UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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the quarterly period ended:
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BLUE STAR FOODS CORP.
FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022
TABLE OF CONTENTS
| PAGE | ||
| PART I - FINANCIAL INFORMATION | 4 | |
| Item 1. | Financial Statements (Unaudited) | 4 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 23 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 28 |
| Item 4. | Controls and Procedures | 28 |
| PART II - OTHER INFORMATION | 29 | |
| Item 1. | Legal Proceedings | 29 |
| Item 1A. | Risk Factors | 29 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 29 |
| Item 3. | Defaults Upon Senior Securities | 30 |
| Item 4. | Mine Safety Disclosures | 30 |
| Item 5. | Other Information | 30 |
| Item 6. | Exhibits | 30 |
| SIGNATURES | 31 | |
| 2 |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Except for historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements include, among others, those statements including the words “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans” and words of similar import. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Forward-looking statements are based on our current expectations and assumptions regarding our business, potential target businesses, the economy and other future conditions. Because forward-looking statements relate to the future, by their nature, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you therefore that you should not rely on any of these forward-looking statements as statements of historical fact or as guarantees or assurances of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include changes in local, regional, national or global political, economic, business, competitive, market (supply and demand), 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; | |
| ● | Changes in the political and regulatory environment and in business and fiscal conditions in the United States and overseas; and | |
| ● | The effect of COVID-19 on our operations and the capital markets. |
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 year ended December 31, 2021 which we filed with the Securities and Exchange Commission (“SEC”) on March 31, 2022. 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., a Delaware corporation, and its consolidated subsidiaries, John Keeler & Co., Inc., d/b/a Blue Star Foods, a Florida corporation, and its wholly-owned subsidiary, Coastal Pride Seafood, LLC, a Florida limited liability company (“Coastal Pride”) and Taste of BC Aquafarms, Inc., a corporation formed under the laws of the Province of British Columbia, Canada (“TOBC”).
| 3 |
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the SEC, and should be read in conjunction with the audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2021, 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
| SEPTEMBER 30, 2022 | DECEMBER 31, 2021 | |||||||
| Unaudited | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory, net | ||||||||
| Advances to related party | ||||||||
| Other current assets | ||||||||
| Total Current Assets | ||||||||
| RELATED PARTY LONG-TERM RECEIVABLE | ||||||||
| FIXED ASSETS, net | ||||||||
| RIGHT OF USE ASSET | ||||||||
| INTANGIBLE ASSETS, net | ||||||||
| Trademarks | ||||||||
| Customer relationships | ||||||||
| Non-compete agreements | ||||||||
| Total Intangible Assets | ||||||||
| GOODWILL | ||||||||
| OTHER ASSETS | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Accounts payable and accruals | $ | $ | ||||||
| Working capital line of credit | ||||||||
| Deferred income | ||||||||
| Current maturities of long-term debt, net | ||||||||
| Current maturities of lease liabilities | ||||||||
| Current maturities of related party long-term notes | ||||||||
| Current maturity of loan payable | ||||||||
| Related party notes payable - subordinated | ||||||||
| Other current liabilities | ||||||||
| Total Current Liabilities | ||||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-term lease liability | ||||||||
| Long-term debt, net | ||||||||
| Related party long-term notes | ||||||||
| TOTAL LIABILITIES | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Series A | ||||||||
| Common stock, $ par value, shares authorized; shares issued and outstanding as of September 30, 2022, and shares issued and outstanding as of December 31, 2021 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ EQUITY | ||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 4 |
Blue Star Foods Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)
| Three months ended September 30 | Nine months ended September 30 | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| REVENUE, NET | $ | $ | $ | $ | ||||||||||||
| COST OF REVENUE | ||||||||||||||||
| GROSS PROFIT (LOSS) | ( | ) | ( | ) | ||||||||||||
| COMMISSIONS | ||||||||||||||||
| SALARIES AND WAGES | ||||||||||||||||
| DEPRECIATION AND AMORTIZATION | ||||||||||||||||
| IMPAIRMENT LOSS | ||||||||||||||||
| OTHER OPERATING EXPENSES | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME | ||||||||||||||||
| LOSS ON SETTLEMENT OF DEBT | ( | ) | ( | ) | ||||||||||||
| INTEREST EXPENSE | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| DIVIDEND ON PREFERRED STOCK | ||||||||||||||||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| COMPREHENSIVE INCOME (LOSS): | ||||||||||||||||
| CHANGE IN FOREIGN CURRENCY TRANSLATION ADJUSTMENT | ( | ) | ( | ) | ||||||||||||
| COMPREHENSIVE INCOME (LOSS) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| COMPREHENSIVE LOSS | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per common share: | ||||||||||||||||
| Net loss per common share - basis and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 5 |
Blue Star Foods Corp.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021
| Series A Preferred Stock $0.0001 par value | Common Stock $0.0001 par value | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Income | Equity | |||||||||||||||||||||||||
| December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Warrants issued on convertible debt note | - | - | ||||||||||||||||||||||||||||||
| Common stock issued for service | - | |||||||||||||||||||||||||||||||
| Common stock issued for asset acquisition | - | |||||||||||||||||||||||||||||||
| Common stock issued from exercise of warrants | - | |||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Cumulative translation adjustment | - | - | ||||||||||||||||||||||||||||||
| March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Common stock issued for service | - | |||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Cumulative translation adjustment | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| June 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Stock based compensation | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Common stock issued for service | - | |||||||||||||||||||||||||||||||
| Common stock issued for note payment | - | |||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Comprehensive Income | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||
| Series A Preferred Stock $0.0001 par value | Common Stock $0.0001 par value | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | |||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Income | (Deficit) | |||||||||||||||||||||||||
| December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Series A preferred | - | ( | ) | |||||||||||||||||||||||||||||
| Common stock issued for service | - | |||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Comprehensive Income | - | - | ||||||||||||||||||||||||||||||
| March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Common stock issued to settle related party interest | - | |||||||||||||||||||||||||||||||
| Common stock issued for cash | - | |||||||||||||||||||||||||||||||
| Common stock issued for service | - | |||||||||||||||||||||||||||||||
| Common stock issued to be held in escrow | - | |||||||||||||||||||||||||||||||
| Common stock issued for Taste of BC acquisition | - | |||||||||||||||||||||||||||||||
| Preferred stock conversion to Common stock | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Comprehensive Income | - | - | ||||||||||||||||||||||||||||||
| June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
| Stock based compensation | - | - | ||||||||||||||||||||||||||||||
| Common stock issued for cash | - | |||||||||||||||||||||||||||||||
| Common stock issued for service | - | |||||||||||||||||||||||||||||||
| Net Loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||
| Comprehensive Income | - | - | ||||||||||||||||||||||||||||||
| September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 6 |
Blue Star Foods Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Nine Months Ended September 30 | ||||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash (used in) operating activities: | ||||||||
| Stock based compensation | ||||||||
| Common stock issued for service | ||||||||
| PPP loan forgiveness | ( | ) | ||||||
| Depreciation of fixed assets | ||||||||
| Amortization of intangible assets | ||||||||
| Amortization of loan costs | ||||||||
| Amortization of debt and warrant discount and issuance costs | ||||||||
| Impairment of goodwill | ||||||||
| Lease expense | ||||||||
| Write down of inventory | ||||||||
| Bad debt expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivables | ||||||||
| Inventories | ( | ) | ( | ) | ||||
| Advances to related parties | ( | ) | ||||||
| Other current assets | ( | ) | ||||||
| Right of use liability | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Accounts payable and accruals | ||||||||
| Deferred income | ( | ) | ||||||
| Other current liabilities | ( | ) | ( | ) | ||||
| Net Cash (Used in) Operating Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Net cash paid for acquisition | ( | ) | ( | ) | ||||
| Purchases of fixed assets | ( | ) | ( | ) | ||||
| Net Cash (Used in) Investing Activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from common stock warrants exercised | ||||||||
| Proceeds from working capital line of credit | ||||||||
| Proceeds from PPP loan | ||||||||
| Proceeds from convertible debt | ||||||||
| Repayments of working capital line of credit | ( | ) | ( | ) | ||||
| Principal payments of convertible debt | ( | ) | ||||||
| Repayments of related party notes payable | ( | ) | ( | ) | ||||
| Principal payments of long-term debt | ( | ) | ||||||
| Payment of loan costs | ( | ) | ||||||
| Net Cash Provided by Financing Activities | ||||||||
| Effect of Exchange Rate Changes on Cash | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH | ( | ) | ( | ) | ||||
| CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD | ||||||||
| CASH AND CASH EQUIVALENTS – END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES | ||||||||
| Operating lease assets recognized in exchange for operating lease liabilities | ||||||||
| Warrants issued for convertible debt | ||||||||
| Common stock issued for asset acquisition | ||||||||
| Common stock issued for partial settlement of note payable | ||||||||
| Series A preferred 8% dividend issued in common stock | ||||||||
| Preferred shares conversion to common stock | ||||||||
| Common stock issued for interest payment | ||||||||
| Common stock issued for acquisition | ||||||||
| Related party notes recognized from business acquisition | ||||||||
| Supplemental Disclosure of Cash Flow Information | ||||||||
| Cash paid for interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
| 7 |
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Company Overview
Blue Star Foods Corp., a Delaware corporation (“we”, “our”, the “Company”), is an international sustainable marine protein company based in Miami, Florida that imports, packages and sells refrigerated pasteurized crab meat, and other premium seafood products. The Company’s main operating business, John Keeler & Co., Inc. (“Keeler & Co.”) was incorporated in the State of Florida in May 1995. The Company’s 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 and Canada under several brand names such as Blue Star, Oceanica, Pacifika, Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh, and steelhead salmon produced under the brand name Little Cedar Farms for distribution in Canada.
On November 26, 2019, Keeler & Co., a wholly-owned direct subsidiary of the Company, entered into an Agreement and Plan of Merger and Reorganization (the “Coastal Merger Agreement”) with Coastal Pride Company, Inc., a South Carolina corporation, Coastal Pride Seafood, LLC, a Florida limited liability company and newly-formed, wholly-owned subsidiary of the Purchaser (the “Acquisition Subsidiary” and, upon the effective date of the Merger, the “Surviving Company” or “Coastal Pride”), and The Walter F. Lubkin, Jr. Irrevocable Trust dated January 8, 2003 (the “Trust”), Walter F. Lubkin III (“Lubkin III”), Tracy Lubkin Greco (“Greco”) and John C. Lubkin (“Lubkin”), constituting all of the shareholders of Coastal Pride Company, Inc. immediately prior to the Coastal Merger (collectively, the “Sellers”). Pursuant to the terms of the Coastal Merger Agreement, Coastal Pride Company, Inc. merged with and into the Acquisition Subsidiary, with the Acquisition Subsidiary being the surviving company (the “Coastal Merger”).
Coastal Pride is a seafood company, based in Beaufort, South Carolina, that imports pasteurized and fresh crabmeat sourced primarily from Mexico and Latin America and sells premium branded label crabmeat throughout North America.
On
April 27, 2021, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with TOBC, and Steve Atkinson
and Janet Atkinson (the “Sellers”), the owners of all of the capital stock of TOBC (the “TOBC Shares”), pursuant
to which the Company acquired all of the TOBC Shares from the Sellers for an aggregate purchase price of CAD$
On
June 24, 2021, the Purchase Agreement was amended (the “Amendment”), to increase the Purchase Price up to an aggregate of
CAD$
TOBC is a land-based recirculating aquaculture systems salmon farming operation, based in Nanaimo, British Columbia, Canada, which sells its steelhead salmon to distributors in Canada.
On
February 3, 2022, Coastal Pride entered into an asset purchase agreement with Gault Seafood, LLC, a South Carolina limited liability
company (“Gault Seafood”), and Robert J. Gault II, President of Gault Seafood (“Gault”) pursuant to which Coastal
Pride acquired all of the Seller’s right, title and interest in and to assets relating to Gault Seafood’s soft-shell crab
operations, including intellectual property, equipment, vehicles and other assets used in connection with the soft-shell crab business.
Coastal Pride did not assume any liabilities in connection with the acquisition. The purchase price for the assets consisted of a cash
payment in the amount of $
| 8 |
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 (“SEC”). Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) 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 results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The consolidated balance sheet as of December 31, 2021 has been derived from the Company’s annual financial statements that were audited by our 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 ended December 31, 2021 filed with the SEC on March 31, 2022 for a broader discussion of our business and the risks inherent in such business.
Advances to Suppliers and Related Party
In the normal course of business, the Company may advance payments to its suppliers, inclusive of Bacolod Blue Star Export Corp. (“Bacolod”), a related party based in the Philippines. 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 September 30, 2022, and December 31, 2021, the balance due from the related party for future shipments was approximately $
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, as such, we record revenue when our customer obtains control of the promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company’s source of revenue is from importing blue and red swimming crab meat primarily from Indonesia, the Philippines and China and distributing it in the United States and Canada under several brand names such as Blue Star, Oceanica, Pacifika, Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh, and steelhead salmon produced by TOBC under the brand name Little Cedar Farms for distribution in Canada. The Company sells primarily to food service distributors. The Company also sells its products to wholesalers, retail establishments and seafood distributors.
To determine revenue recognition for the arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer by receipt of purchase orders and confirmations sent by the Company which includes a required line of credit approval process, (2) identify the performance obligations in the contract which includes shipment of goods to the customer FOB shipping point or destination, (3) determine the transaction price which initiates with the purchase order received from the customer and confirmation sent by the Company and will include discounts and allowances by customer if any, (4) allocate the transaction price to the performance obligations in the contract which is the shipment of the goods to the customer and transaction price determined in step 3 above and (5) recognize revenue when (or as) the entity satisfies a performance obligation which is when the Company transfers control of the goods to the customers by shipment or delivery of the products.
| 9 |
The Company elected an accounting policy to treat shipping and handling activities as fulfillment activities. Consideration payable to a customer is recorded as a reduction of the arrangement’s transaction price, thereby reducing the amount of revenue recognized, unless the payment is for distinct goods or services received from the customer.
