to related party	1,109,015	1,139,619
Other current assets (including VIE $3,821 and $4,351 respectively)	100,428	90,929
Total current assets	9,578,856	13,153,895
FIXED ASSETS, net	83,945	109,169
RIGHT OF USE ASSET	1,182,816
OTHER ASSETS	155,929	218,254
TOTAL ASSETS	11,001,546	13,481,318
CURRENT LIABILITIES
Accounts payable and accruals (including VIE $85,996 and $95,720, respectively)	1,907,517	3,155,741
Working capital line of credit	5,636,481	8,203,725
Related Party Notes Payable	1,100,000
Current maturities of long-term debt	15,600	31,230
Stockholder notes payable - Subordinated	2,910,136	2,910,136
Total current liabilities	11,569,734	14,300,832
LONG -TERM LIABILITY	1,066,310
TOTAL LIABILITIES	12,636,044	14,300,832
Blue Star Foods Corp. Stockholder Equity
Series A 8% cumulative convertible preferred stock, $0.0001 par value; 10,000 shares authorized, 1,413 shares issued and outstanding as of June 30, 2019 and December 31, 2018
Common stock, $0.0001 par value, 100,000,000 shares authorized; 16,095,424 shares issued and outstanding (including 14,130 shares declared (not yet issued) as stock dividend on June 30, 2019) as of June 30, 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	1,612	1,603
Additional paid-in capital	4,885,279	3,404,774
Accumulated deficit	(6,124,983)	(3,895,139)
Total Blue Star Foods Corp. stockholder's deficit	(1,238,092)	(446,762)
Non-controlling interest	(417,602)	(440,833)
Accumulated other comprehensive income (VIE)	21,196	(68,081)
Total VIE's deficit	(396,406)	(372,752)
TOTAL STOCKHOLDER'S DEFICIT	(1,634,498)	(819,514)
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT	$ 11,001,546	$ 13,481,318

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Consolidated Balance Sheets (Parenthetical) - USD ($)	6 Months Ended	12 Months Ended
Consolidated Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 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	16,095,424	16,023,164
Common stock, shares outstanding	16,095,424	16,023,164
Dividend declared but not yet issued, shares	14,130
Common stock dividend shares		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	$ 85,996	$ 95,720
Other Current Assets [Member]
Current assets attributable to VIE	3,821	4,351
Inventories [Member]
Current assets attributable to VIE	46,193	117,816
Accounts Receivable [Member]
Current assets attributable to VIE	87,189	49,624
Cash [Member]
Current assets attributable to VIE	$ 6,774	$ 5,561

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Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
REVENUE, NET	$ 7,532,474	$ 8,805,238	$ 14,043,248	$ 16,995,655
COST OF REVENUE	6,421,144	7,182,171	12,022,058	14,689,239
GROSS PROFIT	1,111,330	1,623,067	2,021,190	2,306,416
COMMISSIONS	19,851	37,400	38,661	66,215
SALARIES & WAGES	1,121,792	460,093	2,238,540	932,970
OTHER OPERATING EXPENSES	665,206	555,255	1,440,612	1,238,734
INCOME (LOSS) FROM OPERATIONS	(695,519)	570,319	(1,696,623)	68,497
OTHER EXPENSE		(25,679)		(25,679)
INTEREST EXPENSE	(257,277)	(289,927)	(495,470)	(556,224)
NET INCOME (LOSS)	(952,796)	254,713	(2,192,093)	(513,406)
LESS: NET INCOME ( LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST	42,499	10,263	23,231	(34,627)
NET INCOME (LOSS) LOSS ATTRIBUTABLE TO BLUE STAR FOODS CORP.	(995,295)	244,450	(2,215,324)	(478,779)
DIVIDEND ON PREFERRED STOCK	28,260		56,520
NET INCOME(LOSS) ATTRIBUABLE TO BLUE STAR FOODS CORP COMMON SHAREHOLDERS	(1,023,555)	244,450	(2,271,844)	(478,779)
COMPREHENSIVE INCOME (LOSS):
TRANSLATION ADJUSTMENT ATTRIBUTABLE TO NON-CONTROLLING INTEREST	6,965	(4,175)	(46,885)	921
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NON-CONTROLLING INTEREST	49,464	6,088	(23,654)	(33,706)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO BLUE STAR FOODS CORP.	(995,295)	244,450	(2,215,324)	(478,779)
PRO FORMA DATA:
PRO FORMA INCOME TAX EXPENSE
PRO FORMA NET (LOSS) INCOME ATTRIBUTABLE TO BLUE STAR FOODS CORP	(995,295)	244,450	(2,215,324)	(478,779)
PRO FORMA COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO BLUE STAR FOODS CORP	$ (995,295)	$ 244,450	$ (2,215,324)	$ (478,779)
Loss per basic and diluted common share:
Basic net income (loss) per common share	$ (0.06)	$ 0.02	$ (0.14)	$ (0.03)
Basic weighted average common shares outstanding	16,045,616	15,000,000	16,045,616	15,000,000
Fully diluted net income (loss) per common share	$ (0.06)	$ 0.02	$ (0.14)	$ (0.03)
Fully diluted weighted average common shares outstanding	16,045,616	15,000,000	16,045,616	15,000,000