Inventories
Substantially all of the Company’s inventory consists of packaged crab meat located at a public cold storage facility and merchandise in transit from suppliers. The Company also has eggs and fish in process inventory from TOBC. The cost of inventory is primarily determined using the specific identification method for crab meat. Fish in process inventory is measured based on the estimated biomass of fish on hand. The Company has established a standard procedure to estimate the biomass of fish on hand using counting and sampling techniques. Inventory is valued at the lower of cost or net realizable value, cost being determined using the first-in, first-out method for crab meat and using various estimates and assumptions in regard to the calculation of the biomass, including expected yield, market value of the biomass, and estimated costs of completion.
Merchandise is purchased cost and freight shipping point and becomes the Company’s asset and liability upon leaving the suppliers’ warehouse.
The
Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value of inventory to the
lower of cost or net realizable value based on its assessment of market conditions, inventory turnover and current stock levels. The
Company recorded an inventory adjustment to reduce the carrying value of inventory to the lower of cost or net realizable value in the
amount of $
The Company’s inventory as of September 30, 2022 and December 31 2021 consists of:
| September 30, 2022 | December 31, 2021 | |||||||
| Inventory purchased for resale | $ | $ | ||||||
| Feeds and eggs processed | ||||||||
| In-transit inventory | ||||||||
| Inventory, net | $ | $ | ||||||
Lease Accounting
We account for our leases under ASC 842, Leases, which 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 that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard.
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 September 30, 2022. Our leases generally have terms that range from three years for equipment and five 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 lease. 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 consolidated balance sheet as of September 30, 2022.
| September 30, 2022 | ||||
| Assets | ||||
| Operating lease assets | $ | |||
| Liabilities | ||||
| Current | ||||
| Operating lease liabilities | $ | |||
| Noncurrent | ||||
| Operating lease liabilities | $ | |||
Supplemental cash flow information related to leases were as follows:
Nine Months Ended September 30, 2022 | ||||
| Cash paid for amounts included in the measurement of lease liabilities: | ||||
| Operating cash flows from operating leases | $ | |||
| ROU assets recognized in exchange for lease obligations: | ||||
| Operating leases | $ | |||
| 10 |
The table below presents the remaining lease term and discount rates for operating leases.
| September 30, 2022 | ||||
| Weighted-average remaining lease term | ||||
| Operating leases | ||||
| Weighted-average discount rate | ||||
| Operating leases | % | |||
Maturities of lease liabilities as of September 30, 2022 were as follows:
| Operating Leases | ||||
| 2022 (three months remaining) | ||||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| Thereafter | ||||
| Total lease payments | ||||
| Less: amount of lease payments representing interest | ( | ) | ||
| Present value of future minimum lease payments | $ | |||
| Less: current obligations under leases | $ | ( | ) | |
| Non-current obligations | $ | |||
Goodwill and Other Intangible Assets
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed, and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.
The
Company reviews its indefinite lived intangibles and goodwill for impairment annually or whenever events or circumstances indicate that
the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed
an assessment of indefinite lived intangibles and goodwill and recognized an impairment loss on goodwill of $
Long-lived Assets
The Company reviews long-lived assets, including finite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset’s useful life on an undiscounted basis. If the evaluation indicates that the carrying value of the asset may not be recoverable, the potential impairment is measured using fair value. Impairment losses for assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.
In
accordance with its policies, the Company performed an assessment of its finite-lived intangibles and recognized an impairment loss on
customer relationships intangible asset of $
| 11 |
Foreign Currency Exchange Rates Risk
We manage our exposure to fluctuations in foreign currency exchange rates through our normal operating activities. Our primary focus is to monitor our exposure to, and manage, the economic foreign currency exchange risks faced by our operations and realized when we exchange one currency for another. Our operations primarily utilize the U.S. dollar and Canadian dollar as their functional currencies. Movements in foreign currency exchange rates affect our financial statements.
Recently Adopted Accounting Pronouncements
ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. In addition, the FASB amended the derivative guidance for the “own stock” scope exception and certain aspects of the EPS guidance. The guidance is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company early adopted the ASU effective January 1, 2022 and applied the provisions of the ASU to the convertible note issued during the nine months ended September 30, 2022.
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 nine months ended September 30, 2022, the Company incurred a net loss of $
Note 4. Other Current Assets
Other
current assets totaled $
| 12 |
Note 5. Fixed Assets, Net
Fixed assets comprised the following:
| September 30, 2022 | December 31, 2021 | |||||||
| Computer equipment | $ | $ | ||||||
| RAS system | ||||||||
| Automobiles | ||||||||
| Leasehold improvements | ||||||||
| Total | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Fixed assets, net | $ | $ | ||||||
For
the nine months ended September 30, 2022 and 2021, depreciation expense totaled approximately $
Note 6. Intangible Assets, Net
The following table sets forth the components of the Company’s intangible assets as of September 30, 2022:
Amortization Period (Years) | Cost | Accumulated Amortization | Net Book Value | |||||||||||||
| Intangible Assets Subject to amortization | ||||||||||||||||
| Trademarks – Coastal Pride | $ | $ | ( | ) | $ | |||||||||||
| Trademarks – TOBC | ( | ) | ||||||||||||||
| Customer Relationships – Coastal Pride | ( | ) | ||||||||||||||
| Customer Relationships – TOBC | ( | ) | ||||||||||||||
| Non-Compete Agreements – Coastal Pride | ( | ) | ||||||||||||||
| Non-Compete Agreements – TOBC | ( | ) | ||||||||||||||
| Total | $ | $ | ( | ) | $ | |||||||||||
The aggregate amortization remaining on the intangible assets as of September 30, 2022 is as follows:
| Intangible Amortization | ||||
| 2022 (3 months remaining) | $ | |||
| 2023 | $ | |||
| 2024 | $ | |||
| 2025 | $ | |||
| 2026 | $ | |||
| Thereafter | $ | |||
Note 7. Debt
Working Capital Line of Credit
On
March 31, 2021, Keeler & Co. and Coastal Pride entered into a loan and security agreement (“Loan Agreement”) with Lighthouse
Financial Corp., a North Carolina corporation (“Lighthouse”) pursuant to the terms of the Loan Agreement, Lighthouse made
available to Keeler & Co. and Coastal Pride (together, the “Borrowers”) a $
| 13 |
The
line of credit is secured by a first priority security interest on all the assets of each Borrower. Pursuant to the terms of a guaranty
agreement, the Company guaranteed the obligations of the Borrowers under the note and John Keeler, Executive Chairman and Chief Executive
Officer of the Company, provided a personal guaranty of up to $
First West Credit Union CEBA Loan
On
June 24, 2021, the Company assumed a commercial term loan with First West Credit Union Canada Emergency Business Account (“CEBA”)
in the principal amount of CAD$
John Keeler Promissory Notes – Subordinated
The
Company had unsecured promissory notes outstanding to John Keeler of approximately $
Walter Lubkin Jr. Note – Subordinated
On
November 26, 2019, the Company issued a five-year unsecured promissory note in the principal amount of $
On
October 8, 2021, $
On
February 1, 2022, $
On
April 28, 2022, $
| 14 |
On
August 16, 2022, $
Interest
expense for the Walter Lubkin Jr. note totaled approximately $
Walter Lubkin III Convertible Note – Subordinated
On
November 26, 2019, the Company issued a thirty-nine-month unsecured promissory note in the principal amount of $
On
October 8, 2021, $
On
February 1, 2022, $
On
April 28, 2022, $
On
August 16, 2022, $
Interest
expense for the Walter Lubkin III note totaled approximately $
Tracy Greco Convertible Note – Subordinated
On
November 26, 2019, the Company issued a thirty-nine-month unsecured promissory note in the principal amount of $
On
October 8, 2021, $
On
February 1, 2022, $
On
April 28, 2022, $
On
August 16, 2022, $
Interest
expense for the Tracy Greco note totaled approximately $
| 15 |
John Lubkin Convertible Note – Subordinated
On
November 26, 2019, the Company issued a thirty-nine-month unsecured promissory note in the principal amount of $
On
October 8, 2021, $
On
February 1, 2022, $
On
April 28, 2022, $
On
August 16, 2022, $
Interest
expense for the John Lubkin note totaled approximately $
Lind Global Fund II LP investment
On
January 24, 2022, the Company entered into a securities purchase agreement with Lind Global Fund II LP, a Delaware limited partnership
(“Lind”), pursuant to which the Company issued Lind a secured, two-year, interest free convertible promissory note in the
principal amount of $
In connection with the issuance of the note, the Company granted Lind a first priority security interest and lien on all of its assets, including a pledge on its shares in John Keeler & Co. Inc., its wholly-owned subsidiary, pursuant to a security agreement and a stock pledge agreement with Lind, dated January 24, 2022. Each subsidiary of the Company also granted a second priority security interest in all of its respective assets.
The note is mandatorily payable prior to maturity if the Company issues any preferred stock (with certain exceptions described in the note) or, if the Company or its subsidiaries issues any indebtedness other than certain amounts under the current line of credit facility with Lighthouse. The Company also agreed not to issue or sell any securities with a conversion, exercise or other price based on a discount to the trading prices of the Company’s stock or to grant the right to receive additional securities based on future transactions of the Company on terms more favorable than those granted to Lind, with certain exceptions.
| 16 |
If
the Company fails to maintain the listing and trading of its common stock, the note will become due and payable and Lind may convert
all or a portion of the outstanding principal at the lower of the then current conversion price and
If
the Company engages in capital raising transactions, Lind has the right to purchase up to
The
note is convertible into common stock at $
Upon
an event of default as described in the note, the note will become immediately due and payable at a default interest rate of
During
the quarter ended September 30, 2022, the Company made principal payments on the note totaling $
Note 8. Business Combination
Acquisition of Taste of BC Aquafarms
On
June 24, 2021, the Company consummated the acquisition of TOBC and TOBC became a wholly owned subsidiary of the Company. The acquisition
was accounted for as a business combination under the provisions of ASC 805. The aggregate purchase price of CAD$
The
transaction costs incurred in connection with the acquisition of TOBC amounted to $
| 17 |
Fair Value of Consideration Transferred and Recording of Assets Acquired
The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed.
| Consideration Paid: | ||||
| Cash | $ | |||
| Common stock, shares of common stock of the Company | ||||
| Promissory notes to Sellers | ||||
| Contingent consideration - Common stock, shares of common stock of the Company in escrow | ||||
| Fair value of total consideration | $ | |||
| Purchase Price Allocation: | ||||
| Tangible assets acquired | $ | |||
| Trademarks | ||||
| Customer relationships | ||||
| Non-compete agreements | ||||
| Goodwill | ||||
| Liabilities assumed | ( | ) | ||
| Fair market value of net assets acquired | $ |
In determining the fair value of the common stock issued, the Company considered the value of the stock as estimated by the Company at the time of closing which was determined to be $, based on the Company’s private placement offering price.
Liabilities
assumed included three mortgage loans of approximately CAD$
Unaudited Pro Forma Information
The following unaudited pro forma information assumes the business acquisition occurred on January 1, 2021. Depreciation and amortization have been included in the calculation of the below pro forma information based upon the actual acquisition costs.
| Three Months Ended September 30, 2021 | Nine Months Ended September 30, 2021 | |||||||
| Revenue | $ | $ | ||||||
| Net loss attributable to common shareholders | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per share | $ | ( | ) | $ | ( | ) | ||
The information included in the pro forma amounts is derived from historical information obtained from the Sellers of the business.
| 18 |
Note 9. Stockholders’ Equity
On
July 21, 2021, the Company entered into a consulting agreement as amended on November 10, 2021, with Intelligent Investments I, LLC (“Intelligent”).
In consideration for consulting services, the Company agreed to issue Intelligent a total of shares of common stock with a fair
value of $
On
January 24, 2022, the Company issued shares of common stock to an investor upon the exercise of warrants for total proceeds of
$
On
February 3, 2022, the Company issued shares of common stock with a fair value of $
On
March 31, 2022, the Company issued shares of common stock to Intelligent Investments I LLC, with a fair value of $
On
March 31, 2022, the Company issued shares of common stock with a fair value of $
On
April 1, 2022, the Company issued shares of common stock with a fair value of $
On
April 4, 2022, the Company issued shares of common stock with a fair value of $
On
April 5, 2022, the Company issued an aggregate of shares of common stock with a fair value of $
On
May 1, 2022, the Company issued shares of common stock with a fair value of $
On
June 1, 2022, the Company issued shares of common stock with a fair value of $
On
June 3, 2022, the Company issued shares of common stock with a fair value of $
On
June 30, 2022, the Company issued shares of common stock to Intelligent Investments I LLC, with a fair value of $
On
July 1, 2022, the Company issued shares of common stock with a fair value of $
On
August 1, 2022, the Company issued shares of common stock with a fair value of $
On
August 25, 2022, the Company issued shares of common stock to Lind, with a fair value of $
On
September 1, 2022, the Company issued shares of common stock with a fair value of $
On
September 26, 2022, the Company issued shares of common stock to Lind, with a fair value of $
| 19 |
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual | Aggregate Intrinsic Value | |||||||||||||
| Outstanding – December 31, 2021 | $ | |||||||||||||||
| Exercisable – December 31, 2021 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Forfeited | ( | ) | $ | |||||||||||||
| Vested | ||||||||||||||||
| Outstanding – September 30, 2022 | $ | |||||||||||||||
| Exercisable – September 30, 2022 | $ | $ | ||||||||||||||
On April 20, 2022, the Company’s existing directors and two newly appointed directors each entered into a one-year director service agreement with the Company, which will automatically renew for successive one-year terms unless either party notifies the other of its desire not to renew the agreement at least 30 days prior to the end of the then current term, or unless earlier terminated in accordance with the terms of the agreement. As compensation for serving on the Board of Directors, each director will be entitled to a $ annual stock grant and for serving on a Committee of the Board, an additional $ annual stock grant, both based upon the closing sales price of the common stock on the last trading day of the calendar year. Each director who serves as chairman of the Audit Committee, Compensation Committee and Nominating and Governance Committee will be entitled to an additional $, $ and $ annual stock grant, respectively. As additional consideration for such Board service, on April 20, 2022, to purchase shares of the Company’s common stock at an exercise price of $ per share, which shares will vest in equal quarterly installments of shares during the term of the option. The agreement also includes customary confidentiality provisions and one-year non-competition and non-solicitation provisions.
On September 16, 2022, the Company granted an employee a -year option to purchase shares of common stock at an exercise price of $ which vests in equal monthly installments during the term of the option.
Under
the Black-Scholes option pricing model, the fair value of the
and
options granted during the nine months ended September 30, 2022 is estimated at $
For the nine months ended September 30, 2022, the Company recognized $ of compensation expense for vested stock options issued to directors, contractors and employees during 2019 to 2021 and accrued a portion of the 2022 stock grants to directors and officers. The non-vested options outstanding are as of September 30, 2022.
For the nine months ended September 30, 2022, the Company determined that the -year option to purchase shares of common stock at an exercise price of $ granted to an employee of TOBC in 2021 will not meet the vesting requirements pursuant to the agreement and accordingly, reversed the expense recorded of approximately $ as of September 30, 2022 and $ as of December 31, 2021.
| 20 |
Note 11. Warrants
The following table represents warrant activity for the nine months ended September 30, 2022:
Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual | Aggregate Intrinsic Value | |||||||||||||
| Outstanding – December 31, 2021 | $ | |||||||||||||||
| Exercisable – December 31, 2021 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Exercised | ( | ) | $ | |||||||||||||
| Forfeited or Expired | $ | |||||||||||||||
| Outstanding – September 30, 2022 | $ | |||||||||||||||
| Exercisable – September 30, 2022 | $ | $ | ||||||||||||||
On
January 24, 2022, in connection with the issuance of the $
During
the nine months ended September 30, 2022, the Company issued
Note 12. Commitment and Contingencies
Office lease
The
Company leased its Miami office and warehouse facility from JK Real Estate, a related party through common family beneficial ownership.
The lease which had a
Coastal
Pride leases approximately
On
February 3, 2022, in connection with the acquisition of certain assets of Gault, the Company entered into a one-year lease agreement
for
TOBC’s
facilities are on land leased to TOBC for approximately $
| 21 |
Rental
and equipment lease expenses amounted to approximately $
Legal
The
Company has reached a settlement agreement with a former employee. Although the agreement is not finalized, the Company has reserved
$
Note 13. COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared that the novel coronavirus (COVID-19) had become a pandemic, and on March 13, 2020, the U.S. President declared a National Emergency concerning the disease. Additionally, in March 2020, state governments in the Company’s geographic operating area began instituting preventative shut down measures in order to combat the novel coronavirus pandemic. The coronavirus and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the economies and financial markets of the geographical areas in which the Company operates. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted to amongst other provisions, provide emergency assistance for individuals, families and businesses affected by the novel coronavirus pandemic for 2020 and into 2021. The Company’s business not being deemed essential resulted in decreased financial performance that may not be indicative of future financial results. Government-mandated closures of businesses and shipping delays have affected our sales and inventory purchases. The Company continues to face uncertainty and increased risks concerning its employees, customers, supply chain and government regulation. In 2022, the Company’s sales and supply continue to be adversely affected due to COVID-19 and plans continue to be developed to ensure a prompt response is given to address the effects of the pandemic.
Note 14. Subsequent Events
On
October 1, 2022, the Company issued shares of common stock with a fair value of $
On
October 24, 2022, the Company paid Lind $
On
November 1, 2022, the Company issued shares of common stock with a fair value of $
| 22 |
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 the financial statements and the related notes thereto. The management’s discussion and analysis contain 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 on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 31, 2022, 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 are an international seafood company that imports, packages and sells refrigerated pasteurized crab meat, and other premium seafood products. Our current source of revenue is from importing blue and red swimming crab meat primarily from Indonesia, the Philippines and China and distributing it in the United States and Canada under several brand names such as Blue Star, Oceanica, Pacifika, Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh, and steelhead salmon produced under the brand name Little Cedar Farms for distribution in Canada. The crab meat which we import is processed in 13 plants throughout Southeast Asia. Our suppliers are primarily via co-packing relationships, including two affiliated suppliers. We sell primarily to food service distributors. We also sell our products to wholesalers, retail establishments and seafood distributors.
COVID-19
The current COVID-19 pandemic has adversely affected our business operations, including disruptions and restrictions on our ability to travel or to distribute our seafood products, as well as temporary closures of our facilities. Any such disruption or delay may impact our sales and operating results. In addition, COVID-19 has resulted in a widespread health crisis that adversely affected the economies and financial markets of many other countries. As a result of COVID-19, the Company has experienced a decrease in revenue for the nine months ended September 30, 2022.
As a result of the business interruption experienced to date, management has taken steps to reduce expenses across all areas of its operations, including payroll, marketing, sales and warehousing expenses. The extent to which we are affected by COVID-19 will largely depend on future developments and restrictions which may disrupt interactions with customers, suppliers, staff and advisors which cannot be accurately predicted, including the duration and scope of the pandemic, governmental and business responses to the pandemic and the impact on the global economy, our customers’ demand for our products, and our ability to provide our products. We continue to monitor the effects of the pandemic on our business.
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 September 30, 2022 and 2021
Net Revenue. Revenue for the three months ended September 30, 2022 decreased 34.8% to $2,429,195 as compared to $3,726,704 for the three months ended September 30, 2021 as a result of selling at a lower price attributable to market price decrease in crab meat.
Cost of Goods Sold. Cost of goods sold for the three months ended September 30, 2022 increased to $3,973,656 as compared to $3,056,461 for the three months ended September 30, 2021. This increase is attributable to price increases in the cost of goods and the adjustment to write down our inventory to net realizable value.
| 23 |
Gross Profit (Loss). Gross (loss) for the three months ended September 30, 2022 increased to $1,544,461 as compared to gross profit of $670,243 in the three months ended September 30, 2021. This increase in losses is attributable to higher cost of goods sold.
Commissions Expense. Commissions expense decreased to $2,674 for the three months ended September 30, 2022 from $23,932 for the three months ended September 30, 2021. This decrease was due to lower commissionable revenues for the three months ended September 30, 2022.
Salaries and Wages Expense. Salaries and wages expense decreased to $352,178 for the three months ended September 30, 2022 as compared to $419,445 for the three months ended September 30, 2021. This decrease is mainly attributable to the reversal of an employee’s stock compensation expense.
Depreciation and Amortization. Depreciation and amortization expense increased to $151,568 for the three months ended September 30, 2022 as compared to $143,199 for the three months ended September 30, 2021. This increase is attributable to higher depreciation due to the acquisition of TOBC and soft-shell crab operations.
Impairment Loss. Impairment loss increased to $748,997 for the three months ended September 30, 2022 as compared to $0 for the three months ended September 30, 2021. This increase is attributable to the impairment recognized on TOBC for the three months ended September 30, 2022.
Other Operating Expense. Other operating expense decreased to $566,977 for the three months ended September 30, 2022 from $575,824 for the three months ended September 30, 2021. This decrease is mainly attributable to small miscellaneous operating expenses for the three months ended September 30, 2022.
Other Income. Other income decreased for the three months ended September 30, 2022 to $22,229 from $385,855 for the three months ended September 30, 2021. This decrease is mainly attributable to the payroll protection program loan forgiveness granted in 2021.
Loss on Settlement of Debt. Loss on settlement of debt increased to $57,085 for the three months ended September 30, 2022 from $0 for the three months ended September 30, 2021. The increase is attributable to the additional payments made to Lind by the issuance of common stock due to a decrease in the Repayment Share Price.
Interest Expense. Interest expense increased to $336,378 for the three months ended September 30, 2022 from $55,486 for the three months ended September 30, 2021. The increase is attributable to the amortization of Lind convertible debt discount.
Net Loss. Net loss was $3,738,089 for the three months ended September 30, 2022 as compared to $161,788 for the three months ended September 30, 2021. The increase in net loss is primarily attributable to decreases in gross profit and to lower sales prices and higher cost of sales.
Nine months ended September 30, 2022 and 2021
Net Revenue. Revenue for the nine months ended September 30, 2022 increased 28.4% to $10,712,363 as compared to $8,341,984 for the nine months ended September 30, 2021 as a result of sales of our new TOBC and soft-shell crab operations.
Cost of Goods Sold. Cost of goods sold for the nine months ended September 30, 2022 increased to $11,431,331 as compared to $6,799,063 for the nine months ended September 30, 2021. This increase is attributable to price increases of our products and an inventory adjustment.
Gross Profit (Loss). Gross (loss) for the nine months ended September 30, 2022 increased to $718,968 as compared to gross profit of $1,542,921 in the nine months ended September 30, 2021. This increase in losses is attributable to higher market prices at the time of purchase and higher cost of goods sold including an inventory adjustment.
Commissions Expense. Commissions expense decreased to $24,051 for the nine months ended September 30, 2022 from $42,332 for the nine months ended September 30, 2021. This decrease was due to lower commissionable revenues for the nine months ended September 30, 2022.
| 24 |
Salaries and Wages Expense. Salaries and wages expense increased to $1,498,703 for the nine months ended September 30, 2022 as compared to $1,028,900 for the nine months ended September 30, 2021. This increase is mainly attributable to the acquisition of TOBC and soft-shell crab operations.
Depreciation and Amortization. Depreciation and amortization expense increased to $426,364 for the nine months ended September 30, 2022 as compared to $243,189 for the nine months ended September 30, 2021. The increase is attributable to higher depreciation due to the acquisition of TOBC and soft-shell crab operations.
Impairment Loss. Impairment loss increased to $748,997 for the nine months ended September 30, 2022 as compared to $0 for the nine months ended September 30, 2021. This increase is attributable to the impairment recognized on TOBC for the nine months ended September 30, 2022.
Other Operating Expense. Other operating expense increased to $1,930,753 for the nine months ended September 30, 2022 from $1,531,807 for the nine months ended September 30, 2021. This increase is mainly attributable to legal and professional fees and stock compensation expense associated with the acquisition of the soft-shell crab operations.
Other Income. Other income decreased for the nine months ended September 30, 2022 to $68,899 from $491,045 for the nine months ended September 30, 2021. This decrease is mainly attributable to the payroll protection program loan forgiveness granted in 2021.
Loss on Settlement of Debt. Loss on settlement of debt increased to $57,085 for the nine months ended September 30, 2022 from $0 for the nine months ended September 30, 2021. The increase is attributable to the additional payments made to Lind by the issuance of common stock due to a decrease in the Repayment Share Price.
Interest Expense. Interest expense increased to $893,146 for the nine months ended September 30, 2022 from $264,757 for the nine months ended September 30, 2021. This increase is attributable to the amortization of Lind convertible debt discount.
Net Loss. Net loss was $6,229,168 for the nine months ended September 30, 2022 as compared to $1,077,019 for the nine months ended September 30, 2021. This increase in net loss is primarily attributable to increases in salaries and wages, decreases in gross profit and other expenses in connection with the acquisition of the soft-shell crab operations and amortization of Lind convertible debt discount.
Liquidity and Capital Resources
The Company had cash of $238,183 as of September 30, 2022. At September 30, 2022, the Company had a working capital surplus of $562,756, including $893,000 in stockholder loans that are subordinated to its working capital line of credit, and the Company’s primary sources of liquidity consisted of inventory of $6,118,720 and accounts receivable of $772,187.
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.
The COVID-19 pandemic has caused significant disruptions to the global financial markets. The full impact of the COVID-19 outbreak continues to evolve, is highly uncertain and subject to change. The Company continues to estimate the effects of the COVID-19 outbreak on its operations and financial. While significant uncertainty remains, the Company believes that the COVID-19 outbreak will continue to have a negative impact on the ability to raise financing and access capital.
Cash (Used in) Operating Activities. Cash used in operating activities during the nine months ended September 30, 2022 was $4,095,243 as compared to cash used in operating activities of $1,005,549 for the nine months ended September 30, 2021. The increase is attributable to the increase in inventory of $4,514,191 netted against the decreases in deferred income of $51,359, accounts receivable netted against other current assets of $2,106,250 and payables netted against other current liabilities of $1,600,363 for the nine months ended September 30, 2022 compared with the nine months ended September 30, 2021.
Cash (Used in) Investing Activities. Cash used in investing activities for the nine months ended September 30, 2022 was $549,337 as compared to cash used in investing activities of $841,643 for the nine months ended September 30, 2021. The decrease was mainly attributable to the acquisition of the soft-shell crab operation for the nine months ended September 30, 2022 netted against the TOBC acquisition completed during the nine months ended September 30, 2021.
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Cash Provided by Financing Activities. Cash provided by financing activities for the nine months ended September 30, 2022 was $3,732,734 as compared to cash provided by financing activities of $1,666,141 for the nine months ended September 30, 2021. The increase is mainly attributable to convertible debt net proceeds of $4,762,855.
Working Capital Line of Credit
On March 31, 2021, Keeler & Co. and Coastal Pride entered into a loan and security agreement (“Loan Agreement”) with Lighthouse Financial Corp., a North Carolina corporation (“Lighthouse”) pursuant to the terms of the Loan Agreement, Lighthouse made available to Keeler & Co. and Coastal Pride (together, the “Borrowers”) a $5,000,000 revolving line of credit for a term of thirty-six months, renewable annually for one-year periods thereafter. Amounts due under the line of credit are represented by a revolving credit note issued to Lighthouse by the Borrowers. As of September 30, 2022, the Company was in compliance with all financial covenants under the Loan Agreement, except for the requirement to maintain a greater than $50,000 cash flow in the months of July, August, and September 2022. Lighthouse has notified the Borrowers as to this default but has elected not to exercise its rights and remedies under the loan documents with the Borrowers.
The advance rate of the revolving line of credit is 85% with respect to eligible accounts receivable and the lower of 60% of the Borrowers’ eligible inventory, or 80% of the net orderly liquidation value, subject to an inventory sublimit of $2,500,000. The inventory portion of the loan will never exceed 50% of the outstanding balance. Interest on the line of credit is the prime rate (with a floor of 3.25%), plus 3.75%. The Borrowers paid Lighthouse a facility fee of $50,000 in three instalments of $16,667 on March, April and May 2021 and paid an additional facility fee of $25,000 on March 31, 2022, which will continue to be required on each anniversary of March 31, 2021. In an effort to increase imports to meet customer demand, on January 14, 2022, the maximum inventory advance under the line of credit was adjusted from 50% to 70% until June 30, 2022, 65% to July 31, 2022, 60% to August 31, 2022 and 55% to September 30, 2022 at a monthly fee of 0.25% on the portion of the loan in excess of the 50% advance. On July 29, 2022, the loan and security agreement was further amended to set the annual interest rate on the outstanding principal amount at 4.75% above the prime rate and to reduce the monthly required cash flow requirements beginning July 31, 2022. The amendment also updated the maximum inventory advance under the line of credit to 60% from August 1, 2022 through December 31, 2022 and 50% thereafter. As of September 30, 2022, the interest rate was 14.0% which includes a default rate of 3%.