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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
ASC 606 Adjustment to January 1, 2018				(81,520)	(81,520)		(81,520)
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 (Income) 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
Net (Income) Loss							254,713
Balance at Jun. 30, 2018		$ 1,500	558,257	(2,055,227)	(1,495,469)	(351,084)	(1,846,553)
Balance, shares at Jun. 30, 2018		15,000,000
Balance at Apr. 02, 2018		$ 1,500	558,257	(2,299,675)	(1,739,918)	(357,172)	(2,097,090)
Balance, shares at Apr. 02, 2018		15,000,000
Net (Income) Loss				244,449	244,449	10,263	254,712
Comprehensive loss						(4,175)	(4,175)
Balance at Jun. 30, 2018		$ 1,500	558,257	(2,055,227)	(1,495,469)	(351,084)	(1,846,553)
Balance, shares at Jun. 30, 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	9,999		10,000		10,000
Common stock issued for Cash, shares		5,000
Stock Based Compensation			665,028		665,028		665,028
Dividends to preferred stockholders		$ 2	28,258	(28,260)
Dividends to preferred stockholders, shares		14,130
Net (Income) 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
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
Net (Income) Loss							(2,192,093)
Balance at Jun. 30, 2019		$ 1,612	4,885,279	(6,124,983)	(1,238,092)	(396,406)	(1,634,498)
Balance, shares at Jun. 30, 2019	1,413	16,095,424
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
Common stock issued for Cash		$ 1	21,999		22,000		22,000
Common stock issued for Cash, shares		11,000
Common stock issued for Services		$ 3	44,997		45,000		45,000
Common stock issued for Services, shares		22,500
Common Stock Incentive Issued to Employees		$ 1	10,999		11,000		11,000
Common Stock Incentive Issued to Employees, shares		5,500
Stock Based Compensation			670,966		670,966		670,966
Dividends to preferred stockholders		$ 1	28,259	(28,260)
Dividends to preferred stockholders, shares		14,130
Net (Income) Loss				(995,295)	(995,295)	42,499	(952,796)
Comprehensive loss						6,965	6,965
Balance at Jun. 30, 2019		$ 1,612	$ 4,885,279	$ (6,124,983)	$ (1,238,092)	$ (396,406)	$ (1,634,498)
Balance, shares at Jun. 30, 2019	1,413	16,095,424

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Consolidated Statements of Changes in Stockholder's Deficit (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2019	Jun. 30, 2018
Common stock, par value	$ 0.0001	$ 0.0001
Series A Preferred Stock [Member]
Preferred stock, par value	$ 0.0001	$ 0.0001