The line of credit is secured by a first priority security interest on all the assets of each Borrower. Pursuant to the terms of a guaranty agreement, the Company guaranteed the obligations of the Borrowers under the note and John Keeler, Executive Chairman and Chief Executive Officer of the Company, provided a personal guaranty of up to $1,000,000 to Lighthouse.
The outstanding balance owed to Lighthouse as of September 30, 2022 was $1,862,301.
John Keeler Promissory Notes – Subordinated
From January 2006 through May 2017, Keeler & Co issued 6% demand promissory notes in the aggregate principal amount of $2,910,000 to John Keeler, our Chief Executive Officer and Executive Chairman. As of September 30, 2022, approximately $893,000 of principal remains outstanding and approximately $41,700 of interest was paid under the notes during the nine months ended September 30, 2022. These notes are subordinated to the Lighthouse note. After satisfaction of the terms of the subordination, the Company may 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. The Company made principal payments of $67,000 during the nine months ended September 30, 2022.
Underwritten Offering
On November 2, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Newbridge Securities Corporation (“Newbridge”), as representative of the underwriters listed therein (the “Underwriters”), pursuant to which the Company agreed to sell to the Underwriters in a firm commitment underwritten public offering (the “Offering”) an aggregate of 800,000 shares of the Company’s common stock, at a public offering price of $5.00 per share. In addition, the Underwriters were granted an over-allotment option (the “Over-allotment Option”) for a period of 45 days to purchase up to an additional 120,000 shares of common stock. The Offering closed on November 5, 2021 and the common stock began trading on the NASDAQ Capital Market under the symbol “BSFC” on November 3, 2021. The Over-allotment Option was not exercised by the Underwriters.
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The net proceeds to the Company from the Offering, after deducting the underwriting discount, the underwriters’ fees and expenses and the Company’s estimated Offering expenses, were approximately $3,600,000. The Company is using the net proceeds from the Offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. The Company may also use a portion of the net proceeds to acquire or make investments in businesses, products, and offerings, although the Company does not have agreements or commitments for any material acquisitions or investments at this time.
In addition, pursuant to the terms of the Underwriting Agreement and related “lock-up” agreements, each director, executive officer, and beneficial owners of over 10% of the Company’s common stock (for a period of 180 days after the date of the final prospectus relating to the Offering), have agreed, subject to customary exceptions, not to sell, transfer or otherwise dispose of securities of the Company, without the prior written consent of Newbridge.
On November 5, 2021, in connection with the Offering, the Company issued a warrant to purchase an aggregate of 56,000 shares of common stock at an exercise price of $5.00 per share to Newbridge. Such warrant expires on November 11, 2024.
Lind Global Fund II LP investment
On January 24, 2022, we entered into a securities purchase agreement with Lind, a Delaware limited partnership (“Lind”), pursuant to which the Company issued Lind a secured, two-year, interest free convertible promissory note in the principal amount of $5,750,000 and a five-year warrant to purchase 1,000,000 shares of common stock at an exercise price of $4.50 per share, subject to customary adjustments. The warrant provides for cashless exercise and for full ratchet anti-dilution if the Company issues securities at less than $4.50 per share. In connection with the issuance of the note and the warrant, the Company paid a $150,000 commitment fee to Lind and approximately $87,000 of debt issuance costs.
The outstanding principal under the note is payable commencing July 24, 2022, in 18 consecutive monthly installments of $333,333, at the Company’s option, in cash or shares of common stock at a price (the “Repayment Share Price”) based on 90% of the five lowest volume weighted average prices (“VWAP”) during the 20-days prior to the payment date with a floor price of $1.50 per share (the “Floor Price”), or a combination of cash and stock provided that if at any time the Repayment Share Price is deemed to be the Floor Price, then in addition to shares, the Company will pay Lind an additional amount in cash as determined pursuant to a formula contained in the note.
In connection with the issuance of the note, the Company granted Lind a first priority security interest and lien on all of its assets, including a pledge on its shares in John Keeler & Co. Inc., its wholly-owned subsidiary, pursuant to a security agreement and a stock pledge agreement with Lind, dated January 24, 2022. Each subsidiary of the Company also granted a second priority security interest in all of its respective assets.
The note is mandatorily payable prior to maturity if the Company issues any preferred stock (with certain exceptions described in the note) or, if the Company or its subsidiaries issues any indebtedness other than certain amounts under the current line of credit facility with Lighthouse. The Company also agreed not to issue or sell any securities with a conversion, exercise or other price based on a discount to the trading prices of the Company’s stock or to grant the right to receive additional securities based on future transactions of the Company on terms more favorable than those granted to Lind, with certain exceptions.
If the Company fails to maintain the listing and trading of its common stock, the note will become due and payable and Lind may convert all or a portion of the outstanding principal at the lower of the then current conversion price and 80% of the average of the 3-day VWAP during the 20 days prior to delivery of the conversion notice.
If the Company engages in capital raising transactions, Lind has the right to purchase up to 10% of the new securities.
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The note is convertible into common stock at $5.00 per share, subject to certain adjustments, at any time after the earlier of six months from issuance or the date the registration statement is effective; provided that no such conversion may be made that would result in beneficial ownership by Lind and its affiliates of more than 4.99% of the Company’s outstanding shares of common stock. If shares are issued by the Company at less than the conversion price, the conversion price will be reduced to such price.
Upon a change of control of the Company, as defined in the note, Lind has the right to require the Company to prepay 10% of the outstanding principal amount of the note. The Company may prepay the outstanding principal amount of the note, provided Lind may convert up to 25% of the principal amount of the note at a price per share equal to the lesser of the Repayment Share Price or the conversion price. The Note contains certain negative covenants, including restricting the Company from certain distributions, stock repurchases, borrowing, sale of assets, loans and exchange offers.
Upon an event of default as described in the note, the note will become immediately due and payable at a default interest rate of 125% of the then outstanding principal amount. Upon a default, all or a portion of the outstanding principal amount may be converted into shares of common stock by Lind at the lower of the conversion price and 80% of the average of the three lowest daily VWAPs.
During the quarter ended September 30, 2022, the Company made principal payments on the note totaling $999,999 through the issuance of an aggregate of 444,444 shares of common stock and cash payments of $609,307 pursuant to the terms of the note.
Off-Balance Sheet Arrangements
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 September 30, 2022, 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.
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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:
● ineffective controls over the Company’s financial close and 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
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 create a position to segregate duties consistent with control objectives and hire personnel resources with technical accounting expertise within the accounting function; and
● We plan to create an internal control framework that will address financial close and reporting process, among other procedures.
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 material pending legal proceedings to which we are a party or in which any director, officer or affiliate of ours, any owner of record or beneficially of more than 5% of any class of our voting securities, or security holder is a party adverse to us or has a material interest adverse to us.
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 July 1, 2022, the Company issued 4,839 shares of common stock to the designee of Clear Think Capital for consulting services provided to the Company.
On August 1, 2022, the Company issued 4,615 shares of common stock to the designee of Clear Think Capital for consulting services provided to the Company.
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On August 25, 2022, the Company issued 222,222 shares of common stock to Lind as partial payment of a convertible promissory note.
On September 1, 2022, the Company issued 5,217 shares of common stock to the designee of Clear Think Capital for consulting services provided to the Company.
On September 26, 2022, the Company issued 222,222 shares of common stock to Lind as partial payment of a convertible promissory note
The above issuances did not involve any underwriters, underwriting discounts or commissions, or any public offering and we believe are exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
| 30 |
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: November 14, 2022 | By: | /s/ John Keeler |
| Name: | John Keeler | |
| Title: | Executive Chairman and Chief Executive Officer (Principal Executive Officer) | |
| Dated: November 14, 2022 | By: | /s/ Silvia Alana |
| Name: | Silvia Alana | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) | |
| 31 |
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE 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: November 14, 2022 | /s/ John Keeler |
| John Keeler | |
Executive Chairman and Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF 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, Silvia Alana, 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: November 14, 2022 | /s/ Silvia Alana |
| Silvia Alana | |
Chief Financial Officer (Principal Financial and Accounting Officer) |
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 September 30, 2022, 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: November 14, 2022 | By: | /s/ John Keeler |
| Name: | John Keeler | |
| Title: | Executive Chairman and Chief Executive Officer | |
| (Principal Executive Officer) |
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 September 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Silvia Alana, Chief Financial 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: November 14, 2022 | By: | /s/ Silvia Alana |
| Name: | Silvia Alana | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Common stock, par value | $ 0.0001 | $ 0.0001 |
| Common stock, shares authorized | 100,000,000 | 100,000,000 |
| Common stock, shares issued | 25,522,727 | 24,671,318 |
| Common stock, shares outstanding | 25,522,727 | 24,671,318 |
| Series A 8% Cumulative Convertible Preferred Stock [Member] | ||
| Preferred stock dividend Percentage | 8.00% | 8.00% |
| Preferred stock, par value | $ 0.0001 | $ 0.0001 |
| Preferred stock, shares authorized | 10,000 | 10,000 |
| Preferred stock, shares issued | 0 | 0 |
| Preferred stock, shares outstanding | 0 | 0 |
Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Income Statement [Abstract] | ||||
| REVENUE, NET | $ 2,429,195 | $ 3,726,704 | $ 10,712,363 | $ 8,341,984 |
| COST OF REVENUE | 3,973,656 | 3,056,461 | 11,431,331 | 6,799,063 |
| GROSS PROFIT (LOSS) | (1,544,461) | 670,243 | (718,968) | 1,542,921 |
| COMMISSIONS | 2,674 | 23,932 | 24,051 | 42,332 |
| SALARIES AND WAGES | 352,178 | 419,445 | 1,498,703 | 1,028,900 |
| DEPRECIATION AND AMORTIZATION | 151,568 | 143,199 | 426,364 | 243,189 |
| IMPAIRMENT LOSS | 748,997 | 748,997 | ||
| OTHER OPERATING EXPENSES | 566,977 | 575,824 | 1,930,753 | 1,531,807 |
| LOSS FROM OPERATIONS | (3,366,855) | (492,157) | (5,347,836) | (1,303,307) |
| OTHER INCOME | 22,229 | 385,855 | 68,899 | 491,045 |
| LOSS ON SETTLEMENT OF DEBT | (57,085) | (57,085) | ||
| INTEREST EXPENSE | (336,378) | (55,486) | (893,146) | (264,757) |
| NET LOSS | (3,738,089) | (161,788) | (6,229,168) | (1,077,019) |
| DIVIDEND ON PREFERRED STOCK | 28,260 | |||
| NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS | (3,738,089) | (161,788) | (6,229,168) | (1,105,279) |
| COMPREHENSIVE INCOME (LOSS): | ||||
| CHANGE IN FOREIGN CURRENCY TRANSLATION ADJUSTMENT | (51,124) | 46,395 | (52,910) | 47,331 |
| COMPREHENSIVE INCOME (LOSS) | (51,124) | 46,395 | (52,910) | 47,331 |
| COMPREHENSIVE LOSS | $ (3,789,213) | $ (115,393) | $ (6,282,078) | $ (1,029,688) |
| Loss per common share: | ||||
| Net loss per common share - basis and diluted | $ (0.15) | $ (0.01) | $ (0.25) | $ (0.05) |
| Weighted average common shares outstanding - basic and diluted | 25,169,671 | 23,181,182 | 25,022,052 | 20,899,560 |
Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited) (Parenthetical) |
3 Months Ended |
|---|---|
Mar. 31, 2021 | |
| Statement of Stockholders' Equity [Abstract] | |
| Preferred stock dividend rate, percentage | 8.00% |
Company Overview |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Company Overview | Note 1. Company Overview
Blue Star Foods Corp., a Delaware corporation (“we”, “our”, the “Company”), is an international sustainable marine protein company based in Miami, Florida that imports, packages and sells refrigerated pasteurized crab meat, and other premium seafood products. The Company’s main operating business, John Keeler & Co., Inc. (“Keeler & Co.”) was incorporated in the State of Florida in May 1995. The Company’s 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 and Canada under several brand names such as Blue Star, Oceanica, Pacifika, Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh, and steelhead salmon produced under the brand name Little Cedar Farms for distribution in Canada.
On November 26, 2019, Keeler & Co., a wholly-owned direct subsidiary of the Company, entered into an Agreement and Plan of Merger and Reorganization (the “Coastal Merger Agreement”) with Coastal Pride Company, Inc., a South Carolina corporation, Coastal Pride Seafood, LLC, a Florida limited liability company and newly-formed, wholly-owned subsidiary of the Purchaser (the “Acquisition Subsidiary” and, upon the effective date of the Merger, the “Surviving Company” or “Coastal Pride”), and The Walter F. Lubkin, Jr. Irrevocable Trust dated January 8, 2003 (the “Trust”), Walter F. Lubkin III (“Lubkin III”), Tracy Lubkin Greco (“Greco”) and John C. Lubkin (“Lubkin”), constituting all of the shareholders of Coastal Pride Company, Inc. immediately prior to the Coastal Merger (collectively, the “Sellers”). Pursuant to the terms of the Coastal Merger Agreement, Coastal Pride Company, Inc. merged with and into the Acquisition Subsidiary, with the Acquisition Subsidiary being the surviving company (the “Coastal Merger”).
Coastal Pride is a seafood company, based in Beaufort, South Carolina, that imports pasteurized and fresh crabmeat sourced primarily from Mexico and Latin America and sells premium branded label crabmeat throughout North America.
On April 27, 2021, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with TOBC, and Steve Atkinson and Janet Atkinson (the “Sellers”), the owners of all of the capital stock of TOBC (the “TOBC Shares”), pursuant to which the Company acquired all of the TOBC Shares from the Sellers for an aggregate purchase price of CAD$4,000,000 for: (i) an aggregate of CAD$1,000,000 in cash (with each Seller receiving a pro rata amount based upon the total number of TOBC Shares held by such Seller); (ii) promissory notes in the aggregate principal amount of CAD$200,000 (the “Notes”) with the principal amount of each Seller’s Note based on such Seller’s pro rata portion of the TOBC Shares); and (iii) shares of the Company’s common stock (representing CAD$2,800,000 of shares based on USD$ per share) with each Seller receiving a pro rata portion of such shares based upon the total number of TOBC Shares held by such Seller.
On June 24, 2021, the Purchase Agreement was amended (the “Amendment”), to increase the Purchase Price up to an aggregate of CAD$5,000,000 and the acquisition closed. Pursuant to the Amendment, on August 3, 2021, an aggregate of shares of the Company’s common stock (representing CAD$1,000,000 of additional shares calculated at USD$2.30 per share) was put in escrow until the 24-month anniversary of the closing. If, within 24 months of the closing, TOBC has cumulative revenue of at least CAD$1,300,000, the Sellers will receive all of the escrowed shares. If, as of the 24-month anniversary of the closing, TOBC has cumulative revenue of less than CAD$1,300,000, the Sellers will receive a prorated number of the escrowed shares based on the actual cumulative revenue of TOBC as of such date.
TOBC is a land-based recirculating aquaculture systems salmon farming operation, based in Nanaimo, British Columbia, Canada, which sells its steelhead salmon to distributors in Canada.
On February 3, 2022, Coastal Pride entered into an asset purchase agreement with Gault Seafood, LLC, a South Carolina limited liability company (“Gault Seafood”), and Robert J. Gault II, President of Gault Seafood (“Gault”) pursuant to which Coastal Pride acquired all of the Seller’s right, title and interest in and to assets relating to Gault Seafood’s soft-shell crab operations, including intellectual property, equipment, vehicles and other assets used in connection with the soft-shell crab business. Coastal Pride did not assume any liabilities in connection with the acquisition. The purchase price for the assets consisted of a cash payment in the amount of $359,250 and the issuance of shares of common stock of the Company with a fair value of $359,250. Such shares are subject to a leak-out agreement pursuant to which Gault Seafood may not sell or otherwise transfer the shares until February 3, 2023.
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Basis of Presentation and Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation and Summary of Significant Accounting Policies | Note 2. Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) 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 results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The consolidated balance sheet as of December 31, 2021 has been derived from the Company’s annual financial statements that were audited by our 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 ended December 31, 2021 filed with the SEC on March 31, 2022 for a broader discussion of our business and the risks inherent in such business.
Advances to Suppliers and Related Party
In the normal course of business, the Company may advance payments to its suppliers, inclusive of Bacolod Blue Star Export Corp. (“Bacolod”), a related party based in the Philippines. 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 September 30, 2022, and December 31, 2021, the balance due from the related party for future shipments was approximately $1,300,000. No new purchases have been made from Bacolod during the nine months ended September 30, 2022. Cost of revenue related to inventories purchased from Bacolod represented approximately $0 of total cost of revenue for the nine months ended September 30, 2022 and 2021.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, as such, we record revenue when our customer obtains control of the promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company’s source of revenue is from importing blue and red swimming crab meat primarily from Indonesia, the Philippines and China and distributing it in the United States and Canada under several brand names such as Blue Star, Oceanica, Pacifika, Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh, and steelhead salmon produced by TOBC under the brand name Little Cedar Farms for distribution in Canada. The Company sells primarily to food service distributors. The Company also sells its products to wholesalers, retail establishments and seafood distributors.
To determine revenue recognition for the arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer by receipt of purchase orders and confirmations sent by the Company which includes a required line of credit approval process, (2) identify the performance obligations in the contract which includes shipment of goods to the customer FOB shipping point or destination, (3) determine the transaction price which initiates with the purchase order received from the customer and confirmation sent by the Company and will include discounts and allowances by customer if any, (4) allocate the transaction price to the performance obligations in the contract which is the shipment of the goods to the customer and transaction price determined in step 3 above and (5) recognize revenue when (or as) the entity satisfies a performance obligation which is when the Company transfers control of the goods to the customers by shipment or delivery of the products.
The Company elected an accounting policy to treat shipping and handling activities as fulfillment activities. Consideration payable to a customer is recorded as a reduction of the arrangement’s transaction price, thereby reducing the amount of revenue recognized, unless the payment is for distinct goods or services received from the customer.
Inventories
Substantially all of the Company’s inventory consists of packaged crab meat located at a public cold storage facility and merchandise in transit from suppliers. The Company also has eggs and fish in process inventory from TOBC. The cost of inventory is primarily determined using the specific identification method for crab meat. Fish in process inventory is measured based on the estimated biomass of fish on hand. The Company has established a standard procedure to estimate the biomass of fish on hand using counting and sampling techniques. Inventory is valued at the lower of cost or net realizable value, cost being determined using the first-in, first-out method for crab meat and using various estimates and assumptions in regard to the calculation of the biomass, including expected yield, market value of the biomass, and estimated costs of completion.
Merchandise is purchased cost and freight shipping point and becomes the Company’s asset and liability upon leaving the suppliers’ warehouse.
The Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value of inventory to the lower of cost or net realizable value based on its assessment of market conditions, inventory turnover and current stock levels. The Company recorded an inventory adjustment to reduce the carrying value of inventory to the lower of cost or net realizable value in the amount of $514,912 which was charged to cost of goods sold.
The Company’s inventory as of September 30, 2022 and December 31 2021 consists of:
Lease Accounting
We account for our leases under ASC 842, Leases, which 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 that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard.
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 September 30, 2022. Our leases generally have terms that range from three years for equipment and five 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 lease. 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 consolidated balance sheet as of September 30, 2022.
Supplemental cash flow information related to leases were as follows:
The table below presents the remaining lease term and discount rates for operating leases.
Maturities of lease liabilities as of September 30, 2022 were as follows:
Goodwill and Other Intangible Assets
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed, and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.
The Company reviews its indefinite lived intangibles and goodwill for impairment annually or whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed an assessment of indefinite lived intangibles and goodwill and recognized an impairment loss on goodwill of $748,997 for the nine months ended September 30, 2022. impairment was recognized for the nine months ended September 30, 2021.
Long-lived Assets
The Company reviews long-lived assets, including finite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset’s useful life on an undiscounted basis. If the evaluation indicates that the carrying value of the asset may not be recoverable, the potential impairment is measured using fair value. Impairment losses for assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.
In accordance with its policies, the Company performed an assessment of its finite-lived intangibles and recognized an impairment loss on customer relationships intangible asset of $374,300 for the year ended December 31, 2021. No impairment was recognized during the nine months ended September 30, 2022.
Foreign Currency Exchange Rates Risk
We manage our exposure to fluctuations in foreign currency exchange rates through our normal operating activities. Our primary focus is to monitor our exposure to, and manage, the economic foreign currency exchange risks faced by our operations and realized when we exchange one currency for another. Our operations primarily utilize the U.S. dollar and Canadian dollar as their functional currencies. Movements in foreign currency exchange rates affect our financial statements.
Recently Adopted Accounting Pronouncements
ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. In addition, the FASB amended the derivative guidance for the “own stock” scope exception and certain aspects of the EPS guidance. The guidance is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company early adopted the ASU effective January 1, 2022 and applied the provisions of the ASU to the convertible note issued during the nine months ended September 30, 2022.
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Going Concern |
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Sep. 30, 2022 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Going Concern | Note 3. Going Concern
The accompanying consolidated financial statements and notes have been prepared assuming the Company will continue as a going concern. For the nine months ended September 30, 2022, the Company incurred a net loss of $6,229,168, had an accumulated deficit of $22,373,319 and a working capital surplus of $562,756, with the current liabilities inclusive of $893,000 in stockholder loans that are subordinated to the provider of the working capital facility, and $57,702 in the current portion of the lease liability recognized. 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 consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
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Other Current Assets |
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Sep. 30, 2022 | |
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | |
| Other Current Assets | Note 4. Other Current Assets
Other current assets totaled $2,054,999 as of September 30, 2022 and $3,702,661 as of December 31, 2021. As of September 30, 2022, approximately $1.83 million of the balance was related to prepaid inventory to our suppliers. The remainder of the balance is related to prepaid insurance and other prepaid expenses.
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Fixed Assets, Net |
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| Fixed Assets, Net | Note 5. Fixed Assets, Net
Fixed assets comprised the following:
For the nine months ended September 30, 2022 and 2021, depreciation expense totaled approximately $168,900 and $55,100, respectively.
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Intangible Assets, Net |
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| Intangible Assets, Net | Note 6. Intangible Assets, Net
The following table sets forth the components of the Company’s intangible assets as of September 30, 2022:
The aggregate amortization remaining on the intangible assets as of September 30, 2022 is as follows:
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Debt |
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Sep. 30, 2022 | |
| Debt Disclosure [Abstract] | |
| Debt | Note 7. Debt
Working Capital Line of Credit
On March 31, 2021, Keeler & Co. and Coastal Pride entered into a loan and security agreement (“Loan Agreement”) with Lighthouse Financial Corp., a North Carolina corporation (“Lighthouse”) pursuant to the terms of the Loan Agreement, Lighthouse made available to Keeler & Co. and Coastal Pride (together, the “Borrowers”) a $5,000,000 revolving line of credit for a term of thirty-six months, renewable annually for one-year periods thereafter. Amounts due under the line of credit are represented by a revolving credit note issued to Lighthouse by the Borrowers.
The advance rate of the revolving line of credit is 85% with respect to eligible accounts receivable and the lower of 60% of the Borrowers’ eligible inventory, or 80% of the net orderly liquidation value, subject to an inventory sublimit of $2,500,000. The inventory portion of the loan will never exceed 50% of the outstanding balance. Interest on the line of credit is the prime rate (with a floor of 3.25%), plus 3.75%. The Borrowers paid Lighthouse a facility fee of $50,000 in three instalments of $16,667 in March, April and May 2021 and will pay an additional facility fee of $25,000 on each anniversary of March 31, 2021. On January 14, 2022, the maximum inventory advance under the line of credit was adjusted from 50% to 70% until June 30, 2022, 65% to July 31, 2022, 60% to August 31, 2022 and 55% to September 30, 2022 at a monthly fee of 0.25% on the portion of the loan in excess of the 50% advance, in order to increase imports to meet customer demand. On July 29, 2022, the loan and security agreement was further amended to set the annual interest rate on the outstanding principal amount at 4.75% above the prime rate and to reduce the monthly required cash flow requirements beginning July 31, 2022. The amendment also updated the maximum inventory advance under the line of credit to 60% from August 1, 2022 through December 31, 2022 and 50% thereafter. As of September 30, 2022, the interest rate was 14% which includes a default rate of 3%.
The line of credit is secured by a first priority security interest on all the assets of each Borrower. Pursuant to the terms of a guaranty agreement, the Company guaranteed the obligations of the Borrowers under the note and John Keeler, Executive Chairman and Chief Executive Officer of the Company, provided a personal guaranty of up to $1,000,000 to Lighthouse. As of September 30, 2022, the Company was in compliance with all financial covenants under the Loan Agreement, except for the requirement to maintain a greater than $50,000 cash flow in the months of July, August, and September 2022. Lighthouse has notified the Borrowers as to this default but has elected not to exercise its rights and remedies under the loan documents with the Borrowers. The outstanding balance owed to Lighthouse as of September 30, 2022 was $1,862,301.
First West Credit Union CEBA Loan
On June 24, 2021, the Company assumed a commercial term loan with First West Credit Union Canada Emergency Business Account (“CEBA”) in the principal amount of CAD$60,000 in connection with the acquisition of TOBC. The loan initially bears no interest and is due on December 31, 2025. The borrower may prepay all or part of the loan commencing November 1, 2022 and, if by December 31, 2022 the Company has paid 75% of the loan amount, the remaining 25% will be forgiven as per the loan agreement. If less than 75% of the loan amount is outstanding by December 31, 2022, the then outstanding balance will be converted to interest only monthly payments at 5.0%.
John Keeler Promissory Notes – Subordinated
The Company had unsecured promissory notes outstanding to John Keeler of approximately $893,000 of principal at September 30, 2022 and interest expense of $41,700 and $58,600 during the nine months ended September 30, 2022 and 2021, respectively. These notes are payable on demand, bear an annual interest rate of 6% and are subordinated to the Lighthouse note. The Company made principal payments of $67,000 during the nine months ended September 30, 2022.
Walter Lubkin Jr. Note – Subordinated
On November 26, 2019, the Company issued a five-year unsecured promissory note in the principal amount of $500,000 to Walter Lubkin Jr. as part of the purchase price for the Coastal Pride acquisition. The note bears interest at the rate of 4% per annum and is payable quarterly in an amount equal to the lesser of (i) $25,000 or (ii) 25% of the EBITDA of Coastal Pride, as determined on the first day of each quarter. The first payment was scheduled for February 26, 2020, however, the EBITDA generated for Coastal Pride during the preceding quarter did not warrant a principal payment. This note is subordinated to the working capital line of credit. Principal payments are permitted so long as the borrower is not in default of its working capital line of credit.
On October 8, 2021, $34,205 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On February 1, 2022, $29,789 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On April 28, 2022, $4,523 of the outstanding accrued interest to date was paid on the note by the Company.
On August 16, 2022, $4,487 of the outstanding accrued interest to date was paid on the note by the Company.
Interest expense for the Walter Lubkin Jr. note totaled approximately $13,500 and $14,900 during the nine months ended September 30, 2022 and 2021, respectively.
Walter Lubkin III Convertible Note – Subordinated
On November 26, 2019, the Company issued a thirty-nine-month unsecured promissory note in the principal amount of $87,842 to Walter Lubkin III as part the purchase price for the Coastal Pride acquisition. The note bears interest at the rate of 4% per annum. The note is payable in equal quarterly payments over six quarters beginning August 26, 2021. At the election of the holder, at any time after the first anniversary of the issuance of the note, the then outstanding principal and accrued interest may be converted into the Company’s common stock at a rate of $2.00 per share. This note is subordinated to the working capital line of credit. Principal payments are permitted so long as the borrower is not in default of its working capital line of credit.
On October 8, 2021, $16,257 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On February 1, 2022, $15,378 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On April 28, 2022, $15,267 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On August 16, 2022, $15,117 of the outstanding principal and accrued interest to date was paid on the note by the Company.
Interest expense for the Walter Lubkin III note totaled approximately $1,400 and $2,600 during the nine months ended September 30, 2022 and 2021, respectively.