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$ (2,192,093)	$ (513,406)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock Based Compensation	1,346,994
Common stock issued for Services	45,000
Depreciation of fixed assets	34,010	31,103
Amortization of Right to use asset	74,935
Amortization of loan costs	72,325	66,827
Changes in operating assets and liabilities:
Receivables	516,279	489,612
Inventories	2,830,850	5,144,395
Advances to affiliated supplier	30,604	(1,082,925)
Other current assets	(9,499)	(7,852)
Change in Right of use Liability	(65,231)
Accounts payable and accruals	(1,374,434)	(992,931)
Net cash provided by operating activities	1,309,740	3,134,823
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets	(8,786)	(6,371)
Net cash used in investing activities	(8,786)	(6,371)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Common Stock Offering	32,000
Proceeds from working capital lines of credit	11,571,080	13,601,796
Repayments of working capital lines of credit	(14,138,324)	(16,738,935)
Proceeds from Related Party Notes Payable	1,100,000
Principal payments of long-term debt	(15,630)	(17,245)
Payments of Loan costs	(10,000)
Net cash used in financing activities	(1,460,874)	(3,154,384)
Effect of exchange rate changes on cash	(46,885)	921
NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(206,805)	(25,011)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH BEGINNING OF PERIOD	347,226	58,875
CASH, CASH EQUIVALENTS AND RESTRICTED CASH - END OF PERIOD	140,421	33,864
SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITY
Series A 8% Dividend issued in Common Stock	56,520
Valuation of Right to Use asset/liability	1,257,751
Supplemental Disclosure of Cash Flow Information
Cash paid for interest	$ 494,596	$ 555,824

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Consolidated Statements of Cash Flows (Unaudited) (Parenthetical)	6 Months Ended
	Jun. 30, 2019
Statement of Cash Flows [Abstract]
Preferred stock, dividend percentage	8.00%

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Company Overview

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Company Overview

Note 1. Company Overview

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Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 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

Restricted Cash

	June 30, 2019		December 31, 2018

Cash and cash equivalents	$	63,071.00	$	13,143.00
Restricted cash		77,350.00		334,083.00
Total cash, cash equivalents, and restricted cash shown in the cash flow statement	$	140,421.00	$	347,226.00

Advances to Suppliers and Related Party

Revenue Recognition

ASC 842 Leases.

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

	June 30, 2019
Assets
Operating lease assets	$	1,182,816

Liabilities
Current	$	126,577
Operating lease liabilities
Noncurrent
Operating lease liabilities	$	1,066,310

Supplemental cash flow information related to leases were as follows:

	Six Months Ended June 30, 2019

Cash used in operating activities:
Operating leases	$	9,704
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.

	June 30, 2019
Weighted-average remaining lease term
Operating leases		6.97 years
Weighted-average discount rate
Operating leases		5.5	%

Maturities of lease liabilities as of June 30, 2019, were as follows:

	Operating Leases

2019 (excluding the six months ended June 30, 2019)	$	99,819
2020		190,574
2021		201,675
2022		213,600
2023		216,847
Thereafter		557,074
Total lease payments		1,479,589
Less: amount of lease payments representing interest		(287,069	)
Present value of future minimum lease payments	$	1,192,520
Less: current obligations under leases	$	(126,577	)
Non current long-term obligations	$	1,065,943

Stock-Based Compensation

Income Taxes

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Going Concern

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Going Concern

Note 3. Going Concern

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Consolidation of Variable Interest Entities

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Consolidation of Variable Interest Entities

Note 4. Consolidation of Variable Interest Entities

The information below represents the assets, liabilities and non-controlling interest related to Strike as of June 30, 2019 and December 31, 2018.

	June 30, 2019
Assets	$	143,977
Liabilities		85,996
Non-controlling interest		(417,602	)

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

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Debt

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Debt

Note 5. Debt

Working Capital Line of Credit

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% and 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 ACF to call the note upon a material adverse change.

As of June 30, 2019, the line of credit bears interest rate of 8.77%.

As of June 30, 2019 and December 31, 2018, the line of credit had an outstanding balance of approximately $5,636,500 and $8,204,000, respectively.

John Keeler Promissory Notes

Current Portion of Long-Term Debt

Kenar Note

Lobo Note

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Common Stock

6 Months Ended

Jun. 30, 2019

Equity [Abstract]

Common Stock