Tracy Greco Convertible Note – Subordinated
On November 26, 2019, the Company issued a thirty-nine-month unsecured promissory note in the principal amount of $71,372 to Tracy Greco as part of the purchase price for the Coastal Pride acquisition. The note bears interest at the rate of 4% per annum. The note is payable in equal quarterly payments over six quarters beginning August 26, 2021. At the election of the holder, at any time after the first anniversary of the issuance of the note, the then outstanding principal and accrued interest may be converted into the Company’s common stock at a rate of $2.00 per share. This note is subordinated to the working capital line of credit. Principal payments are permitted so long as the borrower is not in default of its working capital line of credit.
On October 8, 2021, $13,209 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On February 1, 2022, $12,494 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On April 28, 2022, $12,405 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On August 16, 2022, $12,282 of the outstanding principal and accrued interest to date was paid on the note by the Company.
Interest expense for the Tracy Greco note totaled approximately $1,200 and $2,100 during the nine months ended September 30, 2022 and 2021, respectively.
John Lubkin Convertible Note – Subordinated
On November 26, 2019, the Company issued a thirty-nine-month unsecured promissory note in the principal amount of $50,786 to John Lubkin as part the Coastal Pride acquisition. The note bears interest at the rate of 4% per annum. The note is payable in equal quarterly payments over six quarters beginning August 26, 2021. At the election of the holder, at any time after the first anniversary of the issuance of the note, the then outstanding principal and accrued interest may be converted into the Company’s common stock at a rate of $2.00 per share. This note is subordinated to the working capital line of credit. Principal payments are permitted so long as the borrower is not in default of its working capital line of credit.
On October 8, 2021, $9,399 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On February 1, 2022, $8,891 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On April 28, 2022, $8,827 of the outstanding principal and accrued interest to date was paid on the note by the Company.
On August 16, 2022, $8,740 of the outstanding principal and accrued interest to date was paid on the note by the Company.
Interest expense for the John Lubkin note totaled approximately $800 and $1,500 during the nine months ended September 30, 2022 and 2021, respectively.
Lind Global Fund II LP investment
On January 24, 2022, the Company entered into a securities purchase agreement with Lind Global Fund II LP, a Delaware limited partnership (“Lind”), pursuant to which the Company issued Lind a secured, two-year, interest free convertible promissory note in the principal amount of $5,750,000 and a -year warrant to purchase 1,000,000 shares of common stock at an exercise price of $4.50 per share, subject to customary adjustments. The warrant provides for cashless exercise and for full ratchet anti-dilution if the Company issues securities at less than $4.50 per share. In connection with the issuance of the note and the warrant, the Company paid a $150,000 commitment fee to Lind and $87,144 of debt issuance costs. The Company recorded a total of $1,943,445 debt discount at issuance of the debt, including original issuance discount of $750,000, commitment fee $150,000, $87,144 direct issuance cost, and $956,301 related to warrants issued. Amortization expense recorded in interest expense totaled $685,074 during the nine months ended September 30, 2022.
The outstanding principal under the note is payable commencing July 24, 2022, in 18 consecutive monthly installments of $333,333, at the Company’s option, in cash or shares of common stock at a price (the “Repayment Share Price”) based on 90% of the five lowest volume weighted average prices (“VWAP”) during the 20-days prior to the payment date with a floor price of $1.50 per share (the “Floor Price”), or a combination of cash and stock provided that if at any time the Repayment Share Price is deemed to be the Floor Price, then in addition to shares, the Company will pay Lind an additional amount in cash as determined pursuant to a formula contained in the note.
In connection with the issuance of the note, the Company granted Lind a first priority security interest and lien on all of its assets, including a pledge on its shares in John Keeler & Co. Inc., its wholly-owned subsidiary, pursuant to a security agreement and a stock pledge agreement with Lind, dated January 24, 2022. Each subsidiary of the Company also granted a second priority security interest in all of its respective assets.
The note is mandatorily payable prior to maturity if the Company issues any preferred stock (with certain exceptions described in the note) or, if the Company or its subsidiaries issues any indebtedness other than certain amounts under the current line of credit facility with Lighthouse. The Company also agreed not to issue or sell any securities with a conversion, exercise or other price based on a discount to the trading prices of the Company’s stock or to grant the right to receive additional securities based on future transactions of the Company on terms more favorable than those granted to Lind, with certain exceptions.
If the Company fails to maintain the listing and trading of its common stock, the note will become due and payable and Lind may convert all or a portion of the outstanding principal at the lower of the then current conversion price and 80% of the average of the 3-day VWAP during the 20 days prior to delivery of the conversion notice.
If the Company engages in capital raising transactions, Lind has the right to purchase up to 10% of the new securities.
The note is convertible into common stock at $5.00 per share, subject to certain adjustments, at any time after the earlier of six months from issuance or the date the registration statement is effective; provided that no such conversion may be made that would result in beneficial ownership by Lind and its affiliates of more than % of the Company’s outstanding shares of common stock. If shares are issued by the Company at less than the conversion price, the conversion price will be reduced to such price.
Upon a change of control of the Company, as defined in the note, Lind has the right to require the Company to prepay 10% of the outstanding principal amount of the note. The Company may prepay the outstanding principal amount of the note, provided Lind may convert up to 25% of the principal amount of the note at a price per share equal to the lesser of the Repayment Share Price or the conversion price. The Note contains certain negative covenants, including restricting the Company from certain distributions, stock repurchases, borrowing, sale of assets, loans and exchange offers.
Upon an event of default as described in the note, the note will become immediately due and payable at a default interest rate of 125% of the then outstanding principal amount. Upon a default, all or a portion of the outstanding principal amount may be converted into shares of common stock by Lind at the lower of the conversion price and 80% of the average of the three lowest daily VWAPs.
During the quarter ended September 30, 2022, the Company made principal payments on the note totaling $999,999 through the issuance of an aggregate of shares of common stock with a fair value of $447,777 and cash payments of $609,307 pursuant to the terms of the note, and recorded a loss on settlement of debt of $57,085.
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Business Combination |
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| Business Combination and Asset Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination | Note 8. Business Combination
Acquisition of Taste of BC Aquafarms
On June 24, 2021, the Company consummated the acquisition of TOBC and TOBC became a wholly owned subsidiary of the Company. The acquisition was accounted for as a business combination under the provisions of ASC 805. The aggregate purchase price of CAD$5,000,000 was paid as follows: (i) an aggregate of CAD$1,000,000 in cash to the Sellers; (ii) promissory notes in the aggregate principal amount of CAD$200,000 to the Sellers; (iii) shares of the Company’s common stock and an aggregate of shares of the Company’s common stock were issued on August 3, 2021 and put in escrow until June 24, 2023. If, within 24 months of the closing, TOBC has cumulative revenue of at least CAD$1,300,000, the Sellers will receive all of the escrowed shares. If, as of the 24-month anniversary of the closing, TOBC has cumulative revenue of less than CAD$1,300,000, the Sellers will receive a prorated number of the escrowed shares based on the actual cumulative revenue of TOBC as of such date.
The transaction costs incurred in connection with the acquisition of TOBC amounted to $31,000 which were expensed as incurred.
Fair Value of Consideration Transferred and Recording of Assets Acquired
The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed.
In determining the fair value of the common stock issued, the Company considered the value of the stock as estimated by the Company at the time of closing which was determined to be $, based on the Company’s private placement offering price.
Liabilities assumed included three mortgage loans of approximately CAD$490,000 which were paid off by the Company on July 9, 2021. The Company has one commercial loan outstanding for CAD$60,000 which is due on December 31, 2025.
Unaudited Pro Forma Information
The following unaudited pro forma information assumes the business acquisition occurred on January 1, 2021. Depreciation and amortization have been included in the calculation of the below pro forma information based upon the actual acquisition costs.
The information included in the pro forma amounts is derived from historical information obtained from the Sellers of the business.
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Stockholders’ Equity |
9 Months Ended |
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Sep. 30, 2022 | |
| Equity [Abstract] | |
| Stockholders’ Equity | Note 9. Stockholders’ Equity
On July 21, 2021, the Company entered into a consulting agreement as amended on November 10, 2021, with Intelligent Investments I, LLC (“Intelligent”). In consideration for consulting services, the Company agreed to issue Intelligent a total of shares of common stock with a fair value of $171,106 which is amortized to expense over the term of the agreement. The Company recognized stock compensation expense of $ for the nine months ended September 30, 2022 in connection with these shares.
On January 24, 2022, the Company issued shares of common stock to an investor upon the exercise of warrants for total proceeds of $250,000.
On February 3, 2022, the Company issued shares of common stock with a fair value of $359,250 to Gault Seafood as partial consideration for the purchase of certain of its assets.
On March 31, 2022, the Company issued shares of common stock to Intelligent Investments I LLC, with a fair value of $30,000, for legal services provided to the Company.
On March 31, 2022, the Company issued shares of common stock with a fair value of $9,750 to TraDigital Marketing Group for consulting services provided to the Company.
On April 1, 2022, the Company issued shares of common stock with a fair value of $6,000 to the designee of Clear Think Capital LLC (“Clear Think Capital”) for consulting services provided to the Company.
On April 4, 2022, the Company issued shares of common stock with a fair value of $20,000 to SRAX, Inc. for consulting services provided to the Company which is amortized to expense over the term of the agreement. The Company recognized stock compensation expense of $ for the nine months ended September 30, 2022 in connection with these shares.
On April 5, 2022, the Company issued an aggregate of shares of common stock with a fair value of $156,341 to Newbridge Securities Corporation and its affiliates for consulting services provided to the Company.
On May 1, 2022, the Company issued shares of common stock with a fair value of $6,000 to the designee of Clear Think Capital for consulting services provided to the Company.
On June 1, 2022, the Company issued shares of common stock with a fair value of $6,000 to the designee of Clear Think Capital for consulting services provided to the Company.
On June 3, 2022, the Company issued shares of common stock with a fair value of $13,800 to TraDigital Marketing Group for consulting services provided to the Company.
On June 30, 2022, the Company issued shares of common stock to Intelligent Investments I LLC, with a fair value of $30,000, for legal services provided to the Company.
On July 1, 2022, the Company issued shares of common stock with a fair value of $6,000 to the designee of Clear Think Capital for consulting services provided to the Company.
On August 1, 2022, the Company issued shares of common stock with a fair value of $6,000 to the designee of Clear Think Capital for consulting services provided to the Company.
On August 25, 2022, the Company issued shares of common stock to Lind, with a fair value of $271,111, in satisfaction of the convertible promissory note.
On September 1, 2022, the Company issued shares of common stock with a fair value of $6,000 to the designee of Clear Think Capital for consulting services provided to the Company.
On September 26, 2022, the Company issued shares of common stock to Lind, with a fair value of $176,666, in satisfaction of the convertible promissory note.
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Options |
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| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Options |
On April 20, 2022, the Company’s existing directors and two newly appointed directors each entered into a one-year director service agreement with the Company, which will automatically renew for successive one-year terms unless either party notifies the other of its desire not to renew the agreement at least 30 days prior to the end of the then current term, or unless earlier terminated in accordance with the terms of the agreement. As compensation for serving on the Board of Directors, each director will be entitled to a $ annual stock grant and for serving on a Committee of the Board, an additional $ annual stock grant, both based upon the closing sales price of the common stock on the last trading day of the calendar year. Each director who serves as chairman of the Audit Committee, Compensation Committee and Nominating and Governance Committee will be entitled to an additional $, $ and $ annual stock grant, respectively. As additional consideration for such Board service, on April 20, 2022, to purchase shares of the Company’s common stock at an exercise price of $ per share, which shares will vest in equal quarterly installments of shares during the term of the option. The agreement also includes customary confidentiality provisions and one-year non-competition and non-solicitation provisions.
On September 16, 2022, the Company granted an employee a -year option to purchase shares of common stock at an exercise price of $ which vests in equal monthly installments during the term of the option.
Under the Black-Scholes option pricing model, the fair value of the and options granted during the nine months ended September 30, 2022 is estimated at $84,334 and $8,409, respectively, on the date of grant using the following assumptions: stock price of $ and $ at the grant date, exercise price of the option, option term, volatility rate of % and % and risk-free interest rate of % and %, respectively. The unrecognized portion of the expense remaining at September 30, 2022 is $ and $, respectively, which is expected to be recognized to expense over a period of .
For the nine months ended September 30, 2022, the Company recognized $ of compensation expense for vested stock options issued to directors, contractors and employees during 2019 to 2021 and accrued a portion of the 2022 stock grants to directors and officers. The non-vested options outstanding are as of September 30, 2022.
For the nine months ended September 30, 2022, the Company determined that the -year option to purchase shares of common stock at an exercise price of $ granted to an employee of TOBC in 2021 will not meet the vesting requirements pursuant to the agreement and accordingly, reversed the expense recorded of approximately $ as of September 30, 2022 and $ as of December 31, 2021.
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Warrants |
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| Warrants | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants | Note 11. Warrants
The following table represents warrant activity for the nine months ended September 30, 2022:
On January 24, 2022, in connection with the issuance of the $5,750,000 promissory note to Lind pursuant to a securities purchase agreement, the Company issued Lind a -year warrant to purchase 1,000,000 shares of common stock at an exercise price of $4.50 per share. The warrant provides for cashless exercise and full ratchet anti-dilution if the Company issues securities at less than $4.50 per share. Under the Black-Scholes pricing model, the fair value of the warrants issued to purchase 1,000,000 shares of common stock was estimated at $1,412,213 on the date of issuance of the warrant using the following assumptions: stock price of $ at the date of the agreement, exercise price of the warrant, warrant term, volatility rate of 43.21% and risk-free interest rate of 1.53% from the Department of Treasury. The relative fair value of $956,031 was calculated using the net proceeds of the convertible note and accounted for as paid in capital.
During the nine months ended September 30, 2022, the Company issued 125,000 shares of common stock at an exercise price of $2.00 to an investor upon exercise of warrants.
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Commitment and Contingencies |
9 Months Ended |
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Sep. 30, 2022 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Commitment and Contingencies | Note 12. Commitment and Contingencies
Office lease
The Company leased its Miami office and warehouse facility from JK Real Estate, a related party through common family beneficial ownership. The lease which had a 20-year term, expiring in July 2021, was terminated on December 31, 2020, upon the sale of the facility to an unrelated third-party. In connection with the sale, the Company retained approximately 4,756 square feet of such space, rent-free for 12 months. On January 1, 2022, the Company entered into a verbal month-to-month lease agreement for its executive offices with an unrelated third party. The Company has paid $46,400 to date under this lease.
Coastal Pride leases approximately 1,100 square feet of office space in Beaufort, South Carolina. This office space consists of two leases with related parties that expire in 2024.
On February 3, 2022, in connection with the acquisition of certain assets of Gault, the Company entered into a one-year lease agreement for 9,050 square feet from Gault in Beaufort, South Carolina for $1,000 per month until a new facility is completed.
TOBC’s facilities are on land leased to TOBC for approximately $2,500 per month plus taxes from Steve and Janet Atkinson, the former TOBC owners, under a lease agreement that expired December 2021. On April 1, 2022, the lease was renewed with Steve and Janet Atkinson for approximately $2,000 per month plus taxes and an additional new lease was entered into with Kathryn Atkinson for approximately $1,800 per month plus taxes. Both leases expire in 2027.
Rental and equipment lease expenses amounted to approximately $122,100 and $45,700 for the nine months ended September 30, 2022 and 2021, respectively.
Legal
The Company has reached a settlement agreement with a former employee. Although the agreement is not finalized, the Company has reserved $70,000, representing the entire amount of the settlement.
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COVID-19 Pandemic |
9 Months Ended |
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Sep. 30, 2022 | |
| Unusual or Infrequent Items, or Both [Abstract] | |
| COVID-19 Pandemic | Note 13. COVID-19 Pandemic
On March 11, 2020, the World Health Organization declared that the novel coronavirus (COVID-19) had become a pandemic, and on March 13, 2020, the U.S. President declared a National Emergency concerning the disease. Additionally, in March 2020, state governments in the Company’s geographic operating area began instituting preventative shut down measures in order to combat the novel coronavirus pandemic. The coronavirus and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the economies and financial markets of the geographical areas in which the Company operates. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted to amongst other provisions, provide emergency assistance for individuals, families and businesses affected by the novel coronavirus pandemic for 2020 and into 2021. The Company’s business not being deemed essential resulted in decreased financial performance that may not be indicative of future financial results. Government-mandated closures of businesses and shipping delays have affected our sales and inventory purchases. The Company continues to face uncertainty and increased risks concerning its employees, customers, supply chain and government regulation. In 2022, the Company’s sales and supply continue to be adversely affected due to COVID-19 and plans continue to be developed to ensure a prompt response is given to address the effects of the pandemic.
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2022 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 14. Subsequent Events
On October 1, 2022, the Company issued shares of common stock with a fair value of $6,000 to the designee of Clear Think Capital for consulting services provided to the Company.
On October 24, 2022, the Company paid Lind $333,333 of principal under the outstanding $4,570,001 convertible promissory note.
On November 1, 2022, the Company issued shares of common stock with a fair value of $6,000 to the designee of Clear Think Capital for consulting services provided to the Company. |
Basis of Presentation and Summary of Significant Accounting Policies (Policies) |
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| Basis of Presentation | Basis of Presentation
The following unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all the information and footnotes required by accounting principles generally accepted in the United States (“GAAP”) 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 results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. The consolidated balance sheet as of December 31, 2021 has been derived from the Company’s annual financial statements that were audited by our 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 ended December 31, 2021 filed with the SEC on March 31, 2022 for a broader discussion of our business and the risks inherent in such business.
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| Advances to Suppliers and Related Party | Advances to Suppliers and Related Party
In the normal course of business, the Company may advance payments to its suppliers, inclusive of Bacolod Blue Star Export Corp. (“Bacolod”), a related party based in the Philippines. 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 September 30, 2022, and December 31, 2021, the balance due from the related party for future shipments was approximately $1,300,000. No new purchases have been made from Bacolod during the nine months ended September 30, 2022. Cost of revenue related to inventories purchased from Bacolod represented approximately $0 of total cost of revenue for the nine months ended September 30, 2022 and 2021.
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| Revenue Recognition | Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, as such, we record revenue when our customer obtains control of the promised goods or services in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. The Company’s source of revenue is from importing blue and red swimming crab meat primarily from Indonesia, the Philippines and China and distributing it in the United States and Canada under several brand names such as Blue Star, Oceanica, Pacifika, Crab & Go, First Choice, Good Stuff and Coastal Pride Fresh, and steelhead salmon produced by TOBC under the brand name Little Cedar Farms for distribution in Canada. The Company sells primarily to food service distributors. The Company also sells its products to wholesalers, retail establishments and seafood distributors.
To determine revenue recognition for the arrangements that the Company determines are within the scope of Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer by receipt of purchase orders and confirmations sent by the Company which includes a required line of credit approval process, (2) identify the performance obligations in the contract which includes shipment of goods to the customer FOB shipping point or destination, (3) determine the transaction price which initiates with the purchase order received from the customer and confirmation sent by the Company and will include discounts and allowances by customer if any, (4) allocate the transaction price to the performance obligations in the contract which is the shipment of the goods to the customer and transaction price determined in step 3 above and (5) recognize revenue when (or as) the entity satisfies a performance obligation which is when the Company transfers control of the goods to the customers by shipment or delivery of the products.
The Company elected an accounting policy to treat shipping and handling activities as fulfillment activities. Consideration payable to a customer is recorded as a reduction of the arrangement’s transaction price, thereby reducing the amount of revenue recognized, unless the payment is for distinct goods or services received from the customer.
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| Inventories | Inventories
Substantially all of the Company’s inventory consists of packaged crab meat located at a public cold storage facility and merchandise in transit from suppliers. The Company also has eggs and fish in process inventory from TOBC. The cost of inventory is primarily determined using the specific identification method for crab meat. Fish in process inventory is measured based on the estimated biomass of fish on hand. The Company has established a standard procedure to estimate the biomass of fish on hand using counting and sampling techniques. Inventory is valued at the lower of cost or net realizable value, cost being determined using the first-in, first-out method for crab meat and using various estimates and assumptions in regard to the calculation of the biomass, including expected yield, market value of the biomass, and estimated costs of completion.
Merchandise is purchased cost and freight shipping point and becomes the Company’s asset and liability upon leaving the suppliers’ warehouse.
The Company periodically reviews the value of items in inventory and records an allowance to reduce the carrying value of inventory to the lower of cost or net realizable value based on its assessment of market conditions, inventory turnover and current stock levels. The Company recorded an inventory adjustment to reduce the carrying value of inventory to the lower of cost or net realizable value in the amount of $514,912 which was charged to cost of goods sold.
The Company’s inventory as of September 30, 2022 and December 31 2021 consists of:
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| Lease Accounting | Lease Accounting
We account for our leases under ASC 842, Leases, which 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 that retained the lease classification and initial direct costs for any leases that existed prior to adoption of the standard.
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 September 30, 2022. Our leases generally have terms that range from three years for equipment and five 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 lease. 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 consolidated balance sheet as of September 30, 2022.
Supplemental cash flow information related to leases were as follows:
The table below presents the remaining lease term and discount rates for operating leases.
Maturities of lease liabilities as of September 30, 2022 were as follows:
|
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| Goodwill and Other Intangible Assets | Goodwill and Other Intangible Assets
The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805, “Business Combinations,” where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed, and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.
The Company reviews its indefinite lived intangibles and goodwill for impairment annually or whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable. In accordance with its policies, the Company performed an assessment of indefinite lived intangibles and goodwill and recognized an impairment loss on goodwill of $748,997 for the nine months ended September 30, 2022. impairment was recognized for the nine months ended September 30, 2021.
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| Long-lived Assets | Long-lived Assets
The Company reviews long-lived assets, including finite-lived intangible assets, for indicators of impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Cash flows expected to be generated by the related assets are estimated over the asset’s useful life on an undiscounted basis. If the evaluation indicates that the carrying value of the asset may not be recoverable, the potential impairment is measured using fair value. Impairment losses for assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.
In accordance with its policies, the Company performed an assessment of its finite-lived intangibles and recognized an impairment loss on customer relationships intangible asset of $374,300 for the year ended December 31, 2021. No impairment was recognized during the nine months ended September 30, 2022.
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| Foreign Currency Exchange Rates Risk | Foreign Currency Exchange Rates Risk
We manage our exposure to fluctuations in foreign currency exchange rates through our normal operating activities. Our primary focus is to monitor our exposure to, and manage, the economic foreign currency exchange risks faced by our operations and realized when we exchange one currency for another. Our operations primarily utilize the U.S. dollar and Canadian dollar as their functional currencies. Movements in foreign currency exchange rates affect our financial statements.
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| Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements
ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The FASB reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. In addition, the FASB amended the derivative guidance for the “own stock” scope exception and certain aspects of the EPS guidance. The guidance is effective for smaller reporting companies for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company early adopted the ASU effective January 1, 2022 and applied the provisions of the ASU to the convertible note issued during the nine months ended September 30, 2022. |
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Basis of Presentation and Summary of Significant Accounting Policies (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Inventory | The Company’s inventory as of September 30, 2022 and December 31 2021 consists of:
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| Schedule of Lease-related Assets and Liabilities | The table below presents the lease-related assets and liabilities recorded on the consolidated balance sheet as of September 30, 2022.
|
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| Schedule of Supplemental Cash Flow Information Related to Leases | Supplemental cash flow information related to leases were as follows:
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| Schedule of Remaining Lease Term and Discount Rates for Operating Leases | The table below presents the remaining lease term and discount rates for operating leases.
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| Schedule of Maturities of Lease Liabilities | Maturities of lease liabilities as of September 30, 2022 were as follows:
|
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Fixed Assets, Net (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fixed Assets | Fixed assets comprised the following:
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Intangible Assets, Net (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Intangible Assets | The following table sets forth the components of the Company’s intangible assets as of September 30, 2022:
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| Schedule of Amortization of Intangible Assets | The aggregate amortization remaining on the intangible assets as of September 30, 2022 is as follows:
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Business Combination (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Business Combination and Asset Acquisition [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value of Assets Acquired and Liabilities Assumed | The following table summarizes the acquisition date fair value of the consideration paid, identifiable assets acquired, and liabilities assumed.
|
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| Schedule of Proforma Information |
|
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Options (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Option Activity |
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Warrants (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Warrants | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Warrant Activity | The following table represents warrant activity for the nine months ended September 30, 2022:
|
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Schedule of Inventory (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| Inventory purchased for resale | $ 3,314,773 | $ 863,967 |
| Feeds and eggs processed | 105,910 | 72,733 |
| In-transit inventory | 2,698,037 | 1,182,741 |
| Inventory, net | $ 6,118,720 | $ 2,119,441 |
Schedule of Lease-related Assets and Liabilities (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| Operating lease, right-of-use asset | $ 209,321 | $ 71,128 |
| Operating lease liability, current | 57,702 | 30,583 |
| Operating lease liability, noncurrent | $ 151,075 | $ 40,109 |
Schedule of Supplemental Cash Flow Information Related to Leases (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
USD ($)
| |
| Accounting Policies [Abstract] | |
| Operating cash flows from operating leases | $ 46,942 |
| ROU assets recognized in exchange for lease obligations: Operating leases | $ 185,135 |
Schedule of Remaining Lease Term and Discount Rates for Operating Leases (Details) |
Sep. 30, 2022 |
|---|---|
| Accounting Policies [Abstract] | |
| Weighted-average remaining lease term, Operating leases | 3 years 10 months 17 days |
| Weighted-average discount rate, Operating leases | 6.60% |
Schedule of Maturities of Lease Liabilities (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Accounting Policies [Abstract] | ||
| 2022 (three months remaining) | $ 16,488 | |
| 2023 | 69,672 | |
| 2024 | 58,258 | |
| 2025 | 43,198 | |
| 2026 | 43,198 | |
| Thereafter | 10,799 | |
| Total lease payments | 241,613 | |
| Less: amount of lease payments representing interest | (32,836) | |
| Present value of future minimum lease payments | 208,777 | |
| Less: current obligations under leases | (57,702) | $ (30,583) |
| Non-current obligations | $ 151,075 | $ 40,109 |
Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Defined Benefit Plan Disclosure [Line Items] | |||||
| Due from Related Parties | $ 1,300,000 | ||||
| Cost of Revenue | $ 3,973,656 | $ 3,056,461 | $ 11,431,331 | $ 6,799,063 | |
| Inventory of cost or net realizable value | 514,912 | ||||
| Goodwill impairment loss | $ 748,997 | 748,997 | |||
| Operating Lease, Impairment Loss | $ 374,300 | ||||
| Bacolod Blue Star Export Corp [Member] | |||||
| Defined Benefit Plan Disclosure [Line Items] | |||||
| Cost of Revenue | $ 0 | $ 0 | |||
Going Concern (Details Narrative) - USD ($) |
3 Months Ended | 9 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 |
Jun. 30, 2022 |
Mar. 31, 2022 |
Sep. 30, 2021 |
Jun. 30, 2021 |
Mar. 31, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
Dec. 31, 2021 |
|
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||
| Net loss | $ 3,738,089 | $ 1,437,213 | $ 1,053,866 | $ 161,788 | $ 437,127 | $ 478,104 | $ 6,229,168 | $ 1,077,019 | |
| Accumulated deficit | 22,373,319 | 22,373,319 | $ 16,144,151 | ||||||
| Working capital surplus | 562,756 | 562,756 | |||||||
| Subordinated debt | 893,000 | 893,000 | |||||||
| Operating lease liability current | $ 57,702 | $ 57,702 | $ 30,583 | ||||||
Other Current Assets (Details Narrative) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract] | ||
| Other current assets | $ 2,054,999 | $ 3,702,661 |
| Prepaid inventory | $ 1,830,000 |
Schedule of Fixed Assets (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Total | $ 2,318,697 | $ 2,082,548 |
| Less: Accumulated depreciation | (286,541) | (178,145) |
| Fixed assets, net | 2,032,156 | 1,904,403 |
| Computer Equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total | 97,624 | 90,707 |
| RAS System [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total | 2,009,587 | 1,963,734 |
| Automobiles [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total | 122,431 | 23,188 |
| Leasehold Improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Total | $ 89,055 | $ 4,919 |
Fixed Assets, Net (Details Narrative) - USD ($) |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Property, Plant and Equipment [Abstract] | ||
| Depreciation expense | $ 168,900 | $ 55,100 |
Schedule of Amortization of Intangible Assets (Details) |
Sep. 30, 2022
USD ($)
|
|---|---|
| Goodwill and Intangible Assets Disclosure [Abstract] | |
| 2022 (6 months remaining) | $ 71,643 |
| 2023 | 286,572 |
| 2024 | 296,697 |
| 2025 | 246,848 |
| 2026 | 246,848 |
| Thereafter | $ 1,723,684 |
Debt (Details Narrative) |
3 Months Ended | 9 Months Ended | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Aug. 16, 2022
USD ($)
|
Apr. 28, 2022
USD ($)
|
Feb. 02, 2022
USD ($)
|
Feb. 02, 2022
USD ($)
|
Jan. 24, 2022
USD ($)
$ / shares
shares
|
Oct. 08, 2021
USD ($)
|
Jun. 24, 2021
CAD ($)
|
Mar. 31, 2021
USD ($)
|
Nov. 26, 2019
USD ($)
$ / shares
|
Sep. 30, 2022
USD ($)
$ / shares
shares
|
Sep. 30, 2022
USD ($)
$ / shares
|
Sep. 30, 2021
USD ($)
|
Sep. 16, 2022 |
Jul. 24, 2022 |
Apr. 27, 2021
CAD ($)
|
|
| Short-Term Debt [Line Items] | |||||||||||||||
| Debt instrument, face amount | $ 200,000 | ||||||||||||||
| Payment of cash | $ 609,307 | ||||||||||||||
| Warrant term | 3 years | ||||||||||||||
| Exercise price | $ / shares | $ 2.00 | $ 2.00 | |||||||||||||
| Debt instrument periodic payment | $ 999,999 | ||||||||||||||
| Debt instrument conversion of shares | shares | 444,444 | ||||||||||||||
| Debt instrument fair value | $ 447,777 | $ 447,777 | |||||||||||||
| Loss on settlement of debt | 57,085 | ||||||||||||||
| CEBA Loan [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Debt instrument, face amount | $ 60,000 | ||||||||||||||
| Description on maturity date | The loan initially bears no interest and is due on December 31, 2025. The borrower may prepay all or part of the loan commencing November 1, 2022 and, if by December 31, 2022 | ||||||||||||||
| Debt description | the Company has paid 75% of the loan amount, the remaining 25% will be forgiven as per the loan agreement. If less than 75% of the loan amount is outstanding by December 31, 2022 | ||||||||||||||
| Debt instrument, interest rate | 5.00% | ||||||||||||||
| 6% Demand Promissory Notes [Member] | John Keeler [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Debt instrument, face amount | $ 893,000 | $ 893,000 | |||||||||||||
| Debt instrument, interest rate | 6.00% | 6.00% | |||||||||||||
| Interest expense | $ 41,700 | $ 58,600 | |||||||||||||
| Payment of cash | 67,000 | ||||||||||||||
| Five Year Unsecured Promissory Note [Member] | Walter F. Lubkin, Jr. [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Debt instrument covenant, description | The note bears interest at the rate of 4% per annum and is payable quarterly in an amount equal to the lesser of (i) $25,000 or (ii) 25% of the EBITDA of Coastal Pride, as determined on the first day of each quarter | ||||||||||||||
| Debt instrument, face amount | $ 500,000 | ||||||||||||||
| Debt instrument, interest rate | 4.00% | ||||||||||||||
| Interest expense | 13,500 | 14,900 | |||||||||||||
| Monthly payment | $ 29,789 | $ 34,205 | |||||||||||||
| Interest payable | $ 4,487 | $ 4,523 | |||||||||||||
| Thirty-Nine Month Unsecured Promissory Note [Member] | Walter Lubkin III [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Debt instrument, face amount | $ 87,842 | ||||||||||||||
| Debt description | The note is payable in equal quarterly payments over six quarters beginning August 26, 2021 | ||||||||||||||
| Debt instrument, interest rate | 4.00% | ||||||||||||||
| Interest expense | 1,400 | 2,600 | |||||||||||||
| Monthly payment | 15,117 | 15,267 | $ 15,378 | 16,257 | |||||||||||
| Conversion price | $ / shares | $ 2.00 | ||||||||||||||
| Thirty-Nine Month Unsecured Promissory Note [Member] | Tracy Greco [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Debt instrument, face amount | $ 71,372 | ||||||||||||||
| Debt description | The note is payable in equal quarterly payments over six quarters beginning August 26, 2021 | ||||||||||||||
| Debt instrument, interest rate | 4.00% | ||||||||||||||
| Interest expense | 1,200 | 2,100 | |||||||||||||
| Monthly payment | 12,282 | 12,405 | 12,494 | 13,209 | |||||||||||
| Conversion price | $ / shares | $ 2.00 | ||||||||||||||
| Thirty-Nine Month Unsecured Promissory Note [Member] | John Lubkin [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Debt instrument, face amount | $ 50,786 | ||||||||||||||
| Debt description | The note is payable in equal quarterly payments over six quarters beginning August 26, 2021 | ||||||||||||||
| Debt instrument, interest rate | 4.00% | ||||||||||||||
| Interest expense | 800 | $ 1,500 | |||||||||||||
| Monthly payment | $ 8,740 | $ 8,827 | $ 8,891 | $ 9,399 | |||||||||||
| Conversion price | $ / shares | $ 2.00 | ||||||||||||||
| Securities Purchase Agreement [Member] | Lind Global Fund II LP [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Debt instrument, face amount | $ 5,750,000 | ||||||||||||||
| Debt description | Upon a change of control of the Company, as defined in the note, Lind has the right to require the Company to prepay 10% of the outstanding principal amount of the note. The Company may prepay the outstanding principal amount of the note, provided Lind may convert up to 25% of the principal amount of the note at a price per share equal to the lesser of the Repayment Share Price or the conversion price | ||||||||||||||
| Debt instrument, interest rate | 125.00% | ||||||||||||||
| Interest expense | 685,074 | ||||||||||||||
| Monthly payment | $ 333,333 | ||||||||||||||
| Conversion price | $ / shares | $ 5.00 | ||||||||||||||
| Warrant term | 5 years | ||||||||||||||
| Warrant to purchase shares | shares | 1,000,000 | ||||||||||||||
| Exercise price | $ / shares | $ 4.50 | ||||||||||||||
| Commitment fee | $ 150,000 | ||||||||||||||
| Debt issuance costs | $ 87,144 | ||||||||||||||
| Debt discount | $ 1,943,445 | 1,943,445 | |||||||||||||
| Original issuance discount | 750,000 | ||||||||||||||
| Warrant issuance cost | $ 956,301 | ||||||||||||||
| Repayment description | The outstanding principal under the note is payable commencing July 24, 2022, in 18 consecutive monthly installments of $333,333, at the Company’s option, in cash or shares of common stock at a price (the “Repayment Share Price”) based on 90% of the five lowest volume weighted average prices (“VWAP”) during the 20-days prior to the payment date with a floor price of $1.50 per share (the “Floor Price”), or a combination of cash and stock provided that if at any time the Repayment Share Price is deemed to be the Floor Price, then in addition to shares, the Company will pay Lind an additional amount in cash as determined pursuant to a formula contained in the note | ||||||||||||||
| Debt weighted average interest rate | 80.00% | 80.00% | |||||||||||||
| Ownership percentage | 4.99% | ||||||||||||||
| Securities Purchase Agreement [Member] | Lind Global Fund II LP [Member] | Maximum [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Debt instrument, interest rate | 10.00% | ||||||||||||||
| Exercise price | $ / shares | $ 4.50 | ||||||||||||||
| Keeler & Co. [Member] | Loan Agreement [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Line of credit | $ 5,000,000 | ||||||||||||||
| Line of credit, description | The advance rate of the revolving line of credit is 85% with respect to eligible accounts receivable and the lower of 60% of the Borrowers’ eligible inventory, or 80% of the net orderly liquidation value, subject to an inventory sublimit of $2,500,000. The inventory portion of the loan will never exceed 50% of the outstanding balance. Interest on the line of credit is the prime rate (with a floor of 3.25%), plus 3.75%. The Borrowers paid Lighthouse a facility fee of $50,000 in three instalments of $16,667 in March, April and May 2021 and will pay an additional facility fee of $25,000 on each anniversary of March 31, 2021. On January 14, 2022, the maximum inventory advance under the line of credit was adjusted from 50% to 70% until June 30, 2022, 65% to July 31, 2022, 60% to August 31, 2022 and 55% to September 30, 2022 at a monthly fee of 0.25% on the portion of the loan in excess of the 50% advance, in order to increase imports to meet customer demand. On July 29, 2022, the loan and security agreement was further amended to set the annual interest rate on the outstanding principal amount at 4.75% above the prime rate and to reduce the monthly required cash flow requirements beginning July 31, 2022. The amendment also updated the maximum inventory advance under the line of credit to 60% from August 1, 2022 through December 31, 2022 and 50% thereafter. As of September 30, 2022, the interest rate was 14% which includes a default rate of 3%. | ||||||||||||||
| Line of credit guaranty | $ 1,000,000 | ||||||||||||||
| Debt instrument covenant, description | As of September 30, 2022, the Company was in compliance with all financial covenants under the Loan Agreement, except for the requirement to maintain a greater than $50,000 cash flow in the months of July, August, and September 2022 | ||||||||||||||
| Lighthouse [Member] | |||||||||||||||
| Short-Term Debt [Line Items] | |||||||||||||||
| Line of credit | $ 1,862,301 | $ 1,862,301 | |||||||||||||
Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) |
Sep. 30, 2022
USD ($)
|
|---|---|
| Business Combination and Asset Acquisition [Abstract] | |
| Cash | $ 814,000 |
| Common stock, 987,741 shares of common stock of the Company | 1,975,483 |
| Promissory notes to Sellers | 162,400 |
| Contingent consideration - Common stock, 344,957 shares of common stock of the Company in escrow | 689,914 |
| Fair value of total consideration | 3,641,797 |
| Tangible assets acquired | 2,137,650 |
| Trademarks | 406,150 |
| Customer relationships | 592,979 |
| Non-compete agreements | 121,845 |
| Goodwill | 836,669 |
| Liabilities assumed | (453,496) |
| Fair market value of net assets acquired | $ 3,641,797 |
Schedule of Fair Value of Assets Acquired and Liabilities Assumed (Details) (Parenthetical) - Common Stock [Member] - Taste of BC Aquafarms, Inc. [Member] |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
shares
| |
| Business Acquisition [Line Items] | |
| Business combination number of shares | 987,741 |
| Number of shares issued in escrow | 344,957 |
Schedule of Proforma Information (Details) - USD ($) |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2021 |
|
| Business Combination and Asset Acquisition [Abstract] | ||
| Revenue | $ 3,774,754 | $ 8,711,550 |
| Net loss attributable to common shareholders | $ (543,458) | $ (1,311,249) |
| Basic and diluted loss per share | $ (0.01) | $ (0.05) |
Business Combination (Details Narrative) |
9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|
|
Aug. 03, 2021
CAD ($)
shares
|
Jun. 24, 2021
CAD ($)
|
Apr. 27, 2021
CAD ($)
shares
|
Sep. 30, 2022
USD ($)
$ / shares
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2022
CAD ($)
|
Dec. 31, 2021
$ / shares
|
Jul. 09, 2021
CAD ($)
|
Jun. 24, 2021
USD ($)
|
|
| Business Acquisition [Line Items] | |||||||||
| Payments to acquire businesses net of cash acquired | $ 398,482 | $ 790,593 | |||||||
| Issuance of non-interest bearing promissory note face value | $ 200,000 | ||||||||
| Shares issued | shares | 987,741 | ||||||||
| Common stock issued held In escrow value shares | shares | 344,957 | ||||||||
| Description of escrowed shares | If, within 24 months of the closing, TOBC has cumulative revenue of at least CAD$1,300,000, the Sellers will receive all of the escrowed shares. If, as of the 24-month anniversary of the closing, TOBC has cumulative revenue of less than CAD$1,300,000, the Sellers will receive a prorated number of the escrowed shares based on the actual cumulative revenue of TOBC as of such date | ||||||||
| Common stock per share | $ / shares | $ 0.0001 | $ 0.0001 | |||||||
| December 31, 2025 [Member] | |||||||||
| Business Acquisition [Line Items] | |||||||||
| Notes payable | $ 60,000 | ||||||||
| Mortgage Loan [Member] | |||||||||
| Business Acquisition [Line Items] | |||||||||
| Notes payable | $ 490,000 | ||||||||
| Private Placement [Member] | |||||||||
| Business Acquisition [Line Items] | |||||||||
| Common stock per share | $ / shares | $ 2.00 | ||||||||
| TOBC [Member] | |||||||||
| Business Acquisition [Line Items] | |||||||||
| Transaction Costs | $ 31,000 | ||||||||
| Stock Purchase Agreement [Member] | |||||||||
| Business Acquisition [Line Items] | |||||||||
| Payments to acquire businesses net of cash acquired | $ 5,000,000 | $ 4,000,000 | |||||||
| Taste of BC Aquafarms, Inc. [Member] | |||||||||
| Business Acquisition [Line Items] | |||||||||
| Payments to acquire businesses net of cash acquired | $ 1,000,000 | $ 1,000,000 | |||||||
| Common stock issued held In escrow value shares | shares | 344,957 | ||||||||
| Description of escrowed shares | If, within 24 months of the closing, TOBC has cumulative revenue of at least CAD$1,300,000, the Sellers will receive all of the escrowed shares. If, as of the 24-month anniversary of the closing, TOBC has cumulative revenue of less than CAD$1,300,000, the Sellers will receive a prorated number of the escrowed shares based on the actual cumulative revenue of TOBC as of such date | ||||||||
| Taste of BC Aquafarms, Inc. [Member] | Minimum [Member] | |||||||||
| Business Acquisition [Line Items] | |||||||||
| Cumulative revenue | $ 1,300,000 | ||||||||
| Taste of BC Aquafarms, Inc. [Member] | Maximum [Member] | |||||||||
| Business Acquisition [Line Items] | |||||||||
| Cumulative revenue | $ 1,300,000 | ||||||||
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